NCLAT dismissed the appeal challenging the initiation of ...

Personal Guarantor's Challenge to PIRP Under Section 95 Fails as Security Trustee's Actions Deemed Valid for Lenders

February 4, 2025

Case Laws     IBC     AT

NCLAT dismissed the appeal challenging the initiation of Personal Insolvency Resolution Process (PIRP) against a personal guarantor. The tribunal found that the Section 95 application was filed within limitation period, ending 21.08.2021. Despite no direct privity of contract between SBI and guarantor, the security trustee's actions were valid as they acted for lenders' benefit per the Master Restructuring Agreement. The debt was deemed crystallized upon execution of personal guarantee in 2015, with established default. Claims regarding undervaluation of corporate debtor's subsidiary shares and absence of Section 100(2) directions for negotiations were rejected. The tribunal upheld the maintainability of the PIRP petition, confirming creditor's right to enforce personal guarantee through security trustee arrangement.

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