Authority: National Company Law Tribunal Division Bench (Court–I) Chennai

Order Date: 9th June 2026

Case Overview

The National Company Law Tribunal (NCLT) Chennai heard a petition (CP(IB)/43(CHE)/2024) filed by Aditya Birla Finance Limited under Section 95 of the Insolvency and Bankruptcy Code, 2016 against Mr. G. Thiyagarajan as personal guarantor for loans extended to Velohar Infra Private Limited.

The financial creditor (Aditya Birla Finance) had extended loan facilities totaling ₹3.50 crore (₹2.98 crore working capital demand and ₹52 lakh overdraft) to corporate debtor Velohar Infra Private Limited through a loan agreement dated 24th January 2014. The loan was secured by mortgage of immovable property and guaranteed by Mr. G. Thiyagarajan and Mrs. Vijayalakshmi Subburaj through a Deed of Guarantee executed on the same date.

The corporate debtor defaulted on repayment, resulting in the account being classified as NPA on 1st November 2017 with a default amount of ₹3,65,28,644. The creditor issued a SARFAESI notice under Section 13(2) on 3rd November 2017 to the corporate debtor and Mrs. Vijayalakshmi Subburaj, but not to Mr. Thiyagarajan. The guarantee against Mr. Thiyagarajan was invoked only on 15th October 2022, and the current petition was filed on 9th June 2023.

The respondent/guarantor raised two primary defenses: (1) that the petition was barred by limitation since the default occurred on 1st November 2017 and the petition was filed beyond the three-year limitation period, and (2) that the guarantor's liability stood discharged since the creditor had accepted ₹1,03,66,200 in settlement during the corporate debtor's liquidation proceedings (CP/114/IB/2018).

The tribunal extensively examined the continuing nature of the guarantee deed, particularly clauses 3, 12, and 30, which established that the guarantee remained valid regardless of partial payments or settlements with the principal debtor. The court relied on Supreme Court precedents including Syndicate Bank vs. Channaveerappa Beleri & Ors and Lalit Kumar Jain v. Union of India & Ors, which establish that a continuing guarantee can be enforced against the guarantor even if the claim against the principal debtor becomes time-barred, and that liquidation proceedings against the corporate debtor do not automatically discharge the guarantor's liability.

The tribunal rejected both defenses, holding that the limitation period for invoking the guarantee commenced only on 15th October 2022 (date of invocation), making the petition filed on 9th June 2023 well within limitation. The court also held that the settlement received during corporate liquidation did not discharge the guarantor's independent contractual liability.

Final Outcome

The NCLT admitted the petition and initiated insolvency resolution proceedings against Mr. G. Thiyagarajan under Section 95 of IBC 2016. The court appointed Mr. Ravindra Beleyur (IBBI/IPA-001/IP-00189/2017-18/10368) as the Resolution Professional and declared a 180-day moratorium effective from the date of the order.

The Resolution Professional was directed to: publish public notice within 7 days on NCLT website and in two newspapers (English and vernacular); prepare a list of creditors within 30 days; assist in preparing a repayment plan under Section 105; and submit periodic reports every 30 days. The financial creditor was directed to deposit ₹2,00,000 to the RP's account within one week for expenses.

Topics: Personal Guarantee Insolvency, Limitation Law, Continuing Guarantee