Case Note & Summary
The appeal arose from an order dated 04.02.2026 passed by the National Company Law Tribunal, which initiated insolvency proceedings against Mr. Pawan Gupta under Section 95 of the Insolvency and Bankruptcy Code, 2016. The Appellant, Mr. Gupta, challenged the order on the grounds that he was only a co-borrower and not a personal guarantor for the loan taken by M/s L.R. Builders Pvt. Ltd. The loan documents explicitly stated 'Guarantors: NIL', and the Appellant argued that no deed of guarantee was executed. The Respondent, Charm Investments Pvt. Ltd., claimed that the Appellant was a personal guarantor and that the loan was classified as NPA. The Appellant contended that the initiation of proceedings was without jurisdiction and based on misrepresentation. The Respondent maintained that the Appellant had obligations akin to a guarantor based on the transactional documents. The court analyzed the arguments and found that the Respondent had misrepresented the existence of a guarantee, leading to a jurisdictional error in the proceedings. The court emphasized that the absence of a formal deed of guarantee and the misrepresentation of facts warranted the setting aside of the impugned order. The court concluded that the proceedings initiated against the Appellant were invalid as he was not a personal guarantor, thus upholding the Appellant's challenge.
Headnote
A) Insolvency Law - Personal Guarantor vs Co-Borrower - Jurisdictional Error - Insolvency and Bankruptcy Code, 2016, Sections 95, 97 - The Appellant contended that he was merely a co-borrower and not a personal guarantor, asserting that no formal deed of guarantee existed. The court held that the proceedings initiated under Section 95 were without jurisdiction as the Appellant was not a personal guarantor, thus the impugned order was set aside (Paras 32-34).
Issue of Consideration
Whether the Learned Adjudicating Authority committed any illegality or jurisdictional error in appointing a Resolution Professional under Section 97 of the Insolvency and Bankruptcy Code, 2016.
Final Decision
The court set aside the impugned order dated 04.02.2026, holding that the proceedings initiated against the Appellant were without jurisdiction as he was not a personal guarantor.
Law Points
- Insolvency proceedings
- personal guarantor
- co-borrower
- jurisdictional error
- misrepresentation
