2026 Supreme(Online)(NCLT) 2473

NATIONAL COMPANY LAW TRIBUNAL
THE BANK OF BARODA LIMITED – Appellant
Versus
Arun Goel – Respondent
C.P. (IB) - 85/2022

The approval and full implementation of a corporate debtor's resolution plan, which settles the entire admitted debt, extinguishes the underlying liability, and bars the initiation of personal insolvency proceedings against personal guarantors for that same debt.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 95 (initiation of personal insolvency resolution process), Section 96(1)(a) (interim moratorium), Section 99 (report by Resolution Professional), Section 100 (admission or rejection) - Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantor to Corporate Debtor) Rules, 2019 - Rule 7(2) (application format) - Indian Contract Act, 1872 - Sections 133 (discharge of guarantor by variance in contract), 140, 141, and 145 (rights of guarantor) - SARFAESI Act, 2002 - Section 13(2) (notice to borrower) - Companies Act, 2013 - Section 62(3) (conversion of debt into equity), Section 66 (reduction of share capital) - Recovery of Debts and Bankruptcy Act, 1993 - Section 19 (original application).

(B) Personal Guarantor - Discharge of liability - Approval and implementation of a resolution plan for the corporate debtor, which included cash payment, conversion of debt into equity shares, and assignment of the residual portion of debt, results in the full and final settlement of the original debt. Consequently, no subsisting and legally recoverable debt remains against the personal guarantor, and an application under Section 95 of the IBC for initiating a personal insolvency resolution process against them must be dismissed. (Paras 69-75, 82 and 83)

(C) Conversion of Debt into Equity - Legal Effect - Conversion of a financial debt into equity shares, when effected under an approved Resolution Plan with full statutory compliance (e.g., Board Resolution and RoC filings in Form PAS-3), constitutes a legally recognized mode of satisfaction and restructure of the debt, not a mere book entry. It substitutes the creditor’s right to recover the debt in monetary terms with an ownership interest in the corporate debtor, thereby extinguishing the original financial liability. (Paras 71-75)

(D) Doctrine of Res Judicata - Non-application - The doctrine of res judicata generally does not apply between proceedings under different statutory regimes (e.g., before the DRT under the Recovery of Debts and Bankruptcy Act and before the NCLT under the Insolvency and Bankruptcy Code), as they operate on different premises and provide distinct remedies. (Paras 78-80) (E) Jurisdiction to Admit Section 95 Petition - Condition Precedent - The existence of a legally recoverable, subsisting debt is the foundational jurisdictional requirement for an application under Section 95 of the IBC. If the underlying debt stands fully discharged or satisfied, the application is not maintainable. (Para 82)

Facts of the case:
The Bank of Baroda (Financial Creditor) filed four applications (CP (IB) Nos. 85, 86, 87, and 88 of 2022) under Section 95 of the Insolvency and Bankruptcy Code (IBC) to initiate the Personal Insolvency Resolution Process (PIRP) against four Personal Guarantors (Mr. Arun Goel, Mr. Deepak Mittal, Mr. Pramod Agarwal, and Mr. Kapil Mittal) for an outstanding debt of Rs. 185,78,08,216/- from the Corporate Debtor, M/s Baghauli Sugar & Distillery Limited. The Corporate Debtor’s CIRP was initiated, and a Resolution Plan was approved by the NCLT on 24.11.2023 and upheld by the NCLAT. The Personal Guarantors argued that the approved and implemented Resolution Plan had fully and finally settled the entire debt through a combination of cash payments, conversion of the remaining debt into equity shares, and assignment of a residual portion to the Resolution Applicant. The Financial Creditor contended that the conversion into equity was a mere accounting exercise to provide a “clean slate” to the Resolution Applicant and that a significant haircut meant the debt was not fully satisfied, leaving a recoverable balance from the guarantors.

Findings of Court:
The NCLT found that the approved Resolution Plan provided for a complete and final treatment of the entire admitted debt. The mechanisms of cash payment, conversion of debt into equity shares, and assignment of the residual debt for a fixed sum constituted a full and final settlement of the original financial liability. Once this plan was implemented with full statutory compliance, the underlying debt stood extinguished. The Court held that the conversion of debt into equity was a legally recognized mode of satisfying the debt and was not merely a book entry. Consequently, no subsisting, legally recoverable debt existed to form the jurisdictional basis for a Section 95 application against the Personal Guarantors.

Issues: The main issues were whether the implementation of the approved Resolution Plan for the Corporate Debtor resulted in the full and final satisfaction of the debt, thereby discharging the Personal Guarantors from their liability, and whether a valid debt continued to subsist against the Personal Guarantors at the time of filing the Section 95 application.

Ratio Decidendi: The NCLT held that the approval and full implementation of a resolution plan for a corporate debtor, which comprehensively addresses the entire admitted debt through mechanisms such as cash payment, conversion of debt into equity, and assignment of residual debt, results in the extinguishment of the original financial liability. In the absence of a subsisting and legally recoverable debt, an application under Section 95 of the IBC for initiating the personal insolvency resolution process against a personal guarantor is not maintainable and must be dismissed. Result : All four Company Petitions (CP (IB) No. 85/ALD/2022, 86/ALD/2022, 87/ALD/2022, and 88/ALD/2022) were dismissed. The applications under Section 95 of the IBC were rejected as no subsisting debt was found against the Personal Guarantors.

