A bank can invoke the personal guarantee you signed for your company loan and file an insolvency application against you personally at the NCLT under Section 95 of the Insolvency and Bankruptcy Code 2016. The moment it is filed, an interim moratorium starts. A resolution professional then reports, and the NCLT admits or rejects within set timelines.
You signed a personal guarantee so your company could get a working-capital loan. The company defaulted, and now a bank notice says it has filed against you personally at the National Company Law Tribunal under the Insolvency and Bankruptcy Code. This is not the same as a recovery suit, and it is not the company's insolvency. It is a separate process aimed at your own assets, and the rules and the clock are different. This guide explains exactly what happens, in plain language.
When a director or promoter guarantees a company's loan and the company defaults, the lender can pursue the guarantor under Part III of the Insolvency and Bankruptcy Code 2016. For a personal guarantor to a corporate debtor, the forum is the NCLT - the same tribunal that hears the company's insolvency.
Statute: Insolvency and Bankruptcy Code 2016 (IBC), Part III, which deals with insolvency and bankruptcy of individuals and partnership firms.
The 2019 notification: Provisions of Part III relating to personal guarantors to corporate debtors were brought into force by a Central Government notification dated 15 November 2019, effective 1 December 2019. Before this, Part III had not been operationalised for guarantors.
The forum: Under the notified scheme, the Adjudicating Authority (AA) for a personal guarantor to a corporate debtor is the NCLT - the same bench as the corporate debtor, so both proceedings sit before one tribunal. For other individuals (not guarantors to a company), the AA is the Debt Recovery Tribunal (DRT).
The Supreme Court ruling: In Lalit Kumar Jain v. Union of India, decided 21 May 2021 [(2021) SCC OnLine SC 396], the Supreme Court upheld the validity of the 15 November 2019 notification. Crucially, it held that approval of a corporate resolution plan does not by itself discharge the personal guarantor - your guarantee is an independent contract, so the company's restructuring does not automatically wipe out your liability. This is why lenders now routinely pursue both the company and its guarantors.
A typical case. Take a managing director of a small auto-parts unit who had personally guaranteed a ₹2.4 crore term loan. After the company defaults and enters corporate insolvency, the lender files against the guarantor under Section 95 at the NCLT. An interim moratorium under §96 begins on filing, freezing a parallel recovery action. The NCLT appoints an RP under §97, who examines the file and reports under §99. With advice, the guarantor proposes a repayment plan under §105 restructuring the ₹2.4 crore over five years. The hard lesson: the company's resolution plan, approved months earlier, had not discharged the personal guarantee.
If a public-sector bank or a government-backed lender is the creditor, you can use the Right to Information Act 2005, §6(1) to ask for the records behind the invocation. Useful RTI requests include the board or committee resolution that approved invoking your guarantee, the outstanding-dues computation, and the dates the loan was classified as a non-performing asset. These documents often reveal calculation errors or gaps in the lender's case that you can raise before the NCLT.
You can draft the request with the AI RTI Drafter, and if the bank stays silent past 30 days, escalate with the First Appeal Builder. Check any reply against the PIO Reply Checker.
To: The Central Public Information Officer, [Bank Name], [Branch]
Subject: Information under the RTI Act 2005 regarding invocation of personal guarantee
1. Certified copy of the resolution authorising invocation of my personal guarantee dated [date], in loan account no. [number].
2. The computation of outstanding dues claimed against me as guarantor, with date of NPA classification.
3. Copies of all notices issued to me as personal guarantor under the loan agreement.
I enclose the application fee of ₹10. Kindly provide the information within 30 days under §7(1).
[Name, address, signature, date]
Yes. If you signed a personal guarantee for a corporate debtor, the lender can file under Section 95 of the IBC at the NCLT. The 15 November 2019 notification, upheld in *Lalit Kumar Jain v. Union of India* (2021), specifically enabled this against personal guarantors to corporate debtors.
An interim moratorium under Section 96 starts the moment the application is filed and lasts until the NCLT decides on admission. If the application is admitted, a moratorium under Section 101 runs for 180 days, which courts have held cannot be extended.
No. The Supreme Court in *Lalit Kumar Jain* (21 May 2021) held that approval of a corporate resolution plan does not automatically discharge the personal guarantor. Your guarantee is treated as an independent contract.
You can negotiate a repayment plan under Sections 105 to 114 with the resolution professional, proposing a restructuring for creditors to vote on. You may also explore a one-time settlement with the lender, or contest the application's maintainability before the NCLT. See our loan settlement / OTS guide.
For a personal guarantor to a corporate debtor, the Adjudicating Authority is the NCLT (the same bench as the company). For other individuals, it is the Debt Recovery Tribunal.