Prior invocation of personal guarantee is mandatory to maintain an insolvency application under Section 94.

The Appellant, a personal guarantor, filed an application under Section 94 of the Insolvency and Bankruptcy Code (IBC), 2016, to initiate the insolvency resolution process.

On 02.09.2025, the Adjudicating Authority (NCLT) sought clarification regarding the invocation of the guarantee.

The Appellant filed an affidavit (Annexure AT-32) in response, but the NCLT dismissed the petition on 26.09.2025, holding that the Appellant had not proved the invocation of the personal guarantee and thus did not qualify as a "debtor" under Section 94.

The Appellant subsequently filed this appeal with a 15-day delay in filing and an 85-day delay in re-filing, citing logistical issues between Delhi, Amaravati, and Mumbai, and the time taken to clear defects.

The court applied Section 94 of the IBC, which allows a debtor to apply for insolvency resolution.

It followed the principle that a personal guarantor's status as a "debtor" for the purposes of Section 94 is contingent upon a "default" that occurs only after the personal guarantee has been formally invoked.

Additionally, the court exercised its discretionary power to condone delays in filing and re-filing where "sufficient cause" is shown, as per the standard procedural norms governing the Appellate Tribunal.

The Tribunal first addressed the procedural delays, finding that the distance between the counsels’ offices and the Appellant’s residence, coupled with the time required to clear technical defects, constituted "sufficient cause".

Regarding the merits, the Tribunal noted the NCLT’s finding that the Appellant’s affidavit did not contain a guarantee invocation letter, which is a prerequisite for a personal guarantor to be considered a debtor under Section 94.

Although the Appellant’s counsel argued that several invocation letters were part of the record, the Tribunal observed that the specific affidavit filed before the NCLT failed to indicate such invocation.

However, acknowledging the Appellant's claim that materials existed but were not "properly explained" below, the Tribunal determined that the interest of justice required allowing the Appellant to rectify the evidentiary gap.

It held that while the Adjudicating Authority’s dismissal was based on the failure to prove guarantee invocation, the Appellant should be granted the opportunity to provide proper materials.

Consequently, the appeal was disposed of with liberty granted to the Appellant to file a fresh application under Section 94 of the IBC supported by adequate material evidence.