Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has held that once a resolution plan has been approved and restructured debts are secured by a fresh personal guarantee, a financial creditor cannot invoke an earlier personal guarantee to initiate insolvency proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the guarantor. The decision was delivered by a three-member bench comprising Justice Ashok Bhushan (Chairperson), Mr. Arun Baroka (Technical Member), and Mr. Barun Mitra (Technical Member).

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The appeal was filed by Indian Bank challenging the order dated 24.01.2025 passed by the National Company Law Tribunal (NCLT), New Delhi Bench, Court-III, which had rejected an application under Section 95(1) of the IBC for initiating personal insolvency proceedings against Anjanee Kumar Lakhotia, the personal guarantor and resolution applicant.

Background

M/s MBL Infrastructure Limited, the corporate debtor, had obtained various financial facilities from a consortium of banks led by State Bank of Mysore (now merged with State Bank of India) since 2010. The appellant bank, then Allahabad Bank (now Indian Bank), was part of the consortium. A deed of personal guarantee dated 17.02.2016 was executed by Anjanee Kumar Lakhotia in favour of the lead bank.

Subsequently, the corporate debtor was admitted to Corporate Insolvency Resolution Process (CIRP) on 30.03.2017. Anjanee Kumar Lakhotia, then the suspended director of the company, submitted a resolution plan dated 22.11.2017, which was approved by 78.50% of the Committee of Creditors (CoC). NCLT, Kolkata approved the resolution plan on 18.04.2018. This approval was challenged up to the Supreme Court but was ultimately upheld.

Pursuant to the implementation of the resolution plan, a fresh deed of personal guarantee dated 04.07.2024 was executed by Lakhotia in favour of SBICAP Trustee Company Limited, securing the restructured debts of the consortium.

Section 95 Proceedings and Dissenting Creditor’s Plea

Indian Bank, being a dissenting financial creditor who had voted against the resolution plan, subsequently filed an application under Section 95(1) of the IBC seeking to initiate personal insolvency proceedings against the personal guarantor. The bank contended that the earlier personal guarantee dated 17.02.2016 remained valid and enforceable, and that approval of the resolution plan did not extinguish the guarantor’s liability.

The State Bank of India, representing the consortium of lenders, opposed the application. It was submitted that the previous personal guarantee stood extinguished due to restructuring and that a fresh personal guarantee had been executed under the terms of the approved resolution plan. SBI maintained that since the personal guarantor himself was the resolution applicant and had already infused ₹63 crores as part of implementation, the insolvency process initiated by Indian Bank was not maintainable.

NCLAT’s Observations

The Tribunal carefully reviewed the materials, including the resolution plan and supporting documents. It noted that the plan specifically provided for a new personal guarantee and modifications to the security interest. The value of the personal guarantor’s assets as of 31.03.2017 was taken into account during the approval of the plan, and the restructuring arrangement addressed all claims and securities, including those of dissenting creditors like Indian Bank.

The NCLAT referred to Clause 2.3 of the resolution plan which specifically mentioned: “Personal guarantee of Shri A.K. Lakhotia to consortium working capital lenders, equipment/ECB lenders as per the resolution plan. The net worth of guarantor as on 31.3.2017 is ₹18.37 crores.”

The Tribunal noted that the earlier guarantee had been effectively superseded by a new set of agreements executed on 04.07.2024, including a new personal guarantee, debenture trust deed, working capital term loan agreement, and security trustee agreement.

On the question of law, the Tribunal acknowledged that the Supreme Court in Lalit Kumar Jain v. Union of India [(2021) 9 SCC 321] held that approval of a resolution plan does not automatically extinguish personal guarantees. However, the NCLAT distinguished the present case on facts, highlighting that here the personal guarantor was the resolution applicant himself, and a fresh guarantee had been executed post-approval.

The Tribunal concluded: “When the debt of all lenders was restructured and security interests were extinguished by asking the personal guarantor to submit a fresh personal guarantee to the consortium of banks, the appellant cannot proceed to put the personal guarantor into personal insolvency who himself is the resolution applicant whose resolution plan has been approved up to the Hon’ble Supreme Court.”

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Verdict

In dismissing the appeal, the NCLAT held that the Adjudicating Authority was correct in rejecting the Section 95 application. It reaffirmed the principle that a fresh personal guarantee executed as part of an approved and implemented resolution plan supersedes the earlier one, barring the initiation of separate insolvency proceedings on the old guarantee. Accordingly, the appeal filed by Indian Bank was dismissed.

Appearance

For Appellant: Mr. Amod K. Dalela, Mr. Pradeep Pandey, Advocates.

For Respondents: Mr. Arusuya Salwan, Mr. Rachit Wadhwa, Advocates for R-1, Mr. Abhijeet Sinha, Sr. Advocate with Ms. Shweta Dubey, Ms. Kanishka Prasad, Advocates for R-2, Mr. Sumit Sinha, Advocate with Mr. Roshan Lal Jain in person for R-3.

Cause Title: Indian Bank Vs Anjanee Kumar Lakhotia And Anr.

Case No: Company Appeal (AT) (Insolvency) No. 458 of 2025

Coram: Justice Ashok Bhushan [Judicial Member], Mr. Arun Baroka [Technical Member], Mr. Barun Mitra [Technical Member]

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