The Principal Bench NCLAT Holds If a Demand Notice Is Issued Against the Personal Guarantor to Discharge Its Liabilities, the Guarantee Stands Invoked.

An Appeal was filed by a Personal Guarantor challenging the order dated 04.12.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad, Special Bench, Court-2 rejecting the application under Section 94 filed by the Appellant. Aggrieved by the order rejecting the Application, this Appeal had been filed.

The Principal Borrower- ‘M/s. Surana Metacast (India) Private Limited’ obtained various credit facilities for the business purposes from the State Bank of India and other Financial Creditors i.e. Respondents herein. Appellant executed Deed of Personal Guarantee dated 12.11.2021 in relation to the credit facilities availed by the Principal Borrower. The loan account of the principal borrower was declared NPA on 01.05.2023. A notice under Section 13(2) of the SARFAESI Act, 2002 was issued on 09.10.2023 to the principal borrower as well as to the Appellant personal guarantor demanding repayment of Rs.28,56,64,336.06/- as on 07.10.2023 with interest.

On 22.08.2024, Appellant filed the application under Section 94(1) of the IBC to initiate personal insolvency against the Appellant, the personal guarantor.

The Adjudicating Authority after hearing the Learned Counsel for the Appellant by impugned order dated 04.12.2024 rejected Section 94(1) application holding that the Application under Section 94(1) has been filed by the Appellant without any cause and is premature. Adjudicating Authority took the view that apart from Section 13(2) notice, no other notice was issued to the Appellant, hence, the application is premature.

Challenging the above order dated 04.12.2024, this Appeal has been filed.

The principal bench of the National Company Law Appellate Tribunal held that when demand notice is issued against the personal guarantor asking the personal guarantor to discharge its liabilities, the guarantee stands invoked. Whether notice under Section 13(2) in a particular case invoked the guarantee or not depends on the words and intent of the notice. For finding out as to whether Notice under Section 13(2) invoked the personal guarantee, the letters and words of the Notice has to be looked into to come to any conclusion that whether personal guarantor has been asked to discharge its liabilities or not. In the facts of the present case, we are of the considered opinion that the Notice under Section 13(2) issued by the State Bank of India is a clear demand notice from the Appellant to pay the amount of Rs.28,56,64,336.06/-.

In view of the above discussions and conclusions, we are of the view that the order of the Adjudicating Authority rejecting application under Section 94(1) cannot be sustained.

Asha Basantilal Surana Vs. State Bank of India & Ors.