NCLT Greenlights Insolvency Process Against Personal Guarantor Mukund Kulkarni

Solapur Janata Sahakari Bank's Application to Initiate Insolvency Resolution Process Admitted; Tribunal Clarifies Personal Guarantee Invocation Validity

In a significant ruling, the National Company Law Tribunal (NCLT) Mumbai has admitted the application filed by Solapur Janata Sahakari Bank Limited to initiate an insolvency resolution process against Mr. Mukund Pandharinath Kulkarni, a personal guarantor for the loans extended to Shetkari Sakhar Karkhana (Chandrapuri) Limited. The tribunal, comprising Shri Anil Raj Chellan and Shri K.R. Saji Kumar, issued the order on October 27, 2025, marking a crucial development in the insolvency proceedings.

Solapur Janata Sahakari Bank, the financial creditor, had pursued the insolvency proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016. The bank's application stemmed from personal guarantees provided by Mr. Kulkarni in favor of the credit facilities extended to the corporate debtor, Shetkari Sakhar Karkhana (Chandrapuri) Limited. The total debt claimed in the application amounted to Rs.14.75 crore.

The tribunal's decision to admit the application hinged on several key legal interpretations. Primarily, the tribunal determined that a notice issued under Section 13(2) of the SARFAESI Act could be treated as a valid invocation of personal guarantee if it included a demand on the guarantor. This interpretation was pivotal, as it countered Mr. Kulkarni's defense that no formal demand had been made upon him as a guarantor.

Additionally, the tribunal addressed the issue of limitation raised by Mr. Kulkarni, who argued that the application was barred by the limitation period. However, the tribunal, referencing an arbitration award dated March 11, 2019, clarified that such an award constituted an acknowledgment of debt, thereby providing a fresh cause of action and placing the application within the permissible limitation period.

The tribunal also dismissed Mr. Kulkarni's contention regarding the discharge of his liabilities due to the approval of the resolution plan for the corporate debtor. Citing the Supreme Court's decision in Lalit Kumar Jain v. Union of India, the tribunal reiterated that the approval of a resolution plan does not automatically discharge a personal guarantor's liabilities under the contract of guarantee.

With this order, the tribunal has initiated the insolvency resolution process against Mr. Kulkarni, imposing a moratorium and appointing Mr. Sanjay Shrivastava as the resolution professional. The tribunal outlined the steps for the resolution process, including the publication of a notice inviting claims from creditors and the preparation of a repayment plan.

This case underscores the complexities involved in insolvency proceedings, particularly concerning personal guarantees, and sets a precedent for interpreting statutory provisions related to such guarantees.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 - Validity of invocation of personal guarantee under SARFAESI Act - Arbitration award as acknowledgment of debt and its impact on the limitation period - Approval of corporate debtor's resolution plan does not discharge personal guarantor's liability.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Section 95, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13(2), Limitation Act, Arbitration award acknowledgment.

Solapur Janata Sahakari Bank Limited v. Mukund Pandharinath Kulkarni, (NCLT)(Mumbai) : Law Finder Doc Id # 2813436