CASE NAME: M Gagan Bothra v. Senthil Kumar
CASE NUMBER: CP(IB)/96(CHE)/2025 with IA(IBC)/1384(CHE)/2025
COURT: National Company Law Tribunal, Division Bench-I, Chennai
DATE: 7 September, 2026
QUORUM: Shri Sanjiv Jain, Member (Judicial), and Shri Venkataraman Subramaniam, Member (Technical)
FACTS
The Corporate Debtor PRC International Hotels Private Limited, had borrowed Rs.15.0 Crore from late Shri S. Mukanchand Bothra, father of the Petitioner M. Gagan Bothra, through its erstwhile directors. The Respondent, Senthil Kumar, one such director, executed a personal guarantee undertaking to repay the amount from his own funds if the Company failed to execute a promised sale deed in time. The Corporate Debtor had defaulted and the lender filed CP/540/2018. He died in the year 2019 and Petitioner along with his siblings were impleaded as legal heir.
The Corporate Debtor went through CIRP(Corporate Insolvency Resolution Process) and a resolution plan was approved on 27.08.2019, under which the lender admitted a claim of Rs. 15.0 Crore was settled for only Rs. 4.12 Crore, leaving Rs. 14,92,28,600/- outstanding. The Petitioner claimed the guarantee and issued a demand notice on 06.09.2020. The Respondent gave a reply rejecting liability according to Section 31(1) of the IBC but made no payment. A composite petition against both guarantors, CP/29/2021, was dismissed in 2021, restored by the NCLAT in January 2025 with a finding that the Petitioner stood established as successor to the lender, and then withdrawn with liberty to file separate petitions. The present petition followed. The IRP (Interim Resolution Professional) recommended admission, and the Respondent, despite notice served by mail and international speed post, filed no reply or objection.
ISSUES
- Whether a personal guarantor’s liability survives the approval of a resolution plan against the Corporate Debtor.
- Whether the Petitioner, as legal heir of the original lender, is competent to maintain the petition.
- Whether the petition is barred by limitation given the earlier withdrawal and refiling.
- Whether a personal guarantor permanently resident outside India falls outside the reach of the Code.
LEGAL PROVISIONS
- Section 95, IBC 2016 – enables a creditor to apply for insolvency resolution of a personal guarantor.
- Section 99, IBC 2016 – requires the resolution professional’s report before admission.
- Rule 7, IBBI (Personal Guarantors) Rules, 2019 – governs the demand notice preceding the petition.
- Section 128, Indian Contract Act, 1872 – makes a surety’s liability co-extensive with that of the principal debtor, absent a contrary contract.
- Section 235, IBC, 20160 – allows the Adjudicating Authority to send a letter of request to a foreign court where assets lie abroad.
- Case laws relied upon: Lalit Kumar Jain v. Union of India, AIR 2021 SC 402; Ram Krishan v. State of Uttar Pradesh, AIR 2012 SC 2288.
ARGUMENTS
Petitioner: The guarantee is an independent contract and it does not get extinguished by mere fact that the debt of the principal borrower was restructured under a resolution plan. The Petitioner is the recognised successor of the original lender, a finding already returned by the NCLAT. Owing to the Supreme Court’s suo motu extension of limitation during the Covid period and the liberty granted while permitting withdrawal of the earlier composite petition, the present petition is within time.
Respondent: Beyond a reply to the demand notice asserting that Section 31(1) of the IBC extinguished his liability upon approval of the resolution plan, the Respondent entered no appearance and filed no objection to the IRP’s report or the petition itself.
ANALYSIS
The Tribunal held that approval of a resolution plan does not automatically release a personal guarantor, relying on the case of Lalit Kumar Jain, which treats a discharge of the principal debtor by operation of law or through insolvency as leaving the surety’s independent liability untouched. Section 128 of the Contract Act was read to the same effect, and Ram Krishan v. State of UP was cited for the creditor’s right to proceed against surety and principal debtor alike. On this footing, the Respondent’s reliance on Section 31(1) was rejected.
On standing, the Tribunal treated the NCLAT’s finding that the Petitioner stood established as successor to the deceased lender as binding, coupled with his siblings’ affidavits authorising him to act on their behalf. On limitation, the petition was found protected by the Covid-era extension and by the liberty granted when the earlier composite petition was withdrawn.
On jurisdiction over a guarantor resident in the United States, the Tribunal held that the Code draws no distinction on nationality or residence, particularly where the guarantee itself was executed with a Chennai address, and the underlying Corporate Debtor was based in Chennai. Section 235 was noted as the mechanism available to reach assets located abroad through a foreign court.
JUDGMENT
The petition was allowed and an insolvency resolution process was commenced against the Respondent as a Personal Guarantor. The moratorium was enacted under section 101 of the IBC. Dr. S.R. Shriraam Shekher was designated as Resolution Professional alongside orders to release notice inviting claims, compile a list of creditors, support setting up a repayment plan under Section 105 and present periodic reports before the Tribunal every 30 days. The Petitioner was ordered to deposit Rs. 3,00,000/- towards the Resolution Professional’s fees and expenses within one week.
CONCLUSION
The order reaffirms that a personal guarantee is a separate contract that outlives the fate of the principal debtor’s resolution plan, and that a shortfall left after a resolution plan remains recoverable from the guarantor. It also confirms that residence outside India offers no shelter from proceedings under the Code, so long as the guarantee and the underlying transaction connect the guarantor to India, with Section 235 available to reach assets abroad if needed. Read together with Lalit Kumar Jain, the order leaves little room for a guarantor to treat an approved resolution plan, however modest the recovery under it, as the end of the matter.
“PRIME LEGAL is a National Award-winning law firm with over two decades of experience across diverse legal sectors. We are dedicated to setting the standard for legal excellence in civil, criminal, and family law.”
WRITTEN BY: HARSHMEET KAUR SUDAN
