National Company Law Appellate Tribunal, New Delhi: In an appeal filed by the personal guarantor challenging the admission of an application under Section 95, Insolvency and Bankruptcy Code, 2016, the Bench comprising Mohd. Faiz Alam Khan, Member (Judicial) and Naresh Salecha, Member (Technical) held that the demand notice issued under Section 13(2), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) constituted a valid invocation of the personal guarantee in terms of the deed of guarantee.
The Tribunal further held that where the guarantee deed does not prescribe any particular mode of invocation, a demand notice under Section 13(2), SARFAESI Act calling upon the guarantor to discharge the outstanding liability is sufficient to invoke the guarantee, and the mere description of the guarantor as a “Director” in the notice does not invalidate the invocation or the subsequent proceedings under Section 95, Insolvency and Bankruptcy Code.
Background
M/s Green World International (P) Ltd. (Corporate Debtor) had taken different loan facilities from Union Bank of India (Financial Creditor), and these loans were later restructured. To ensure that the loans would be repaid, the appellant signed a personal guarantee in favour of the Bank. By doing so, the appellant (Personal Guarantor) agreed to be jointly and individually responsible for repaying the outstanding dues if the company failed to do so.
When the company failed to repay the loans, the Bank classified the loan account as a non-performing asset (NPA). After this, the Bank issued a demand notice under Section 13(2), of the SARFAESI Act to the company, its directors, and the guarantors, asking them to clear the outstanding dues. Later, the Bank issued a notice under Rule 7(1), Insolvency Resolution Process for Personal Guarantors to Corporate Debtors Rules, 2019, and filed an application under Section 95, Insolvency and Bankruptcy Code, 2016 (IBC) to start insolvency proceedings against the appellant as a personal guarantor.
The adjudicating authority admitted the Bank’s application and started the insolvency resolution process against the appellant. The appellant challenged this order by filing the present appeal. The appellant argued that the personal guarantee was an “on-demand” guarantee, but it had never been properly invoked. According to the appellant, the notice issued under Section 13(2), SARFAESI Act referred to him only as a “Director” and did not specifically ask him to pay in his capacity as a “personal guarantor” or state that the guarantee was being invoked.
The appellant also argued that the notice issued under Rule 7(1) could not be treated as a valid invocation of the guarantee. In addition, the appellant claimed that the Bank’s application under Section 95 was defective because the Bank had not been properly authorised to file it.
Issues
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Whether the Section 13(2) SARFAESI notice amounted to a valid invocation of the appellant’s personal guarantee.
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Whether describing the appellant as a “Director” instead of “Personal Guarantor” invalidated the notice.
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Whether the guarantee deed required any specific form or procedure for invocation.
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Whether technical defects relating to authorisation of the Bank’s representative rendered the Section 95 application non-maintainable.
Analysis, Law, and Decision
The Tribunal examined the terms of the deed of guarantee executed by the appellant and found that it expressly authorised the Bank to issue any request or demand personally, at the guarantor’s last known address or by post. The guarantee deed did not prescribe any specific format, language or separate mode for invoking the guarantee.
The Tribunal observed that where the contract merely requires issuance of a demand notice, any communication demanding payment of the guaranteed debt within a specified period is sufficient to invoke the guarantee. No additional formalities could be read into the contract.
Analysing the contents of the Section 13(2) notice, the Tribunal held that it specifically quantified the outstanding dues, required payment within 60 days and warned of enforcement action upon failure to comply. The notice therefore constituted an unequivocal demand requiring the appellant to discharge his liability under the guarantee.
Rejecting the appellant’s contention that he was described only as a “Director”, the Tribunal held that nomenclature cannot override the substance of the communication. Since the appellant had admittedly executed the guarantee and the notice clearly demanded payment of the outstanding debt, the addition of the word “Director” after his name did not alter his legal status as a personal guarantor or invalidate the invocation.
While considering the appellant’s reliance on Amanjyot Singh v. Navneet Kumar Jain, 2023 SCC OnLine NCLAT 1621, the Tribunal distinguished the decision on facts, observing that in that case the creditor itself had admitted that no steps had been taken to invoke the guarantee. The Tribunal instead relied upon its earlier decisions in Mavjibhai Nagarbhai Patel v. SBI, (2025) 262 Comp Cas 336 : 2024 SCC OnLine NCLAT 2014, Shantanu Jagdish Prakash v. SBI, 2025 SCC OnLine NCLAT 117 and the three-member Bench decision in Asha Basantilal Surana v. SBI, (2025) 262 Comp Cas 350: 2025 SCC OnLine NCLAT 920, which consistently held that a Section 13(2) notice can amount to valid invocation where it satisfies the contractual requirements of the guarantee.
The Tribunal further rejected the appellant’s objections regarding absence of proper authorisation or filing of supporting affidavits by the Bank, observing that such procedural irregularities were curable and could not defeat substantive justice, particularly when there was no dispute regarding the debt, default or the authority of the Bank to recover its dues.
Accordingly, the Tribunal held that the Section 13(2) notice validly invoked the appellant’s personal guarantee, the application under Section 95, IBC, 2016 was maintainable, and no interference with the order of the adjudicating authority was warranted. The appeal was dismissed without costs.
[Ujwal Gupta v. Union Bank of India, 2026 SCC OnLine NCLAT 8, decided on 7-1-2026]
Judgment authored by *Justice Mohd. Faiz Alam Khan, Member (Judicial)
Advocates who appeared in this case:
For the Appellant: Palash S. Singhai, Sonam Sharma and Harshal Sareen, Advocates
For the Respondent: Viren Sharma, Yash Srivastava, Naveli Garg and Shivam Gautam Advocates
