NCLT Mumbai Rejects Personal Guarantor's Insolvency Plea, Says It Was Filed To Scuttle Auction Sale

The National Company Law Tribunal (NCLT) in Mumbai has rejected a personal insolvency plea filed by a personal guarantor to Heera Group companies. It observed that the application was moved after the auction of a mortgaged property and was intended to scuttle the concluded auction process initiated by Union Bank of India.

A Bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar dismissed the plea filed by Vandana Ravindra Chaudhari. She had furnished personal guarantees for credit facilities extended by Union Bank of India to Heera Ind Trading Pvt Ltd, Heera Hospitality Pvt Ltd and Pratham Heera Sales Pvt Ltd.

“It is at this juncture, the personal guarantor, after realising that the mortgaged asset has been auctioned, woke up and considered insolvency resolution process for himself. These facts only demonstrate that such act was intended to scuttle the concluded auction process by taking shelter of moratorium in terms of section 96 of IBC consequent to filing of present petition. These facts can not lead to a conclusion that the present petition is bona-fide attempt to seek resolution of insolvency of the personal guarantor,” the tribunal observed.

Union Bank had sanctioned multiple credit facilities to the three Heera Group companies. Chaudhari executed personal guarantees in favour of the bank. She also mortgaged a residential flat in Navi Mumbai that formed part of the security created for the borrowings.

Heera Ind Trading's loan account was classified as a non-performing asset on April 16, 2023. The accounts of Heera Hospitality and Pratham Heera Sales had already been declared NPAs on April 10, 2023.

Union Bank thereafter issued demand notices under the SARFAESI Act and proceeded to enforce its security interest over the mortgaged property.

The tribunal recorded that the bank made multiple attempts to sell the property through auction after taking possession. None of those efforts succeeded. A fresh sale notice was issued on May 9, 2025, and the property was eventually auctioned on May 30, 2025.

The personal insolvency application was filed on June 9, 2025. According to Union Bank, the plea was moved only after the auction had been completed and just before the sale certificate was to be issued.

Chaudhari disputed that position. She argued that the sale had not attained finality and that no valid third-party rights had crystallised in favour of the auction purchaser. She relied on a December 10, 2025 judgment of the Bombay High Court, which had observed that the sale could not be regarded as final unless a sale certificate was issued in accordance with law.

The tribunal noted that the High Court judgment is under challenge before the Supreme Court. On February 2, 2026, the Supreme Court directed the parties to maintain status quo with respect to the property.

While declining to render any conclusive finding on whether rights had crystallised in favour of the auction purchaser, the tribunal examined the circumstances in which the insolvency plea came to be filed.

It concluded that the application was filed after the auction had concluded and that the circumstances indicated an attempt to take shelter under the interim moratorium and scuttle the auction process, rather than a bona fide attempt to seek insolvency resolution.

Relying on the National Company Law Appellate Tribunal's decision in *Ashwani Kumar Oberoi v. State Bank of India and Ors.*, the tribunal observed that insolvency proceedings cannot be invoked to scuttle a concluded auction sale process. It also noted that a guarantor may pursue remedies before the Debt Recovery Tribunal to challenge such a sale.

“Further, it is noted that Hon'ble NCLAT has categorically held that section 94 IBC provisions can not be resorted to scuttle a concluded auction sale process, and the guarantor may approach Ld. DRT to challenge the said sale, if she wish to. Accordingly, we are of considered view that the present petition filed on 9.6.2025 after conclusion of auction of property on 30.5.2025 is nothing but an abuse of process of court and the said petition is not filed with an intent for resolution of insolvency but to scuttle the concluded sale,” the tribunal held.

The tribunal also held that the filing of the application amounted to an acknowledgment of debt by the personal guarantor. It therefore concluded that no issue of limitation arose in the facts of the case.

The insolvency plea was rejected. The tribunal also disposed of an intervention application filed by the auction purchaser. It granted liberty to the auction purchaser to seek appropriate remedies before the competent forum if subsequent developments so warrant.