SARFAESI Notice Alone Cannot Establish Personal Guarantee Invocation Without Deed: NCLT Chandigarh

The National Company Law Tribunal (NCLT), Chandigarh bench, has ruled that a personal guarantor seeking insolvency resolution must place the underlying Deed of Guarantee on record to establish that status.

A SARFAESI demand notice by itself cannot conclusively establish invocation of the guarantee when the deed is absent.

A bench of Judicial Member Khetrabasi Biswal and Technical Member Shishir Agarwal observed,

“The Deed of Guarantee is the foundational document from which the Applicant's very status as a 'Personal Guarantor' and consequently the cause of action for invoking Part III of the Code is derived.”

The court further observed, “Where the guarantee deed itself has not been produced, such comparison cannot be undertaken, and the Section 13(2) notice alone would be insufficient to conclusively establish valid invocation of the guarantee.”

The ruling came on an application filed by Vijay Singh seeking personal insolvency. He sought initiation of insolvency resolution proceedings against himself as a Personal Guarantor of J.K. Matting House Private Limited.

Singh's case was that he was a co-borrower and Personal Guarantor for a loan facility obtained by the company from Punjab and Sind Bank. He had also mortgaged property as security for the facility.

After the default, bank issued a SARFAESI demand in December 2025 allleging a defaut of over ₹1 crore. Symbolic posession was later taken by creditor and a sale notice was issued for auction.

Singh argued that the demand notice itself invoked the guarantee and that the bank's documents established him as a Personal Guarantor, without requiring the Deed of Guarantee.

The tribunal rejected this, holding that the Deed of Guarantee was necessary to establish his status as a Personal Guarantor. Whether he fell within that description under the IBC was a “jurisdictional fact” that could not be verified without the underlying guarantee contract.

It also held that the guarantor's liability and the manner of invocation had to be determined from the terms of the guarantee. The SARFAESI notice could not be ignored, but whether it amounted to invocation had to be assessed against those terms.

Relying on Asha Basantilal Surana v. State Bank of India, the court observed that whether a Section 13(2) notice amounts to invocation depends on the language and intent of the notice read with the relevant terms of the guarantee agreement. Since Singh had not produced the deed, that comparison could not be made.

The tribunal also distinguished Ujjwal Gupta v. Union Bank of India, pointing out that the Deed of Guarantee was on record in that case, unlike here.

It further observed that the Resolution Professional has to ascertain under Section 99 whether the guarantee was invoked and when. Without the guarantee deed, the RP could not meaningfully carry out that exercise.