Section 164A and Restricted explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The IBC (Amendment) Act, 2026 empowers the NCLT under section 164A to set aside fraudulent or undervalued transactions by personal guarantors, closing a gap that previously existed only for corporate debtors. Separately, a guarantor's right of subrogation against the corporate debtor is now stayed by the section 14 moratorium, and the guarantor must file as a creditor in the CIRP instead.
Gap one — avoidance powers stopped at the company
Sections 43 to 51 give powerful avoidance remedies against preferential, undervalued and extortionate transactions — but only in respect of the corporate debtor. A promoter who saw distress coming and moved personal assets into family names, trusts or nominee holdings was outside that machinery entirely.
Section 164A closes it, empowering the NCLT to set aside fraudulent or undervalued transactions by personal guarantors.
This matters most in combination with section 28A. There is little point creating a mechanism to bring guarantor assets into the CIRP if the guarantor can simply dispose of them first. Section 164A is what makes section 28A workable.
Gap two — subrogation as a route back into the estate
A guarantor who pays the creditor is, at general law, subrogated to the creditor's rights against the principal debtor. Applied during a CIRP, that creates a problem: the guarantor becomes a claimant pursuing the corporate debtor while the resolution process is live.
| Position | Before | After the 2026 amendment |
|---|---|---|
| Section 14 moratorium and the guarantor | Applies to the corporate debtor's estate; does not automatically protect the guarantor | Unchanged as to protection — but a new sub-section expressly extends the moratorium to actions initiated by the personal guarantor against the corporate debtor in exercise of subrogation rights |
| Guarantor who has paid | Could pursue the corporate debtor | Must submit the subrogation claim as a creditor in the CIRP |
ICAI states the rationale plainly: the change prevents disruption of the resolution process. And it produces a neat symmetry — section 14 has never protected the guarantor, and now it restrains them.
The worked position
A promoter guarantees a Rs 1,000 crore facility. During the CIRP the promoter pays Rs 150 crore to the lender under the guarantee.
- The promoter is subrogated to the lender's rights to that extent.
- The promoter cannot pursue the corporate debtor for it — the action is stayed by section 14.
- The promoter must file as a creditor in the CIRP for the Rs 150 crore and take its place in the process.
- Under section 31(6), the balance of the guarantee obligation is not discharged by approval of the resolution plan.
ICAI separately identifies subrogation rights of partially paid personal guarantors in the context of incomplete CIRP recoveries as an issue still requiring attention in the framework — so the treatment of the part-paying guarantor is not fully worked out.
Section 28A from the guarantor's side
The corporate-side description of section 28A is that guarantor assets can be brought into the CIRP with CoC approval, subject to the creditor having possession. The personal guarantor material states the position from the other side: section 28A enables inclusion of the personal guarantor's secured assets in the corporate debtor's resolution plan, subject to a 75% approval threshold of the personal guarantor's creditors.
Read together, section 28A engages two separate creditor constituencies — the corporate debtor's CoC, and the personal guarantor's own creditors at a 75% threshold. They are not the same body, and their interests need not align: the guarantor's creditors are being asked to release assets into someone else's resolution.
The valuation methodology and distribution norms are still to be prescribed by regulations, so how value is shared between the two constituencies is not yet settled. Do not commit a plan structure to an assumed split.
What practitioners should do now
- Run a guarantor transaction review alongside the corporate one. Section 164A gives the remedy; someone has to find the transaction.
- Trace into family members, HUFs and trusts — that is where guarantor-level transfers go.
- Advise paying guarantors that payment converts them into a CIRP claimant, not a recovering creditor.
- File the subrogation claim in the CIRP rather than commencing recovery.
- Do not assume section 28A is straightforward — it needs two approvals and the regulations are awaited.
Compliance checklist
- Extend transaction review to the personal guarantor's own dealings, not just the company's.
- Look specifically for undervalued transfers to family members, HUFs, trusts and nominees.
- Advise guarantors that subrogation is stayed and must be pursued as a CIRP claim.
- For section 28A, identify both the CoC approval and the 75% guarantor-creditor approval.
- Do not fix a distribution methodology before the regulations issue.
- Note that the position of a partially paid guarantor remains unsettled.
Common mistakes
- Limiting avoidance review to the corporate debtor.
- Commencing recovery against the corporate debtor after paying under a guarantee.
- Assuming section 28A needs only CoC approval in a personal guarantor case.
- Treating the guarantor's creditors as the same body as the CoC.
- Assuming section 14 protects the guarantor because it now mentions them.