Sumit Bhatnagar vs Uco Bank & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Comp. App. (AT) (Ins) No. 2038 of 2024 & I.A. No. 738 of 2025 (Arising out of the Order dated 23.10.2024 passed by the National Company Law Tribunal, Ahmedabad Bench, in Company Petition (IB) No. (IB)/200(AHM) 2024 with IA/1072(AHM)2024) and Company Petition (IB)/199(AHM) 2024 with IA/1068(AHM)2024

IN THE MATTER OF: Amit Bhatnagar S/O Sh. Suresh Narain Bhatnagar, Aged Around 42 Years, R/O 6 Green Park, Nizampura, Vadodara, Gujarat 380005 ...Appellant

Versus 1. UCO Bank Having Its Branch Office At: Mid Corporate Branch, 14-17 Earth Complex, Akshar Chowk, Old Padra Road, Vadodara 390020 Through Authorized Representative, Vishal Dileeprao Niam ...Respondent No. 1

2. CS & IP Amrish Gandhi Resolution Professional 504, Shivalik Abaise, Nr. Anand Nagar Bus Stand, Opp Shell Petrol Pump Anand Nagar Road, ...Respondent No. 2 Satellite, Ahmedabad 380015

3. Indian Overseas Bank Having its Registered Office: At 703, Anna Salai, Chennai-600002 Having its Branch Office sat: - Asset Recovery Management Branch, Ground Floor, Sharad shopping, opp. Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

Handloom House Chinubhai tower centre Chinubhai tower Road, Ashram Road, Ahmedabad - 380009 ... Intervenor

Present For Appellants: Mr. Malak Bhatt, Ms. Neeha Nagpal & Ms. Sukanya Joshi, Advocates.

For Respondents: Mr. Amrish Gandhi, Advocate for RP Mr. Jaimohan, Mr. Aayush Gupta, Advocates for R-1 Ms. Swati Sood, Advocate

With Comp. App. (AT) (Ins) No. 2039 of 2024 & I.A. No. 740 of 2025

IN THE MATTER OF: Sumit Bhatnagar S/O Sh. Suresh Narain Bhatnagar, Aged Around 42 Years, R/O 6 Green Park, Nizampura, ...Appellant Vadodara, Gujarat 380005

Versus 1. UCO Bank Having Its Branch Office At: Mid Corporate Branch, 14-17 Earth Complex, Akshar Chowk, Old Padra Road, Vadodara 390020 Through Authorized Representative, Vishal Dileeprao Niam ...Respondent No. 1

2. CS & IP Amrish Gandhi Resolution Professional 504, Shivalik Abaise, Nr. Anand Nagar Bus Stand, Opp Shell Petrol Pump Anand Nagar Road, ...Respondent No. 2 Satellite, Ahmedabad 380015

Page 2 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

3. Indian Overseas Bank Having its Registered Office: At 703, Anna Salai, Chennai-600002 Having its Branch Office sat: - Asset Recovery Management Branch, Ground Floor, Sharad shopping, opp. Handloom House Chinubhai tower centre Chinubhai tower Road, Ashram Road, Ahmedabad - 380009 ...Intervenor

Present For Appellants: Mr. Malak Bhatt, Ms. Neeha Nagpal & Ms. Sukanya Joshi, Advocates.

For Respondents: Mr. Amrish Gandhi, Advocate for RP Mr. Jaimohan, Mr. Aayush Gupta, Advocates for R-1 Ms. Swati Sood, Advocate

JUDGEMENT

(12 .05.2026)

NARESH SALECHA, MEMBER (TECHNICAL)

1. There are two appeals in the present case. We are taking both the appeals

together. The appeals have been filed by the Appellants i.e., Amit Bhatnagar and

Sumit Bhatnagar, who are the Personal Guarantors of M/s Diamond Power

Transformers Ltd. ("Corporate Debtor"), under Section 61 of the Insolvency

and Bankruptcy Code, 2016 ('Code') against the Order dated 23.10.2024

("Impugned Order") passed by the National Company Law Tribunal, Ahmedabad

Bench ("Adjudicating Authority") in Company Petition (IB) No. Company

Page 3 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

Petition (IB) No. (IB)/200(AHM) 2024 with IA/1072(AHM)2024 and Company

Petition (IB)/199(AHM) 2024 with IA/1068(AHM)2024.

UCO Bank, who is the Financial Creditor of the Corporate Debtor, is the

Respondent No.1/Respondent Bank, herein.

CS & IP Amrish Gandhi, who is the Resolution Professional of Mr. Amit

Bhatnagar and Mr. Sumit Bhatnagar, is Respondent No. 2, herein.

