Only Contractual Guarantee Debt Relevant For IBC Section 94 Threshold: NCLT Chandigarh

The Chandigarh Bench of the National Company Law Tribunal (NCLT) on 17 April held that only debts arising from a valid contract of guarantee can be considered for determining the pecuniary threshold under Section 94 of the Insolvency and Bankruptcy Code, 2016.

A Bench comprising Judicial Member Khetarbasi Biswal and Technical Member Shishir Agarwal clarified that liabilities not arising from such a guarantee or not linked to the petitioner's capacity as a personal guarantor to a corporate debtor cannot be taken into account. It observed:

“In the present case, the debt of Rs. 5,00,000/- arises out of a specific Deed of Guarantee dated 03.12.2025, executed by the Petitioner in favour of M/s Baba Shri Chand Alloys. However, the other debts sought to be relied upon by the Petitioner neither arise from any contract of guarantee nor relate to his capacity as a Personal Guarantor to a Corporate Debtor. Therefore, such debts cannot be taken into consideration for the purpose of determining pecuniary jurisdiction under Section 94 of the Code.”

The Bench was hearing a petition filed by Mukesh Kumar seeking initiation of insolvency resolution as a personal guarantor. He had relied on multiple liabilities to satisfy the statutory threshold under Section 94.

On examination, the Tribunal found that only the debt of Rs. 5,00,000 arising from a specific Deed of Guarantee dated 3 December 2025 executed in favour of Baba Shri Chand Alloys qualified as a relevant obligation. It noted that this debt directly stemmed from a contractual guarantee and was connected to the petitioner's role as a personal guarantor.

However, the remaining debts cited were held to be outside the scope of Section 94. The Tribunal observed that these liabilities neither originated from any contract of guarantee nor related to the petitioner's capacity as a personal guarantor to a corporate debtor, and therefore could not be aggregated for meeting the statutory threshold.

Reiterating the scheme under the Insolvency and Bankruptcy Code, the NCLT emphasised that insolvency proceedings against personal guarantors are confined to obligations arising strictly from guarantees issued in favour of corporate debtors. It cautioned that including unrelated personal liabilities would expand the jurisdiction beyond legislative intent.

The Tribunal further observed that permitting inclusion of non-guarantee debts would dilute the statutory framework and potentially allow misuse of the insolvency process for resolving unrelated personal financial disputes.

Accordingly, the NCLT held that the petitioner failed to meet the threshold requirement under Section 94 and dismissed the petition as not maintainable.