NCLAT sets aside Canara Bank insolvency case against a personal guarantor

The National Company Law Appellate Tribunal (NCLAT) on 27 October 2026 set aside an order of the National Company Law Tribunal (NCLT), Mumbai Bench, that had admitted Canara Bank's insolvency petition against a personal guarantor of Frost International Limited. The appellate tribunal held that the bank's petition was filed after the limitation period had run out, and dismissed it.

What Happened

According to the order, Canara Bank had sanctioned working capital facilities to Frost International in 2014 under a consortium arrangement, and the guarantor had signed a deed of guarantee. The company's account was classified as a non-performing asset (NPA) on 17 July 2018. The bank later moved the NCLT under Section 95 of the Insolvency and Bankruptcy Code, which lets a creditor seek an insolvency process against an individual guarantor.

The NCLT admitted the petition on 6 February 2026. Its own calculation found that the three-year limitation period, after excluding the Covid-19 period set by the Supreme Court, ended on 12 March 2024. It still treated the petition as within time because the resolution professional in Frost International's own insolvency process had admitted the bank's claim, which it read as an acknowledgement of the debt.

The NCLAT noted that the NCLT relied on an earlier NCLAT ruling, Shankar Khandelwal vs Omkara Asset Reconstruction, which the Supreme Court set aside on 29 April 2026. The Supreme Court held that a resolution professional's admission of a claim is an administrative task and does not amount to an acknowledgement of debt under Section 18 of the Limitation Act. Applying that, the NCLAT held the petition was beyond limitation and dismissed it.

What It Means

For personal guarantors of company loans, the ruling means a lender cannot rely on a resolution professional having admitted its claim in the borrower company's insolvency to stretch the time limit for an insolvency case against the guarantor.

For lenders, the order underlines that insolvency petitions against guarantors must be filed within limitation. The order does not decide whether the debt itself is payable; it only dismisses the insolvency petition as time-barred. The NCLAT's order may be appealed to the Supreme Court.

Source: NCLAT order