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Acknowledgement of the Debt by the Guarantor Extends the Limitation Period

NCLAT Principal Bench held that the acknowledgement of the debt by the guarantor extends the limitation period.


The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench headed by Justice Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member) was hearing an appeal and held that the acknowledgement of the debt by the guarantor extended the limitation period, considering the exclusion period mandated by a Supreme Court order. The NCLAT Bench affirmed the admission of the Section 95 application by the Adjudicating Authority.


Additionally, the Appellate Tribunal ruled that Section 95 permits a creditor to file through a resolution professional, finding no procedural flaws in the application. Arguments contesting the validity of the deed of guarantee, non-disclosure of the assignment agreement, and disputing the creditor's status were all rejected.


The NCLAT judgment in question concerned an appeal by a personal guarantor against an order passed by the Adjudicating Authority admitting a Section 95 application filed by a financial creditor. The case involved a loan facility granted by Dena Bank to M/s Morakhia Metals and Alloy Pvt. Ltd., with the guarantor being the appellant and another individual. After the corporate debtor's account was declared an NPA, the bank invoked the personal guarantee and demanded repayment from the appellant. Subsequently, the loan was assigned to Reliance Asset Reconstruction Company Ltd.


The appellant contended that the application was time-barred, as the invocation of the guarantee in 2016 meant the three-year limitation period had expired before the application was filed in 2021. However, the court found that a declaration cum undertaking issued by the appellant in 2018 acknowledged the debt, extending the limitation period. Furthermore, the period from March 2020 to February 2022, as per a Supreme Court order, was excluded from the calculation of time.


Additionally, the appellant argued that the application was defective because it was signed by a resolution professional who was not an authorized officer of the creditor. However, the court determined that Section 95 permits a creditor to file through a resolution professional, and no defects were identified in the application.


Other arguments regarding the validity of the deed of guarantee, non-disclosure of the assignment agreement, and questioning the status of the financial creditor were also dismissed by the court. Ultimately, the court found no error in the Adjudicating Authority's decision to admit the Section 95 application and dismissed the appeal.

 

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