Personal Guarantor's Insolvency Cannot Block Recovery Against Company's Property: NCLT Mumbai

Aztek Processors Pvt. Ltd. (Corporate Debtor) availed the loan facilities from the ICICI Bank. An industrial plot situated at Dombivali Industrial Estate, Maharashtra, owned by the corporate debtor was mortgaged to secure the financial facilities, and Abhishek Ajit Naker was the personal guarantor to facilities.

The present application was filed by the UV Asset Reconstruction Company Limited (UVARCL), assignee of the loan facility from ICICI Bank.

The applicant previously initiated the enforcement proceedings under the proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), and obtained an order under section 14 of the Act and took physical possession of the property.

However, the enforcement mechanism was challenged before the DRT on the ground that the personal insolvency of the personal guarantor is pending and the interim moratorium is in existence. The DRT directed the applicant not to take any coercive steps until NCLT altered or lifted the moratorium. Therefore, UVARCL filed present application contending that the moratorium in respect of personal guarantor doesn't protect property belonging to the corporate debtor.

The NCLT relied upon the ruling of Ramesh Kumar Chugh v. Assets Care and Construction Enterprises Limited, where NCLAT observed that the moratorium under Section 96 would apply only to the security interest created by the personal guarantor. The NCLT observed that it is evident that the moratorium specified under Section 96 pertains solely to the assets owned by or the security interest created by the personal guarantor.

The NCLT noted that the personal guarantor had failed to produce any document establishing that the secured property belonged to him. In contrast, UVARCL had placed on record a memorandum of entry evidencing the creation of an equitable mortgage by the corporate debtor. The bench observed that the moratorium in respect of the personal guarantor doesn't extend to the subject property which belongs to the corporate debtor.

Further, the NCLT relied on and discussed the Insolvency and Bankruptcy Code (Amendment) Act, 2026, which inserted sub-section (4) into Section 96 to exclude personal guarantors to corporate debtors from the benefit of the interim moratorium.

The bench lastly rejected the personal guarantors argument that the 2026 amendment doesn't apply to already pending applications. It relied upon Bombay High Court's ruling in Tata Capital Financial Services Limited v. Neel Motors LLP & Ors. and the Delhi High Court's decision in IDBI Trusteeship Services Limited v. Manish Jain & Ors., to discuss that the amendment is retrospective or quasi-retrospective in operation.

Accordingly, the NCLT allowed the UVARCL's application.

For Applicant: Advocate Rathira Maravarman

For Respondent: Advocate Meet Sawant along with Mohd Ziyad instructed by Apex Law.