A director resigned and wrote to the bank revoking his guarantee — then, five days later, signed a new and irrevocable one. Seven years on, could the bank still take him into insolvency? Watch the letters cross in the Gallery, test revocation, variation and the clock at the Bar, and find the limits at the Bench.
State Bank of India v. Gourishankar Poddar & Anr.
Comp. App. (AT) (Ins.) No. 689 of 2024, with No. 663 of 2024 · NCLAT, Principal Bench, New Delhi · 06.01.2025 · Justice Rakesh Kumar Jain, Member (Judicial), Naresh Salecha & Indevar Pandey, Members (Technical) (per Pandey, Member (Technical))
Start with the story. Climb when you want the rule behind it.
Provisions IBC s. 95 · Contract Act ss. 130 & 133 · Limitation Act ss. 14 & 18Question Can a guarantor walk away from an irrevocable guarantee by resigning and writing to revoke it?Outcome“…the impugned order is set aside. The appeal is allowed. CP (IB) No. 80 (AHM) 2021 is restored.” · Para 82
Seat one · five minutes · the story
The Gallery
Two deeds, a stack of letters the bank never accepted — and a petition that came seven years later.
1
A director signs for the company. Raj Rayon Industries Ltd. has borrowed from the State Bank of India since 1999, under a 2005 consortium agreement enlarged again and again. On 10 July 2013 one of its directors, Gourishankar Poddar, signs a personal guarantee for a facility raised to ₹292 crore. The deed calls the guarantee irrevocable, unconditional and continuing. Paras 5(i)–(iii), 29.
2
The account fails, and the director leaves. The loan account is classified as a non-performing asset on 30 November 2013. On 6 March 2014 Poddar resigns as director; the board accepts on 18 March. He says he sold his shares and left the business. The bank’s reply of 12 March is blunt: his liability as personal guarantor will continue. Paras 5(iv)–(v), 15, 27, 34.
3
Revoke — then sign again. On 24 March 2014 he writes to the lenders revoking his guarantees. Five days later, on 29 March, he signs a fresh deed of guarantee for the restructured loans — again irrevocable, and again giving up his protection if the loan terms change. More letters seeking release follow in April. The bank never accepts any of them. Paras 5(vi), 28, 31, 35–36.
4
The loans keep moving. In July 2014 a Seventh Supplemental Agreement reworks the facilities, a renewal follows in 2015, and in February 2016 a “revival letter” is signed by other guarantors — not by Poddar. On 18 January 2018 the bank invokes the guarantees: pay ₹998.52 crore within seven days. A month later it files a recovery case before the Debts Recovery Tribunal. Paras 5(vii)–(viii), 28, 49–50.
5
Insolvency on both fronts. The company is admitted into insolvency on 23 January 2020, and a resolution plan for it is approved on 5 October 2021. On 8 March 2021 the bank serves Poddar a demand for about ₹1,854 crore; weeks later it petitions under section 95 of the Code — the route to an insolvency process against a personal guarantor. Paras 5(ix)–(x), 9, 38, 51.
6
The NCLT says no. On 23 February 2024 the NCLT, Ahmedabad dismisses the petition: the guarantees had been revoked, Poddar never signed the revival letter, and the claim was time-barred. It also accuses the resolution professional of an “absolutely false statement” that he had signed that letter, and calls for an inquiry by the insolvency regulator, the IBBI. Paras 5(xi), 5(xiii), 28.
★
Both appeals succeed. On 6 January 2025 the NCLAT sets the order aside and restores the bank’s petition to the NCLT. The irrevocable guarantees were never released, his waivers kept him bound through the changes in the loan, and the petition was in time. The revival-letter mistake was the bank’s own, copied by the resolution professional with a disclaimer — so the remarks against her are expunged. Paras 41, 47, 59, 76–80, 82.
Six expressions this page uses
Personal guarantor — an individual who promises the lender that a company’s loan will be paid; here Gourishankar Poddar.
Continuing guarantee — a guarantee that covers a series of transactions, present and future, not a single loan.
