No Deed Of Guarantee Or Invocation On Record: NCLAT Sets Aside Insolvency Order Against Alleged Personal Guarantor

The National Company Law Appellate Tribunal (NCLAT) at Delhi has set aside an order initiating insolvency proceedings against Pawan Gupta, holding that the National Company Law Tribunal's order was passed on the basis of misrepresentation of jurisdictional facts after a deed of guarantee and invocation of guarantee were stated to be on record even though no such documents had been placed before it

A bench of Chairperson Justice Ashok Bhushan and Technical Member Indevar Pandey held that the National Company Law Tribunal's February 4, 2026 order was vitiated by misrepresentation of jurisdictional facts that were foundational to the proceedings.

"The 'Deed of Guarantee' and 'Letter of Invocation' of the Guarantee are the two most important documents in a Section 95 proceedings. The impugned order dated 04.02.2026 was passed by the Ld. Adjudicating Authority on the basis of misrepresentation of relevant jurisdictional facts by the Respondent No.1, which are foundational to the requirements of Section 95 of the Code. This has been duly noted by Ld. Adjudicating authority in its order dated 03.03.2026. In view of the above, we are of the view that the findings of the Ld. Adjudicating authority were vitiated and therefore are void ab initio”, the tribunal observed.

The appeal arose from an order passed by the National Company Law Tribunal's Delhi bench on February 4, 2026, appointing a resolution professional on an application filed by Charm Investments Pvt. Ltd. against Gupta as a personal guarantor.

Union Bank of India had sanctioned a credit facility of ₹5.55 crore to L.R. Builders Pvt. Ltd. on November 18, 2011, which was subsequently reduced to ₹4.95 crore. The sanction documents described L.R. Builders Pvt. Ltd., Pawan Gupta and Kamal Gupta as borrowers/co-borrowers and recorded "Guarantors: NIL". The facility was secured by mortgage of three immovable properties.

Following defaults, Union Bank of India issued a legal notice on December 9, 2019 and subsequently initiated recovery proceedings before the Debt Recovery Tribunal. Gupta contended that he had been arrayed in those proceedings as a co-borrower and not as a guarantor. The debt was subsequently assigned by Union Bank of India to Rishikesh Hire Purchase and Leasing Company Pvt. Ltd., which in turn assigned it to Charm Investments Pvt. Ltd. Both assignment agreements recorded "Guarantors: NIL".

Charm Investments issued a demand notice to Gupta on January 10, 2026 and, on January 27, 2026, filed an application before the NCLT seeking initiation of insolvency proceedings against him by describing him as a co-borrower/personal guarantor. On February 4, 2026, the NCLT appointed a resolution professional and directed submission of a report.

Gupta challenged the order, contending that he was only a co-borrower and never a personal guarantor. He argued that no deed of guarantee had been executed and that no invocation of any guarantee had been placed on record. He also relied on the sanction letter, which recorded "Guarantors: NIL", as well as the assignment agreements and the recovery proceedings.

Charm Investments argued that the appeal was premature and that questions relating to the existence of a guarantee, maintainability and jurisdiction were required to be considered after submission of the resolution professional's report and at the stage of adjudication by the NCLT.

It further contended that a composite reading of the loan documents, board resolutions, demand promissory notes and related transactional documents demonstrated that Gupta had undertaken obligations in the nature of a guarantor.

Examining the record, the appellate tribunal noted that the loan assignment agreements recorded "Guarantors: NIL". It further found that the demand notice issued by Charm Investments did not list a deed of guarantee or a notice invoking a guarantee among the documents relied upon to establish the debt and default.

The tribunal also examined the insolvency application filed before the NCLT and found that while Gupta had been described as a co-borrower/guarantor, neither a deed of guarantee nor a notice invoking a guarantee was included among the documents relied upon.

The appellate tribunal further noted that Charm Investments subsequently stated before the NCLT that it had not placed any deed of guarantee or letter of invocation on record. In an order dated March 3, 2026, the NCLT recorded its dissatisfaction with the manner in which the case had been conducted and represented before it by placing incorrect facts.

“It comes out clearly that there was no personal Deed of Guarantee or its invocation placed on record in the proceedings. The two loan assignment deeds did not have any Guarantee listed in them. Neither the demand notice nor the application under Section 95 of the code mention any Guarantee Document and its subsequent invocation.”, the tribunal observed.

The tribunal observed that the NCLT's February 4, 2026 order had specifically recorded that a deed of guarantee and letter of invocation had been placed on record.

Holding that the NCLT's findings were vitiated by misrepresentation of relevant jurisdictional facts before it, the appellate tribunal concluded that the order was void ab initio.

The NCLAT accordingly set aside the February 4, 2026 order. It, however, granted liberty to the financial creditor to file a fresh application with all relevant documents.