Indian Overseas Bank, who was the other Financial Creditor of the

Corporate Debtor in addition to Respondent No.1 /UCO Bank, is the Intervenor

in both the appeals.

2. We will refer both UCO Bank- Respondent No. 1 and Indian Overseas

Bank-Intervenor, as "Consortium Banks", since their cause and grounds are same,

hereinafter.

3. The Appellants submitted that the Consortium Banks extended a credit

facility of Rs. 40 crores to the Corporate Debtor (DPTL) on 15.10.2011, which

was renewed on 29.06.2013. Pursuant thereto, a Consortium Agreement dated

31.03.2015 was executed for an aggregate credit facility of Rs. 114.60 crores. The

Appellants contended that despite the explicit terms of the said Consortium

Agreement, the Consortium Banks failed to disburse Rs. 24 crores to the

Corporate Debtor (DPTL). This non-disbursement amounted to a unilateral

variation in the essential terms of the Consortium Agreement and a breach of the

obligations assumed by the Consortium Banks thereunder.

Page 4 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

4. The Appellants submitted that the Deed of Guarantee dated 31.03.2015

executed by the Appellants and Diamond Power Infrastructure Ltd. (DPIL)

(Corporate Guarantor) in favour of the Consortium Banks was predicated entirely

upon the Consortium Agreement and the promised disbursement of the full Rs.

114.60 crores. The Appellants contended that the failure to disburse Rs. 24 crores

constituted a material alteration in the terms of the contract between the creditor

and the principal debtor without the consent of the sureties. Consequently, the

Appellants stands fully discharged from all liability under the Deed of Guarantee

in terms of Section 133 of the Indian Contract Act, 1872, and the Adjudicating

Authority was duty-bound to recognise the same while examining the petition

under Section 95 of the Code.

5. The Appellants submitted that the account of the Corporate Debtor (DPTL)

was declared NPA on 30.07.2016, leading to admission of Company Petition (IB)

No. 28 of 2017 under Section 10 of the Code on 06.07.2017 and subsequent order

of liquidation dated 19.03.2018 in IA No. 92 of 2018. Separately, the lead bank

of the Consortium (Bank of India) initiated proceedings under Section 7 against

the Corporate Guarantor (DPIL), resulting in admission into CIRP on 24.08.2018.

The Appellants contended that the Consortium Banks filed its claim before the

Resolution Professional of DPIL, which was accepted and crystallised on the

strength of the corporate guarantee furnished by DPIL for the dues of the

Corporate Debtor (DPTL). The said claim were dealt with and satisfied in full

under the approved Resolution Plan.

Page 5 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

6. The Appellants submitted that the Resolution Plan of the Corporate

Guarantor (DPIL) was approved by the Committee of Creditors on 06.01.2022

with 89.46% voting share and thereafter allowed by the Adjudicating Authority

on 20.06.2022 in CP (IB) No. 137 of 2018. The Consortium Banks, being a

member of the Committee of Creditors, actively participated and accorded its

consent to the Resolution Plan, which expressly dealt with and extinguished its

entire claim. The Appellants contended that the Successful Resolution Applicant

took over management of DPIL and made upfront cash payments as well as

deferred payments to all financial creditors, including the Respondent Bank, and

issued Bond Certificate No. 17 dated 17.09.2022 bearing face value of Rs.

49,96,91,500/- in favour of the Respondent Bank. Thereafter, the Successful

Resolution Applicant repurchased the said bonds from the Respondent Bank

under the Bond Repurchase Agreement dated 07.10.2022 executed with M/s

Gomax. The Respondent Bank further issued an Acknowledgement Letter dated

07.10.2022 to the Successful Resolution Applicant (Consortium of GSEC Ltd.

with Rakesh Shah) expressly accepting the treatment of its claims under the

approved Resolution Plan as full and final settlement.

7. The Appellants submitted that the dues of the Consortium Banks stood

completely extinguished and satisfied in accordance with the approved

Resolution Plan of the Corporate Guarantor (DPIL), which is binding on all

stakeholders under Section 31 of the Code. The Appellants contended that after a

lapse of more than two years from the date of full satisfaction and

Page 6 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

acknowledgement, the Consortium Banks issued Demand Notice dated

25.01.2024 claiming an amount of Rs. 116,15,08,125/- towards purported

outstanding liability and interest and thereafter filed Company Petition (IB) No.

