What is the insolvency process against a personal guarantor under IBC?

Question

The bank has filed an insolvency application against me as a personal guarantor to a corporate loan. What is the procedure and can I settle before it proceeds? I would like to understand which provision governs this, what it entitles me to, and how long I have before the remedy lapses. I also want to know whether I need a lawyer for this or can do it myself.

MyVakeel Legal Desk · Accepted Answer

In India, the answer to "What is the insolvency process against a personal guarantor under IBC?" turns on Insolvency and Bankruptcy Code 2016, Section 95, Insolvency and Bankruptcy Code 2016, Section 100 and Insolvency and Bankruptcy Code 2016, Section 114. The points below set out the position and then what to do about it, in the order it should be done.

Under Section 95 of the IBC, a creditor can file an application before the NCLT to initiate insolvency resolution against a personal guarantor upon default.

A Resolution Professional is appointed to examine the application and submit a report recommending admission or rejection within the timeline under Section 99.

Under Section 100, the Adjudicating Authority must pass an order admitting or rejecting the application within 14 days of receiving the RP's report, and the guarantor gets an opportunity to be heard.

The Supreme Court in Lalit Kumar Jain v. Union of India upheld that approval of a corporate resolution plan does not automatically discharge the personal guarantor's liability.

A repayment plan can be proposed under Section 114 and if approved by creditors, it can settle the guarantor's liability without proceeding to bankruptcy.

What to do next: 1) Engage the Resolution Professional and respond to the notice with your financial position and repayment proposal; 2) Examine whether the underlying corporate debt figures used against you as guarantor are accurate; 3) Propose a repayment plan under Section 114 for creditor approval before the matter proceeds further; 4) If admission of the application is improper, contest it before the NCLT citing procedural lapses.

If you are unsure whether your facts fall inside Insolvency and Bankruptcy Code 2016, Section 95, that is worth checking with an advocate before you commit to a route, because switching later costs time. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in banking law.