Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLT) 522

NATIONAL COMPANY LAW TRIBUNAL
Rajeev Bhardwaj, Judicial Member, Sanjay Puri, Technical Member
Bank of Baroda – Appellant
Versus
M.Srinivasa Babji – Respondent
Company Petition IB/128/95/HDB/2023 U/s 95 of IBC

Advocates:
For the Petitioner: Dr. S. Sathinarayanan
For the Respondent: Ms. Aakanksha Nehra, Krishna Mohan, Mr. Sreenivasa Rao

Statutory Form B demand notice under IBC does not invoke on-demand personal guarantee requiring specific contractual demand; absence of valid invocation per deed terms renders Section 95 application non-maintainable.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 95 - Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 - Rule 7(1), Rule 3(1)(e) - Personal guarantee requiring demand for invocation - Statutory demand notice in Form B issued under Rule 7(1) does not constitute valid contractual invocation of on-demand personal guarantee - SARFAESI notice addressed only to principal borrower and copied to guarantor does not invoke guarantee - Liability of guarantor arises only upon demand strictly per deed terms, as guarantee is neither automatic nor unconditional - No valid invocation results in debt not becoming due against guarantor - Application under Section 95 not maintainable. (Paras 32-44)

(B) Contract Act, 1872 - Section 128 - Liability of guarantor is co-extensive with principal borrower but governed by contract terms - Default date for guarantor depends on guarantee deed stipulations, not automatically same as principal borrower. (Paras 35-37)

Facts of the case:
Financial creditor sanctioned credit facilities to corporate debtor, guaranteed by respondent as personal guarantor via deeds requiring written demand. Account classified as NPA, CIRP initiated and liquidation ordered against corporate debtor. Statutory demand notice in Form B issued to guarantor, followed by Section 95 application. RP recommended admission. Guarantor contested on grounds including absence of guarantee invocation, limitation, defective service.

Findings of Court:
No valid invocation of guarantee; Form B notice serves procedural IBC role but cannot substitute contractual demand requirement. SARFAESI notice inadequate for invocation.

Issues: Whether Form B demand notice satisfies contractual invocation of on-demand guarantee; whether absence of prior invocation per deed renders Section 95 application non-maintainable.

Ratio Decidendi: Invocation must strictly follow guarantee deed terms; without it, guarantor not a debtor under rules, no default occurs, insolvency proceedings unsustainable.

Result: Company Petition dismissed.

Table of Content
1. petition details and financial facilities to corporate debtor. (Para 3 , 4 , 5 , 6 , 7 , 8)
2. rp appointment and section 99 report recommending admission. (Para 9 , 10 , 11)
3. rp findings on debt, default, and guarantee validity. (Para 12 , 13 , 14 , 15)
4. respondent's counter on limitation and procedural defects. (Para 16 , 17 , 18 , 19 , 20 , 21)
5. guarantee unenforceability and non-invocation arguments. (Para 22 , 23 , 24 , 25 , 26 , 27)
6. financial creditor's submissions on limitation and service. (Para 28 , 29 , 30)
7. court recaps facts and guarantee terms. (Para 31 , 32 , 33 , 34)
8. no valid guarantee invocation required for pirp. (Para 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44)

ORDER

This petition is filed by the Bank of Baroda (Financial Creditor/FC) under Section 95 of the IBC 1, Insolvency and Bankruptcy Code, 2016. read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019, seeking an order for initiation of the Personal Insolvency Resolution Process (PIRP against M. Srinivasa Babji, Personal Guarantor/ Respondent 1, who is the Personal Guarantor (PG) of M/s. Vijay Home Appliances Ltd., Corporate Debtor (CD).

APPLICATION

1. It is submitted that various credit facilities aggregating to Rs 15 Crores were sanctioned to the Corporate Debtor, M/s. Vijay Home Appliances Limited, vide sanction letters dated 03.01.2009 and 06.06.2011, which were reviewed on 07.12.2012. It is further submitted that the said facilities were thereafter revised and enhanced from time to time. It is averred that the Respondent stood as the Personal Guarantor and executed General Forms of Guarantee dated 30.03.2009, 09.06.2011, 23.06.2011, and 09.01.2013, thereby guaranteeing repayment of the said facilities along with applicable interest. It is further averred that the total outstanding debt stood at Rs 13,38,60,144 as on 31.07.2020, together with further interest and costs from 01.08.2020 till the date of payment.

2. It is further submitted that the loan account of the Corporate Debtor was classified as a Non-Performing Asset (NPA) on 29.11.2016. It is stated that thereafter, CIRP was initiated against the Corporate Debtor by this Tribunal vide order dated 24.04.2019 passed in CP (IB) No. 568/09/HDB/2018 under Section 9 of the IBC. It is further stated that liquidation of the Corporate Debtor was ordered by this Tribunal vide order dated 09.01.2020. In view of the default committed by the Principal Borrower and the commencement of CIRP followed by liquidation proceedings, it is stated that proceedings have been initiated against the Personal Guarantor for the recovery of the guaranteed debt.

3. It is submitted that a statutory demand notice in Form B was issued to the Personal Guarantor on 06.08.2020, calling upon the Personal Guarantor to discharge the guaranteed liability. It is averred that the Personal Guarantor failed to make payment within the stipulated period of fifteen days and, accordingly, the effective date of default is stated to be 21.08.2020.

4. It is placed on record that upon presentation of the present application, this Adjudicating Authority, vide order dated 21.03.2024, appointed Mr. Sreenivasa Rao Ravinuthala, bearing Registration No. IBBI/IPA- 003/IP-N00081/2017-2018/10704, as the Resolution Professional and directed submission of a report under Section 99 of the Insolvency and Bankruptcy Code, 2016.

5. The Resolution Professional filed a report under Section 99 of the IBC on 08.04.2024 through IA No. 714/2024.

RP REPORT

6. After due examination of the application, the Resolution Professional recommended its admission based on the details recorded in the RP report, as mentioned hereunder:

6.1 It is submitted that the Financial Creditor sanctioned fund-based and non-fund-based limits aggregating to Rs. 15 crores to the Corporate Debtor, M/s Vijay Home Appliances Limited, at its request,

Click Here to Read the rest of this document

2026 Supreme(Online)(NCLT) 522

NATIONAL COMPANY LAW TRIBUNALRajeev Bhardwaj, Judicial Member, Sanjay Puri, Technical MemberBank of Baroda – AppellantVersusM.Srinivasa Babji – RespondentCompany Petition IB/128/95/HDB/2023 U/s 95 of IBC

Statutory Form B demand notice under IBC does not invoke on-demand personal guarantee requiring specific contractual demand; absence of valid invocation per deed terms renders Section 95 application non-maintainable.

Cases Referred (3)

NATIONAL COMPANY LAW TRIBUNAL
Rajeev Bhardwaj, Judicial Member, Sanjay Puri, Technical Member
Bank of Baroda – Appellant
Versus
M.Srinivasa Babji – Respondent
Company Petition IB/128/95/HDB/2023 U/s 95 of IBC