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NCLT Mumbai Rejects SBI's ₹1,759 Crore Insolvency Plea Against Patanjali Foods Guarantor on Limitation Grounds
The , has dealt a significant blow to the by rejecting its ₹1,759 crore insolvency petition against Dinesh Shahra, the for (formerly ). The Tribunal held that the petition was filed after the expiration of the and that the earlier was granted under a mistaken understanding of the ’s COVID-19 relaxation orders.
The ruling underscores the strict application of limitation periods under the and clarifies the limits of the granted by the apex court. The decision also touches upon the interplay between a and the continuing liability of a .
Background: From Ruchi Soya to Patanjali Foods
The dispute originates from credit facilities sanctioned by SBI to starting in 2013. Dinesh Shahra, the then promoter, executed multiple to secure these facilities. After Ruchi Soya defaulted, SBI invoked the guarantees on , with the default crystallising on . Subsequently, the corporate debtor underwent insolvency proceedings, and a submitted by the was approved on . Under that plan, SBI received ₹854.04 crore in satisfaction of its dues.
Despite this recovery, SBI issued a demand notice to Shahra on , and later filed a insolvency petition before the NCLT on . Shahra opposed the petition on two primary grounds: first, that the had discharged the underlying debt, and second, that the petition was barred by limitation.
The Limitation Puzzle: A Timeline of Key Dates
The Tribunal meticulously analysed the limitation timeline. The relevant default occurred on , and the period for filing an application under against a is three years from the date of default, as per . Consequently, the limitation expired on . However, the ’s extended all limitation periods during the pandemic. The order dated , provided that where the remaining period of limitation as of , was less than 90 days, an additional 90 days would be available. In this case, the Tribunal calculated that as of , SBI had 362 days of limitation remaining (from , to ). Since this period exceeded 90 days, the additional 90-day relaxation did not apply. Therefore, the limitation expired on . SBI filed its petition on —23 days after the deadline.
The Tribunal had earlier, on , condoned the delay, relying on the ’s relaxation. However, upon re-examination following a challenge by Shahra, the Tribunal found that the condonation was based on a “mistaken belief.” The of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar observed:
“On a careful reading of the order passed in Writ Petition, it is noted that the said period of 90 days was allowed in case the remaining period starting from remains less than 90 days. In the present case, a period of 362 days was available from , accordingly, the said condonation is based on mistaken belief that they remain the period of 90 days was beyond the relaxation granted by hon'ble in the said petition.”
The Tribunal further held that the provision permitting under does not apply to applications governed by the . It stated:
“However, the said provisions apply to applications filed under any statute where the time limit is prescribed to do so and it does not apply to the filing of the application where the period for filing of such application is governed by the time limit specified in schedule appended to the Limitation Act. Accordingly, the present petition filed on having been filed after the expiry of limitation on is .”
and Guarantee Liability
Shahra had argued that the approved by the NCLT extinguished his liability as a . The Tribunal disagreed, noting that the receipt of ₹854.04 crore under the plan did not by itself discharge Shahra’s guarantee. It held that the amount had to be accounted for in determining the , but the guarantee remained intact pending a final adjudication. The pendency of proceedings before the also did not establish discharge in the absence of a conclusive order.
The Tribunal’s reasoning aligns with the settled principle that a does not automatically absolve personal guarantors of their obligations unless the plan explicitly provides for such discharge. The in and subsequent decisions have clarified that the liability of a is independent and can be pursued even after the corporate debtor’s resolution.
Procedural History: The NCLAT Liberty
SBI had earlier obtained a from the NCLT on . Shahra challenged this order before the , but later withdrew the appeal on , with liberty to raise the limitation issue before the NCLT. The NCLAT’s order left the limitation question open. The Tribunal noted this and proceeded to examine the issue afresh, ultimately ruling that the petition was .
Implications for Insolvency Practice
This judgment serves as a cautionary tale for financial creditors seeking to initiate insolvency proceedings. It reinforces the need for meticulous calendar management, especially in cases where the default predates the pandemic. The decision also clarifies that the ’s COVID-19 relaxation is not a blanket extension; it applies only where the remaining is less than 90 days as of . Creditors cannot rely on the relaxation if they still had ample time to file.
For personal guarantors, the ruling provides a strong defence against . However, the Tribunal’s observation that the did not extinguish the guarantee means that guarantors remain exposed unless the plan or a separate agreement explicitly releases them.
Conclusion
The NCLT Mumbai’s order is a textbook application of limitation principles in the context of insolvency. By rejecting SBI’s petition, the Tribunal has reinforced the sanctity of and the limited scope of pandemic-related extensions. The case also highlights the importance of the NCLAT’s liberty to raise limitation issues, ensuring that procedural mistakes do not preclude substantive review. For legal professionals, this judgment offers a clear framework for calculating limitation periods in IBC cases involving personal guarantors, and it underscores the need for vigilance in filing petitions within the prescribed time.
The petition was disposed of as , with the parties left to bear their own costs. The order was delivered by the of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar.
