NCLT Ahmedabad Holds SARFAESI Notice Validly Invokes Guarantee But Dismisses Personal Insolvency Plea As Abuse

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has held that a SARFAESI demand notice can validly invoke a personal guarantee but dismissed a personal insolvency plea filed thereafter, finding it was not intended for insolvency resolution.

The bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma observed this while examining a demand notice dated August 18, 2025 issued by Canara Bank under Section 13(2) of the SARFAESI Act.

“Invocation of guarantee is a matter of substance and not form. A notice which identifies the guarantor, quantifies the liability and calls upon the guarantor to pay constitutes invocation of guarantee.”, it said.

“Therefore, the demand notice dated 18.08.2025 satisfies the requirement of invocation of guarantee. The subsequent invocation notice dated 20.02.2026 is only confirmatory in nature and does not affect the validity of prior invocation.”, it added.

The tribunal made these observations while dismissing personal insolvency petitions filed by personal guarantors Patel Prakash Baldevbhai and Patel Hasmukhbhai Ranchodbhai against Canara Bank.

The corporate borrower, Ramdev International Castor Products Pvt. Ltd., had availed credit facilities of over Rs 23.35 crore in August 2023, backed by personal guarantees from the petitioners. The account was classified as a non-performing asset on January 31, 2025.

Following this, the bank issued the SARFAESI demand notice on August 18, 2025 claiming over Rs 20.62 crore, and later obtained possession orders from magistrate courts in December 2025 and January 2026. An auction notice was issued on January 31, 2026.

The guarantors filed insolvency petitions on February 12, 2026, and an interim resolution professional recommended their admission.

Canara Bank opposed the petitions, contending that they were not maintainable and had been filed after recovery proceedings had already been initiated.

The tribunal, however, found that the petitions were not filed with the intent to resolve insolvency.

“The Adjudicating Authority is, therefore, satisfied that the present Company Petitions have been filed with intent other than resolution of insolvency, and constitute an abuse of the insolvency framework.”

It also noted that the guarantors had approached the Debts Recovery Tribunal in parallel proceedings challenging the recovery measures.

Accordingly, the tribunal dismissed both petitions and imposed a Rs 2 lakh cost each on both petitioners.