Locus to invoke personal guarantee through security trustee mechanism defeated individual lender's Section 95 insolvency application

A financial creditor could not maintain a Section 95 insolvency application against a personal guarantor in its own name where the personal guarantee was issued in favour of a security trustee and the financing documents required enforcement through the trustee under the inter-creditor and security trustee arrangements. Because the record showed no unanimous consent or authorisation from all co-lenders, and the contractual structure did not allow one lender to bypass the trustee mechanism, the creditor lacked locus to invoke the guarantee independently. The application was therefore not maintainable and was dismissed.

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Issues: (i) Whether the financial creditor, being neither the signatory to the deed of personal guarantee nor authorised by all co-lenders, could maintain an application under Section 95 of the Insolvency and Bankruptcy Code, 2016 against the personal guarantor.

Analysis: The personal guarantee was executed in favour of the security trustee under the financing structure, and the security documents contemplated enforcement through the trustee acting on written instructions in accordance with the inter-creditor and security trustee arrangements. The record did not show unanimous consent or authorisation from all lenders for the applicant bank to proceed alone, and the contractual framework did not permit an individual lender to bypass the trustee mechanism. In these circumstances, the applicant bank lacked the requisite locus to invoke the personal guarantee in its own name and to maintain the insolvency application against the personal guarantor.

Conclusion: The application under Section 95 was not maintainable and was rightly dismissed against the applicant bank.

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