Most loans to Indian companies, especially mid-sized and family-run ones, are backed by personal guarantees from promoters. When the company defaults, those guarantees become a lender's most important source of recovery. Since 1 December 2019, lenders can start an insolvency resolution process against personal guarantors of corporate debtors under Section 95 of the Insolvency and Bankruptcy Code, before the NCLT.
The Supreme Court upheld this regime in Lalit Kumar Jain v Union of India (2021), and confirmed in Dilip B. Jiwrajka v Union of India (2023) that the process starts with a resolution professional's examination before any adjudication. A personal guarantor's insolvency puts pressure on the promoter's personal assets and often produces settlements that company-level recovery could not. This page explains the process from the lender's side. If you are a guarantor, see defending a guarantor petition.
हिंदी में सारांश
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Is this your situation?
- You lent money to a company and its promoter or director signed a personal guarantee
- The company has defaulted and is in insolvency, liquidation or simply not paying
- You have invoked the guarantee and the guarantor has not paid
- You want recovery from the guarantor's personal assets
- The guarantor is transferring property or living beyond apparent means
- You want a structured process rather than separate suits and DRT cases against the guarantor
Key principles
Guarantor liability is independent
A guarantor's liability is co-extensive with the borrower's. Approval of a resolution plan for the company does not discharge the guarantor, as the Supreme Court held in Lalit Kumar Jain (2021).
The NCLT is the forum
For personal guarantors of corporate debtors, the adjudicating authority is the NCLT. If insolvency or liquidation of the company is pending, the guarantor's case goes to the same bench.
A demand notice comes first
The creditor must serve a demand notice on the guarantor and wait the prescribed period before applying.
No interim moratorium since 2026
Section 96, as amended with effect from 26 May 2026, provides that the interim moratorium does not apply when an application is filed in respect of a personal guarantor to a corporate debtor. Other recovery actions are not automatically frozen on filing.
Report before adjudication
After filing, a resolution professional examines the application and submits a report recommending acceptance or rejection. The NCLT decides after that report.
Repayment plan or bankruptcy
If admitted, the guarantor can propose a repayment plan to creditors. If no plan is approved, bankruptcy can follow.
How a Section 95 application works
Invoke the guarantee
The lender invokes the guarantee in writing, demanding payment from the guarantor under the deed. Keep proof of service.
Serve a demand notice
The creditor serves a demand notice on the guarantor in the prescribed form, giving the guarantor the time allowed under the rules to pay. If the guarantor does not pay, the creditor may apply.
File the application before the NCLT
The application is filed under Section 95 with the guarantee deed, proof of invocation and demand, and details of the debt and default. The creditor can propose a resolution professional; otherwise the IBBI nominates one.
Resolution professional's report
Under Section 99, the resolution professional examines the application, may seek information from the guarantor and submits a report within 10 days of appointment recommending acceptance or rejection.
Admission or rejection
The NCLT considers the report, hears the guarantor, and passes an order within 14 days of receiving the report. If admitted, a moratorium under Section 101 applies for 180 days, covering legal actions in respect of the guarantor's debts.
Claims, repayment plan and creditors' meeting
Creditors file claims. The guarantor, with the resolution professional, prepares a repayment plan, which needs the approval of creditors holding at least three-fourths in value of the debts present and voting. If approved by the NCLT, it binds creditors. If not, the creditor or guarantor may apply for bankruptcy.
Changes in 2026 that matter for lenders
Two changes made by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, in force from 26 May 2026, shift the balance towards lenders:
- No interim moratorium on filing. Previously, the moment an application was filed by or against a personal guarantor, an interim moratorium froze legal actions concerning the guarantor's debts. Guarantors used this to stall lenders by filing their own applications. That interim moratorium no longer applies to personal guarantors to corporate debtors. The moratorium under Section 101 still applies after admission.
- Guarantor assets within the company's process. A new Section 28A allows assets of a guarantor, of which the creditor has taken possession under applicable law, to be transferred within the company's insolvency process with the committee's approval, so they can be sold together with the company's assets where that gives better value.
