NCLT Jaipur: Individual Insolvency Under IBC Applicable Only To Personal Guarantors, Not Co-Borrowers Or Co-Applicants

May 6, 2026 : The National Company Law Tribunal (NCLT), Jaipur Bench, has held that the individual insolvency framework under the Insolvency and Bankruptcy Code, 2016 can be invoked only by or against personal guarantors to corporate debtors and not against co-borrowers or co-applicants. The Tribunal observed that the legislative scheme consciously limits the applicability of Sections 94 and 95 of the Code to personal guarantors of corporate debtors.

A Bench comprising Judicial Member Reeta Kohli and Technical Member Kavita Bhatnagar dismissed a petition filed by Ankit Baldwa under Section 94 of the IBC seeking initiation of insolvency resolution proceedings against himself in connection with liabilities arising from loans availed by Khushboo Marbles Private Limited.

The applicant claimed that he had furnished personal guarantees in favour of various financial creditors including Axis Finance Limited, Ugro Capital Limited and SMFG India Credit Co. Limited. According to him, after defaults committed by the corporate debtor, the creditors invoked the guarantees, issued recall notices and initiated recovery proceedings under the SARFAESI Act. He stated that his aggregate liability stood at approximately ₹11.63 crore.

The Tribunal had earlier admitted the Section 94 application on May 27, 2025 and appointed Resolution Professional Smita Gupta to submit a report under Section 99 of the Code. During the proceedings, the Resolution Professional sought loan agreements, guarantee deeds, details of outstanding debt and documents evidencing invocation of guarantees from both the applicant and the creditors.

In her report, the Resolution Professional recommended rejection of the petition after noting that neither the applicant nor the creditors produced any independent deed of personal guarantee. Instead, the available documentation consistently described the applicant as a “co-borrower” or “co-applicant”. Ugro Capital informed the Resolution Professional that no guarantee deed had been executed by the applicant, while SMFG India Credit clarified that he was only a co-borrower in the relevant loan transactions.

The Resolution Professional concluded that the mere use of expressions such as “co-borrower cum guarantor” without an independently executed guarantee deed or express contractual undertaking could not satisfy the legal requirement of a personal guarantor under the IBC.

Opposing the report, the applicant argued that the liabilities of a co-borrower and guarantor were analogous in nature and that recall notices issued by creditors demonstrated the existence of enforceable guarantee obligations against him. He also contended that the report submitted under Section 99 was only recommendatory and not binding upon the Tribunal.

Rejecting these submissions, the Bench distinguished the legal position of a co-borrower from that of a guarantor. The Tribunal observed that a co-borrower is primarily liable for repayment of debt, whereas a guarantor becomes liable only upon default by the borrower or co-borrower.

Referring to the notification dated November 15, 2019, by which provisions relating to personal guarantors were brought into force, the Tribunal held that the individual insolvency framework under Sections 94 and 95 applies exclusively to personal guarantors of corporate debtors. The Bench observed that “the Legislature in its wisdom has consciously brought the provisions of individual insolvency only qua personal guarantors of the Corporate Debtor and not qua other debtors.”

The Tribunal further held that for invoking jurisdiction under Sections 94 or 95, the debtor must unequivocally establish that he is a personal guarantor to a corporate debtor. In the present case, no validly executed guarantee deed or documentary evidence substantiating invocation of any personal guarantee was placed on record. On the contrary, the material available before the Resolution Professional showed that the applicant functioned only as a co-borrower or co-applicant.

Holding that the mandatory statutory requirements for initiation of personal insolvency proceedings were not satisfied, the Tribunal dismissed the petition and vacated the interim moratorium that had commenced pursuant to admission of the Section 94 application.

Case Title: Ankit Baldwa v. Ugro Capital Limited & Ors.
Case No.: CP (IB) No. 47/94/JPR/2025