Revocation — the guarantor’s notice withdrawing the guarantee; section 130 allows it for future transactions.
Variation — a change in the loan terms between bank and borrower; without consent it can discharge a guarantor (section 133).
Acknowledgment — a written admission of the debt; under section 18 of the Limitation Act it restarts the clock.
Limitation — the time limit for filing: three years, counted from when the right to apply arises.
Self-checkHe resigned and wrote to revoke his guarantee in 2014. Why was he still liable in 2021?
Because both deeds were irrevocable and continuing, he signed the second one after his first revocation letter, and the bank never agreed to release him. A revocation the creditor never accepted, of a guarantee he had made irrevocable, did not absolve him. Paras 36, 39, 41.
Move to the Bar
He revoked in writing, and the loans changed after he left. Why did neither the letters nor the changes set him free?
Read the two deeds first — then the letters, the variations and the clock.
Bar · 1
Four questions the decision answers
1.
Is the personal guarantor’s revocation of his guarantees valid — after he resigned as director and wrote to the lenders? Paras 26(i), 27–41.
2.
Did later changes to the loan terms discharge him? The Tribunal framed this as “novation” and answered it under section 133 of the Contract Act. Paras 26(ii), 42–47.
3.
Was the bank’s section 95 petition against him within limitation? Paras 26(iii), 48–59.
4.
In the second appeal: could the NCLT make adverse remarks against the resolution professional, and refer her to the IBBI, without hearing her? Paras 61–81.
A note on dates and figures: the judgment describes the Seventh Supplemental Agreement of 25.07.2014 as increasing the facilities from ₹292 crore to ₹398.64 crore (Para 5(vii)) and later as reducing them to ₹106.64 crore (Para 46). It dates the revival letter 06.02.2016 (Paras 5(vii), 28) and once 06.12.2016 (Para 53), and records the section 95 filing as 23.04.2021 (Para 5(x)) and as 24.03.2021 (Paras 54, 56). Nothing in the result turns on the dates — either filing date falls within the COVID-extended period (Para 58) — and the Para 47 rule, which takes the lower figure, works on either description of the 2014 agreement.
Bar · 2
Three maps of one guarantee
Our reading of the mechanism · select a box, arrow or badge for its paragraph reference. Red, with a × badge, marks the guarantor’s routes out — release by letter, discharge by variation, and a clock counted from his revocation — each rejected by the Tribunal. On small screens, swipe the chart sideways.
The dates that decided it: guarantee 10.07.2013 · resignation 06.03.2014 · revocation letter 24.03.2014 · second deed 29.03.2014 · invocation 18.01.2018, default 25.01.2018 · three years to 24.01.2021 · section 95 petition 2021. The three years from the default ended inside the COVID period, so the extension applied and the petition was in time (Paras 5, 28, 49, 58).
Bar · 3
The holdings — our reading, then the Court
Seven propositions to take into the briefOur reading is this page’s interpretation; The Court is verbatim, with paragraph numbers from the judgment.
Holding 1 · Q1 · An irrevocable guarantee is not revoked by letter
Our readingResigning as director did not end the personal guarantee, and neither did letters asking to revoke it. The bank said in writing that his liability would continue, never accepted a revocation, and held two irrevocable deeds. On those facts his unilateral revocation did not absolve him.
The Court · Para 36“It is noted that said revocation of personal guarantee has not been accepted by the Appellant at any point in time.”
The Court · Para 41“It is clear from the above that unilateral revocation of guarantee by the Respondent No.1 does not absolve him from his obligations under the guarantee agreement as the Financial Creditor has not agreed to such revocation. The terms of contract agreement also clearly show that the contract was irrevocable.”
Our readingHe said the bank coerced him into the 2014 deed. But he signed it after his resignation had been accepted, when nothing obliged him to sign; he took no legal step to undo it; and he first pleaded duress in 2021.
The Court · Para 33“We have already noticed that the Respondent No.1 has already resigned and his resignation was accepted by the Board well before he signed the 2014 guarantee deed on 29.03.2014. … The respondent was free to take legal recourse for revocation of guarantees if the same was executed under duress. The plea of duress was only taken in the year of 2021 when the question of enforceability of the 2014 Guarantee came into question.”
