Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLAT) 30

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Mohd. Faiz Alam Khan, Member (Judicial), Arun Baroka, Member (Technical)
Phoenix Arc Private Limited Trustee of Phoenix Trust FY 19-21 – Appellant
Versus
Rajendra Himmatlal Salot – Respondent
Company Appeal (AT) (Insolvency) No. 2185 of 2024 | Company Appeal (AT) (Insolvency) No. 2186 of 2024

Advocates:
For the Appellants/Petitioners: Mr. J. Rajesh, Ms. Nandita, Mr. MD. Arsalan Ahmed, Mr. Yashwardhan Aggarwal, Ms. Rahat Kapadia
For the Respondents: Ms. Aakashi Lodha, Ms. Nishtha Jindal

Section 13(2) SARFAESI notice may invoke personal guarantee based on language demanding liability; principal borrower's debt acknowledgement in financials extends guarantor's limitation period under Section 18.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 61, 95 - SARFAESI Act, 2002 - Section 13(2) - Limitation Act, 1963 - Sections 18, 137 - Personal guarantee - Notice under Section 13(2) of SARFAESI Act addressed to corporate debtor and guarantors demanding discharge of liability within 60 days - Whether constitutes invocation of personal guarantee for limitation purposes under IBC - Held: Invocation depends on language and intent of notice; separate Rule 7(1) notices under IBC required - Acknowledgement of debt by principal borrower in audited financial statements (FY 2019-20, dated 31.12.2020) extends limitation for guarantor under Section 18 - Three-year period restarts from acknowledgement date, further adjusted for COVID-19 exclusion till 28.02.2022, expiring 01.03.2025 - Petition filed 13.10.2023 within time. (Paras 43-72)

(B) Acknowledgement by principal borrower - Effect on guarantor - Balance sheet/auditor’s report acknowledging debt to assignee constitutes fresh limitation period for guarantor; principal borrower’s acknowledgement binding on guarantor. (Paras 58-62)

(C) Concurrent proceedings - SARFAESI, arbitration, DRT proceedings do not bar IBC proceedings against personal guarantor; Section 238 IBC overrides. (Paras 52, 64)

Facts of the case:
Asset reconstruction company, assignee of cash credit facility extended to corporate debtor, filed Section 95 petitions against personal guarantors. Original lender issued Section 13(2) SARFAESI notice on 12.04.2018 to corporate debtor, directors, and guarantors demanding repayment of Rs.15.37 crores within 60 days. Account assigned 30.03.2019. Rule 7(1) notices issued 23.09.2022, 14.02.2023, 06.04.2023. Corporate debtor’s audited financials (FY 2019-20, filed 31.12.2020) acknowledged debt to assignee. NCLT dismissed petitions as time-barred from 12.04.2018; appeals preferred.

Findings of Court:
Section 13(2) notice’s effect on guarantee invocation case-specific, based on words demanding guarantor liability; here distinguishable due to separate invocations and debt acknowledgement. Limitation recomputed from 31.12.2020 acknowledgement + COVID adjustment; petitions within time.

Issues: (1) Whether Section 13(2) SARFAESI notice invokes personal guarantee, starting limitation clock; (2) Effect of principal borrower’s debt acknowledgement on guarantor’s limitation; (3) Impact of prior SARFAESI/arbitration/DRT proceedings on IBC petition.

Ratio Decidendi: Language/intent of Section 13(2) notice determines guarantee invocation; principal borrower’s balance sheet acknowledgement resets guarantor’s limitation under Section 18; IBC proceedings independent, not barred by SARFAESI/DRT matters; limitation from 01.03.2022 post-COVID expires 01.03.2025.

Result: Appeals allowed; Section 95 petitions admitted.