200 of 2024 under Section 95 of the Code seeking initiation of insolvency

resolution against the Appellants as personal guarantors while claiming an

aggregate sum of Rs. 116.40 crores. The Appellants submitted that no debt or

liability whatsoever survives against the Appellants in view of the complete

extinguishment of the underlying debt through the CIRP of the Corporate

Guarantor (DPIL).

8. The Appellants contended that the Resolution Professional (Respondent

No. 2) filed a Report dated 06.07.2024 under Section 99 of the Code mechanically

confirming a default of Rs. 122.19 crores without any independent scrutiny of

documents, without examining the discharge of the guarantee under Section 133

of the Contract Act, 1872, without considering the approved Resolution Plan of

DPIL, and without addressing the issue of limitation. The Report is a verbatim

reproduction of the petition filed by the Respondent Bank and discloses no

application of mind. The Appellants submitted that the Resolution Professional

failed to discharge the statutory duty cast under Section 99(2) of the Code to

examine whether the application satisfies the requirements of Section 95(4),

including existence of a debt, occurrence of default, and production of relevant

evidence of non-repayment.

Page 7 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

9. The Appellants contended that the petition under Section 95 of the Code

does not fulfil the mandatory criteria prescribed under Section 95(4) inasmuch as

there is no debt owed by the Appellants to the Respondent Bank after full

satisfaction under the DPIL Resolution Plan, there has been no failure to pay any

subsisting debt within fourteen days of demand, and no credible evidence of any

default has been produced. The Appellants submitted that in the absence of any

existing debt or default, the petition was not maintainable and ought to have been

rejected at the threshold.

10. The Appellants submitted that the claim are barred by limitation. The NPA

date is 30.07.2016, the liquidation order records default as on 19.03.2018, and the

Demand Notice was issued only on 25.01.2024. The Appellants contended that

the Consortium Banks failed to demonstrate any acknowledgment of debt or any

continuous cause of action that could extend the period of limitation under the

Limitation Act, 1963. The proceedings under Section 95 are thus barred by time

and the Adjudicating Authority erred in not dismissing the petition on this ground

alone.

11. The Appellants contended that the Resolution Professional (Respondent

No. 2) had itself issued a No Dues Certificate confirming complete settlement of

all dues of the Corporate Guarantor (DPIL) and had also ensured deletion of the

name of DPIL from the list of defaulters. Having accepted full and final payment

under the Resolution Plan, the Consortium Banks have no locus to pursue any

further claim against the Appellants/personal guarantors. The Appellants

Page 8 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

submitted that once the corporate guarantor's liability has been discharged and

the debt extinguished, no residual or balance claim can be enforced against the

Appellants under the principle of co-extensiveness of guarantees and the doctrine

of discharge by performance.

12. The Appellants submitted that the impugned order dated 23.10.2024

passed by the Adjudicating Authority in Company Petition (IB) No. 200 of 2024

and Company Petition (IB) No. 199 of 2024 are perverse, passed in a callous and

casual manner without appreciation of facts or law, and is contrary to the scheme

and object of the Code. The Appellants alleged that the Adjudicating Authority

failed to consider the discharge of the guarantee, the binding nature of the

approved Resolution Plan of DPIL, the acknowledgement of full settlement by

the Respondent Bank, the absence of any subsisting debt, and the bar of

limitation. The order merely reiterates the erroneous Report of the Resolution

Professional without independent application of mind.

13. The Appellants contended that the entire proceedings initiated by the

Respondent Banks are an afterthought and an attempt at unjust enrichment and

extortion in flagrant violation of the provisions of the Code and settled principles

of law. The Appellants submitted that the present appeal have been preferred bona

fide and in the interest of justice.

14. Concluding their arguments, the Appellants requested this Appellate

Tribunal to set aside the Impugned Orders and allow both appeals.

Page 9 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

15. Per contra, the Consortium Banks denied all averments made by the

Appellants as misleading and baseless.

16. The intervenor (Indian Overseas Bank) submitted that it has been

impleaded as a party to the present appeal in view of its significant financial

interest in the outcome of the proceedings. The intervenor contended that the

Applicant/Respondent Bank holds substantial outstanding dues aggregating to

Rs. 273.34 crores as on 23.10.2024, recoverable from Diamond Power

Transformers Ltd. (DPTL) and Diamond Power Infrastructure Ltd. (DPIL), and

the adjudication of the present appeal directly impacts the rights and remedies

available to the intervenor in respect of the said dues.