Holding 3 · Q2 · Waiver of section 133: no discharge, but the lower figure
Our readingBoth deeds waived the guarantor’s protection under section 133, so changes in the loan terms did not discharge him. But the waiver does not enlarge his promise: he is liable for the outstanding amount under the guarantee or under the later amendments, whichever is lower.
The Court · Para 46“In the present case both deed of guarantees grant waiver from Section 133 in case of variance, hence, such variance would not lead to discharge of the surety, but it would only be to the extent of any variance with respect to transactions subsequent to variance.”
The Court · Para 47“The Respondent No.1 would continue to be liable for outstanding amount as per the guarantee agreement or subsequent amendments, whichever is lower, but it would not lead to discharge of his liability.”
Holding 4 · Related · The borrower’s resolution plan does not release him
Our readingApproval of a resolution plan for the borrower company did not discharge its personal guarantor. A discharge that the principal debtor obtains by operation of law leaves the surety liable.
The Court · Para 38“It is clear from the above that the approval of resolution plan of Raj Rayon Ltd/ Corporate Debtor on 5.10.2021 in the CIRP proceeding does not discharge the liability of personal guarantor.”
MSEB v. Official Liquidator (SC), Para 7 · reproduced at Para 38“But a discharge which the principal debtor may secure by operation of law in bankruptcy (or in liquidation proceedings in the case of a company) does not absolve the surety of his liability.”
Holding 5 · Q3 · The borrower’s acknowledgments bind him; the clock waits for a demand
Our readingUnder clauses 12 and 19 of the 2013 deed, the borrower’s acknowledgments of the debt count as the guarantor’s own and restart limitation under section 18. And the guarantor’s limitation begins only when a demand is made on him specifically.
The Court · Para 52“Clause 12 and Clause 19 of the 2013 Guarantee explicitly provides that any acknowledgement of liability on the part of the Corporate Debtor shall be treated as acknowledgement on the part of Respondent No. 1, thus restarting limitation in accordance with Section 18 of the Limitation Act, 1963.”
The Court · Para 57“We further note that the period of limitation against the guarantor starts only when a demand is raised from the guarantor specifically. In case of continued payments by a principal borrower, no demand would be raised against a guarantor and thus limitation does not commence.”
Holding 6 · Q3 · Counted from the 2018 default, the COVID period saves the filing
Our readingThe bank invoked the guarantee on 18.01.2018 with seven days to pay, so the default fell on 25.01.2018 (Para 49). Three years from it ended on 24.01.2021 — inside the period excluded by the Supreme Court’s COVID orders — so the 2021 petition was in time. Separately, the time spent before the DRT from 15.02.2018 was to be excluded under section 14 (Para 50).
The Court · Para 58“The limitation period, if seen from another angle based on the date of default 25.01.2018 would end on 24.01.2021. However, the said date falls within Covid exemption period as decided by Hon’ble Supreme Court in suo moto writ petition (c) No. 3 of 2020…”
The Court · Para 59“It is therefore clear that the application for initiating CIRP proceedings against the Respondent No.1 was filed well in time and is maintainable.”
Holding 7 · Q4 · No adverse remarks without hearing the professional
Our readingThe wrong entry about the revival letter came from the bank’s own list of dates, which the resolution professional reproduced with a disclaimer. Condemning her conduct, and sending the remarks to the IBBI, without asking for her explanation breached natural justice.
The Court · Para 80“Based on the above we are of the view that the mistake, if any on part of RP was not deliberate or malafide. … Without her version the Adjudicating Authority went ahead made adverse comments against the conduct of Appellant which clearly violates principles of natural justice.”
The Court · Para 82“All adverse remarks against the appellant in Para 13 (k) of the impugned order are expunged.”
