Yes Bank's plea to initiate insolvency proceedings against personal guarantor upheld; SARFAESI notice under Section 13(2) deemed valid invocation of guarantee despite pending CIRP of corporate debtor
In a significant ruling dated October 12, 2026, the National Company Law Tribunal (NCLT), Principal Bench at New Delhi, admitted an insolvency application filed by Yes Bank Ltd. against Mr. Anil Madan, the personal guarantor of M/s Johnson Watch Company Private Limited, a corporate debtor undergoing insolvency proceedings. The Tribunal declared a moratorium against the personal guarantor and directed the initiation of the Personal Insolvency Resolution Process (PIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC).
Background:
The corporate debtor, Johnson Watch Company Pvt. Ltd., had availed various credit facilities from Yes Bank, secured by personal guarantees executed by Mr. Anil Madan and others. Despite repeated demand notices and classification of the loan account as a Non-Performing Asset (NPA) on March 16, 2023, the corporate debtor defaulted on repayment obligations.
The financial creditor issued a demand cum guarantee invocation notice on May 24, 2023, and subsequently, a notice under Section 13(2) of the SARFAESI Act, 2002, on July 10, 2023, addressed jointly to the corporate debtor and the personal guarantors, demanding repayment of over Rs. 34.69 crores. Despite these efforts, payments were not made.
Yes Bank issued a demand notice under Form B on November 4, 2024, to Mr. Anil Madan and filed an application under Section 95(1) of the IBC on December 7, 2024, seeking initiation of insolvency proceedings against him as the personal guarantor for a debt amount of approximately Rs. 17.07 crores.
Key Issues and Tribunal's Findings:
1. Valid Invocation of Guarantee:
Mr. Madan contended that the guarantee was never validly invoked since no proper notice was served in terms of the guarantee deed's Clause 29, and that the SARFAESI notice under Section 13(2) did not constitute invocation against the personal guarantor. However, the Tribunal relying on the judgment of the NCLAT in Ujwal Gupta v. Union Bank of India (2026) held that a notice under Section 13(2) of the SARFAESI Act can amount to a valid invocation of the personal guarantee if it specifically demands payment from the guarantor as per the guarantee agreement. The Tribunal noted that the SARFAESI notice dated July 10, 2023, clearly demanded payment from the personal guarantor and thus constituted valid invocation.
2. Default and Debt Due:
The Tribunal found that the debt was due and payable by the personal guarantor and remained unpaid, thereby constituting a default as required under the IBC for admission of insolvency proceedings.
3. Role of Resolution Professional (RP):
The personal guarantor alleged that the RP mechanically accepted the creditor's claim without independent verification. The Tribunal dismissed this objection as unsubstantiated and upheld the RP's report recommending admission.
4. Prematurity of Application:
It was argued that since the corporate debtor's insolvency resolution process was ongoing, the application against the personal guarantor was premature. The Tribunal referred to the NCLAT's ruling in State Bank of India v. Mahendra Kumar Jajodia (2022) which clarified that insolvency proceedings can be initiated against a personal guarantor irrespective of the status of the corporate debtor's insolvency process. The Tribunal also rejected the contention that ongoing negotiations for assignment of debt to an Asset Reconstruction Company barred the proceedings.
Orders Passed:
The Tribunal admitted the insolvency petition under Sections 95 and 100 of the IBC against Mr. Anil Madan and declared a moratorium for 180 days or until further orders. The RP was directed to take all necessary steps including publication of public notice inviting claims, preparation of a list of creditors, and facilitating a repayment plan in accordance with the Code. The personal guarantor was directed to cooperate fully by furnishing details of assets, liabilities, income tax returns, net worth certificates, and any asset transfers.
The financial creditor was directed to deposit Rs. 1,00,000 towards the expenses of the resolution process. The RP must submit periodic status reports to the Tribunal.
Significance:
This ruling reinforces the position that a SARFAESI notice under Section 13(2) demanding payment from a personal guarantor can constitute valid invocation of the guarantee. It confirms that insolvency proceedings against personal guarantors can proceed even when the corporate debtor's insolvency process is pending. The decision emphasizes strict compliance with procedural requirements for invocation but affirms that technical lapses such as non-service of separate invocation notices do not invalidate the process if the SARFAESI notice clearly demands payment from the guarantor.
This judgment thus clarifies critical aspects of personal guarantor insolvency under the IBC, providing useful guidance to financial creditors, guarantors, resolution professionals, and adjudicating authorities.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Personal guarantor insolvency - Notice under Section 13(2) of SARFAESI Act can amount to valid invocation of personal guarantee if it specifically demands payment from personal guarantor in terms of guarantee deed - Pendency of CIRP against corporate debtor does not bar proceedings under Section 95 against personal guarantor - Petition admitted and moratorium declared.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 95, 99, 100, 101; Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section 13(2); Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019 Rule 7(1).
Yes Bank Ltd. v. Anil Madan, (NCLT)(Principal Bench) : Law Finder Doc Id # 2996383
