Authority: National Company Law Tribunal Principal Bench, New Delhi

Order Date: 12.06.2026

Case Overview

The National Company Law Tribunal (NCLT) Principal Bench, New Delhi, heard a petition filed by IDBI Bank Limited under Section 95(1) of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Personal Insolvency Resolution Process (PIRP) against Shri Sudhir Narayan Rao Modak, personal guarantor for corporate debtor M/s SMS Paryavaran Ltd. The financial creditor (IDBI Bank) had sanctioned working capital facilities to the corporate debtor, initially amounting to ₹20 crore in 2010, which was subsequently enhanced to ₹33 crore in 2013 and eventually became part of a consortium lending arrangement totaling ₹149 crore. The respondent executed multiple personal guarantee agreements between 2010 and 2016 and mortgaged several immovable properties as security.

The corporate debtor's account was classified as Non-Performing Asset (NPA) on 28.02.2018. The Corporate Insolvency Resolution Process (CIRP) against SMS Paryavaran Ltd. was admitted by NCLT on 03.01.2020, and a resolution plan was approved on 21.02.2023, under which IDBI Bank received ₹4.30 crore as partial satisfaction of its dues. The financial creditor issued a demand notice under Rule 7(1) of the Personal Guarantor Rules, 2019 on 15.06.2024 for an outstanding amount of ₹67,70,47,092.82 as on 05.06.2024, which remained unpaid.

The tribunal examined three key issues: (1) whether the petition was filed within limitation period, (2) whether the guarantee deeds were validly invoked and default established, and (3) whether guarantee invocation was premature due to ongoing implementation of the corporate debtor's resolution plan.

On the limitation issue, the tribunal found that multiple One-Time Settlement (OTS) proposals submitted between 2020-2023 (last on 06.11.2023) constituted fresh acknowledgements under Section 18 of the Limitation Act, 1963. The guarantee deeds also contained clauses stating that acknowledgements by the corporate debtor would bind the guarantor. The petition filed on 26.07.2024 was within limitation from the last OTS proposal.

On the second issue, the tribunal found that the respondent executed multiple personal guarantees (dated 12.10.2010, 20.05.2013, 08.05.2014, 03.07.2015, 01.08.2015, and 05.04.2016) which were irrevocable and continuing in nature. The financial creditor validly invoked the guarantees through recall notices (24.05.2018), guarantee invocation notices (15.06.2018), and SARFAESI notice (27.06.2018), followed by the demand notice under Rule 7(1) on 15.06.2024.

On the third issue, the tribunal held that the personal guarantees operate independently of the corporate debtor's resolution plan. The approved resolution plan specifically provided at Para 2.7(e)(vii) that personal guarantees would continue to be held by financial creditors until complete implementation of the plan and full payment. The rejection of OTS proposals by the consortium lenders entitled the financial creditor to invoke the guarantees.

Final Outcome

The NCLT admitted the petition under Section 100 of IBC and initiated insolvency resolution process against the personal guarantor, Shri Sudhir Narayan Rao Modak. The interim moratorium under Section 96(1) ceased, and a fresh moratorium under Section 101 was declared for 180 days or until order under Section 114. Mr. Rahul Jindal (IBBI Registration No. IBBI/IPA-001/IP-P-02649/2021-2022/14048) was confirmed as Resolution Professional and directed to take further steps under Part III, Chapter-III of IBC, including publishing public notice, preparing list of creditors, and facilitating repayment plan. The financial creditor was directed to deposit ₹1,00,000 with the RP for expenses. The respondent was directed to cooperate with the RP and submit complete details of assets and liabilities within two weeks, including Income Tax Returns for 2023-24 and 2024-25.

Topics: Personal Guarantor Insolvency, Bank Debt Recovery, NCLT Proceedings