Received Section 95 IBC Demand Notice (Form B)? How to Defend at NCLT

Section 95 allows creditors to initiate insolvency against corporate loan guarantors. Under Section 95(4)(b) and Rule 7(1) of the Personal Guarantors Rules 2019, the lender must first serve a demand notice in Form B.

Form B gives you fourteen days to pay. It specifies debt details, default dates, security documents, and Information Utility records. Lenders cannot file at the NCLT without strictly complying with this notice mandate.

Lenders often claim Form B invokes the guarantee. The NCLAT rejected this in SBI v. Deepak Kumar Singhania and Amanjyot Singh v. Navneet Kumar Gupta.

A guarantee deed is a contract under the Indian Contract Act 1872. The bank must invoke the deed according to its specific notice terms. Without prior contractual invocation, no default arises under Section 3(12) of the Code. Form B cannot replace this contractual step.

Under Section 96(1), an interim moratorium starts automatically the day the bank files its petition at the NCLT. You do not need to wait for court admission.

This shield stays all pending debt recovery cases and blocks new actions. Because Section 96 is debt-centric, it halts SARFAESI physical possession and property auctions. DRT recovery suits are also frozen.

In Dilip B. Jiwrajka v. Union of India (2024), the Supreme Court upheld Sections 95 to 100 while establishing vital boundaries.

The court ruled that the Resolution Professional is not a judge. The RP has no power to decide debt liability or freeze bank accounts. The RP report under Section 99 is purely recommendatory. Guarantors receive a full hearing before the NCLT under Section 100 before any petition is admitted.

In Lalit Kumar Jain v. Union of India (2021), the Supreme Court ruled that a corporate resolution plan does not discharge the personal guarantor.

Company discharge under Section 31 happens by operation of law. Under Section 128 of the Contract Act, guarantor liability remains co-extensive with the borrower. In SBI v. V. Ramakrishnan, the court held Section 14 moratorium does not shield guarantors. Under Mahendra Kumar Jajodia v. SBI, lenders can file Section 95 petitions independently.

Guarantors can assert established statutory defenses under the Indian Contract Act 1872 before the NCLT:

• Section 133: Altering credit terms, loan tenures, or interest rates without guarantor consent discharges liability.
• Section 134: Out-of-court voluntary release of the borrower discharges the guarantor by law.
• Section 135: Granting extra repayment time to the borrower without consent ends surety liability.
• Section 141: Losing or releasing mortgaged assets reduces guarantor liability to that extent.

Under Section 238A of the IBC, the Limitation Act 1963 applies strictly. Article 137 establishes a three-year deadline from the date default occurs and the guarantee is invoked.

If the bank declared the account NPA and invoked the guarantee over three years ago, the claim is time-barred. Balance sheets signed only by company directors do not extend limitation against guarantors under Section 18.

Under Section 97, the NCLT appoints an RP who submits a report within ten days under Section 99. The NCLAT treats this timeline as directory.

You can submit repayment proofs under Section 99(2) and explain why no default occurred under Section 99(4). Under Section 99(9) and (10), the RP must record reasons and serve a copy of the report on you.

Under Section 100, the NCLT decides within fourteen days whether to admit or reject the petition after hearing you.

If admitted, a full moratorium starts under Section 101 for 180 days. All debt lawsuits stay frozen, while the guarantor cannot transfer or pledge personal assets without court permission.

Under Section 105, the guarantor drafts a repayment plan with the RP. It functions like a formal restructuring plan, stating settlement sums, asset sales, and funding sources.

Under Section 111, the plan requires approval from over 75 percent in value of voting creditors. Once sanctioned under Section 114, it binds all creditors under Section 115.

Completing the repayment plan leads to a Discharge Order under Section 119, releasing you from covered debts.

If creditors reject the plan under Section 111, parties can file for bankruptcy under Section 121 within three months. This leads to personal asset vesting in a Bankruptcy Trustee and directorship disqualifications.

In P. Mohanraj v. Shah Brothers Ispat, the court held corporate moratorium does not stop cheque bounce trials against individual signatories.

In Rakesh Bhanot (2025), the Supreme Court ruled that Section 96 interim moratorium applies to civil debt claims and does not halt criminal Section 138 trials. While Dineshchand Surana (2026) referred conflicting views to a three-judge bench, guarantors must appear in court and obtain bail.

Follow these steps upon receiving a Form B notice or Section 95 petition:

1. Inspect Guarantee Deed: Check whether the deed required a contractual invocation notice before Form B.
2. Reply within 14 Days: Challenge improper invocation, interest calculation errors, and contract variances.
3. Enforce Section 96 Stay: Notify DRT courts and SARFAESI officers to halt property auctions immediately.
4. Submit Documents to RP: Provide the RP with proof of payments and security impairments under Section 99.
5. Oppose at Section 100: Present limitation, contractual, and service defenses before the NCLT bench.
6. Structure Repayment Plan: If debt is undisputed, propose a repayment plan under Section 105 to obtain discharge.