Personal Guarantors Face Higher Debt Threshold: NCLAT Rejects Low-Value Claims and Protects Against Frivolous Insolvency Proceedings

NCLAT determined the threshold limit for filing an insolvency application against a Personal Guarantor under IBC. The Tribunal held that the Adjudicating Authority for Personal Guarantors is NCLT, rejecting the argument that Debt Recovery Tribunal has jurisdiction. The court specifically rejected the contention that a minimal debt of Rs.1000/- could trigger personal insolvency proceedings. The Tribunal emphasized that permitting insolvency proceedings on such a low threshold would undermine the legislative intent and potentially lead to excessive litigation against Personal Guarantors. Consequently, the threshold remains consistent with the standard Rs.1 crore limit for financial creditors. The appeal was dismissed, affirming the higher monetary threshold for initiating insolvency resolution against Personal Guarantors. .....

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