Insolvency of Personal Guarantors to Corporate Debtors
The only part of individual insolvency in force: who files where, the day counts, and the three-fourths vote.
Part III of the Code deals with the insolvency of individuals and partnership firms, but the Central Government has brought it into force for only one group: personal guarantors to corporate debtors. That happened on 1 December 2019. For them, the insolvency resolution process (sections 94 to 120) and bankruptcy (sections 121 onward) are live, and the Adjudicating Authority is the NCLT (section 60(1)).
Where the corporate debtor's CIRP or liquidation is already pending, the guarantor's case must go to the same NCLT bench (section 60(2)). This page sets out the process at the exam cut-off of 4 February 2025 and marks what the 2026 amendment changed.
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The Insolvency Resolution Process Step by Step
- 1
1. Application
The guarantor may apply (s. 94), or a creditor alone or jointly (s. 95). A creditor must show a demand notice and non-payment within 14 days of its service. Section 78 sets the minimum default for Part III at ₹1,000.
- 2
2. Interim moratorium
On filing, an interim moratorium starts on all the debtor's debts and runs until admission: pending proceedings are stayed and no new ones can begin (s. 96).
- 3
3. Resolution professional appointed
If the application names an RP, IBBI confirms within 7 days that no disciplinary proceedings are pending. If not, IBBI nominates one within 10 days of the NCLT's direction (s. 97).
- 4
4. RP's report within 10 days
The RP examines the application and recommends admission or rejection (s. 99). The RP can ask for information, and the debtor can show repayment by bank transfer, encashed cheque or the creditor's signed acknowledgment.
- 5
5. Admission within 14 days
The NCLT admits or rejects within 14 days of the report (s. 100). On admission a moratorium of 180 days starts, ending earlier if the NCLT rules on the repayment plan first (s. 101). The debtor cannot transfer or encumber assets meanwhile.
- 6
6. Claims
Public notice within 7 days of admission, inviting claims within 21 days of the notice (s. 102).
- 7
7. Repayment plan
The debtor prepares it with the RP (s. 105). The RP files it with a report within 21 days of the last date for claims, proposing a creditors' meeting 14-28 days later (s. 106).
- 8
8. Creditors vote
Approval needs a majority of more than three-fourths in value of creditors present and voting (s. 111). The NCLT then approves or rejects the plan (s. 114).
- 9
9. If it fails
Where the NCLT rejects the plan or it ends prematurely, the debtor or creditors may apply for bankruptcy within three months of that order (s. 121).
Two Supreme Court Rulings You Must Know
- Lalit Kumar Jain v. Union of India (2021)
- Upheld the 15 November 2019 notification. Approval of the corporate debtor's resolution plan does not by itself discharge the personal guarantor, whose liability arises from an independent contract of guarantee.
- Dilip B. Jiwrajka v. Union of India (2023)
- Upheld sections 95 to 100. The RP's role is facilitative and the section 99 report only recommends; there is no adjudication, and no hearing, before the RP is appointed. Natural justice applies when the NCLT decides admission under section 100.
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What Changed From 26 May 2026
Not part of the law the exam tests.
Interim moratorium for a guarantor
At the exam cut-off
Applies on filing (s. 96)
Now
Does not apply to applications against a personal guarantor to a corporate debtor (new s. 96(4)); same for the bankruptcy interim moratorium (new s. 124(4))
RP's report
At the exam cut-off
10 days (s. 99(1))
Now
21 days; copy to both debtor and creditor (s. 99(10))
No repayment plan filed in time
At the exam cut-off
No specific provision
Now
RP reports, NCLT terminates the process, and a bankruptcy application may follow (new ss. 106(1A), 121(1)(d))
Creditors' meeting
At the exam cut-off
Only if the RP recommends one
Now
For a personal guarantor, the RP must summon it (new s. 106(3A))
Guarantor's assets held by a creditor
At the exam cut-off
No provision
Now
With CoC approval, a creditor that has enforced security over a guarantor's asset may transfer it as part of the corporate debtor's resolution (new s. 28A)
| Point | At the exam cut-off | Now |
|---|---|---|
| Interim moratorium for a guarantor | Applies on filing (s. 96) | Does not apply to applications against a personal guarantor to a corporate debtor (new s. 96(4)); same for the bankruptcy interim moratorium (new s. 124(4)) |
| RP's report | 10 days (s. 99(1)) | 21 days; copy to both debtor and creditor (s. 99(10)) |
| No repayment plan filed in time | No specific provision | RP reports, NCLT terminates the process, and a bankruptcy application may follow (new ss. 106(1A), 121(1)(d)) |
| Creditors' meeting | Only if the RP recommends one | For a personal guarantor, the RP must summon it (new s. 106(3A)) |
| Guarantor's assets held by a creditor | No provision | With CoC approval, a creditor that has enforced security over a guarantor's asset may transfer it as part of the corporate debtor's resolution (new s. 28A) |
How the Limited Insolvency Examination Tests This
Individual insolvency has its own case study: four questions of two marks each. A typical set: a bank invokes Mr A's ₹5 crore guarantee for a company already in CIRP at the Mumbai bench, and asks where to file, when the interim moratorium starts, how long the RP has to report, and what vote approves a repayment plan. The answers are the Mumbai bench (s. 60(2)), on filing, 10 days, and more than three-fourths in value of creditors present and voting. The traps are the DRT (the forum only for other individuals, and Part III is not yet in force for them), the CoC's 66% threshold, and the 2026 figures.
FAQs
Where is insolvency of a personal guarantor filed under IBC?expand_more
Before the NCLT (section 60(1)). If the corporate debtor's CIRP or liquidation is pending, the application must be filed before the NCLT bench handling that case (section 60(2)).
Does approval of a resolution plan discharge the personal guarantor?expand_more
No. In Lalit Kumar Jain (2021) the Supreme Court held that approval of the corporate debtor's resolution plan does not by itself discharge the personal guarantor's liability under the guarantee.
What majority approves a repayment plan?expand_more
More than three-fourths in value of the creditors present in person or by proxy and voting at the creditors' meeting (section 111).
Is a hearing required before the resolution professional is appointed?expand_more
No. Dilip B. Jiwrajka (2023) held that no adjudication takes place at the appointment stage. The NCLT must observe natural justice when it decides admission under section 100.
Next steps
- Individual Insolvencyarrow_forward
- Lalit Kumar Jain casearrow_forward
- Contract & Guaranteearrow_forward
- NCLT and NCLATarrow_forward
65 questions, case-study format, negative marking.