Committee of Creditors’ Rejection of Repayment Plan Confirmed; NCLAT Rules Personal Guarantors Cannot Reopen Liability Dispute After DRT Finality
In a significant ruling dated September 21, 2026, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, dismissed three appeals filed by personal guarantors challenging the rejection of their repayment plan under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeals stemmed from an order by the National Company Law Tribunal (NCLT), Ahmedabad, which allowed the Resolution Professional’s (RP) application under Section 114 of the IBC seeking discharge following the failure of the repayment plan.
The appellants—personal guarantors of M/s Archon Engicon Limited—contended that their liability under the Deed of Guarantee dated June 12, 2014, was restricted only to the market value of the mortgaged properties, as per Clause 24 of the guarantee deed. They argued that this limited guarantee should have been recognized in the repayment plan and that the NCLT erred in holding them liable for the entire outstanding dues.
However, the NCLAT, led by Justice Yogesh Khanna, Officiating Chairperson, delivered a detailed judgment rejecting these contentions. The Tribunal underscored that Clauses 1, 6, and 9 of the Deed of Guarantee clearly imposed joint and several liability on the guarantors for the entire principal amount of Rs. 427 crores along with interest, costs, and charges. Clause 24, which referred to the mortgaged properties, was found to relate solely to the security arrangement and did not curtail the primary contractual liability.
The Tribunal further emphasized that the principle of contra proferentem (interpreting ambiguous contract clauses against the drafter) could not be invoked to override explicit liability clauses in a commercial contract. The guarantors’ plea of “non est factum” (claiming ignorance of the nature of the document signed) was also found unsubstantiated, as they had participated in the Debt Recovery Tribunal (DRT) proceedings and never disputed the execution of the guarantee deed.
Importantly, the Tribunal noted that the DRT, by an unchallenged order dated August 3, 2021, had already adjudicated the guarantors as jointly and severally liable for the entire debt owed by the borrower company. The appellants had not challenged this final order, thereby precluding them from reopening the issue in collateral proceedings under Section 114 of the IBC.
On the question of the repayment plan submitted by the personal guarantors, the NCLAT observed that the plan, which offered payments far below the admitted claims, failed to secure the requisite 66% affirmative vote from the Committee of Creditors (CoC). The Tribunal held that the Adjudicating Authority cannot substitute its commercial wisdom for that of the CoC and has no jurisdiction to approve a plan without the statutory majority. Consequently, the rejection of the repayment plan and the discharge sought by the RP were upheld.
The judgment reaffirms the binding nature of CoC decisions in insolvency resolution and clarifies that personal guarantors cannot evade full liability when the guarantee deed expressly provides for joint and several liability. It also highlights the finality of orders passed by the DRT and restricts collateral challenges in insolvency proceedings.
This ruling provides clarity on the interpretation of guarantee deeds in insolvency cases and strengthens the position of creditors in recovery proceedings against personal guarantors.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Personal guarantors - Repayment plan rejected by Committee of Creditors for want of requisite 66% voting share - Personal guarantors cannot, in proceedings under Section 114 of the Code, re-agitate plea that their liability under deed of guarantee was limited only to mortgaged property value, particularly when DRT had already adjudicated them jointly and severally liable and such order had attained finality.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 111, 114; Contract Act Section 128; IBC Rules 2016 Rule 11
