Authority: National Company Law Tribunal, Mumbai Bench - IV (Court IV)
Order Date: 06.07.2026
Case Overview
The State Bank of India (Financial Creditor) filed an application under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. The application sought initiation of insolvency resolution process against Mr. Vaibhav Lodha (Personal Guarantor) for a total debt of ₹1076.34 crore as on 31.05.2021. The debt arose from various credit facilities availed by Topworth Pipes & Tubes Pvt. Ltd. (Corporate Debtor) from SBI and other consortium lenders dating back to 2008. Mr. Lodha had executed a Deed of Guarantee dated 30.03.2015 guaranteeing due payment of the corporate debtor's obligations.
The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP) on 11.12.2018 and subsequently liquidated on 12.06.2020. In the liquidation process, SBI recovered ₹27.40 crore. SBI issued a Demand Notice in Form B dated 21.06.2021 to the Personal Guarantor, who responded through his advocate on 01.07.2021 contesting the claim, arguing that the debt was extinguished after liquidation recovery and that he was not a guarantor after discharge.
The key legal issue was whether SBI had properly invoked the personal guarantee before filing the application. The tribunal examined whether the recall notice dated 01.02.2016 (addressed to the corporate debtor but copied to the guarantor) and the statutory Form B notice dated 21.06.2021 constituted valid invocation of the guarantee under the terms of the Deed of Guarantee.
Final Outcome
The NCLT rejected SBI's application, holding that the Financial Creditor failed to establish a cause of action. The tribunal found that:
1. The recall notice dated 01.02.2016 was addressed to the corporate debtor and merely copied to the guarantor without any specific demand directed at the guarantor, thus not constituting proper invocation under Clause 3.1 of the Deed of Guarantee.
2. The statutory notice in Form B issued under Rule 7 cannot be treated as invocation of guarantee, following the NCLAT precedent in State Bank of India v. Mr. Deepak Kumar Singhania [(2025) ibclaw.in 153 NCLAT].
3. Since no proper invocation was established, the question of limitation (raised by the respondent) did not require consideration.
The application C.P.(IB) No. 902/MB/2021 was rejected with no order as to costs.
Topics: Personal Guarantee Invocation, Insolvency Proceedings, Banking Debt Recovery