17. The Consortium Banks contended that the debts owed by the Appellants as

personal guarantors have not been settled or extinguished in terms of the

Resolution Plan dated 20.06.2022 approved in the CIRP of the corporate

guarantor (DPIL). The Consortium Banks submitted that the acknowledgement

letter dated 07.10.2022 and the treatment of its claim under the said Resolution

Plan were limited to the amount crystallised and admitted in the CIRP of DPIL

and do not operate as a discharge or waiver of the remaining unpaid dues of the

Consortium Banks recoverable from the Appellants under the personal guarantee

and the final adjudication made by DRT-II, Ahmedabad vide judgment and

Recovery Certificate dated 06.02.2020 in OA No. 436 of 2018.

18. The Consortium Banks contended that they had extended a credit facility

of Rs. 40,00,00,000/- as part of the consortium arrangement. The total sanctioned

Page 10 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

limit under the Consortium Agreement dated 31.03.2015 was Rs. 114,60,00,000/-

(Rs. 40 crores by the Respondent No. 1 + Rs. 50.60 crores by Indian Overseas

Bank + additional Rs. 24 crores). The Consortium Banks submitted that the plea

of alleged non-disbursement of Rs. 24,00,00,000/- is wholly misconceived, non-

jurisdictional under the code, and in any event stands finally adjudicated and

rejected by the DRT in the above-referred recovery proceedings. The Consortium

Banks contended that the liabilities of the Appellants have been conclusively

determined by the DRT for a sum of Rs. 109,11,40,210.00 together with interest

at 14.25% p.a. and penal interest at 2% p.a. with effect from 12.04.2018, which

adjudication has attained finality.

19. The Consortium Banks submitted that there was never any unilateral

variation in the terms of the loan or the Deed of Guarantee dated 31.03.2015

executed by one of the Appellant, Sumit Bhatnagar and DPIL. The Consortium

Banks contended that the plea of discharge of the guarantee under Section 133 of

the Indian Contract Act, 1872 is completely misconceived and ill-founded,

inasmuch as the alleged non-disbursement (if any) of part of the limit does not

constitute a material alteration that discharges the personal guarantor, more

particularly when the entire matter has been adjudicated by the DRT and the

Recovery Certificate has been issued. The Consortium Banks submitted that the

said plea is hit by the principles of res judicata and is non-est in proceedings under

the Code.

Page 11 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

20. The Consortium Banks contended that the CIRP proceedings initiated by

Bank of India (Lead Bank of Consortium of Banks) against DPIL (corporate

guarantor) under Section 7 of the Code were in respect of an independent lending

transaction and have no bearing on the separate and distinct rights of the

Consortium Banks to recover their own dues from the Appellants as personal

guarantors. The Consortium Banks submitted that although claims were filed by

the Consortium Banks in the CIRP of DPIL, the law is well-settled that recovery

proceedings can validly continue against non-CIRP obligants, including personal

guarantors.

21. The Consortium Banks submitted that the approval of the Resolution Plan

of DPIL on 20.06.2022 and the subsequent compliance thereof by the Successful

Resolution Applicant (including upfront cash payments, deferred payments and

issuance/repurchase of Bond Certificate No. 17 dated 17.09.2022 for face value

of Rs. 49,96,91,500/-) do not absolve the Appellants of their independent and co-

extensive liability as personal guarantors. The Consortium Banks contended that

the said Resolution Plan neither limits nor extinguishes the right of the

Consortium Banks to claim the remaining unpaid debts from the Appellants.

22. The Consortium Banks submitted that the claims filed by them in the CIRP

of DPIL were updated only up to the date of admission of that petition and did

not include future accruals of interest or other charges as per the contractual terms

and the DRT decree. The unpaid balance therefore continues to remain

recoverable from the Appellants.

Page 12 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

23. The Consortium Banks contended that the Demand Notice dated

25.01.2024 was issued strictly in terms of the outstanding dues crystallised under

the Recovery Certificate dated 06.02.2020 for the remaining unpaid amount of

Rs. 1,16,15,08,125/-. The Consortium Banks submitted that the Appellants'

failure to pay the said amount despite receipt of the demand notice gave a fresh

and valid cause of action to initiate proceedings under Section 95(1) of the Code.

The Consortium Banks contended that the petition under Section 95 of the Code

satisfies all criteria under Section 95(4) of the Code, including the existence of a

debt, occurrence of default, and production of relevant evidence in the form of

the DRT judgment, Recovery Certificate and the Deed of Guarantee by the

Appellant.

24. The Consortium Banks submitted that the Resolution Professional

(Respondent No. 2) submitted its report dated 06.07.2024 filed under Section 99

of the Code, based on due consideration of all facts, claims and documents on

record and is not a mechanical reproduction of the petition. The Consortium

Banks contended that the Resolution Professional has rightly confirmed the debt

and the default amounting to Rs. 122.19 crores after independent scrutiny.

