Authority: Calcutta High Court, Commercial Division (Hon'ble Justices Debangsu Basak & Md. Shabbar Rashidi)

Order Date: July 2, 2026

Case Overview

  • Plaintiffs: Sri Vineet Mohan Gupta & Anr.; Respondents: Canara Bank (lead consortium banker) and other consortium members (Nos 1‑12) plus the borrower (No 13).
  • The appellants filed Title Suit COM 110/2024 on November 6, 2024 in the Commercial Court, Rajarhat, seeking (a) declaration that their personal guarantees for the borrower’s debts are discharged, (b) perpetual injunction restraining the consortium banks from treating them as guarantors, and related reliefs.
  • The consortium had extended credit facilities to the borrower (No 13). The appellants had given personal guarantees. After the death of their father (Feb 21, 2021), eight of the twelve consortium banks released the guarantees; four did not.
  • A demand notice dated November 17, 2023 was issued by Canara Bank (No 1) recalling the credit facilities. The appellants challenged this notice before the Orissa High Court (WP(C) 41170 2023); the High Court disposed the writ on August 22, 2024, allowing the appellants to approach the NCLT.
  • Respondent No 1 filed two insolvency petitions under Section 95 IBC 2016 (CP(IB)/32/KB/2025 and CP(IB)/33/KB/2025) on January 15, 2025 against the two appellants. The NCLT admitted both on February 4, 2025 and appointed a Resolution Professional; the matters are fixed for hearing on July 30, 2026.
  • The trial judge dismissed the suit on February 19, 2026 invoking Section 96 IBC 2016 (interim‑moratorium) and Order VII Rule 11(d) CPC, holding the suit barred.
  • The appellants argued that the suit was filed before any insolvency petition, that Section 96 only operates after a petition is filed, and that the civil court retains jurisdiction to grant declaratory relief on personal guarantees.
  • The Court examined the statutory framework:
  • Section 96 creates an interim moratorium only when a petition under Section 94/95 is filed; the moratorium ran from January 15, 2025 to February 4, 2025.
  • Since the suit was filed on November 6, 2024, the moratorium was not in force at that time; therefore Section 96 could not justify dismissal.
  • Sections 231 and 238 IBC bar civil courts only when a proceeding under the IBC is pending and the specific stay provisions (Sections 96/101) apply. Here, the civil suit preceded the insolvency proceedings, so the bar does not arise.
  • The Court reiterated that Order VII Rule 11(d) must be applied strictly on the averments in the plaint, not on subsequent events.
  • The Court concluded that the impugned order was erroneous, set it aside, and remanded the suit for disposal by the trial court.
  • No costs were awarded; AD COM 2 2026 was allowed without costs, and IA CAN 1 2026 was disposed.

Final Outcome

  • The February 19, 2026 order dismissing the title suit is set aside.
  • Title Suit COM 110/2024 is remanded to the trial court for further proceedings.
  • The appeal (AD COM 2 2026) is allowed; no costs are imposed.

Topics: Insolvency & Bankruptcy, Civil Procedure, Personal Guarantees