Personal Guarantor Who Participated In NCLT Proceedings Can Appeal Insolvency Admission: NCLAT
The National Company Law Appellate Tribunal (NCLAT) at New Delhi has held that a personal guarantor who was permitted to participate in proceedings before the Adjudicating Authority qualifies as an “aggrieved person” entitled to maintain an appeal under the Insolvency and Bankruptcy Code against the admission of insolvency proceedings. The ruling came in an appeal filed by Ashwin Smith,...
The National Company Law Appellate Tribunal (NCLAT) at New Delhi has held that a personal guarantor who was permitted to participate in proceedings before the Adjudicating Authority qualifies as an “aggrieved person” entitled to maintain an appeal under the Insolvency and Bankruptcy Code against the admission of insolvency proceedings.
The ruling came in an appeal filed by Ashwin Smith, a former director and personal guarantor of CM Smith & Sons Ltd. Smith challenged the admission of a Section 7 insolvency application, arguing that it exposed him to personal insolvency and coercive recovery proceedings as a guarantor. He also alleged that the insolvency case was initiated fraudulently and with malicious intent.
Rejecting objections to the maintainability of the appeal, the Appellate Tribunal noted that the appellant could not be treated as a stranger to the proceedings and recorded, “especially when appellant was permitted to participate before the adjudicating authority by filing a reply to Section 7 application and further he is a personal guarantor of the corporate debtor for the financial facilities availed from Indian Bank on 11.03.2014 which facilities are basis of initiating Section 7 application, we are of the view that appellant has locus to maintain the appeal, hence the objection of the respondent that appellant has no locus is rejected"
The judgment was delivered by Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra in an appeal against the October 16, 2025 order of the National Company Law Tribunal (NCLT), Ahmedabad Bench, which had admitted a Section 7 insolvency application filed by Invent Assets Securitisation and Reconstruction Pvt Ltd.
The insolvency proceedings arose from loan facilities availed by CM Smith & Sons Ltd from Indian Bank and State Bank of India. Indian Bank later assigned its debt to the financial creditor through a registered deed of assignment.
The corporate debtor thereafter submitted a one-time settlement proposal, which was accepted, but only Rs 98 lakh was paid under the settlement. The corporate debtor defaulted thereafter, with the date of default recorded as January 10, 2019.
The financial creditor initially initiated recovery proceedings before the Debt Recovery Tribunal and subsequently filed a Section 7 application under the IBC. The NCLT admitted the application after recording that the existence of debt and default stood established through the one-time settlement, the NeSL record of default and the audited balance sheets of the company acknowledging liability.
Before the Appellate Tribunal, the financial creditor raised a preliminary objection to the maintainability of the appeal, contending that the appellant had resigned as director and was neither a shareholder nor part of the management of the corporate debtor.
The NCLAT rejected this objection, noting that the Smith had been permitted by the Adjudicating Authority to file a reply in the Section 7 proceedings and that he had executed a personal guarantee securing the very loan facilities forming the basis of the insolvency case.
The appellate tribunal relied on the Supreme Court's interpretation of the expression “any person aggrieved” in GLAS Trust Company LLC vs Byju Raveendran & Ors to observe that there is no rigid locus requirement under Sections 61 and 62 of the Code and that a person who has participated in the proceedings and whose legal rights are directly affected cannot be treated as a stranger.
On merits, the Appellate Tribunal found no infirmity in the NCLT's conclusion that the debt and default were duly established and upheld the admission of the insolvency application.
However, the NCLAT granted liberty to Smith to approach the NCLT by filing an appropriate application to raise the plea of fraudulent or malicious initiation of the corporate insolvency resolution process. The Adjudicating Authority has been directed to consider his plea in accordance with law.
Case Title: Ashwin Smith v. Invent Assets Securitisation and Reconstruction and Anr.
Case Number: Company Appeal (AT) (Ins) No.1664/2025
For Appellant: Senior Advocate Abhijeet Sinha with Advocates Malak Bhatt, Neeha Nagpal and Nitya Prabhakar.
For Respondent: Senior Advocate Krishnendu Dutta with Advocates Jaimin Dave, Palash S. Singhai, Alina Merin Mathew, Harshal Sareen and Tirth Nayak