Proceedings under Section 95 IBC against personal guarantors cannot continue before DRT once CIRP of corporate debtor is pending before NCLT
Meetu Kumari | Dec 17, 2025 |
High Court Orders Transfer of Personal Guarantor Insolvency Proceedings from DRT to NCLT
A batch of writ petitions was filed by secured creditors, including Kotak Mahindra Bank Ltd. and Anbit Finvest Pvt. Ltd., challenging the jurisdiction of the Debt Recovery Tribunal (DRT) to entertain insolvency applications filed against personal guarantors under Section 95 of the Insolvency and Bankruptcy Code, 2016. The petitions arose from proceedings initiated by the personal guarantors allegedly to stall recovery actions under the SARFAESI Act, after possession proceedings had reached an advanced stage.
The petitioner had extended credit facilities to a corporate borrower, secured by personal guarantees and mortgages created by individual guarantors. While SARFAESI measures were underway, an insolvency application under Section 95 IBC was filed before DRT against a personal guarantor, leading to declaration of an interim moratorium under Section 96 IBC. Thereafter, CIRP proceedings against the principal corporate borrower were admitted by the NCLT, prompting the lenders to file this appeal.
Main Issue: Whether insolvency proceedings initiated against personal guarantors under Section 95 of the IBC can continue before the DRT when CIRP proceedings of the corporate debtor are pending before the NCLT.
HC’s Ruling: The Bombay High Court allowed the writ petitions and held that, in view of Section 60 of the IBC and the law laid down by the Supreme Court in Lalit Kumar Jain v. Union of India, the adjudicating authority for insolvency proceedings against personal guarantors is the NCLT once insolvency proceedings against the corporate debtor are pending. The Court observed that the DRT lacked jurisdiction to entertain such proceedings and ought to have transferred them to the NCLT.
The Court set aside the DRT’s order dated 2 May 2022 declaring an interim moratorium under Section 96 of the IBC. Liberty was granted to the personal guarantors to pursue appropriate remedies before the NCLT. The DRT was directed to transfer all pending proceedings in these matters to the NCLT within four weeks. All interim applications were disposed of, and no order as to costs was made
To Read Full Judgment, Download PDF Given Below
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