The National Company Law Appellate Tribunal (NCLAT) has dismissed three appeals filed by personal guarantors of Archon Engicon Ltd., holding that liability already determined by the Debts Recovery Tribunal (DRT) and left unchallenged cannot be reopened in collateral proceedings under Section 114 of the Insolvency and Bankruptcy Code (IBC).

The bench of Justice Yogesh Khanna (Officiating Chairperson) and (Technical Members) Barun Mitra and Ajai Das Mehrotra upheld the rejection of the guarantors’ repayment plans, observing that the adjudicating authority cannot independently approve a plan that has failed to obtain the requisite 66% affirmative voting share of creditors. 

Buy Now: 90+ Supreme Court Judgments – September 2026

They challenged an order of the NCLT, Ahmedabad Bench, passed on applications filed by their resolution professional under Section 114 of the IBC read with Rule 11 of the NCLT Rules, 2016. The applications sought the resolution professional’s discharge and appropriate directions following the unsuccessful repayment-plan process.

The principal dispute concerned whether the guarantors’ liability was restricted to the market value of the properties they had mortgaged or extended to the borrower’s entire outstanding dues.

The guarantors relied on Clause 24 of the guarantee deed dated June 12, 2014, which stated that their guarantee was restricted to the market value of the properties mortgaged or proposed to be mortgaged to secure the company’s credit facilities.

They also relied on an arrangement letter, bank sanction letters, an inter-creditor agreement and a transaction audit report. According to them, these documents supported their contention that they had furnished limited guarantees and could not be made personally liable beyond the value of their collateral.

The NCLAT noted that the guarantors had previously raised the limited-guarantee argument while challenging the admission of applications under Section 95 of the IBC.

At that stage, the appellate tribunal had observed that the extent of the guarantees should be examined by the adjudicating authority when the repayment plans were finalised. It had dismissed the earlier appeals with that observation.

In the proceedings now under challenge, the NCLT expressly framed an issue concerning whether the plea of limited liability under Clause 24 affected the rejection of the repayment plans. It considered the clause alongside the other provisions of the guarantee deed and the supporting documents relied upon by the guarantors.

The NCLAT therefore rejected the contention that the adjudicating authority’s findings lacked reasons.

The appellate tribunal examined Clauses 1, 6, 9 and 24 of the guarantee deed.

Clause 1 required the guarantors, upon the borrower’s default and a demand by the bank, to pay the principal sum—subject to the stated ceiling of ₹427 crore—along with interest, costs, charges, expenses and other amounts due.

Clause 6 provided that the guarantee could be enforced even where collateral securities remained outstanding, unenforced or unrealised. Clause 9 similarly recognised the bank’s right to call upon the guarantors to pay despite its rights under other securities.

The NCLAT upheld the NCLT’s interpretation that Clause 24 concerned the security arrangement and did not restrict the primary contractual liability undertaken under the earlier clauses.

It accepted that the provisions had to be read harmoniously and that the collateral-related clause could not be construed to override the express liability provisions. The adjudicating authority could not rewrite the commercial contract.

A central consideration was the DRT’s order dated August 3, 2021, in Original Application No. 83 of 2017.

The NCLAT recorded that the DRT had upheld the validity of the guarantee deed and held the guarantors jointly and severally liable for dues of ₹1,49,26,12,243, approximately ₹149.26 crore.

The guarantors acknowledged that they had not challenged that order. The appellate tribunal also noted that they had not challenged the claims lodged by the banks before the resolution professional.

Since the DRT’s determination had attained finality, the NCLAT held that the guarantors could not seek to reopen the extent of their liability through proceedings under Section 114 of the IBC. Bhumika Nilay R. Shah

The guarantors argued that the DRT proceedings had been conducted ex parte and that they had not received an opportunity to be heard.

The NCLAT rejected this submission after examining the DRT order. It noted that written statements had been filed or adopted by the defendants and that the DRT had expressly considered those pleadings, even though some defendants subsequently allowed the proceedings to continue ex parte.

The appellate tribunal concluded that the guarantors had participated in the proceedings and presented their defence. It also recorded that they had not disputed execution of the guarantee deed.

The NCLAT observed that the repayment proposals had been considered over several creditor meetings. The guarantors had received repeated opportunities to improve their offers, while creditors discussed the plans’ feasibility and viability.

The judgment admitted claims of ₹1,221.55 crore and referred to final repayment plans of ₹1.60 crore and ₹2.75 crore. These proposals failed to secure the required 66% affirmative voting share.

According to the voting figures reproduced in the judgment, IDBI Bank, holding 21.35% of the voting share, supported the proposal. Bank of Baroda and Union Bank of India, together holding 20.14%, voted against it. State Bank of India, holding 42.16%, abstained, while Bank of India, holding 15.91%, was absent.

The tribunal held that the failure to obtain the statutory majority could not be overcome by asking the adjudicating authority to substitute its own commercial assessment.

The NCLAT explained that Section 114 requires consideration of a repayment plan on the basis of the report of the creditors’ meeting. It does not authorise the adjudicating authority to independently approve a plan where the approval required under Section 111 has not been secured.

The tribunal found no demonstrated prejudice or finding that the statutory process had been vitiated. It consequently upheld the creditors’ rejection of the repayment plans and dismissed all three appeals. Pending applications were also disposed of. 

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: Rajasthan High Court Denies Bail in Udaipur Kanhaiya Lal Tailor Murder Case