Insolvency and Bankruptcy Code, 2016
Personal Guarantor Insolvency: Section 95 and Moratorium
Personal guarantors are the only individuals to whom Part III currently applies, and they are its main users. Questions test the forum, whether the guarantor can stall enforcement, the role of the resolution professional, and how a repayment plan is approved or fails. The 2026 Amendment changed one of these answers sharply by removing the interim moratorium for personal guarantors.
1. The Law in Brief
Figure 1: The process for a personal guarantor after 2026
- Forum. The NCLT is the adjudicating authority for personal guarantors to corporate debtors; where the corporate debtor's CIRP or liquidation is pending, the application must be filed before that NCLT, and other pending proceedings stand transferred to it (section 60(1) to (4))
- Initiation. The guarantor may apply under section 94, or a creditor under section 95 after a demand notice not complied with within fourteen days, in each case through a resolution professional.
- 2026 changes. No interim moratorium for personal guarantors (section 96(4)); the professional's report within 21 days (section 99); a meeting of creditors always summoned for guarantors; termination if no repayment plan is submitted (section 106(1A))
2. Where Is a Personal Guarantor's Application Filed?
Facts AB Ltd's CIRP is pending before the NCLT Mumbai Bench. CD Bank files a section 95 application against AB Ltd's promoter, Mr E, a personal guarantor, before the Debts Recovery Tribunal in Delhi, where Mr E lives. A recovery application against Mr E is also pending before the DRT. Advise. |
- Issue. The forum for insolvency proceedings against a personal guarantor whose corporate debtor is in CIRP.
- Law. Under section 60(1), the NCLT having jurisdiction over the corporate debtor's registered office is the adjudicating authority for its personal guarantors. Section 60(2) requires an application relating to the insolvency of a personal guarantor to be filed before the NCLT where the corporate debtor's CIRP or liquidation is pending, and section 60(3) transfers pending insolvency proceedings against the guarantor in any court or tribunal to that NCLT, which has the powers of a DRT under section 60(4)
- Application. AB Ltd's CIRP is before NCLT Mumbai. The DRT in Delhi is not the adjudicating authority for Mr E.
- Conclusion. CD Bank must file its section 95 application before NCLT Mumbai. Insolvency proceedings against Mr E in other forums stand transferred to it. The DRT recovery application, being a recovery proceeding rather than an insolvency proceeding, continues unless stayed by a moratorium after admission.
3. Does a Personal Guarantor Get an Interim Moratorium after 2026?
Facts FG Finance invokes Mr H's personal guarantee for GH Ltd's loans and starts arbitration against him. In April 2026, another creditor files a section 95 application against Mr H, which is still pending in September 2026. Mr H argues that the interim moratorium under section 96 bars the arbitration. Decide. |
- Issue. Whether a personal guarantor gets an interim moratorium on filing of an insolvency application after the 2026 Amendment, including on applications pending on its commencement.
- Law. Section 96, which imposes an interim moratorium from filing until admission, was used by guarantors to stall enforcement. Section 96(4), inserted in 2026, provides that section 96 does not apply where the application is against a personal guarantor to a corporate debtor. In Tata Capital v Neel Motors (2026), the Bombay High Court held that section 96(4) applies to applications pending on 26 May 2026, so the interim moratorium no longer barred arbitration against guarantors. The guarantor is protected only by the section 101 moratorium after admission.
- Application. Mr H is a personal guarantor to a corporate debtor. The application against him was pending on 26 May 2026 and has not been admitted.
- Conclusion. On the view taken in Tata Capital v Neel Motors, the arbitration may proceed. If the NCLT later admits the section 95 application, the moratorium under section 101 will apply from admission.
Figure 2: Protection and discharge of personal guarantors
4. Must the Resolution Professional Hear the Guarantor?
Facts In a section 95 application against Ms J, the resolution professional examines the creditor's documents, seeks information from Ms J, and recommends admission without giving her an oral hearing. Ms J argues that the professional decided the existence of the debt against her without natural justice, and that the provisions are unconstitutional. Decide. |
- Issue. The role of the resolution professional under sections 97 to 99, and whether the guarantor must be heard at that stage.
- Law. In Dilip B Jiwrajka v Union of India (2023), the Supreme Court upheld sections 95 to 100, holding that the resolution professional only facilitates and collects information and makes a recommendation, without adjudicating; no adjudication occurs until the NCLT decides under section 100, where the debtor is heard. The professional's report is due within 21 days of appointment after 2026.
- Application. The professional gathered information and made a recommendation, which is not a decision. Ms J will be heard by the NCLT before admission.
- Conclusion. Ms J's challenge fails. She may contest the debt and the default before the NCLT under section 100, which must consider her objections before deciding.
5. How Is a Repayment Plan Approved?
Facts Mr K's section 94 application as personal guarantor was admitted. He proposes a repayment plan paying creditors 40 per cent over three years. At the meeting, creditors holding 70 per cent in value of the debts of those voting approve; one creditor argues the meeting was unnecessary. In a second case, Ms L never submits a plan at all. Advise on both, and on what discharge would cover. |
- Issue. The approval of a repayment plan, the need for a meeting, and the consequences of failure.
- Law. A repayment plan is approved by a majority of more than three-fourths in value of the creditors present in person or by proxy and voting, and then by the NCLT (sections 111 and 114). After 2026, a meeting of creditors must always be summoned for personal guarantors to corporate debtors. If no plan is submitted in time, the process is terminated and the debtor or creditors may apply for bankruptcy (section 106(1A)). A discharge under section 119 does not release persons other than the debtor.
- Application. Mr K's plan received 70 per cent, not more than 75 per cent. The meeting was required. Ms L submitted no plan.
- Conclusion. Mr K's plan is not approved, and the creditors or he may apply for bankruptcy within the time allowed. Ms L's process must be terminated, and bankruptcy may follow. Had Mr K's plan succeeded, his discharge would not have released his co-guarantors or the corporate debtor.
⚠ Exam trap Forum: the NCLT handling the corporate debtor (s. 60(2)). No section 14 protection (V. Ramakrishnan, 2018) and no discharge by the company's plan (Lalit Kumar Jain, 2021). After 2026, no interim moratorium (s. 96(4)), applied to pending cases by the Bombay High Court; protection only from admission under s. 101. The professional facilitates; the NCLT adjudicates (Jiwrajka, 2023). Plans need more than three-fourths in value of those voting; failure leads to bankruptcy. |
6. Frequently Asked Questions
How long does the section 101 moratorium last?
Until 180 days from admission or the approval of the repayment plan, whichever is earlier.
When was Part III applied to personal guarantors?
By notification from 1 December 2019, upheld in Lalit Kumar Jain (2021).
Can a guarantor be pursued while the company's CIRP is pending?
Yes. The section 14 moratorium protects only the corporate debtor.
7. Related Topics
- Topic 66: Personal Guarantors. Part III proceedings in detail.
- Topic 104: Corporate and Personal Guarantors under IBC. Corporate and personal guarantors.
- Topic 134: Fresh Start and Bankruptcy under IBC. Individuals.