Table of Content
1. case details and parties introduced. (Para 1 , 2 , 3)
2. loan facilities, guarantees, and assignment timeline. (Para 4 , 5 , 6 , 7 , 8 , 10 , 11 , 13 , 14 , 15 , 16)
3. demand notices and petition filing. (Para 17 , 18 , 19 , 20 , 21 , 22 , 23)
4. respondent's limitation defense via sarfaesi notice. (Para 24 , 25 , 26 , 27 , 28 , 29 , 30)
5. precedents supporting guarantee invocation by sarfaesi. (Para 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41)
6. analysis of sarfaesi notice as guarantee invocation. (Para 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51)
7. ibc independence from sarfaesi proceedings. (Para 52 , 53)
8. distinguishing precedents on notice language. (Para 55 , 56)
9. principal borrower's debt acknowledgment binds guarantor. (Para 57 , 58 , 59 , 60 , 61 , 62)
10. drt proceedings do not bar ibc initiation. (Para 64 , 65)
11. limitation extended by acknowledgment and covid period. (Para 66 , 67 , 68 , 69 , 70 , 71 , 72)
12. petitions allowed, not barred by limitation. (Para 73 , 74 , 75)

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH: NEW DELHI Company Appeal (AT) (Insolvency) No. 2185 of 2024 [Arising out of the Order dated 03.09.2024, passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Mumbai Bench in CP (IB) No. 1174/MB/2023]

IN THE MATTER OF:

Phoenix Arc Private Limited Trustee of Phoenix Trust FY 19-21 and Having its registered office at:

3rd Floor, Wallace Tower (Earlier known as Shiv Building), 139/140/B, Crossing of Sahar Road &

Western Express Highway, Vile Parle (E), Mumbai - 400 057 …Appellant Versus Mr. Rajendra Himmatlal Salot (Personal Guarantor of M/s Raj Poly Products Limited)

18 Maheshwar Prakash Building, Jain Derasar Lane Santacruz (W), Mumbai, Maharashtra – 400054 …Respondent Present:

For Appellant : Mr. J. Rajesh, Ms. Nandita, Mr. MD. Arsalan Ahmed, Mr. Yashwardhan Aggarwal & Ms. Rahat Kapadia, Advocates For Respondent : Ms. Aakashi Lodha & Ms. Nishtha Jindal, Advocates With Company Appeal (AT) (Insolvency) No. 2186 of 2024 IN THE MATTER OF:

Phoenix ARC Private Limited Trustee of Phoenix Trust FY 19-21 and Having its registered office at:

3rd Floor, Wallace Tower (Earlier known as Shiv Building), 139/140/B, Crossing of Sahar Road &

Western Express Highway, Vile Parle (E), Mumbai - 400 057 …Appellant Versus Mr. Hema Rajendra Salot (Personal Guarantor of M/s Raj Poly Products Limited)

18 Maheshwar Prakash Building, Jain Derasar Lane Santacruz (W), Mumbai, Maharashtra – 400054 …Respondent Present:

For Appellant : Mr. J. Rajesh, Ms. Nandita, Mr. MD. Arsalan Ahmed, Mr. Yashwardhan Aggarwal & Ms. Rahat Kapadia, Advocates For Respondent : Ms. Aakashi Lodha & Ms. Nishtha Jindal, Advocates

J U D G M E N T

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

Introduction The present set of appeals have been preferred under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“the Code”) against the Order dated 3rd September 2024 passed by the Hon’ble National Company Law Tribunal, Mumbai bench (“Ld. Adjudicating Authority”) in C.P. No. 1174 of 2023.

2. The Appellant is an Asset Reconstruction Company that was assigned the loan account of M/s Raj Poly Products Limited ("Corporate Debtor") along with all rights, titles, interest, and claims in respect of the loan facility granted by Janata Sahakari Co-operative Bank ("Original Lender") through an assignment agreement ("Assignment Agreement").

3. The Respondent is the personal guarantor in both the Appeals, who had executed a Letter of Guarantee in favour of the Original Lender to secure the loan facility granted to the Corporate Debtor.

Submissions of the Appellant

4. The Appellant contends that the Corporate Debtor needed funds for its working capital. The Original Lender vide a sanction letter dated 27th September 2013 and an agreement dated 19th December 2013 sanctioned a Term Loan/ Cash Credit Facility of Rs. 10,00,00,000/- (Rupees Ten Crores)

(“Original Agreement”) to the Corporate Debtor.

5. The Appellant contends that on 3r

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2026 Supreme(Online)(NCLAT) 30

Section 13(2) SARFAESI notice may invoke personal guarantee based on language demanding liability; principal borrower's debt acknowledgement in financials extends guarantor's limitation period under Section 18.

Cases Referred (2)