NCLAT Affirms SARFAESI Section 13(2) Notice as Valid Invocation of Personal Guarantee under IBC

The Hon’ble National Company Law Appellate Tribunal (NCLAT), Principal Bench, in its judgment dated January 7, 2026, in Ujwal Gupta v. Union Bank of India and Anr., addressed the critical issue of whether a demand notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act,  can be treated as a valid invocation of a personal guarantee, especially when the guarantor is addressed by their corporate designation of being a ‘director’.

The appeal arose from an order of the Ld. National Company Law Tribunal (NCLT), New Delhi, which admitted a Section 95 petition filed by Union Bank of India (later replaced by CFM Asset Reconstruction Pvt. Ltd.) against the Appellant, a personal guarantor for M/s Green World International Pvt. Ltd (which had availed certain credit facilities from Union Bank of India). The Appellant contended that the personal guarantee was never validly invoked because the notice under Section 13(2) of the SARFAESI Act, 2002 was addressed to him as a “Director” rather than a “Personal Guarantor,” and failed to follow the specific procedures for demand outlined in the guarantee deed.

The Respondent-Financial Creditor defended the admission, asserting that demand notice clearly called upon the Appellant to discharge the outstanding liability of approximately Rs. 9.85 Crores, and was also in the manner as shown in the guarantee deed.

The Hon’ble NCLAT, while dismissing the appeal and clarifying the law laid down in the precedents, held as follows:

1. Sufficiency of Notice: Whether a guarantee is invoked by a Section 13(2) notice depends on the terms of the guarantee and the content of the notice; if the notice clearly demands payment, it is a valid invocation.

2. Designation vs. Capacity: Suffixing the word “Director” after the Appellant’s name does not change his legal character as a guarantor or invalidate the notice.

The ruling reinforces that the Insolvency and Bankruptcy Code does not require a specific format for invocation unless explicitly mandated in the guarantee deed. Ultimately, the NCLAT clarified that the phraseology of the notice is the crucial factor in determining if a guarantor has been properly called upon to discharge its liability.