Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLT) 2066

NATIONAL COMPANY LAW TRIBUNAL
Rajeev Bhardwaj, Judicial Member, Sanjay Puri, Technical Member
CANARA BANK – Appellant
Versus
Sri A.D.Vamsi Mohan the personal guarantor of M/s. A L Sudershan Construction Company Ltd (In Liquidation) R/o. H.No. 7-3-719 R.P. Road Secunderabad-500003 Telangana. – Respondent
Company Petition (IB) No. 95/95/HDB/2024

Advocates:
For the Appellants/Petitioners: Mr. Dishit Bhattachajee
For the Respondents: Mr. Avinash Desai, Mr. G. Bhupesh

A Financial Creditor cannot initiate insolvency proceedings against a personal guarantor for a new debt account created after the closure of the original loan account without proving a fresh guarantee or a clear, legally established nexus linking the subsequent liability to the original guarantee agreement.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - S. 95 - Personal Insolvency Resolution Process against Personal Guarantor - Liability of guarantor - The court examined whether the debt claimed was the same debt for which the guarantee was originally executed in 2005. The tribunal noted that the original loan account was closed in 2013 and a new account with a larger liability was opened without any fresh guarantee or extension document. (Paras 49, 57, 59, 60)

(B) Evidence and Burden of Proof - Financial Creditor failed to establish a clear nexus between the 2005 guarantee and the 2013 account. The inconsistent records and lack of reconciliation regarding the transferred amounts led the tribunal to hold that the liability is not clearly established. (Paras 58, 61)

Facts of the case:
The petitioner sought to initiate insolvency proceedings under S. 95 of the IBC against the respondent, who was a personal guarantor for credit facilities granted to the corporate debtor in 2005. The corporate debtor's account was classified as an NPA in 2006. In 2013, the account was transferred to an 'OTS product account' with a different balance. The respondent contended that the 2005 guarantee did not cover the new 2013 liability and that the claim was time-barred.

Findings of Court:
The Tribunal found that the Financial Creditor failed to provide a documentary explanation for the variation in amounts between the original account closure and the new account opening in 2013. Without a fresh guarantee for the new liability, the nexus between the initial guarantee and the present claim cannot be established.

Issues: Whether the personal guarantor remains liable for the debt reflected in the new account opened in 2013 despite the closure of the original guaranteed account and the absence of a fresh guarantee.

Ratio Decidendi: A personal guarantor's liability is restricted to the debts specifically guaranteed. If the original account for which the guarantee was provided is closed and a new debt is created without a fresh guarantee agreement, the creditor cannot enforce the initial guarantee against the new, unexplained, and higher liability.

Result: Petition dismissed.

Table of Content
1. petitioner's right to initiate insolvency process against personal guarantor. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11)
2. resolution professional's role and report recommending admission. (Para 12 , 13 , 14 , 15 , 16 , 17)
3. respondent's counter: barred by limitation, inflated claims, and lack of nexus. (Para 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35)
4. rejoinders and competing parties' reliance on limitation and liability continuity. (Para 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48)
5. inconsistency in accounting records precludes proof of debt nexus. (Para 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61)

This petition is filed by the Canara Bank (“Financial Creditor/FC”) under Section 95 of Insolvency and Bankruptcy Code 2016 (“IBC”) 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 A.D.Vamsi Mohan, who is the Personal Guarantor (PG/Respondent) of M/s A.L.Sudershan Constructions Company Limited, Corporate Debtor (CD).

APPLICATION

1. It is submitted that the Corporate Debtor is engaged in the business of building construction and civil engineering activities. The Corporate Debtor had availed various financial facilities from the Financial Creditor, including working capital facilities in the nature of term loans, overdraft facilities, and SBLC/BG facilities under different loan agreements.

2. In order to secure the repayment of the said financial assistance, several Guarantors, including A.D.Vamsi Mohan, executed Guarantee Agreements¹Page 65 of the Application dated 28.07.2005 in favour of the Financial Creditor, thereby undertaking to repay the dues in the event of default by the Corporate Debtor.

3. It is contented that the Corporate Debtor committed default in repayment of the outstanding dues and the account was classified as Non-Performing Asset (“NPA”) on 11.06.2006. The Corporate Debtor has repeatedly acknowledged the outstanding liability by way of acknowledgments of debt²Page 70 of the Application executed on 30.09.2007, 30.06.2008, 01.06.2011, 20.05.2014, and 11.05.2017, as well as through multiple One-Time Settlement (“OTS”).

4. Later, the Financial Creditor issued a Legal notice³Page 77 of the Application dated 10.06.2019 to the Corporate Debtor, calling upon it to repay the entire outstanding amount. Despite the issuance of such recall notices, neither the Corporate Debtor nor the guarantors, including the Personal Guarantor herein, have repaid the outstanding dues.

5. It is submitted that, in view of continued default, the Financial Creditor and its associate banks initiated recovery proceedings before the Learned Debt Recovery Tribunal by filing Original Application bearing O.A. No. 547/2019 on 20.06.2019, which is pending adjudication under the provisions of the Recovery of Debts and Bankruptcy Act, 1993.

6. It is stated that the Financial Creditor also initiated Corporate Insolvency Resolution Process against the Corporate Debtor under Section 7 of the IBC, bearing CP (IB) No. 324/7/HDB/2020, which was admitted by this Tribunal vide order dated 06.05.2022.

7. It is submitted that as on date, a sum of Rs. 495,09,50,398.81/- remains due and payable by the Corporate Debtor and the Personal Guarantor to the Financial Creditor.

8. It is further submitted that pursuant to the notification of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 with effect from 01.12.2019, the Financial Creditor is entitled to initiate insolvency proceedings against the Personal Guarantor.

9. In compliance with the statutory requirements, the Financial Creditor issued a Demand Notice dated 28.11.20

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2026 Supreme(Online)(NCLT) 2066

Cases Referred (1)