Authority: National Company Law Tribunal, Ahmedabad (Court - II)

Order Date: 17 June 2026

Coram: Mrs. Chitra Hankare (Member Judicial) and Dr. V. G. Venkata Chalapathy (Member Technical)

Case Overview

State Bank of India (Financial Creditor) filed an application under Section 95 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Insolvency Resolution Process against Mr. Dhananjay Sanjay Agrawal as Personal Guarantor for corporate debtor M/s Raninga Paper Mills Private Limited. The bank claimed a default amount of Rs. 28,12,30,051.61/- with date of default as 05.12.2024.

The personal guarantee was executed on 24.05.2022 for credit facilities originally sanctioned to the corporate debtor. The loan account was declared as NPA on 27.09.2024. The bank issued demand notice under Rule 7(1) on 17.01.2025 calling for payment of Rs. 26,64,23,493.46/-.

The respondent guarantor raised multiple objections: (1) lack of proper authorization in filing the application; (2) he had resigned as director of corporate debtor on 27.01.2023 and informed bank via letters dated 04.04.2023, 04.10.2023 and 06.11.2023; (3) he disputed liability for post-resignation facilities sanctioned on 20.07.2023 and 24.05.2024; (4) claimed discharge under Section 133 of Indian Contract Act due to material variation without consent; and (5) argued that parallel recovery proceedings were pending before DRT.

The Resolution Professional (Mr. Sunil Kumar Agarwal, IBBI/IPA-002/IP-N00081/2017-18/10222) appointed on 26.11.2025 submitted report on 11.12.2025 recommending admission, noting the guarantee contained waiver clauses for variations under Sections 131, 133, 134, 135, 139, 140 and 141 of Indian Contract Act.

The tribunal examined the guarantee agreement dated 25.05.2022 which guaranteed facilities for Rs. 29,48,11,435 with supplemental agreements dated 12.02.2019, 11.08.2020, 05.03.2021, 12.11.2021 and 29.12.2021. The waiver clause (Clause 3) was qualified by the condition that variations or fresh limits would be "subject to the aggregate thereof not exceeding the principal sum."

The court found that post-resignation sanction letters dated 20.07.2023 and 24.05.2024 created facilities that exceeded the original principal sum contemplated under the guarantee deed. This constituted a fundamental variation beyond the scope of the guarantor's consent, and the waiver clause could not bind the guarantor to liabilities exceeding the contractual cap of Rs. 29.48 crore.

Final Outcome

The application CP(IB) No. 180 of 2025 is partly allowed. Insolvency process is initiated against Mr. Dhananjay Sanjay Agrawal, but his liability is limited to the principal sum stipulated under the original Deed of Guarantee (Rs. 29.48 crore). The claim relating to enhanced exposure exceeding this amount cannot be enforced against him.

Moratorium is declared for 180 days from the order date, during which: (a) pending legal actions in respect of any debt are stayed; (b) creditors cannot initiate new legal proceedings; (c) debtor cannot transfer, alienate or dispose of assets; (d) with exceptions for transactions notified by Central Government.

Resolution Professional is directed to: publish public notice within 7 days; prepare list of creditors within 30 days; help debtor prepare repayment plan within 21 days from last claim date; and conduct creditors meeting if required. SBI is directed to deposit Rs. 2,00,000/- to RP's bank account within one week towards fees.

Topics: Personal Guarantor Insolvency, Contractual Liability Limit, Banking Recovery