Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLAT) 541

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Naresh Salecha, Member (Technical)
Amit Bhatnagar – Appellant
Versus
UCO Bank – Respondent
Company Appeal (AT) (Insolvency) No. 1558 of 2023|Company Petition (IB) No. 200 of 2024|Company Petition (IB) No. 199 of 2024|CP(IB)/200(AHM)2024|CP(IB)/199(AHM)2024|IA/1072(AHM)2024|IA/1068(AHM)2024

Advocates:
For the Appellants/Petitioners: Malak Bhatt, Neeha Nagpal, Sukanya Joshi
For the Respondents: Amrish Gandhi, Jaimohan, Aayush Gupta, Swati Sood

The liability of a personal guarantor is co-extensive with the principal debtor and is not discharged by the approval of a Resolution Plan for the corporate guarantor. A DRT order provides a fresh cause of action for limitation purposes.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 61, 95, 99 - Limitation Act, 1963 - Section 18 - Indian Contract Act, 1872 - Sections 128 and 133 - Proceedings under Section 95 against personal guarantors - Maintainability even after approval of Resolution Plan for corporate guarantor - Liability of personal guarantor remains co-extensive and is not discharged by approval of Resolution Plan - Approval of a Resolution Plan under Section 31 of the Code does not operate as a discharge of the guarantor's liability. (Paras 41, 42, 44)

(B) Insolvency and Bankruptcy Code, 2016 - Section 95 - Limitation - Filing of Section 95 application - Period of limitation - Date of NPA, invocation of guarantee, and DRT judgment - A decree from DRT gives a fresh cause of action for limitation - Extension of limitation period due to the Supreme Court's Suo Moto order during COVID-19. (Paras 39(e), 39(f))

(C) Insolvency and Bankruptcy Code, 2016 - Section 95 - Debt - Existence of - Liability of personal guarantor is not extinguished by payments made under a Resolution Plan for the corporate guarantor - The remaining unpaid debts survive, and the guarantor continues to be liable for the unpaid portion. (Paras 40, 44)

Facts of the case:
The creditors (a consortium of banks) extended credit facilities to a Corporate Debtor, which were personally guaranteed by the Appellants. The Corporate Debtor defaulted, and the banks invoked the personal guarantees. The corporate guarantor of the Corporate Debtor went into CIRP, and a Resolution Plan was approved, under which the banks received certain payments. Subsequently, the banks filed applications under Section 95 of the Code against the Appellants as personal guarantors to recover the remaining unpaid debt, which was crystallised by a Debt Recovery Tribunal (DRT) judgment. The Adjudicating Authority admitted the Section 95 applications, leading to the present appeals.

Findings of Court:
The Appellate Tribunal upheld the Adjudicating Authority's order, finding that the personal guarantors' liability is co-extensive with the principal debtor and is not discharged by the approval of the Resolution Plan for the corporate guarantor. The Tribunal also found the applications were not barred by limitation, as the DRT order provided a fresh cause of action.

Issues: The main issues were whether the claims against the personal guarantors were barred by limitation and whether the approval of a Resolution Plan for the corporate guarantor extinguished the liability of the personal guarantors.

Ratio Decidendi: The liability of a personal guarantor under Section 128 of the Indian Contract Act, 1872, is co-extensive with that of the principal debtor and is not automatically discharged by the approval of a Resolution Plan in the CIRP of the corporate debtor or corporate guarantor. A DRT decree crystallising the debt provides a fresh cause of action for the purpose of limitation under Section 18 of the Limitation Act, 1963.

Result: Both appeals fail and stand rejected. No cost.

Table of Content
1. this section provides the factual background of the cases, including the parties involved, history of credit facilities, invocation of guarantees, cirp of related entities, and the basis of the current appeals. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 15 , 16 , 18 , 30 , 31 , 32 , 34 , 35 , 36 , 37 , 46 , 47)
2. this section details the arguments and contentions of the appellants and the respondent banks, including points on discharge of guarantee, limitation, and effect of resolution plan. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 17 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29)
3. background facts and procedural history of the case (Para 33)
4. court's analysis addressing the two main issues: limitation period and discharge of personal guarantor's liability through a resolution plan. (Para 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 48 , 49)
5. court rejects both grounds raised by the appellants. (Para 50)
6. both appeals are dismissed with no order as to costs. (Para 51)

J U D G E M E N T

(12 .05.2026)

NARESH SALECHA, MEMBER (TECHNICAL)

1. There are two appeals in the present case. We are taking both the appeals together. The appeals have been filed by the Appellants i.e., Amit Bhatnagar and Sumit Bhatnagar, who are the Personal Guarantors of M/s Diamond Power Transformers Ltd. (“Corporate Debtor”), under Section 61 of the Insolvency and Bankruptcy Code, 2016 (‘Code’) against the Order dated 23.10.2024 ("Impugned Order") passed by the National Company Law Tribunal, Ahmedabad Bench ("Adjudicating Authority") in Company Petition (IB) No. Company Petition (IB) No. (IB)/200(AHM) 2024 with IA/1072(AHM)2024 and Company Petition (IB)/199(AHM) 2024 with IA/1068(AHM)2024.UCO Bank, who is the Financial Creditor of the Corporate Debtor, is the Respondent No.1/Respondent Bank, herein. CS & IP Amrish Gandhi, who is the Resolution Professional of Mr. Amit Bhatnagar and Mr. Sumit Bhatnagar, is Respondent No. 2, herein. Indian Overseas Bank, who was the other Financial Creditor of the Corporate Debtor in addition to Respondent No.1 /UCO Bank, is the Intervenor in both the appeals.

2. We will refer both UCO Bank- Respondent No. 1 and Indian Overseas Bank-Intervenor, as “Consortium Banks”, since their cause and grounds are same, hereinafter.

3. The Appellants submitted that the Consortium Banks extended a credit facility of Rs. 40 crores to the Corporate Debtor (DPTL) on 15.10.2011, which was renewed on 29.06.2013. Pursuant thereto, a Consortium Agreement dated 31.03.2015 was executed for an aggregate credit facility of Rs. 114.60 crores. The Appellants contended that despite the explicit terms of the said Consortium Agreement, the Consortium Banks failed to disburse Rs. 24 crores to the Corporate Debtor (DPTL). This non-disbursement amounted to a unilateral variation in the essential terms of the Consortium Agreement and a breach of the obligations assumed by the Consortium Banks thereunder.

4. The Appellants submitted that the Deed of Guarantee dated 31.03.2015 executed by the Appellants and Diamond Power Infrastructure Ltd. (DPIL) (Corporate Guarantor) in favour of the Consortium Banks was predicated entirely upon the Consortium Agreement and the promised disbursement of the full Rs. 114.60 crores. The Appellants contended that the failure to disburse Rs. 24 crores constituted a material alteration in the terms of the contract between the creditor and the principal debtor without the consent of the sureties. Consequently, the Appellants stands fully discharged from all liability under the Deed of Guarantee in terms of Section 133 of the Indian Contract Act, 1872 , and the Adjudicating Authority was duty-bound to recognise the same while examining the petition under Section 95 of the Code.

5. The Appellants submitted that the account of the Corporate Debtor (DPTL) was declared NPA on 30.07.2016, leading to admission of Company Petition (IB) No. 28 of 2017 under Section 10 of the Code on 06.07.2017 and subsequent order of liquidation da

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2026 Supreme(Online)(NCLAT) 541

The liability of a personal guarantor is co-extensive with the principal debtor and is not discharged by the approval of a Resolution Plan for the corporate guarantor. A DRT order provides a fresh cause of action for limitation purposes.

Cases Referred (1)