The State Bank of India (‘SBI’) had filed an application before the NCLT, Kolkata for initiating insolvency resolution process against Mr. Mahendra Kumar Jajodia (personal guarantor to a corporate debtor). However, the NCLT observed that since no CIRP or liquidation process was pending against the corporate debtor, the conditions for initiating insolvency resolution process against personal guarantors, as prescribed under the IBC have not been met, and, therefore, did not admit the application.

SBI appealed against this decision before the NCLAT. The NCLAT held that the provisions of the Code do not require the corporate debtor to be undergoing CIRP or liquidation process, for an insolvency resolution process to be initiated against the personal guarantor. It further held that the insolvency resolution process can be initiated against the personal guarantor before such NCLT, which has jurisdiction over the corporate debtor. On this ground, the Order of the NCLT, Kolkata was set aside.

Aggrieved by this order of the NCLAT, Mr. Mahendra Kumar Jajodia, the personal guarantor, filed an appeal before the SC. The SC after hearing the parties, held that there were no cogent reasons to interfere with the Order of the NCLAT and dismissed the appeal. Therefore, an insolvency resolution process against personal guarantors to a corporate debtor can be initiated even if there is no ongoing CIRP or liquidation process against the corporate debtor.