25. The Consortium Banks submitted that their claims are well within the

period of limitation. The Consortium Banks contended that the date of default

recorded in the liquidation order of the corporate debtor, i.e. 19.03.2018 does not

bar the present proceedings, more particularly when the dues have been finally

adjudicated by the DRT on 06.02.2020 and the Demand Notice was issued on

Page 13 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

25.01.2024, taking into account Suo-moto judgement of Hon'ble Supreme Court

of India extended the period of limitation. The Consortium Banks submitted that

the cause of action is continuous in nature and the proceedings under Section 95

of the code are not barred by limitation.

26. The Consortium Banks contended that the plea of unjust enrichment or lack

of locus is wholly untenable. The Consortium Banks submitted that they have

claimed only their legitimate dues as per the contractual relationship, the personal

guarantees and the binding DRT adjudication. The threshold limit under the code

is duly satisfied. The Consortium Banks contended that the issuance of any No

Dues Certificate or deletion of DPIL's name from the list of defaulters in the

CIRP of the corporate guarantor has no effect on the independent liability of the

Appellants as personal guarantors.

27. The Consortium Banks submitted that the impugned order dated

23.10.2024 has been passed after complete application of mind, due consideration

of all rival pleadings, written submissions, additional written submissions,

rejoinders and documents placed on record. The Consortium Banks contended

that the Adjudicating Authority has rightly admitted the petition under Section 95

of the Code and the present appeals are devoid of any merit. The Consortium

Banks submitted that the both appeals have been preferred malafide and are not

in the interest of justice. The Consortium Banks contended that the Appellant are

merely attempting to evade their admitted and adjudicated liabilities as personal

guarantors.

Page 14 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

28. Concluding arguments, the Consortium Banks requested this Appellate

Tribunal to dismiss both the appeals with cost.

29. The Respondent No. 2/ Resolution Professional submitted that he does not

want to file any reply as recorded vide this Appellate Tribunal's order dated

16.01.2025.

Findings

30. We note that two Company Petitions i.e. CP(IB)/200(AHM)2024 and

CP(IB)/199(AHM)2024 were filed on 21.05.2024 under Section 95(1) of the

Code by the Respondent Banks seeking initiation of Insolvency Resolution

Process against Mr. Amit Bhatnagar and Mr. Sumit Bhatnagar respectively

(hereinafter referred to as "Personal Guarantors") for default amount of Rs.122.19

Crores in respect of Deed of Guarantee dated 31.03.2015 executed in favour of

the Consortium Bank. We note that Diamond Power Transformers Limited

("DPTL") is the Corporate Debtor and Diamond Power Infrastructure Limited

("DPIL") is Corporate Guarantor to the Corporate Debtor. In respect of the

guarantee issued by the Appellants as Personal Guarantors for DPTL, the

Consortium Banks have invoked guarantee vide letter dated 06.04.2018.

31. We also take into consideration that the Consortium Banks granted

aggregate facility of Rs. 40.00 Crores to the Corporate Debtor DPTL (Under

Liquidation) vide sanction letter dated 15.10.2011 which was renewed vide

Sanction Letter dated 29.06.2013 & 31.03.2015 at the request of the Corporate

Page 15 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

Debtor. The Consortium Banks had sanctioned Working Capital facilities vide

Consortium Agreement entered with the Corporate Debtor for financial facility

of Rs 114.60 Crores. The Corporate Debtor ("DPTL") and others executed

various loan/security documents in favour of the Banks from time to time.

Similarly, the Appellants as Personal Guarantors also executed Deed of

Guarantee on 31.03.2015 in favour of the Consortium Banks to secure the Credit

Facilities granted to the Corporate Debtor. We note that the loan accounts of the

Corporate Debtor ("DPTL") were classified as NPA on 30.07.2016. Meanwhile,

the Corporate Debtor ("DPTL") itself filed CP (IB) No. 28/10/NCLT/AHM/2017

under Section 10 of the Code seeking CIRP against itself before the Adjudicating

Authority and vide order dated 06.06.2017, the Corporate Debtor was admitted

into the CIRP and later an order of liquidation was passed on 19.03.2018 in IA

No. 92 of 2018 by the Adjudicating Authority.

32. We note that the Consortium Banks invoked personal guarantees executed

by the Appellants as personal guarantors in its favour through Notice of

Invocation of Guarantee dated 06.04.2018. The Consortium Banks also filed O.A.

No. 436 of 2018 on 12.04.2018 before DRT Ahmedabad which was allowed and

Recovery Certificate was issued vide DRT order dated 06.02.2020 against the

Corporate Debtor ("DPTL") as well as the Appellants/Personal Guarantors.

