NCLAT Rejects Personal Guarantor’s Bid To Stall SARFAESI Recovery After Auction, Calls Section 94 Plea Abuse Of Process

May 8, 2026 : The National Company Law Appellate Tribunal (NCLAT), New Delhi, has dismissed two appeals filed by personal guarantor Ashwani Kumar Oberoi seeking to restrain SARFAESI recovery proceedings and set aside an auction sale conducted by the State Bank of India (SBI), holding that the insolvency proceedings were initiated only to obstruct recovery after the auction process had substantially concluded.

A Bench comprising Justice Ashok Bhushan and Indevar Pandey upheld the orders of the NCLT Chandigarh Bench rejecting interlocutory applications filed by Oberoi in proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016.

The Tribunal observed that the Section 94 insolvency application filed by the personal guarantor lacked bona fides and was intended only to frustrate the Bank’s recovery proceedings after the auction had already been completed and confirmed. The NCLAT held:

“…initiation of proceeding under Section 94 by the personal guarantor was not with object of resolution of insolvency of the personal guarantor rather it was only with the intent to somehow create hurdles in the conclusion of the proceedings initiated by the Bank for recovery of its debts when auction was already held on 11.04.2024 which was confirmed on 12.04.2024, filing of the application on 27.04.2024 clearly was not bona fide application and the application was an abuse of process of Court…”

Background

SBI had sanctioned various credit facilities amounting to ₹29.23 crore to Kirtiman Cements & Packaging Industries Limited on 28 January 2019. On the same date, Ashwani Kumar Oberoi executed a personal guarantee and mortgaged his immovable property as security for the loan.

After the borrower’s account was classified as a Non-Performing Asset on 27 July 2019, SBI issued a demand notice under Section 13(2) of the SARFAESI Act on 31 December 2019 seeking repayment of more than ₹29 crore.

Subsequently, the Bank initiated proceedings under Section 13(4) of the SARFAESI Act, took symbolic possession of the secured assets, and issued an auction notice dated 19 March 2024 for sale of the mortgaged property situated at Plot No. M-31, Industrial Area, Yamunanagar. The e-auction was conducted on 11 April 2024 and the sale was confirmed in favour of the auction purchasers on 12 April 2024.

Oberoi thereafter filed an application under Section 94 of the IBC on 27 April 2024 seeking initiation of insolvency resolution proceedings as a personal guarantor.

He later moved applications before the NCLT seeking restraint against further SARFAESI action and setting aside of the sale certificate issued on 31 May 2024, arguing that the interim moratorium under Section 96 of the IBC barred the Bank from proceeding further once the insolvency application had been filed.

NCLAT’s Findings

Before the Appellate Tribunal, the appellant relied on the Supreme Court’s judgment in Indian Overseas Bank v. RCM Infrastructure Ltd. to argue that transfer in favour of the auction purchaser becomes complete only upon issuance of the sale certificate and therefore the moratorium under Section 96 prohibited issuance of the sale certificate after filing of the Section 94 application.

SBI opposed the plea and argued that the insolvency application was filed only after the auction had concluded and the sale had already been confirmed. The Bank further contended that under the amended Section 13(8) of the SARFAESI Act, the guarantor’s right of redemption stood extinguished upon publication of the auction notice on 25 March 2024.

The NCLAT referred extensively to the Bombay High Court’s decision in Rozina Firoz Hajiani v. Union of India, where the High Court cautioned against misuse of Sections 94, 95 and 96 of the IBC by chronic defaulters and guarantors attempting to derail SARFAESI proceedings after auctions had reached culmination.

The Tribunal also relied on its earlier rulings in Syed Sirajis Salikin Khadri v. Edelweiss Asset Reconstruction Company Ltd. and Mrs. Vimla Devi v. Karnataka Bank Ltd., where Section 94 applications filed solely to secure the benefit of moratorium and obstruct recovery proceedings were rejected.

Noting that Oberoi had already challenged the auction before the Debt Recovery Tribunal through Securitisation Application No. 340/2024 but failed to obtain interim relief, the NCLAT held that the insolvency proceedings were clearly initiated as a belated attempt to scuttle completed auction proceedings.

Accordingly, the Tribunal dismissed both appeals and upheld the NCLT’s refusal to restrain SARFAESI proceedings or interfere with the auction sale.

Case Title: Ashwani Kumar Oberoi v. State Bank of India & Ors.
Case Nos.: Company Appeal (AT) (Insolvency) Nos. 741 & 742 of 2026
Coram: Justice Ashok Bhushan (Chairperson) and Indevar Pandey (Technical Member)