Published On: February 17th 2026
Authored By: Saumya Mishra
NALSAR University of Law, Hyderabad
Abstract
The provisions for initiation of insolvency proceedings against the personal guarantors of corporate debtors, under the IBC, have come into force from 1st December 2019, via a notification from the Government of India, published on 15th November 2019.[1] This article will discuss the invocation of the guarantee not as a formality under the contract, but as a condition precedent for initiation of proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC). In the course of analysing the impact that the recent judgments of NCLAT in the cases of Deepak Kumar Singhania & Saranga A. Aggarwal of 2025 would have, the article concludes that invocation of a guarantee is the fulcrum on which the insolvency proceedings against a personal guarantor revolve and that these judgments offer an abundance of illustrations of the application of the various rules and forms for deciding whether a personal guarantor is in liability in a debt.
Introduction
One of the core objectives of the personal guarantors’ inclusion under the Insolvency and Bankruptcy Code of 2016 was to promote credit discipline, and more importantly to prevent a personal guarantor from avoiding their responsibilities when a corporate debtor defaults. Section 95 of the IBC provides that a creditor may file an application for initiating an insolvency resolution process against the personal guarantor. At first glance, the provision appears to be merely procedural. Nonetheless, if we examine it alongside the Insolvency and Bankruptcy (Application to adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules 2019[2] (PGIRP Rules, 2019), substantive questions that are more profound and critical arise. That is, does the liability arise automatically on the corporate debtor or is it only upon the invocation of the guarantee? Can a statutory demand notice take the place of contractual invocation? And, at what point does a guarantor become a debtor under the Code?
These are not mere theoretical questions but in fact they form the core of the maintainability of a Section 95 application before the Adjudicating Authority. Recent appellate rulings have started to illuminate this area, positioning the invocation of the guarantee as the focal point of the investigation.
The Legal Structures That Regulate Personal Guarantors
- The Applicability of Part III to Personal Guarantors
Under the provisions of part III of the IBC, the personal guarantors of the corporate debtors are expressly subject to the IBC as stated in Section 2(e) of the IBC, and when read in conjunction with Section 60 of the IBC, it allows for the adjudication of the insolvency of the personal guarantors through the National Company Law Tribunal (NCLT). This ensures if there are pending insolvency proceedings against a corporate debtor as well, both kinds of insolvency proceedings will occur in front of the same authority, which is the NCLT.
- The Procedural Framework and Section 95 of the IBC
A creditor may initiate an insolvency resolution process in respect of a personal guarantor pursuant to Section 95 of the IBC. While, subsection (4) of Section 95 of the IBC requires that the application for such initiation include certain specified information and documents whereas subsection (7) of Section 95 of the IBC delegates specification of these requirements to subordinate legislation. The PGIRP Rules, 2019, were promulgated as a result of this delegation.
The creditor must give a demand notice to the personal guarantor in the correct format as prescribed by Rule 7(1) of the PGIRP Rules. The date of the default must be included in Form B. Prior to issuing the Rule 7(1) demand notice, a default must exist which is attributed to the personal guarantor.
Definitional Issues: Guarantor and the Additional Meaning of Personal Guarantor.
A personal Guarantor is described in Sec 5(22) of the IBC as an individual who provides for a personal Guarantee of a Corporate Debtor (CD). This description is to be read into the Code unless the context indicates differently.
Rule 3(1)(e) of the PGIRP Rules is especially important when it comes to Section 95 proceedings. As per the rule, a debtor who is a personal guarantor to a corporate debtor and whose personal guarantee has been invoked by the creditor but has not paid anything on that guarantee, in whole or in part, is referred to as a “guarantor”. This means that the personal guarantor must have provided a personal guarantee and such guarantee must have been invoked by the creditor in order to qualify as a guarantor.
Section 5(22) of the IBC is found in Part II, and Section 95 of the IBC is found in part III. Because the term under Section 5(22) might not apply, the definition given in Rule 3(1)(e) of the PGIRP Rules, 2019 must be taken into consideration in order to start the insolvency process against the Personal Guarantor.[3]
Crystallisation of Liability and Invocation of Personal Guarantee Under the IBC
- Definition of Debt and Default Under the IBC
Under the Insolvency and Bankruptcy Code (IBC), ‘debt’ and ‘default’ are defined in sections 3(11) and 3(12) respectively, and a ‘debt’ becomes a ‘default’ when the debt has become due and payable and remains unpaid. A ‘debt’ is ‘defaulted’ upon the occurrence of a default, which occurs when the obligations of the person making the guarantee under the guarantee become due (i.e. when liability arises from an invocation), meaning that the personal guarantee becomes a liability only upon an invocation.
