The NCLAT has affirmed insolvency proceedings against the personal guarantor of Nyka Steels Private Limited regarding unpaid UCO Bank dues. The tribunal rejected the guarantor's argument that liability was capped, citing accrued interest and renewed credit facilities. This case underscores the strict enforcement of personal guarantees under the Insolvency and Bankruptcy Code (IBC).
The National Company Law Appellate Tribunal (NCLAT) has rejected an appeal filed by Asif Ahmed Siddique, a personal guarantor for Nyka Steels Private Limited. The tribunal affirmed a February 2026 decision by the National Company Law Tribunal (NCLT) Mumbai, which allows creditors to initiate insolvency proceedings against the guarantor for the company’s outstanding dues to UCO Bank.
It is important for market participants to distinguish this event from publicly traded companies. Nyka Steels Private Limited is a private, unlisted entity and is currently undergoing a Corporate Insolvency Resolution Process (CIRP). This development is unrelated to FSN E-Commerce Ventures, the owner of the retail brand Nykaa, and investors should be careful to avoid confusing the two entities.
Guarantor Liability and Interest Provisions
The dispute centered on the extent of the personal guarantee provided by Siddique. He had argued that his liability was capped at Rs 40 crore, covering loans sanctioned in 2013 and 2017. However, the NCLAT bench, comprising Justice Yogesh Khanna and Technical Member Ajai Das Mehrotra, noted that the guarantee deed included a stipulation for interest at 12.70% per annum from the date of demand. Because of this, the total outstanding amount exceeded the initial principal cap.
The tribunal also highlighted that Siddique had personally signed for the renewal of credit facilities in April 2018. Under the terms of the original agreement, the guarantee was a continuing one, meaning it remained legally binding for the renewed credit facilities. Consequently, the appellate tribunal found no grounds to limit the liability to the initial Rs 40 crore.
Strengthening IBC Provisions
This ruling reaffirms the legal position regarding personal guarantors under the Insolvency and Bankruptcy Code (IBC). The NCLAT clarified that insolvency proceedings against personal guarantors can proceed independently, regardless of the status of the corporate debtor or the existence of a separate resolution plan. The tribunal also rejected arguments that the bank was required to first pursue alternative rehabilitation frameworks for Micro, Small, and Medium Enterprises (MSMEs) before invoking the IBC.
For creditors and promoters, this case signals that personal guarantees are increasingly treated as ironclad commitments in debt resolution. Courts are prioritizing the recovery of dues based on the terms stipulated in guarantee agreements, including interest, rather than relying on claims of liability caps that are not supported by the contract.
The next step in this matter involves the ongoing insolvency process for Nyka Steels. Creditors and legal observers will continue to track how these personal insolvency proceedings affect the recovery of the total outstanding debt, which has been reported as significantly higher than the contested cap.