Disposition is not a new rule: the Tribunal set the NCLT order aside, restored the bank’s petition and directed the parties to appear before the NCLT on 16.01.2025; in the second appeal it told the Registry to send its order to the IBBI “not to proceed with the enquiry” against the professional (Para 82). Restoration is not admission — the NCLT still had to decide the petition. Nor did the judgment separately answer every objection: it records, but does not rule on, the pleas that the 2014 deed was unstamped and incomplete, that it was procured by misrepresentation, that the bank’s conduct discharged him under section 139, and that the demand notice referred only to the 2013 deed (Paras 16, 20, 22–23).
Bar · 4
Why the Court got there
Our readingThe Tribunal began with the deeds. A guarantor’s liability — how much, and when — turns on the terms of his contract, and these deeds were irrevocable and continuing (Paras 37, 40).
Syndicate Bank v. Channaveerappa Beleri (SC), Para 9 · reproduced at Para 37“A guarantor’s liability depends upon the terms of his contract. … the extent of liability under a guarantee as also the question as to when the liability of a guarantor will arise, would depend purely on the terms of the contract.”
The Court · Para 40“We note that the guarantee as is evident from Clause 2, 8, 11 and 12 of the 2013 Guarantee and Clause 5 and 14 of the 2014 Guarantee was intended to be irrevocable and continuous in nature and thus in accordance with the Syndicate Bank Judgment, the guarantee was intended to be applicable to all subsequent transactions as well.”
Our readingOn resignation, it adopted the Bombay High Court’s reasoning in Allahabad Bank, Nagpur v. Hemantkumar: resigning is a unilateral act, and it releases nothing unless the bank accepts it or acts on it (Para 36).
Hemantkumar (Bom HC), Para 28 · reproduced at Para 36“It was a unilateral act on the part of respondent no. 1 and 2 to resign from the Company but by such unilateral act, unless it was accepted or acted upon by the bank, respondent nos. 1 and 2 cannot contend that as they have resigned from the post of Directors, they should also be absolved from the liability of dues which were outstanding against the Company.”
Our readingThe guarantor relied on the Supreme Court’s Margaret Lalita: a continuing guarantee can be revoked for future transactions, leaving the guarantor liable for earlier ones. The Tribunal did not doubt that rule. It distinguished the case on the irrevocable 2014 deed (Para 39).
The Court · Para 39“The aforesaid precedent is distinguishable because the 2014 Guarantee is irrevocable and such right has been explicitly granted by the Respondent No.1.”
Our readingFor variation, it took the section 133 framework from the Supreme Court’s BRS Ventures — No. 8 in this series — and then held the guarantor to the waivers in his deeds (Paras 44–46).
BRS Ventures v. SREI (SC), Para 14 · reproduced at Para 45“Thus, the law provides that if any variance is made without surety’s consent in the terms of the contract between the principal debtor and the creditor, it amounts to discharge of the surety as to the transactions subsequent to the variance.”
Our readingOn limitation it relied on its own decisions: E.M. Najeeb for the borrower’s acknowledgment binding the guarantor, and Pooja Ramesh Singh and Archana Deepak Wani — No. 11 in this series — for a guarantor’s clock that waits for a demand (Paras 48, 57).
E.M. Najeeb v. Union Bank (NCLAT), Paras 66–67 · reproduced at Para 48“66. An Acknowledgment of a liability made by the Principal Borrower should be considered as an acknowledgment of liability, on behalf of Guarantor. 67. A Revival Letter/ an acknowledgment, executed by the Principal Borrower on the authorization binds the Guarantor.”
Our readingLast came the Supreme Court’s COVID order, which gave every limitation period that would have expired in the pandemic window at least 90 days from 1 March 2022 (Para 58).
Suo motu W.P. (C) No. 3 of 2020 (SC) · reproduced at Para 58“In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022.”
Move to the Bench
An irrevocable deed, signed again after he resigned — strong facts for the bank. What if the deed can be revoked, or the bank accepts the letter?
Keep the deed, the letters and the clock in three separate columns.
Bench · 1
Three over-readings to stop
Over-reading 01
A guarantor can never revoke a continuing guarantee.
The error: treating this case as if section 130 no longer lets a guarantor revoke for future transactions.
