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2024 Supreme(Online)(NCLAT) 701
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Justice Ashok Bhushan (Chairperson) , Hon'ble Mr. Barun Mitra (Member (Technical)) , Hon'ble Mr. Arun Baroka (Member (Technical)) ,
Mr. Jagdish Mansukhani – Appellant
Versus
STCI Finance Limited (Creditor) through the Resolution Professional Rajendra R. Agrawal – Respondent
1439/ND/2024 COMPANY APPEAL(AT)(INS)
Acknowledgment of debt by a guarantor extends the limitation period under Section 18 of the Limitation Act, as confirmed by the court.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 95 - Limitation Act, 1963 - Section 18 - Appeal by Personal Guarantor against admission of Section 95 Application - The Appellant contended that the application was barred by time, invoking the limitation period post the acknowledgment of debt - The Adjudicating Authority found that the letter dated 12.06.2017 constituted an acknowledgment under Section 18, extending the limitation period - The application was deemed timely as per the Supreme Court's directive on exclusion of certain periods during the pandemic. (Paras 4, 7, 12, 14)
(B) Acknowledgment of Debt - The court emphasized that acknowledgment by a guarantor extends the limitation period, as established in prior case law, and the intention behind the acknowledgment must be liberally construed. (Paras 8, 9)
Facts of the case:
The Appellant guaranteed a loan of ₹10 Crores to two companies, which defaulted. Notices were issued for repayment, and the Appellant's letter requesting time was deemed an acknowledgment of debt.
Findings of Court:
The Adjudicating Authority correctly admitted the application under Section 95, finding it within the limitation period due to the acknowledgment.
Issues: Whether the letter dated 12.06.2017 constituted an acknowledgment under Section 18 of the Limitation Act, thus extending the limitation period.
Ratio Decidendi: The court ruled that the letter acknowledged the debt and extended the limitation period, affirming the Adjudicating Authority's decision.
Result: Appeal dismissed.
J U D G M E N T
ASHOK BHUSHAN, J.
This Appeal by a Personal Guarantor has been filed challenging the Order dated 07.06.2024 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court – IV) by which Order, Section 95 Application filed by the STCI Finance Ltd. against the Appellant, has been admitted under Section 100 of the Insolvency and Bankruptcy Code, 2016 , (for short `The Code’ or `The IBC’). Order admitting Section 95 Application is challenged by the Personal Guarantor in this Appeal.
2. Brief facts necessary to be noticed for deciding the Appeal are:
i. STCI Finance Ltd. sanctioned a corporate short-term loan of ₹10 Crores to Man Tubinox Ltd. (Borrower No. 1) and Man Infraprojects Ltd. (Borrower No. 2).
ii. The Loan Agreement was executed on 01.12.2015 by the Financial Creditor and Borrower No. 1 and Borrower No. 2.
iii. A Deed of Guarantee dated 01.12.2015 was executed by the Appellant in favour of the STCI Finance Ltd. guaranteeing the repayment of the loan.
iv. On 17.01.2017, a Notice was issued by the Financial Creditor to the Borrower No. 1 and 2 as well as Guarantors including Appellant demanding the payment of ₹8,52,72,832/- as on 08.01.2017, together with the interest till payment.
v. Another Notice dated 01.06.2017 was issued by Financial Creditor under Section 13(2) of SARFAESI Act, 2002 , calling upon the Borrower No. 1 and 2 to make the payment of ₹7,38,80,553/–. Notice was also endorsed to Personal Guarantors including the Appellant demanding the said amount within seven days of receipt of Notice.
vi. The Appellant replied the Notice dated 01.06.2017 vide letter dated 12.06.2017 stating that borrowers are at advance stage of discussion with number of lenders and expect to close the loan very shortly. It was requested to grant time till 31.07.2017 and withhold any further action under SARFAESI Act.
vii. The Financial Creditor thereafter issued a Demand Notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtor), Rules, 2019 to the Appellant and thereafter filed a C.P. 1264/2021 under Section 95.
viii. Adjudicating Authority on 19.04.2022, appointed Rajendra R. Agarwal as a Resolution Professional (`RP’). On 07.05.2022, RP filed a Report under Section 99 of the IBC. Appellant also filed his Affidavit pointing out various discrepancies in the proceedings. Adjudicating Authority, heard the Company Petition and by Order dated 07.06.2024, admitted Section 95 Application.
ix. Aggrieved by which Order, this Appeal has been filed.
3. We have heard, Learned Counsel for the Appellant and Learned Counsel for the Respondent.
4. Learned Counsel for the Appellant have challenged the Order on the ground that Application filed by Financial Creditor under Section 95 was barred by time. It is submitted that Bank Guarantee issued by the Appellant in favour of the Financial Creditor was invoked by Letter dated 17.01.2017, hence, three years period of Limitation expired on 16.01.2020 and the Application filed on 30.09.2021 under Section 95 was clearly barred by time and deserves to be rejected. It is submitted that Adjudicating Authority committed error in relying on the Letter dated 12.06.2017 written by the Appellant to the Financial Creditor as acknowledgement within meaning of Section 18 of the Limitation Act, whereas the said Letter cannot be read as acknowledgement nor on the strength of the said Letter, fresh Limitation period can be given to the Financial Creditor with effect from 12.06.2017. Adjudicating Authority committed an error in admitting Section 95 Application which was barred by time.
5. Learned Counsel for the Respondent refuting the submissions submits that Letter 12.06.2017 is acknowledgement by the Appellant and the acknowledgement by the Appellant has effect of extending the Limitation under Section 18 of the Limitation Act and the Application filed on 30.09.2021 was we
