NCLAT Affirms Maintainability of Section 95 Application Against Personal Guarantor Without Pending CIRP
- REEDLAW
- Aug 29
- 3 min read
Updated: Sep 1
REEDLAW Legal News Network reports: In a notable interpretation of the Insolvency and Bankruptcy Code, the National Company Law Appellate Tribunal (NCLAT) has ruled that an application under Section 95 against a personal guarantor remains maintainable even in the absence of any pending Corporate Insolvency Resolution Process (CIRP) or liquidation proceedings against the corporate debtor. This decision affirms the jurisdiction of the Adjudicating Authority to independently proceed against personal guarantors.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr. Arun Baroka (Technical Member), while adjudicating a Company Appeal, held that an application under Section 95 of the IBC against a personal guarantor is maintainable even when no insolvency resolution or liquidation proceedings are pending against the corporate debtor. The Tribunal emphasised that the National Company Law Tribunal (NCLT) possesses jurisdiction to adjudicate such applications independently, thereby safeguarding the creditors’ rights under the statutory framework.
The National Company Law Appellate Tribunal (NCLAT) allowed the appeal filed by the Financial Creditor against the order dated 08.01.2025 of the Adjudicating Authority, which had dismissed a Section 95 application on the ground that no insolvency resolution process was pending against the Corporate Debtor. The Adjudicating Authority held that an application under Section 95 of the Insolvency and Bankruptcy Code, 2016, is not maintainable unless a CIRP or liquidation proceeding is ongoing against the Corporate Debtor.
The Appellant contended that the issue stood settled by the NCLAT judgment in Anita Goyal (Mrs.) v. Vistra ITCL (India) Limited and Another, REEDLAW 2025 NCLAT Del 01564 decided on 23.01.2025, which categorically held that a Section 95 application against a personal guarantor is maintainable even in the absence of a pending CIRP against the Corporate Debtor. It was argued that the impugned order overlooked the binding precedents laid down by the Tribunal in State Bank of India, Stressed Asset Management Branch v. Mahendra Kumar Jajodia Personal Guarantor to Corporate Debtor, REEDLAW 2022 NCLAT Del 01619 and Mahendra Kumar Agarwal v. PTC India Financial Services Limited and Another, REEDLAW 2023 NCLAT Chn 08515, which were affirmed by the Hon’ble Supreme Court.
The Tribunal observed that the NCLT’s reliance on contrary judgments delivered by the Kolkata Bench in Aditya Birla Finance Ltd. v. Sarita Mishra and Tata Capital Financial Services Ltd. v. Arjun Agarwal was misplaced as these decisions were rendered in violation of binding appellate precedents and were per incuriam. Relying on its earlier decision in Anita Goyal (Mrs.) v. Vistra ITCL (India) Limited and Another, REEDLAW 2025 NCLAT Del 01564 and the law declared in State Bank of India, Stressed Asset Management Branch v. Mahendra Kumar Jajodia Personal Guarantor to Corporate Debtor, REEDLAW 2022 NCLAT Del 01619, the NCLAT held that the Financial Creditor’s application under Section 95 was maintainable regardless of whether a CIRP against the Corporate Debtor was pending.
Accordingly, the impugned order was set aside, and the Section 95 application was restored to the file of the Adjudicating Authority for adjudication on merits. The Tribunal clarified that it had not expressed any opinion on the merits of the case, leaving all issues open for consideration by the NCLT in accordance with law.
Ms. Ekta Bhasin and Ms. Aastha Trivedi, Advocates, represented the Appellant.
Ms. Meenakshi Manot and Mr. Abrode Sinha, Advocates, appeared for the Respondents.
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