33. It has been empathetically pleaded by the Consortium Banks that the

personal guarantees extended for the Corporate Debtor ("DPTL") nowhere

mentioned/dealt in the Resolution Plan of the Corporate Guarantor ("DPIL").

Page 16 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

Thus, the Consortium Banks have retained their right to initiate actions under the

joint and several personal guarantees of the Corporate Debtor ("DPTL") for the

balance amounts due to them against the Appellants as personal guarantors.

34. It has been pleaded by the Consortium Banks that the pay-out by the

Successful Resolution Applicant of the Corporate Guarantor ("DPIL") was based

upon the admitted claim of Rs.52.00 Crores exclusive of the interest amounts

payable by the Corporate Debtor ("DPTL") and subsequently awarded by the

DRT, Ahmedabad and the interest receivable by the Banks still remain

outstanding.

35. We also note that the Interim Resolution Professional filed the report dated

06.07.2024 through IA/1072(AHM)2024 dated 08.07.2024 recommending the

admission of the application filed under Section 95 of the Code against the

Appellants.

36. It is the case of the Consortium Banks that the settlement with the

Corporate Guarantor does not automatically extinguish the liability of the

Personal Guarantors, unless specifically stated in the Resolution Plan and further

submitted that, after reviewing the documents, no evidence was found suggesting

that the Appellant's liability as personal guarantor had been fully discharged.

37. We also take into consideration that the liability of the Personal Guarantor

has been calculated to the extent of Rs.122,19,18,337.07 as on 31.03.2024, based

upon the Judgment dated 06.02.2020 passed by the DRT, Ahmedabad.

Page 17 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

38. After noting rival contentions and going through the facts in the appeals,

we find that basically there are only two issues which have been raised by the

Appellants in both the appeals i.e., the claims of the Consortium Banks are barred

by law of limitation and further entire payment of all creditors including

Consortium Banks have fully been paid by the SRA as per approved Resolution

Plan, which stand implemented.

39. We shall take first issue of limitation raised by the Appellants

(a) It is the case of the Appellants that the Corporate Debtor was declared NPA

way back on 30.07.2016 and Consortium Banks invoked personal

guarantees against the Appellants on 06.04.2018. The Appellants

empathetically pleaded that the Consortium Banks have consistently

treated this date of 30.07.2016 as the date of default w.r.t. the Appellants

as personal guarantors and the same has been reflected in demand notice

issued under Rule 7 dated 25.01.2024 and in the Section 95 application

filed by the Consortium Banks before the Adjudicating Authority. The

Appellants also submitted that the personal guarantees against the

Appellants involved on 06.04.2018 therefore, according to Consortium

Banks own case, the last possible date for the purpose of limitation could

be computed w.r.t 06.04.2018 and thus, even taking this date, the limitation

would have expired on 06.04.2021 whereas the application under Section

95 against the Appellants were filed much after expiry of this limitation

Page 18 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

period of 06.04.2021 and indeed the application under Section 95 was filed

by the Consortium Banks on 18.05.2024.

(b) The Appellants stated that this clearly proves that the applications of the

Consortium Banks under Section 95 were completely barred by the

limitation Act and therefore, the impugned orders are perverse and contrary

to established fact and settled laws and therefore, on this ground alone the

impugned orders need to be set aside.

(c) In this connection, we note that the CIRP was initiated against the

Corporate Guarantor ("DPIL") 24.08.2018 and subsequently the Bank filed

an OA 436 of 2018 before the DRT, Ahmedabad, which gave its judgement

on 06.02.2020 and recovery certificate was issued in favour of Consortium

Banks.

(d) We would also take into consideration that the Hon'ble Supreme Court of

India in Suo-moto case as noted earlier, had extended the limitation period

due to Covid for all cases and as such, the law of limitation for all case got

extended between 15.03.2020 to 28.02.2022. Thus, the decree of DRT and

further taking into consideration Suo-moto judgment of the Hon'ble

Supreme Court of India extended the limitation period for the Consortium

Banks in the present case.

(e) We reiterate that the loan accounts of the Corporate Debtor ("DPTL") were

classified as NPA on 31.07.2016, and as per NeSL records, the date of

default of the Corporate Debtor ("DPTL") is recorded as 30.07.2016.

