NCLAT Reaffirms IBC Proceedings Against Personal Guarantor Not Barred By SARFAESI Action
Sandhra Suresh
7 March 2026 3:17 PM IST
The National Company Law Appellate Tribunal (NCLAT) has reiterated that the pendency of proceedings under the SARFAESI Act does not bar the initiation of personal insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), noting that the Code overrides other laws.
A bench of Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Ajai Das Mehrotra observed, “As per provisions of Section 238 of IBC, 2016, the Code overrides other laws and there is no bar of filing application under Section 95 of IBC, 2016 during the pendency of the proceedings under the SARFAESI Act, 2002.”
The tribunal made the observation while dismissing an appeal filed by Vibu Venkatsubramanian, the personal guarantor for loans availed by Global Infonet Distribution Private Ltd., challenging a March 22, 2024, order of the National Company Law Tribunal (NCLT), New Delhi, which had taken on record the Resolution Professional's report and initiated the insolvency resolution process against him.
The corporate debtor had availed loan facilities of Rs 42 crore from State Bank of India under a sanction letter dated July 31, 2012, and executed various loan and security documents on September 25, 2012.
Venkatsubramanian had executed a deed of guarantee on September 25, 2012, in connection with the credit facilities extended to the company.
The lending arrangement did not remain static. The facilities were later renewed and modified through sanction letters issued in December 2016, February 2017, and April 2018.
The appellant argued that his personal guarantee, executed in 2012, was limited to the original limit of Rs 42 crore and did not extend to subsequent renewals or enhanced facilities in 2016 and 2018.
Venkatsubramanian argued that the debt was time-barred and that the guarantee was not renewed. It was also contended that the bank's multiple proceedings under SARFAESI, DRT, and IBC amounted to forum shopping. He also contended that the Resolution Professional (RP) exceeded his mandate by recommending initiation of insolvency.
The State Bank of India countered that the guarantee deeds of 2012 and 2015 were continuing guarantees, irrevocable and enforceable, covering all renewals and variations unless expressly revoked.
The bank argued that the guarantor's liability is co-extensive with that of the principal debtor. It further argued that the SARFAESI notice dated 09.11.2018 triggered default, making the Section 95 petition filed on 11.08.2021 well within time, particularly in light of the COVID-related suspension of limitation.
The NCLAT examined the guarantee deed clauses and noted that the appellant had expressly agreed that variations in loan terms would not discharge his liability. The bench relied on the Supreme Court ruling of H.R. Basavaraj v. Canara Bank.
The tribunal further noted that the guarantee was continuing in nature and had never been revoked
On limitation, the Tribunal found that the SARFAESI notice of 2018 constituted the cause of action, and the insolvency petition filed in 2021 was within three years.
Regarding forum shopping, the Tribunal observed that Section 238 of the IBC overrides other laws, and parallel proceedings under SARFAESI or DRT do not bar insolvency action under the Code.
For Appellants: Senior Advocate Pooja Mehra Saigal with Advocates Ankit Mittal & Nivesh Dixit
For Respondents: Advocate Bheem Sain Jain