Section 94 petition fails without guarantor status

The Karnataka High Court, Principal Bench at Bengaluru, declined to interfere with the NCLT’s order dismissing a Section 94 application under the Insolvency and Bankruptcy Code, 2016. Justice Suraj Govindaraj held that the petitioner had not established the foundational facts required to maintain the proceeding and that the writ court should not be used to bypass the statutory appellate route.

The petitioner had approached the NCLT in CP(IB) No.240/BB/2025 claiming that he had furnished a personal guarantee in favour of Aditya Birla Capital Limited for credit facilities extended to Ace Embedded Intensive Care Units Private Limited. He relied on a SARFAESI demand notice dated 20 May 2025 and asserted that, as a personal guarantor, he was entitled to invoke Section 94 of the IBC and seek commencement of the insolvency resolution process.

The NCLT dismissed the application on 30 March 2026, holding that the petitioner lacked locus standi. Before the High Court, the petitioner argued that Section 94 is wide enough to permit a debtor, including a personal guarantor, to move the Adjudicating Authority.

The respondent’s principal answer was factual. It contended that the petitioner was not a personal guarantor at all, but a co-borrower. The High Court examined the sanction letter and the facility agreement dated 11 November 2023. The agreement distinguished between borrowers in Schedule I, Part A and co-borrowers in Schedule I, Part B. The petitioner’s name appeared in the co-borrower schedule. The court noted that neither the recital nor the schedules described him as a personal guarantor.

The court also referred to the equitable mortgage documentation and the demand notice. On that material, it held that the petitioner had not produced any document showing that he had executed a personal guarantee in favour of the financial creditor. A mere description in the demand notice was held insufficient to establish the jurisdictional fact necessary for Section 94.

The High Court concluded that the NCLT was justified in holding the application not maintainable. It found no infirmity, illegality, perversity, or jurisdictional error in the impugned order and dismissed the writ petition.

The court also recorded that an efficacious statutory appeal lay to the National Company Law Appellate Tribunal, yet the petitioner persisted with the writ petition. For that reason, it imposed exemplary costs of ₹1,00,000, payable to the Karnataka State Legal Services Authority within four weeks.

Practical takeaway: A Section 94 IBC application must rest on clear foundational material showing the applicant’s status and locus, and writ courts will not entertain such challenges when the appellate remedy is available.