ALLAHABAD BENCH, PRAYAGRAJ (Applications filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 r/w Rule 7(2) of the Insolvency and Bankruptcy Rules, 2019)

IN THE MATTER OF:

BANK OF BARODA Stressed Assets Management Branch

4^th Floor Rajendra Bhawan, Rajendra Palace New Delhi-110008 .........Applicant/Financial Creditor Versus MR. ARUN GOEL

1. Station Chowk Opposite PNB Kiratpur Branch Kiratpur Bijnor Uttar Pradesh- 246731

2. S/O Dhani Ram House No.17 1^st Floor Near Panchseela Club Delhi-110017 ..........Respondent AND IN THE MATTER OF:

BANK OF BARODA Stressed Assets Management Branch

4^th Floor Rajendra Bhawan, Rajendra Palace New Delhi-110008 .........Applicant/Financial Creditor Versus MR. DEEPAK MITTAL

1. S/O Sh. Ashwani Kumar Mittal Nath House Devpura Haridwar Uttar Pradesh- 249401

2. H. No-77 Usha Colony Sahastradhara Road Dehradun Uttar Pradesh- 248001

3. Pushpanjali realms and infratech Li Orchid Park, Khasara No-11 Tarlan Heli Pad Uttaranchal-248001 ..........Respondent AND IN THE MATTER OF:

BANK OF BARODA Stressed Assets Management Branch

4^th Floor Rajendra Bhawan, Rajendra Palace New Delhi-110008 .........Applicant/Financial Creditor Versus MR. PRAMOD AGARWAL

1. S/O Late Sh. Dhani Ram L5 Hauz Khas Enclave Near Char Minar New Delhi-110016

2. Rama Paper Mills Ltd. 12/22 2^nd Floor East Patel Nagar, Delhi-110008 ..........Respondent AND IN THE MATTER OF:

BANK OF BARODA Stressed Assets Management Branch

4^th Floor Rajendra Bhawan, Rajendra Palace New Delhi-110008 .........Applicant/Financial Creditor Versus MR. KAPIL MITTAL

1. W/O Kapil Kumar H. No. 79 Nath House SIDCUL Sector 5A Shivalik Nagar Haridwar Uttaranchal-249403

2. Kapil Mittal Flat No. 1, P3A Deep Ganga Apartments, SIDCUL Sector 6A Uttaranchal-24903

3. S/O Sh. Ashwani Kumar Mittal Nath House Devpura Haridwara Near Deupra Chok B/H Himgiri /Hotel Uttaranchal-249401

4. Old 620 New 642 Kishan Pura, Baghpat Road Meerut City HO Uttar Pradesh- 250002 ..........Respondent Order pronounced on: 23.04.2026 Coram:

Sh. Praveen Gupta : Member (Judicial)

Sh. Ashish Verma : Member (Technical)

Appearances:

Sh. Ashish Verma with Sh. Nikhil : For the FC/ Bank of Baroda Thakur, Advs.

Sh. Utkarsh Aswal, Adv. : For the RP, Mr. Sandeep Goel present in person Sh. Ravi Data with Sh. Ranit Basu, : For the Personal Guarantor Advs.

ORDER

1. Our present order will decide and dispose of the Company Petitions (IBs) having Nos. 85 of 2022, 86 of 2022, 87 of 2022 and 88 of 2022, respectively. Since the factual and legal premises/ issues involved in all these petitions are similar, therefore by way of this present common order, we are dealing with the petitions and deciding accordingly.

2. For the convenience of discussion, the reference is made and facts are drawn from CP (IB) No. 87 of 2022.

CP (IB) No. 87 of 2022

3. This present petition was filed on 28.07.2022 by the Bank of Baroda (hereinafter referred to as the “Applicant”/ “Applicant Bank”/“Financial Creditor”) under Section 95 of Insolvency and Bankruptcy Code (hereinafter referred to as the “IBC/Code”) r/w Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantor to Corporate Debtor) Rules, 2019 (hereinafter referred as “PG Rules, 2019”). The prayer made is to initiate the Insolvency Resolution Process against the Respondent Mr. Pramod Agarwal (hereinafter referred to as “Respondent”/ “PG”/ “Personal Guarantor”), who stood as one of the Personal Guarantors to the various credit facilities availed by the Corporate Debtor namely, M/s Baghauli Sugar & Distillery Limited from the Financial Creditor Bank i.e., Bank of Baroda for a total outstanding debt of Rs. 185,78,08,216.00/- (Rupees One Hundred Eighty-Five Crores Seventy-Eight Lakhs Eight Thousand Two Hundred and Sixteen Only) including interest and penalties as on 07.02.2020. The Date of Default, as mentioned in Part III of the application, is

31.05.2010.

4. It has been noted that the resolution plan of the Corporate Debtor, M/

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