The Court · Para 39“The aforesaid precedent is distinguishable because the 2014 Guarantee is irrevocable and such right has been explicitly granted by the Respondent No.1.”
The move: the ruling rests on an irrevocable deed, a creditor that never agreed to the revocation (Para 41) and a fresh irrevocable deed that superseded the earlier one (Para 39), signed five days after his first revocation letter (Paras 5(vi), 35). Where the deed is not irrevocable, Margaret Lalita still stands — distinguished here, not doubted.
Over-reading 02
A section 133 waiver binds the guarantor to whatever the loan later becomes.
The error: reading the waiver as consent to any enlargement of the guaranteed debt.
The Court · Para 47“The Respondent No.1 would continue to be liable for outstanding amount as per the guarantee agreement or subsequent amendments, whichever is lower…”
The move: the waiver stops discharge; it does not raise the ceiling. Compute the guarantor’s exposure both ways — under the deed and under the amended terms — and claim or concede the lower.
Over-reading 03
A continuing guarantee never becomes time-barred.
The error: reading Para 56 — liability continues until the dues are paid — as switching off limitation altogether.
The Court · Para 58“The limitation period, if seen from another angle based on the date of default 25.01.2018 would end on 24.01.2021.”
The move: the Tribunal still counted three years from the default after invocation, and that count needed the COVID exclusion (Para 58). Plead the invocation and the date of default; then add acknowledgments (Para 52) and excluded time (Para 50) only where the record supports them.
Bench · 2
Both edges of the authority
For the creditor bank
Hold the guarantor to his deed
Answer every release request in writing. The bank’s letter of 12.03.2014 said his liability would continue, and no release was ever granted (Paras 34–36).
Put the clauses before the Tribunal. Irrevocability, continuity, the section 133 waivers and acknowledgment-by-borrower each decided an issue here (Paras 29–32, 40, 44, 52).
Count limitation on every footing the record allows. The invocation date with the COVID window, the borrower’s acknowledgments and time spent before the DRT all appear in the Tribunal’s reasoning (Paras 50–58).
Meet the “plan” defence. Approval of the borrower’s resolution plan does not discharge the personal guarantor (Para 38).
For the personal guarantor
Find the gaps this deed closed
Read the deed for “irrevocable”. Without it, revocation for future transactions under section 130 and Margaret Lalita remain open (Para 39).
Do not sign again. The fresh irrevocable deed of 29.03.2014 defeated both the revocation and the duress plea (Paras 33, 39).
Plead duress at once, in proceedings. A plea first raised in 2021 failed for delay and for want of any legal step (Para 33).
Hold the bank to the lower figure. Liability runs under the guarantee or the amendments, whichever is lower (Para 47) — and the judgment itself describes the 2014 agreement both as an increase and as a reduction (Paras 5(vii), 46).
Bench · 3
Test the argument in your own brief
Does the guarantee survive the guarantor’s defences on this reasoning?Assume a creditor has petitioned under section 95 against a personal guarantor who says he revoked the guarantee, that the loan terms later changed and that the claim is time-barred. Answer all four; the result addresses those defences only — not the amount of the debt or admission of the petition.
1. Is the guarantee expressed to be irrevocable?Clauses 2 and 11 of the 2013 deed; the 2014 deed — Paras 29–32, 39–40.
2. Has the creditor refused, or never accepted, the guarantor’s revocation or resignation?The letter of 12.03.2014 and no release — Paras 34–36, 41.
3. Does the deed waive the guarantor’s protection under section 133 against later variations?Both deeds here — Paras 44, 46.
4. Is the petition within three years of the guarantor’s default after invocation — counting acknowledgments, excluded time and the COVID period?Invocation 18.01.2018, default 25.01.2018 — Paras 49–58.
Pending
Answer the four questions to see how Gourishankar Poddar applies.
An argument check, not a prediction. It does not decide whether a deed is truly irrevocable, whether a particular letter invoked the guarantee, the amount due, or whether the petition should be admitted. Paragraphs refer to the judgment.