NCLT Ahmedabad Rejects Personal Guarantor’s Insolvency Plea as Time-Barred, Imposes ₹2 Lakh Cost for Abuse of Process

March 11, 2026 : The Ahmedabad Bench of the National Company Law Tribunal (NCLT) has dismissed a personal guarantor’s application under Section 94 of the Insolvency and Bankruptcy Code, 2016, holding that the plea was barred by limitation and filed with the intent to obstruct recovery proceedings under the SARFAESI Act.

The Bench comprising Judicial Member Shammi Khan and Technical Member Sanjeev Sharma passed the order on 11 March 2026 in Prakash Kishorebhai Bindal v. Axis Bank Limited, rejecting the insolvency application filed by the personal guarantor of Bindal Fashion Private Limited.

The Tribunal noted that the applicant had sought initiation of insolvency proceedings for a default of ₹10.08 crore arising from a Deed of Guarantee dated 16 August 2017 executed in favour of Axis Bank. The corporate debtor had availed credit facilities of ₹8.50 crore along with an additional ₹1 crore, for which the applicant stood as personal guarantor.

The loan account was classified as a non-performing asset on 29 December 2021, following which the financial creditor issued a recall notice dated 5 May 2022 demanding repayment of the entire outstanding dues. The Tribunal held that this recall notice constituted invocation of the guarantee, thereby triggering the limitation period of three years under Article 137 of the Limitation Act.

Since the insolvency application was filed on 17 January 2026, well beyond the limitation period which expired on 4 May 2025, the Tribunal held the petition to be time-barred. It further rejected the contention that subsequent communications in 2023 extended limitation, noting that no acknowledgment of liability under Section 18 of the Limitation Act was established.

On the issue of intent, the Bench observed that the application was filed after the creditor had already initiated recovery proceedings under the SARFAESI Act, including issuance of an auction notice dated 19 February 2025. It held that the timing of the filing indicated an attempt to avail the interim moratorium under Section 96(1) of the Code to stall recovery proceedings.

Relying on precedent, the Tribunal held that insolvency proceedings initiated merely to delay or frustrate recovery action amount to abuse of the insolvency framework and cannot be entertained.

The Bench also found that the applicant had suppressed material facts by failing to disclose two earlier Section 94 petitions filed in March and November 2025, which were not registered due to defects. It noted that such non-disclosure, coupled with the benefit of interim moratorium enjoyed during those filings, constituted abuse of process.

In view of these findings, the Tribunal rejected the application, imposed a cost of ₹2 lakh on the personal guarantor, and directed that the amount be paid to the financial creditor within 15 days. It also rejected the Interim Resolution Professional’s report recommending admission of the application and ordered that the interim moratorium shall cease to have effect.

The Tribunal clarified that the financial creditor remains free to continue recovery proceedings under the SARFAESI Act and other applicable laws.