NCLT Mumbai Admits ₹671 Crore Insolvency Petition Against Personal Guarantor Of Frost International; Holds Claim Within Limitation

The Mumbai Bench-I of the National Company Law Tribunal has admitted an application under Section 95 of the Insolvency and Bankruptcy Code, 2016, initiating insolvency resolution proceedings against Poonam Anoop Wadhera, personal guarantor of Frost International Limited, on a claim exceeding ₹671 crore filed by Canara Bank.

Background

Canara Bank had sanctioned multiple fund-based and non-fund-based working capital facilities to Frost International Limited between 2014–2015, secured by hypothecation of assets, mortgage of immovable properties, and personal guarantees executed by multiple guarantors, including the respondent. A Deed of Guarantee dated 12 May 2014 capped aggregate liability at ₹3,236 crore. Following default by the corporate debtor, the bank issued a demand notice under Section 13(2) of the SARFAESI Act on 21 January 2019, invoking the guarantee. As payment was not made, a demand notice under Rule 7(1) of the 2019 Rules was issued on 1 December 2023, and the Section 95 petition was filed on 8 November 2024.

Objections By Personal Guarantor

The personal guarantor contended that the petition was time-barred, that the guarantee was executed without informed consent and under coercion, and that she neither exercised control over nor derived benefit from the corporate debtor. She also relied on a civil suit filed before the Delhi High Court challenging the enforceability of the guarantee and objected to the bank filing additional affidavits after arguments were concluded.

Tribunal’s Findings

The Tribunal held that the guarantee was an on-demand guarantee, and default qua the personal guarantor occurred only upon expiry of 60 days from service of the SARFAESI notice. Accordingly, the date of default was determined as 29 March 2019, not the NPA classification date of the corporate debtor. Applying the Supreme Court’s suo motu limitation orders and relying on NCLAT precedents, the Bench held that limitation stood extended. Additionally, admission of the bank’s claim in the CIRP of the corporate debtor constituted an acknowledgment of debt binding on the guarantor, further saving limitation. The Tribunal rejected allegations of fraud and coercion, noting absence of contemporaneous challenge to the Deed of Guarantee and no interim protection from any civil court. It further held that filing of additional affidavit to evidence invocation of guarantee did not introduce a new cause of action.

Holding that default stood established and statutory requirements under Section 95 were satisfied, the NCLT admitted the petition, initiated insolvency resolution proceedings against the personal guarantor, declared moratorium under Section 101, and appointed a Resolution Professional to conduct the process.