NCLAT says resigning as director does not end a personal guarantee to Bank of India

The National Company Law Appellate Tribunal (NCLAT) on 30 October 2026 dismissed an appeal by a former director of Shree Raj Mahal Jewellers Private Limited and upheld personal insolvency proceedings that Bank of India had sought against him as a guarantor of the company's loans. The tribunal held that his resignation from the board in 2014 did not release him from the guarantees he had signed.

What Happened

According to the order, Bank of India sanctioned credit facilities of Rs 45 crore to the company on 28 April 2010, and the former director signed deeds of guarantee in 2010, 2013 and 2014. He resigned as a director on 1 October 2014. The company's account was classified as a non-performing asset on 30 June 2015; the company was admitted into insolvency on 24 April 2019 and ordered into liquidation on 8 September 2020.

The bank's notice of 17 February 2021 sought about Rs 113.83 crore from him, and the National Company Law Tribunal's Principal Bench admitted the bank's application under Section 95 of the Insolvency and Bankruptcy Code on 22 January 2025.

The former director argued that the claim was time-barred, that later changes to the loan discharged him, that his signatures on two later documents were forged, and that the bank had not enforced collateral he put at about Rs 100 crore. The NCLAT rejected each plea. It held that a clause in the guarantee kept the guarantor liable despite later changes to the loan, unless the lender released him. It said forgery claims cannot be decided in summary insolvency proceedings, that a private forensic report had no evidentiary value, and that debt and default were established even without the disputed documents. An acknowledgement of debt by the borrower also extends the time limit against the guarantor, it held, citing the Supreme Court.

What It Means

Anyone who signs a personal guarantee for a company's loan should note that leaving the board does not by itself end that liability. A guarantee usually ends only when the lender releases or discharges it, so its terms matter. The tribunal also held that a lender's failure to enforce collateral does not, on its own, free a guarantor. The NCLAT's order may be appealed to the Supreme Court.

Source: NCLAT order