Page 19 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

Initially, joint Notice of Innovation of Guarantee dated 06.04.2018 were

issued and served by the Banks upon the Appellants/Personal Guarantors

with in three years of limitation period from the date of default. Thus, in

terms of Notice of Invocation of Guarantee dated 06.04.2018, three years

of limitation period for filing the Petition U/s 95(1) of the Code, was

available to the Respondent Banks till 06.04.2021, however, in view of the

order dated 06.02.2020 passed by the DRT, Ahmedabad in O.A. No. 436

of 2018, the debt liability of the Appellants/Personal Guarantors were

crystalized by giving them two-month period to pay the same from the date

of order. Thus, the period of Limitation stood extended for three years

w.e.f. order dated 06.02.2020 to 05.02.2023 in terms of section 18 of the

Limitation Act, 1963. The decree of guarantee by DRT, Ahmedabad gives

a fresh lease to the limitation and a new cause of action to the Applicant.

(f) We also note that the Deed of Guarantee were again involved by the

Consortium Banks on 25.01.2024, whereas the present applications under

Section 95 were filed on 18.05.2024 before the Adjudicating Authority.

Thus, we do not find any merit in the contentions of the Appellant w.r.t.

limitation, as, the limitation is clearly covered by the series of events and

judicial pronouncements as discussed above.

40. Now, we shall deal with another issue raised by the Appellants/Personal

Guarantors qua the absolvent of the liability from Personal Guarantee, in view of

the Resolution Plan approved by the Adjudicating Authority in respect of the

Page 20 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

Corporate Debtor ("DPIL") M/s. Diamond Power Infrastructure Limited. During

hearing, the Consortium Banks categorically stated that the personal guarantees

extended for the Corporate Debtor ("DPTL") nowhere mentioned/dealt in the

Resolution Plan of the Corporate Guarantor ("DPIL"), thus, the Consortium

Banks retained their rights to initiate actions under the joint and several personal

guarantees of the Corporate Debtor ("DPTL") for the balance amounts due to

them. It has been brought out during hearings that the pay-out by the successful

resolution applicant of the corporate Guarantor ("DPIL") was based upon the

admitted claim of Rs.52 Crores, exclusive of the interest amounts payable by the

Corporate Debtor ("DPTL") and subsequently awarded by the DRT, Ahmedabad.

The approval of Resolution Plan for the Corporate Guarantor ("DPIL") (Diamond

Power Infrastructure Limited) to the Corporate Debtor (Diamond Power

Transformers Limited) has no bearing on the rights of the banks against the

Appellants as no resolution plan has even been approved for the Corporate

Debtor/DPTL and the Corporate Debtor is under liquidation. The interest

receivable by the banks still remain outstanding, hence, the Consortium Banks

issued demand notice on 25.01.2024 to the Appellants/Personal Guarantors in

Form-B under Rule 7(1) of the I&B Consortium Banks to recover the outstanding

interest amounts from the Respondent/Personal Guarantor. The total debt owed

to the Banks as per DRT Judgment as on 31.03.2024 under the personal guarantee

is Rs. 122,19,18,337.07 which comprises of interest and penal interest.

Page 21 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

41. We observe that it is a settled position of law that the liability of the

personal guarantor remains co-extensive with that of the principal debtor and is

not extinguished merely by reason of the approval of a Resolution Plan in the

insolvency proceedings of the corporate debtor or the corporate guarantor.

42. We also note that the Hon'ble Supreme Court in Lalit Kumar Jain v.

Union of India & Ors. [(2021) 9 SCC 321] has held that the approval of a

Resolution Plan under Section 31 of the Code does not operate as a discharge of

the guarantor's liability and that the liability of the guarantor continues to remain

co-extensive with that of the principal debtor. The said judgment applies to the

facts of the present case and completely negates the Appellant's contention that

the debt stands extinguished upon approval of the Resolution Plan.

43. This Appellate Tribunal, in case of Roshan Lal Mittal & Ors. v. Rishabh

Jain & Ors., Company Appeal (AT) (Insolvency) No. 1558 of 2023, has reiterated

that a Resolution Plan does not absolve personal guarantors and that their liability

continues notwithstanding the approval of the Resolution Plan. Similarly, the

Hon'ble Calcutta High Court in Gouri Shankar Jain v. Punjab National Bank,

W.P. No. 10147(W) of 2019 has held that the approval of a Resolution Plan and

the acceptance of a haircut by the financial creditors does not impair or extinguish

the creditor's right to recover the balance amount from the guarantor. The

Appellant's plea that the entire debt stands extinguished subsequent to approval

of Resolution Plan is therefore is not sustainable.