These changes make personal guarantor applications quicker and harder to delay, and are likely to encourage early settlements.
Other routes against a guarantor
DRT for banks
Banks and financial institutions can proceed against guarantors in DRT along with the borrower.
Suit on the guarantee
Other lenders can sue on the guarantee in a commercial court, sometimes as a summary suit.
SARFAESI
Where the guarantor has mortgaged property as security, banks can enforce under SARFAESI.
Combining routes
Lenders often run a Section 95 application alongside other remedies. The interplay, including after admission when the Section 101 moratorium applies, needs careful planning.
Time and typical cost
Fees are agreed in writing for each stage and do not depend on recovery.
| Stage | Usual time | What it involves |
|---|---|---|
| Invocation and demand notice | 2 to 4 weeks | Drafting and service |
| Filing under Section 95 | 1 to 2 weeks after notice period | Application, fee as per rules, proposed professional |
| Resolution professional's report | Within 10 days of appointment | Information requests to guarantor |
| Admission decision | Within 14 days of the report | Hearing |
| Repayment plan stage | Several months | Claims, creditors' meeting, plan approval |
Documents you will need
The guarantee
- Personal guarantee deed and any supplementary deeds
- Loan agreement and sanction letter to the company
- Security documents
Default and invocation
- Statement of account of the company's loan
- Recall notice to the company
- Invocation letter to the guarantor with proof of service
- Demand notice and proof of service
The guarantor
- Address, PAN and known assets of the guarantor
- Details of any property mortgaged
- Insolvency or liquidation status of the company
A lender, a promoter and a stalled recovery
Here's a made-up example. An NBFC lent Rs 14 crore to a Ghaziabad packaging company, backed by personal guarantees from its two promoters. The company went into liquidation and the NBFC recovered only a fraction. The promoters owned flats and farmland but had ignored the invocation letters.
We served demand notices on both promoters and filed Section 95 applications before NCLT Allahabad, where the company's liquidation was pending. One promoter immediately filed his own application under Section 94, hoping to trigger an interim moratorium, but after the 2026 amendment no interim moratorium applied. The resolution professional's report recommended admission. Facing admission and a review of their assets, the promoters proposed a settlement backed by the sale of the farmland, which the NBFC accepted.
Mistakes lenders make against guarantors
- Not invoking the guarantee properly: the deed often prescribes how invocation must be made. A defective invocation gives the guarantor an easy objection.
- Claiming beyond the guarantee cap: many guarantees are limited to a specific facility or amount. Claim within the deed.
- Not crediting recoveries from the company: amounts recovered from the company's assets must reduce the claim against the guarantor.
- Missing limitation: a claim against a guarantor is generally subject to a three-year period, often counted from invocation. Diary it.
- Relying on filing alone for pressure: since 2026 there is no interim moratorium on filing, but there is also no automatic freeze on the guarantor's assets. Consider protective steps in parallel.
- Ignoring co-guarantors: where several promoters guaranteed the loan, plan applications against each, and consider their relative assets.
Key terms in plain words
| Term | What it means |
|---|---|
| Personal guarantor | An individual who guaranteed a company's debt |
| Invocation | The lender's formal demand to the guarantor to pay under the guarantee |
| Section 95 application | A creditor's application to start insolvency against an individual, including a guarantor |
| Section 99 report | The resolution professional's report recommending acceptance or rejection |
| Section 101 moratorium | The pause on legal actions against the guarantor's debts after admission, for up to 180 days |
| Repayment plan | The guarantor's proposal to repay creditors, needing three-fourths approval |
| Bankruptcy | The process that may follow if no repayment plan is approved |
Information the resolution professional can demand
During the examination under Section 99, the resolution professional can ask the guarantor for evidence of repayment, if the guarantor claims the debt has been paid, and for information about the guarantor's financial position. The guarantor must cooperate. For lenders, this stage often produces useful information about the guarantor's assets and transactions. A well-documented application, with details of known properties and accounts, helps the professional ask the right questions and produce a report that supports admission.
