Personal Guarantor Insolvency Case Must Be Filed Where Corporate Debtor CIRP Pending: NCLAT

NCLAT quashes Section 95 proceedings against personal guarantor initiated before NCLT New Delhi, holding that the mandatory provisions of Section 60(2) IBC require such applications to be filed before the same bench handling the corporate debtor's CIRP.

In a significant ruling reinforcing the consolidation of insolvency proceedings, the National Company Law Appellate Tribunal (NCLAT) has set aside an order of the NCLT Principal Bench and quashed insolvency proceedings against a personal guarantor. The appellate tribunal held that the NCLT New Delhi lacked jurisdiction to entertain the Section 95 application because the corporate debtor's Corporate Insolvency Resolution Process (CIRP) was already pending before the NCLT Chandigarh Bench-II.

Background: Two Benches, One Debt

The dispute arose from the insolvency of Laxmi Pipes Ltd., a company incorporated in Haryana. Operational creditor Praveen Kumar Garg had initiated CIRP against the company before the NCLT Chandigarh Bench-II, which admitted the petition on May 17, 2023, and appointed a Resolution Professional. Subsequently, Garg filed a separate application under Section 95 of the Insolvency and Bankruptcy Code (IBC) before the NCLT New Delhi Bench-II against Kamlesh Rani Singla, the suspended director and personal guarantor of Laxmi Pipes Ltd. That application was admitted on May 28, 2024, triggering an interim moratorium.

Singla moved a transfer application before the NCLT Principal Bench, arguing that under Section 60(2) IBC, all proceedings against a personal guarantor must be heard by the same bench dealing with the corporate debtor's CIRP. The Principal Bench dismissed the transfer application on December 5, 2025, relying on a Gujarat High Court judgment that interpreted Rule 16(d) of the NCLT Rules, 2016, as limiting the President's transfer power to intra-territorial transfers only.

The Jurisdictional Conundrum

The core legal question before the NCLAT was whether the NCLT New Delhi could validly exercise jurisdiction over a personal guarantor's insolvency when the corporate debtor's CIRP was pending before a different bench. The appellant contended that Section 60(2) IBC contains a non-obstante clause and overrides the general territorial jurisdiction rule under Section 60(1). The provision mandates that where CIRP of a corporate debtor is pending before "a" NCLT, any application relating to the personal guarantor "shall be filed before such" NCLT.

The NCLAT found merit in this argument, noting that the legislative intent is to ensure consolidation, judicial consistency, and avoidance of conflicting decisions from different benches.

NCLAT's Legal Analysis: Overriding Mandate of Section 60(2)

The appellate tribunal examined the scheme of Section 60 IBC and concluded that the provision is mandatory in nature. It referred to its earlier decision in Ankit Miglani v. State Bank of India (Company Appeal (AT) (Insolvency) No. 58 of 2023), where it was held that Section 60(2) admits of no discretion and requires that proceedings against a personal guarantor be instituted before the same bench where the corporate debtor's CIRP is pending.

The tribunal also considered State Bank of India v. Mahendra Kumar Jajodia (Company Appeal (AT) (Insolvency) No. 60 of 2022), which clarified that Section 60(2) applies only when CIRP is pending; if no proceedings are pending, the application can be filed before the NCLT having territorial jurisdiction under Section 60(1).

Critically, the NCLAT rejected the narrow interpretation of Rule 16(d) adopted by the Principal Bench. It held that the President of NCLT is empowered to transfer cases from one bench to another, including across territorial boundaries, especially when required by Section 60(2). "It will create anomalous situations by a narrow interpretation that Rule 16(d) restricts it to the same territorial jurisdiction ," the bench observed.

Key Observations from the Judgment

"Thus, this is an overriding statutory mandate under Section 60(2) of the Insolvency and Bankruptcy Code, 2016 . Therefore, NCLT, New Delhi, lacks both territorial jurisdiction as well as inherent jurisdiction to entertain or proceed with the Section 95 application against the Appellant, and any continuation of such proceedings would be void ab initio and without jurisdiction."

"The idea is that both proceedings be entertained by one and the same NCLT... The object is that when a CIRP or Liquidation Proceeding of a Corporate Debtor is pending before 'a' NCLT, the application relating to Insolvency Process of a Corporate Guarantor or Personal Guarantor should be filed before the same NCLT."

"We note that the Ld. Adjudicating Authority has misconstrued the scope of Rule 16(d) of the National Company Law Tribunal Rules, 2016 as being confined only to intra-territorial transfers , thereby completely disregarding and rendering otiose the jurisdictional command contained in Section 60(2) of the Insolvency and Bankruptcy Code, 2016 ."

The Final Decision

The NCLAT set aside the impugned order dated December 5, 2025, passed by the NCLT Principal Bench in TA(IBC)-50(PB)/2024. It quashed all proceedings in CP(IB) No. 419/ND/2023 before the NCLT New Delhi Bench-II. However, the tribunal granted liberty to the operational creditor, Praveen Kumar Garg, to file a fresh application under Section 95 before the NCLT Chandigarh Bench-II, which has appropriate jurisdiction over the matter.

The ruling reinforces the mandatory character of Section 60(2) IBC and clarifies that administrative rules like Rule 16(d) cannot override the substantive jurisdictional mandate of the Code. This decision will likely prevent future forum-shopping and ensure that all related insolvency proceedings are consolidated before a single NCLT bench, promoting efficiency and judicial coherence.