NCLAT New Delhi Rules, Once CoC Agrees To Release Personal Guarantees Upon Payment, Invocation Cannot Be Directed By Adjudicating Authority
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), has clarified that where the Committee of Creditors (CoC) has expressly agreed to release personal and corporate guarantees upon completion of payment under an approved resolution plan, the Adjudicating Authority (NCLT) cannot issue contrary directions mandating their invocation.
Background
The appeal arose from Company Appeal (AT) (Insolvency) No. 1192 of 2025 filed by Mukesh Goel, Resolution Applicant for M/s Aanchal Ispat Limited. By order dated 27.03.2025, the Adjudicating Authority (NCLT) approved the resolution plan submitted by Goel but, while doing so, made additional observations in paragraphs 28 and 39. These impugned paragraphs directed that personal guarantees of the corporate debtor, if any, must be invoked, holding that such invocation was “essential for maximization of wealth of the Corporate Debtor.”
Challenging these observations, the Appellant argued that they were inconsistent with the approved resolution plan, which specifically provided for release of guarantees upon full payment and implementation of the plan.
Appellant’s Submissions
Represented by Advocates Diwakar Maheshwari, Shreyas Edupuganti, and Karan B., the Appellant submitted that the resolution plan, approved unanimously by the CoC with 100% voting, contained an explicit clause that:
All personal and corporate guarantees and third-party assets provided as security would be released only after complete implementation and payment of the resolution plan.
The Secured Financial Creditors were to be paid ₹47.25 crores out of a total plan amount of ₹54.50 crores, without reduction under any circumstances.
The Appellant also relied on the Executive Summary of the Resolution Plan (page 262 of the record) and a specific undertaking clause (page 342), which confirmed that guarantees would be released only upon full implementation. Further, reliance was placed on the CoC’s letter dated 03.07.2024 (page 451 of the record), which reiterated that “all guarantees and security interests in respect of the credit facility extended to Aanchal Ispat Ltd. shall be settled and released only after complete implementation and payment of the resolution plan amount of ₹54.50 crores.”
Accordingly, it was argued that the NCLT’s observations in paragraphs 28 and 39 were not only unnecessary but also ran contrary to the commercial wisdom of the CoC and the binding terms of the plan.
Respondents’ Submissions
Counsel for the CoC supported the Appellant’s position, submitting that the resolution plan’s terms were clear and required no additional directions. Advocate Dipankar Das, appearing for Respondent No. 2, also argued that the CoC had already taken a conscious decision regarding release of guarantees, and hence the NCLT’s observations were redundant.
NCLAT’s Observations
The Bench first reproduced the impugned paragraphs of the NCLT order, which had directed invocation of personal guarantees irrespective of the plan terms. After examining the record, it noted that the approved resolution plan and CoC letter categorically contemplated release, not invocation, of guarantees upon full payment. The Tribunal observed: “There was no question of invocation of personal guarantee as observed in paragraph 28 and 39. When personal guarantees were being released on payment after implementation of the plan, invocation of personal guarantee was not even contemplated.”
It emphasized that once the CoC has exercised its commercial wisdom and approved a resolution plan unanimously, the Adjudicating Authority cannot add conditions that contradict the plan. The Tribunal underscored that invocation of guarantees is a commercial decision of the creditors and cannot be judicially mandated when the CoC has expressly agreed to release them.
Final Decision
Finding the observations inconsistent with the approved resolution plan, the NCLAT deleted paragraphs 28 and 39 from the NCLT’s order. It concluded: “When the CoC itself has agreed to release the personal guarantees after receiving the payment under the plan, question of invocation of personal guarantee does not arise.” Accordingly, the appeal was allowed to that limited extent, and the resolution plan approved by the NCLT remained undisturbed in all other respects.
The ruling reinforces the principle that the commercial wisdom of the CoC is paramount in insolvency proceedings. Once the CoC has approved terms for release of guarantees upon implementation of a resolution plan, the Adjudicating Authority cannot direct their invocation in the name of maximizing recovery.
Appearance
For Appellant: Mr. Diwakar Maheshwari, Mr. Shreyas Edupuganti and Mr. Karan B., Advocates.
For Respondents: Mr. Dipankar Das, Advocate for Respondent no.2.
Cause Title: Mukesh Goel V. Santanu Brahman & Anr.
Case No: Company Appeal (AT) (Ins) No. 1192 of 2025 & I.A. No. 4654, 4658 of 2025
Coram: Justice Ashok Bhushan [Chairperson], Barun Mitra [Member - Technical]