Page 22 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

44. We also take into consideration that under Section 128 of the Indian

Contract Act, 1872, the liability of the guarantor is co-extensive with that of the

principal debtor. The Hon'ble Supreme Court in BRS Ventures Investments Ltd.

v. SREI Infrastructure Finance Ltd., Civil Appeal No. 4565 of 2021 has held

that recovery of part of the debt or settlement with one obligant does not

extinguish the liability of the other obligants and that the creditor retains the full

right to recover the balance debt from the remaining obligants, including the

personal guarantor. Thus, even where a Resolution Plan results in partial

recovery, the remaining unpaid debts survive and the guarantors continue to

remain liable for the unpaid portion as applicable in the present case

45. We observe that proceedings under Section 95(1) of the Code against

personal guarantors are fully maintainable even after or during the CIRP of the

corporate debtor or the corporate guarantor and the Respondent Banks are

therefore entitled to proceed against the Appellant for recovery of the unpaid debt

under the personal guarantee. The filing and admission of claims in the CIRP of

the corporate guarantor does not amount to full satisfaction of the debt and does

not bar the recovery of the remaining dues from other obligants, including the

personal guarantors. It is well settled that recovery proceedings can validly

continue against the personal guarantors for the unpaid amount.

46. The Appellants pleaded that the total claims w.r.t. all Secured Financial

Creditors of the Corporate Debtor were Rs. 2833.62 Crores and total amount

admitted for all Secured financial Creditor was Rs. 2372.87 Crores. The

Page 23 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

Appellants submitted that the entire claim of Indian Overseas Bank was of Rs

1195.46 Crores which was admitted whereas UCO Bank's claim of Rs. 52.01

Crores was admitted at Rs. 52 Crores. The Appellants submitted that approved

Resolution Plan has dealt the claims of the Consortium Banks in full. In this

connection, the Appellants in his written submissions dated 15.04.2026 has given

a table which, we reproduce as under, for sake of convenience: -

Page 24 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

47. From above, we note that against the claims of Operational Creditors of

Rs. 900.74 Crores, Rs. 5 Crores has been provided by SRA. Similarly, again the

admitted claims of all Secured Financial Creditors including Consortium Banks

were of Rs. 2372.87 Crores whereas Rs. 42.60 Crores were made as upfront

payment. Further, the approved Resolution Plan provided for payment of Rs. 431

Crores in favour of Secured Financial Creditors as deferred payment and also

21,92,112 new equity shares in the Corporate Debtor of Rs. 10 each, post capital

redemption by the Corporate debtor.

Page 25 of 27

Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

48. During hearing, the Appellants emphasising submitted that SRA proposed

issuance of Unsecured redeemable bond aggregating Rs. 1900 Crores carrying

zero coupon rates for a period of thirty years, as such the combined values of cash

payments, deferred payments, equity shares and bonds, equal to total admitted

debts of unsecured Financial Creditors. On the face of it, the arguments of the

Appellants sound quite attractive. However, the fact remains that the payment to

the Consortium Banks are not fully covered especially interest and do not cover

due amount as awarded by DRT Ahmedabad. We reiterate that due to failure of

the Appellants for failure to repay the amount due to the Consortium Banks on

account of its personal guarantees extended by the Appellants, the Consortium

Banks issued demand notice and also filed OA before the DRT Ahmedabad,

which has gone into all aspects and crystallised the liabilities against the

Corporate Guarantor and the Appellants as Personal Guarantors at Rs. 109.11

Crore along with interest @ 14.25% and penal interest of @ 2% w.rt. 12.04.2018.

49. We also take into consideration the DRT Ahmedabad's order has not been

challenged by the Appellants, thus, the DRT's order has attained finality based

on which the Consortium Banks invoked Section 95 applications before the

Adjudicating Authority. The Adjudicating Authority, in the impugned order, after

going through all the facts and law, concluded that the petitions under Section 95,

based on the report of the Interim Resolution Professional, submitted

subsequently under Section 99 of the Code, fully satisfy the requirements of the

Code. The Adjudicating Authority thus, after recording comprehensive findings,

Page 26 of 27 Comp. App. (AT) (Ins) No. 2038 of 2024 & Comp. App. (AT) (Ins) No. 2039 of 2024

admitted the applications against the Appellants. We also find merit in the

Consortium Banks submissions that their claims are still outstanding. We do not

find any merit in the contentions of the Appellants on this point that the claims of

the Consortium Banks stand settled in view of approved Resolution Plan.

50. In view of above detailed examinations of facts and law, we reject both the

grounds of the Appellants i.e., limitation as well as full discharge of claims of the

Consortium Banks.

51. We do not find any error in the impugned orders. Both the appeals fail and

stand rejected. No cost. I.A.'s, if any, are closed.

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical) Sim

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