A personal guarantee has contingent liabilities until the contingencies of the deed of guarantee are satisfied. Therefore, for the purposes of establishing liability for a personal guarantee, the personal guarantor will normally only have liability once there has been a formal demand or notice of recall against the person who made the personal guarantee, unless specified in the actual deed.
- Clarifying Judicial Authority in Deepak Kumar Singhania
The decision made by the NCLAT in the case of State Bank of India v Deepak Kumar Singhania deals with an application filed under section 95 without first having invoked the relevant guarantee. The Tribunal ruled that any default by a personal guarantor must exist on the date a demand notice in Form B was issued to the personal guarantor.[4] Defaults are only those that occur under the financial obligations of the personal guarantor; the financial obligations of the personal guarantor arise only at the time the guarantee is invoked as specified in the guarantee deed.
The Tribunal rejected the argument that the word “ and” in Rule 3(1)(e) should be read as “or”. The Tribunal held that reading the word “and” to mean “or” would eliminate the distinction established between the liabilities of the personal guarantor on a contingency basis and those liabilities that are actual liabilities, which would conflict with the entire statutory scheme contained in the IBC.[5]
Form B and the Statutory Demand Limitations
Many creditors have contended that Form B is essentially a statutory demand notice from a creditor to their debtor, hence it serves to automatically invoke the guarantee. This interpretation was expressly rejected in Deepak Kumar Singhania by the tribunal.
In the tribunal’s view in , Form B does not constitute the invocation of a personal guarantor’s guarantee. A default by a personal guarantor has to be present as on the date the demand notice in Form B has been issued, and that any liability to a personal guarantor only arises after invocation of the guarantee in accordance with Deed of Guarantee. Until the guarantee is invoked, there is no debt owed by the personal guarantor, thus there cannot be a default.[6]
The Date of Default & Whether Any Invocation Is Involved.
The decision made in the case of Saranga A. Aggarwal v. State Bank of India adds an important procedural component to the issue presented. The creditor in that case was asking that the date of default be amended in a Section 95 application, based on a recall notice that allegedly constituted an invocation of the guarantee. The NCLAT allowed for the amendment, stressing that amendments to applications under Section 95, as long as they are necessary for proper adjudication, may be allowed. However, the Tribunal was careful to explain that allowing the amendment did not automatically mean that the guarantee had been validly invoked; the question of whether the guarantee was validly invoked is still left open for final determination on the merits, including the considerations of limitation.[7]
Most importantly, the Tribunal determined that it is an established law that no action under Section 95 may be started without the personal guarantor’s deed of guarantee being invoked. It is also generally established that invocation of guarantee must precede Form B demand notice.[8]
Conclusion
The requirement imposed by appellate tribunals to invoke the guarantee before the commencement of the proceedings demonstrates the insolvency system’s response to real financial problems rather than simply creating a liability by way of the use of processes.
Invocation of the guarantee is a necessary legal step; it changes the type of obligation that a guarantor has (a contingent obligation) into an enforceable debt. The personal guarantor will not be included in Section 95 until the invocation occurs as per the guarantee deed, emphasising the need for sound contractual actions to provide greater creditability to personal guarantor insolvency processes and to preserve the integrity of the Code’s structure.
References
[1]Notification S.O. 4126(E), Insolvency and Bankruptcy Code, 2016 (Nov. 15, 2019), https://ibbi.gov.in/uploads/legalframwork/1fb8c2b785f35a5126c58a2e567be921.pdf
[2]Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, G.S.R. 854(E) (India), Nov. 15, 2019, https://ibbi.gov.in/uploads/legalframwork/8e0ab9331455200b402d91257113805c.pd
[3]State Bank of India v. Deepak Kumar Singhania, (2025) https://nclat.nic.in/display-board/view_order
[4]Id.
[5]Id.
[6]Id.
[7]Saranga A. Aggarwal v. State Bank of India, Company Appeal (AT) (Insolvency) No. 1788 of 2025, Nat’l Co. L. App. Trib., Principal Bench, New Delhi (Dec. 19, 2025), https://indiankanoon.org/doc/134747385/
[8]Id.
