Amendment to Insolvency and Bankruptcy Code, 2026 Bars Moratorium Benefit to Personal Guarantors; Enforcement under SARFAESI Act Allowed on Corporate Debtor's Property
In a significant ruling dated October 14, 2026, the National Company Law Tribunal (NCLT), Mumbai Bench, clarified that the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code (IBC), 2016 does not extend to secured immovable property exclusively owned and mortgaged by a Corporate Debtor in insolvency proceedings initiated against a Personal Guarantor. The judgment came in the case of UV Asset Reconstruction Company Ltd. v. Abhishek Ajit Naker, involving a dispute over enforcement of securities under the SARFAESI Act, 2002.
The case arose when Mr. Abhishek Ajit Naker, a Personal Guarantor to Aztek Processors Pvt. Ltd. (Corporate Debtor), filed an application under Section 94 of the IBC seeking initiation of insolvency proceedings against himself. The financial creditor, UV Asset Reconstruction Company Ltd. (UVARCL), assignee of ICICI Bank's debt, challenged the applicability of the interim moratorium to the secured asset - an immovable property mortgaged by the Corporate Debtor - contending that the moratorium does not affect assets owned by the Corporate Debtor.
The Tribunal, presided by Shri Anil Raj Chellan and Shri K. R. Saji Kumar, observed that Section 96 moratorium protects only assets owned by or security interests created by the Personal Guarantor. Since the disputed property was exclusively owned by the Corporate Debtor and mortgaged as security for the corporate debt, it was not protected by the moratorium triggered by insolvency proceedings against the Personal Guarantor. The Tribunal noted that the personal guarantor failed to demonstrate any ownership or security interest over the property.
Further, the Tribunal emphasized the effect of the Insolvency and Bankruptcy Code (Amendment) Act, 2026, which inserted a proviso in Section 96 explicitly excluding personal guarantors to corporate debtors from the benefit of interim moratorium in insolvency proceedings initiated after May 26, 2026. The amendment was held to apply retroactively to pending matters, thereby denying the moratorium protection to the Personal Guarantor even though his application was filed before the amendment came into force.
The financial creditor also argued that the insolvency petition by the Personal Guarantor was a strategic misuse aimed at stalling the lawful enforcement action under the SARFAESI Act. The Tribunal found merit in this submission, highlighting repeated litigations, settlement proposals, and challenges before various forums as indicative of abuse of process. Nonetheless, the decisive factor remained that the secured asset did not belong to the Personal Guarantor, and therefore, the moratorium did not apply.
The Tribunal consequently held that the Debt Recovery Tribunal's restraining order on coercive steps was unsustainable since no admission order under Section 100 of the IBC was passed and the moratorium provisions under Section 96 do not cover the Corporate Debtor's property. UVARCL was permitted to continue enforcement proceedings including possession, sale, auction, and realization of the secured asset without impediment.
This ruling reinforces the legal position that insolvency protection under Section 96 of the IBC is confined to the personal assets of the guarantor and cannot be used as a shield to protect corporate assets from enforcement by secured creditors. It also affirms the retrospective applicability of the 2026 amendment curtailing moratorium benefits to personal guarantors in corporate insolvencies, thereby balancing creditor rights and preventing misuse of insolvency mechanisms.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Interim moratorium under Section 96 in proceedings initiated by personal guarantor does not extend to secured asset exclusively owned and mortgaged by Corporate Debtor - After 2026 amendment, benefit of interim moratorium is not available to personal guarantor to corporate debtor even in pending matters from date amendment came into force.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 94, 96, 100; SARFAESI Act, 2002 Sections 13(2), 14
