Threshold Limit For Initiating Insolvency Process Against Personal Guarantors Shall Also Be ₹1 Crore: NCLT Chennai
Mohd Malik Chauhan
31 March 2025 6:10 AM
The National Company Law Tribunal (NCLT) Chennai bench of Shri. Sanjiv Jain (Judicial Member) Shri. Venkataraman Subramaniam (Technical Member) has held that the threshold limit for initiating the Personal Insolvency Resolution Process (PIRP) under Sections 94 or 95 of the Insolvency and Bankruptcy Code, 2016 (Code), shall be the same as that for a Corporate Debtor under Section 4 of...
The National Company Law Tribunal (NCLT) Chennai bench of Shri. Sanjiv Jain (Judicial Member) Shri. Venkataraman Subramaniam (Technical Member) has held that the threshold limit for initiating the Personal Insolvency Resolution Process (PIRP) under Sections 94 or 95 of the Insolvency and Bankruptcy Code, 2016 (Code), shall be the same as that for a Corporate Debtor under Section 4 of the Code, i.e., ₹1 crore.
Brief Facts:
Mr. Keerthan Kumar Upadhya (Applicant) has filed this application under section 94 of the code seeking initiation of the Insolvency Resolution Process against himself as the Personal Guarantor for SKV United Hospitals Limited (Corporate Debtor).
SKV United Hospitals Limited had taken credit facilities from Shreem Hreem Shreem Holdings. The Applicant herein had given personal guarantee to the said loans. The Corporate Debtor failed to repay the debts and in pursuance of which the present application has been filed.
Observations:
The Tribunal observed that the corporate debtor took a loan of Rs. 75,00,000 for which the Applicant provided a personal guarantee. The creditor invoked the guarantee demanding the said amount which is clearly below the threshold limit for initiating the insolvency process that is 1 crore.
It further added that the IBC classifies individuals into three categories- personal guarantors to corporate debtors, partnership firms and proprietorship firms and other individuals to enable implementation of individual insolvency in a phased manner. The provisions for personal guarantors to the corporate debtor came into effect on December 1 2019.
The Tribunal further observed that the threshold limit for initiating insolvency proceedings against personal guarantors under Sections 94 and 95 of the Code shall be the same as that for Corporate Debtors under Section 4 of the Code, i.e., ₹1 crore.
Based on the above, it held that in the present case, the defaulted amount does not meet the threshold limit therefore the application under section 94 of the code cannot be maintained.
The Tribunal further observed that the Applicant also failed to send notice to all financial creditors and the corporate debtor as required under Rule 6(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.
Accordingly, the present petition was dismissed.
Case Title: Keerthan Upadhya(Guarantor)
Case Number: CP(IB)/51(CHE)/2025
Order Date: 19/03/2025
For Petitioner: Sahaya Sukuna, Advocate