No Asset Or Repayment Assessment Needed At Admission Stage For Personal Guarantor IRP: NCLT Chennai

The Chennai National Company Law Tribunal (NCLT) on 23 March held that at the stage of admission under Section 94 of the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority need not assess the repayment capacity or sufficiency of assets of a personal guarantor.

A Bench comprising Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramanian admitted the petition filed by Senthil Kumar, a personal guarantor to Biogen Fertilizers India Private Limited, seeking initiation of an Insolvency Resolution Process (IRP) against himself.

The Tribunal observed:

“The Section does not impose any requirement on the Petitioner to demonstrate inability to repay debt beyond the existence of the default in repayment of debt. The provision enables a debtor who has committed a default to initiate the insolvency resolution process, subject to the conditions specified therein.”

The company had availed credit facilities from Canara Bank, secured by its assets and personal guarantees. Upon default, the bank classified the account as NPA in September 2025 and invoked the personal guarantee through a demand notice under the SARFAESI Act.

Kumar stated that despite efforts to regularise the account, no resolution was reached, and the Tribunal noted that no CIRP was pending against the company. The bank argued that mere inability to repay was insufficient and that Kumar had sufficient secured assets.

The Tribunal observed that the law does not require an inquiry into assets or repayment capacity at admission. Noting the IRP had recommended admission, it held the IRP's role is facilitative and recommendatory. The Bench observed:

“On perusal of the IRP's report, we are satisfied that IRP has conducted an examination of the petition and considering the notice issued under Section 13(2) and Statement of Affairs, has concluded the existence of debt and default.”

It rejected the bank's claim that the petition aimed to obstruct recovery or that non-initiation against the corporate debtor affected maintainability. It noted:

“The comparative advantage of recovery under different statutory mechanisms is not a relevant consideration… Therefore, the possibility of better realization under SARFAESI does not render the present petition inadmissible.”

It added:

“The mere filing of the petition subsequent to the initiation of proceedings under the SARFAESI Act, by itself, cannot lead to the conclusion that the present petition is intended as a tool for obstruction…”

Accordingly, the Tribunal admitted the petition and appointed Prabhu S as the IRP.

For Petitioner: A.S Sathish Kumar, PCS

For IRP: Advocate A.G Sathyanarayana

For Respondent: Advocate Arjun Makuny