Limitation Period For Filing Application U/S 95 Of IBC Against Personal Guarantor Stands Extended By Acknowledgement Of Debt: NCLAT
The Nationwide Firm Legislation Appellate Tribunal (NCLAT) New Delhi bench comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) has held that the limitation interval for submitting an software beneath Part 95 of the Insolvency and Chapter Code, 2016 (“the Code”) by a creditor towards a private guarantor, stands prolonged upon a sound acknowledgment of debt made by the principal borrower. The Tribunal held that acknowledgement of debt by way of a One-Time Settlement (OTS) proposal is deemed to be an acknowledgement by the guarantor.
Temporary Information
Indian Financial institution (“Respondent”) had sanctioned a credit score facility of ₹58.35 crores to M/s Aravali Infrapower Ltd. (“Company Debtor”) on 31.10.2012 as a part of a Company Debt Restructuring (CDR) scheme. In furtherance of the identical, Shri Rakesh Jolly (“the Appellant”) executed a Deed of Assure dated 13.02.2013 in favour of State Financial institution of India, the lead financial institution of the consortium. The Respondent Financial institution categorized the account of the Principal Borrower as a Non-Performing Asset (NPA) on 29.10.2012 resulting from default in compensation.
On 13.06.2016, the Respondent Financial institution issued a requirement discover beneath Part 13(2) of the SARFAESI Act, invoking the private assure and demanding compensation of ₹109.43 crores from the Appellant-Private Guarantor. On 19.03.2018, the Principal Borrower proposed a One-Time Settlement (OTS) to the lead financial institution. The Consortium rejected the OTS. The Respondent Financial institution issued a recent demand discover on 10.05.2022 for cost of ₹200.90 crores from the Appellant-Private Guarantor. The Appellant denied this legal responsibility and said that the declare was barred by limitation.
Thereafter, on 03.08.2022, the Respondent Financial institution filed an software beneath Part 95(1) of the Code earlier than the NCLT, New Delhi to provoke insolvency proceedings towards the Appellant. The NCLT handed the impugned order on 24.07.2023, admitting the appliance. Aggrieved, the Appellant most popular the enchantment beneath Part 61 of the Code, difficult the impugned order on the bottom that the declare was time-barred.
Submissions
Mr. Sunil Fernandes, Senior Counsel for the Appellant, submitted that the appliance was barred by limitation. He contended that the account of the Principal Borrower turned an NPA on 29.10.2012, and due to this fact, the limitation interval expired nicely earlier than the submitting of the appliance on 19.07.2022. He submitted that the NCLT erred in accepting 10.05.2022 i.e. the date of issuance of the demand discover as the start line of limitation.
Counsel additional argued that the OTS proposal submitted by the Appellant in his capability as Director of the Principal Borrower was not positioned earlier than the NCLT and therefore, can’t be relied upon for the primary time on the appellate stage. For the reason that OTS was not accepted by the Financial institution and didn’t end in any settlement, it couldn’t be handled as a legitimate acknowledgment of debt beneath Part 18 of the Limitation Act to increase the limitation interval.
Counsel for the Respondent No. 1 (Indian Financial institution) relied upon a sequence of acknowledgments of debt, together with the OTS proposal submitted by the Appellant on 19.03.2018. He argued that any acknowledgment of debt by the Principal Borrower is deemed to be acknowledgment by the Guarantor as nicely. He submitted that the acknowledgment dated 19.03.2018 reset the limitation interval, which might have expired on 18.03.2021. He submitted that because of the Covid-19-induced exclusion of the limitation interval from 15.03.2020 to 31.05.2022, the Demand Discover dated 10.05.2022 was served inside time. Thus, the appliance beneath Part 95 filed on 19.07.2022 was inside the prescribed limitation interval.
Observations
The Tribunal noticed that the OTS proposal has a fabric bearing on the difficulty of limitation. Such paperwork can’t be ignored even when first launched on the appellate stage. The Tribunal held that acknowledgement of debt by way of the OTS Proposal by the Principal Borrower is deemed to be made by the Guarantor as nicely, thus extending the limitation interval.
The Tribunal famous that the interval from 15.03.2020 to twenty-eight.02.2022 can be excluded for limitation functions as per the orders of the Supreme Courtroom in Suo Motu Writ Petition (C) No. 3 of 2020. It noticed that the three-year limitation interval from the final acknowledgement of debt on 19.03.2018 would have expired on 18.03.2021, which fell inside the exclusion interval prescribed by the Supreme Courtroom. Subsequently, the demand discover issued on 10.05.2022 was inside limitation.
The Tribunal thus held that the Part 95 software was filed nicely inside the prescribed limitation interval and accordingly, dismissed the enchantment.
Case Title: Shri Rakesh Jolly vs. Indian Financial institution & Anr.
Case Quantity: Firm Attraction (AT) (Ins.) No. 1267 of 2023
For Appellant: Mr. Sunil Fernandes, Sr. Advocate, Mr. Amit Dhall, Ms. Diksha Dadu, Mr. Rajat Srivastava, Advocates.
For Respondents: Mr. Brijesh Kumar Tamber and Mr. Prateek Kushwaha, Advocates.
Date of Judgment: 03.07.2025
