When There Is More Than One Guarantor, Creditor Has Discretion To Proceed Against All Or Any One Of Them: NCLAT

The present appeal has been filed against an order passed by National Company Law Tribunal (NCLT) by which it admitted an application under section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC).

The Appellant submitted that the amount of ₹44 crore for which guarantee was given by appellant never came to be sanctioned or disbursed subsequent to 02.03.2016, no amount of ₹44 crore having been disbursed by the bank. There is no liability of appellant for any repayment there is no debt no default attributable to the appellant.

Per contra, the Respondent submitted that the guarantee also covered the facilities already granted, and the bank has proved by filing relevant statement of account of the corporate debtor to prove the disbursement and outstanding in the cash credit account. Disbursal of term loan and facility of cash credit extended was fully proved by the bank.

It was further argued that Appellant was well aware of the financial facilities already extended to the corporate debtor prior to 02.03.2016, for which guarantee was given.

The Tribunal observed that the guarantee by a personal guarantor can be issued for a consideration which has already been received by a borrower or to be received by borrower and in the facts of the present case the facility of ₹44 crore has already been received by the borrower which is amply proved. The submission of the appellant that since no disbursement was made on ₹44 crore subsequent to the execution of the personal guarantee by the appellant hence there is no liability on the appellant cannot be accepted.

It further observed that the Appellant's submission that the guarantee was given based on management's representation that the bank would extend further credit of Rs. 44 crores for a new cannot be accepted. The execution of the guarantee on 02.03.2016 is undisputed. The guarantee deed and related documents must be construed as they stand.

It further held that the fact that application for recovery of the debt filed by the bank before the DRT is pending along with counter claim filed by the appellant does not preclude the bank from initiating proceeding Section 95 of the IBC which is separate remedy provided by the bank.

The Tribunal also held that “It is for the bank to proceed against one or all personal guarantors of a corporate debtor under Section 95 and the mere fact that bank has proceeded against the appellant cannot be any reason to reject any application under Section 95 filed by bank against one personal guarantors.”

It further observed that Rule 11 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 contains withdrawal of application filed by creditors or guarantor. In the present case, Section 95 application having already been admitted on 01.07.2025 against which order this Appeal has been filed.

It concluded that it shall be open for the Adjudicating Authority to consider the application for withdrawal and pass appropriate order as per Rule 11 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.

Case Title: Kiran Kumar Jain Versus Cosmos Co-Operative Bank Ltd. & Anr.

Case Number: I.A. No. 4524 of 2025 In Company Appeal (AT) (Insolvency) No. 955 of 2025

Judgment Date: 02/09/2025