The NCLAT ruled that a continuing personal guarantee remains valid despite a guarantor's resignation or renewal of loan terms.
NCLAT Stands Firm on Personal Guarantees
The National Company Law Appellate Tribunal (NCLAT) ruled that a guarantor's resignation or the renewal of a loan facility does not discharge a continuing personal guarantee. The ruling addressed provisions under Sections 62, 129, 130, and 133 of the Indian Contract Act.
The Tribunal held that a guarantor must remain liable even amidst changes in loan agreements or upon stepping down from directorial positions. The decision reaffirms the binding nature of personal guarantees unless expressly revoked following proper legal channels.
Legal practitioners should advise clients on the enduring nature of personal guarantees, especially in corporate financing arrangements, ensuring clarity about ongoing liabilities despite any changes in corporate structure or loan terms.
Citations
- NCLAT Order (2026) No. XX
