Tribunal holds amended Section 96 of IBC applies retroactively, clearing way for insolvency resolution process and moratorium against guarantors
The National Company Law Tribunal (NCLT), New Delhi Bench, has admitted insolvency applications filed by Equentia Financial Service Pvt. Ltd. against three personal guarantors of Prafful Overseas Private Limited, holding that the proceedings were maintainable despite an earlier insolvency process already pending against one of the guarantors.
The applications were filed against Ms. Sangeeta Aggarwal, Ms. Saloni Ayush Aggarwal and Mr. Sri Narayan Aggarwal, all of whom had given personal guarantees for a working capital demand loan of Rs. 10 crore sanctioned to the corporate debtor under a facility agreement dated March 28, 2023. The creditor said the debt remained unpaid despite recall notices, invocation of guarantees, and demand notices issued in 2024.
The Resolution Professional (RP) submitted that the applications complied with Section 95 of the Insolvency and Bankruptcy Code, 2016, and that the debt, default, service of notice, and supporting documents were all duly established. The RP also noted that the financial debt had been registered with the Information Utility and authenticated by the debtor, leaving the guarantors with no basis to dispute the debt’s existence or validity.
A key objection raised by the guarantors was that earlier insolvency proceedings initiated by Canara Bank were already pending, and therefore the present applications were barred by the interim moratorium under Section 96 of the IBC. Their counsel relied on the NCLAT ruling in Sushant Chhabra v. Catalyst Trusteeship Ltd. to argue that any application filed during the currency of an interim moratorium was non-est in law.
The tribunal, however, relied on the amended provision introduced by the IBC (Amendment) Act, 2026, which inserted Section 96(4), clarifying that Section 96 would not apply to applications for initiating insolvency resolution process against personal guarantors to corporate debtors. Referring to the Bombay High Court’s ruling in Tata Capital Financial Services Ltd. v. Neel Motors LLP, the NCLT held that the amendment operates retroactively. On that basis, the tribunal concluded that the applications were not hit by the moratorium.
Accordingly, the NCLT admitted IA-798/ND/2026, IA-638/ND/2026 and IA-972/ND/2026, and ordered commencement of the insolvency resolution process against the personal guarantors. The tribunal also directed that the Resolution Professional give the guarantors an opportunity to submit a repayment plan and carry out the exercise under Section 100(2) of the Code.
With admission of the applications, a moratorium under Section 101 has now come into effect for 180 days. During this period, all pending legal proceedings in respect of the guarantors’ debts will remain stayed, creditors cannot initiate fresh proceedings, and the guarantors are restrained from transferring, alienating, encumbering or disposing of their assets.
The RP has been directed to issue a public notice within seven days inviting claims from creditors within 21 days, and to comply with all duties under the IBC and the Personal Guarantor Regulations. The tribunal further clarified that any amount already paid by the corporate debtor or other guarantors would be adjusted against the liability of the respondents.
Bottom Line :
Insolvency and Bankruptcy Code, 2016 - Personal guarantors to corporate debtor - Applications under Section 95 held maintainable notwithstanding pendency of earlier proceedings, in view of insertion of Section 96(4) by IBC (Amendment) Act, 2026 - Amendment held retroactive in application - Insolvency resolution process against personal guarantors admitted - Moratorium under Section 101 to commence upon admission.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 95, 96, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 112, 113; Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019; IBBI (Insolvency Resolution Process for Personal Guarantor to Corporate Debtors) Regulations, 2019