Checklist for a creditor
- Get the deed of guarantee and confirm it is signed and properly stamped
- Check that the guarantee was invoked, and note the date of invocation
- Calculate the amount due from the guarantor, with interest, as on the date of filing
- Send the demand notice in the form prescribed under the personal insolvency rules
- Allow the 14-day period after the demand to run before filing
- File before the NCLT that is dealing with, or would deal with, the corporate debtor
- Collect what you know about the guarantor's assets for later stages
- Check whether other creditors have already started proceedings against the same guarantor
Running recovery alongside the application
Since the 2026 amendment, filing an application against a guarantor of a company loan does not trigger an interim moratorium. For a lender, this changes the planning. Recovery steps already under way, such as a SARFAESI action on mortgaged property or an original application before the DRT, are not automatically frozen when the Section 95 application is filed. They pause only once the NCLT admits the application and the Section 101 moratorium begins.
That gives lenders a choice to make. Some prefer to complete a SARFAESI sale of a specific property first and then pursue insolvency for the shortfall. Others file early because the insolvency process brings all the guarantor's assets and creditors into one forum, and because the repayment plan stage gives a structured route to settlement. We look at what security you hold, what other creditors are doing, and how quickly each route is likely to move before recommending a sequence. See defending a guarantor case for the guarantor's side and the 2026 change to Section 96.
A bank pursues a promoter after CIRP
Here's a made-up example. A bank lent Rs 40 crore to a Gurugram company, with a personal guarantee from its managing director. The company went into CIRP, and the bank recovered Rs 18 crore under the resolution plan. The plan said nothing about releasing the guarantor.
Under Lalit Kumar Jain v Union of India (2021), approval of the plan does not discharge the guarantor. The bank sent a demand under the personal insolvency rules and then filed under Section 95 before NCLT Chandigarh, which had dealt with the company. The bank's SARFAESI notice on a separate commercial property continued alongside, because no interim moratorium applied. A resolution professional was appointed and examined the claim. The guarantor then proposed a repayment plan over three years, secured on his house, and the creditors approved it.
Frequently Asked Questions
Can a lender go after a personal guarantor when the company is in insolvency?
Yes. The company's moratorium does not protect guarantors, and a Section 95 application can be filed before the NCLT.
Does approval of the company's resolution plan release the guarantor?
No. The Supreme Court held in Lalit Kumar Jain (2021) that the guarantor's liability survives approval of the company's plan.
Is there an interim moratorium when a guarantor application is filed?
Not for personal guarantors to corporate debtors since 26 May 2026. The moratorium under Section 101 applies after admission.
Which bench hears the application?
The NCLT bench where the company's insolvency or liquidation is pending; otherwise the bench with jurisdiction over the company.
Does the guarantor get a hearing before admission?
Yes, at the admission stage after the resolution professional's report, as confirmed in Dilip B. Jiwrajka (2023).
What if the guarantor proposes a repayment plan?
Creditors vote on it. It needs approval from creditors holding at least three-fourths in value of the debts present and voting, and then the NCLT's approval.
Can the guarantor's assets be sold along with the company's?
Under the new Section 28A, guarantor assets in the creditor's possession can, in some cases, be transferred within the company's process with the committee's approval.
How are your fees decided?
By the amount and the number of guarantors, agreed in writing. They do not depend on recovery.
Holding a Personal Guarantee?
Share the guarantee deed and the company's default status. We will plan the invocation, notice and application so the guarantor cannot stall.
This page gives general information about the law as it stood when it was last reviewed. It is not legal advice on your case and does not promise any result. IBC rules and NCLT procedures change often, so outcomes depend on your own documents, dates and facts.
Need help with Insolvency Against Personal Guarantors of Company Loans?
Send us the notice, the petition or the order. We will tell you where you stand, which bench hears it and the date the next step is due, in plain words.
