In a ruling in favour of UCO bank, the National Company Law Tribunal (NCLT) held that the appeal falls within the ambit of the limitation period as prescribed under Section 19 of the Limitation Act, 1963 and the liquidator can institute a Section 95(4) of the Insolvency Bankruptcy Code (IBC), 2016 proceedings against the personal guarantors.
Under Section 95 of the Insolvency and Bankruptcy Code, 2016, UCO Bank, the applicant and creditor, filed a lawsuit against respondents Nishu and Ajay Goel, who served as personal guarantors for the financial facilities provided to the Principal Debtor, M/s VCRM Petrochemicals Pvt. Ltd. On May 31, 2017, the deed of guarantee was signed, and on March 31, 2018, the Principal Debtor account was designated as a non-performing asset (NPA). As a result, notice was sent in accordance with SARFAESI Act, 2002, Section 13(2).
In order to recoup a portion of the loan, Nishu Goel’s assets were subsequently seized and liquidated on November 15, 2019. The company was ordered to be liquidated when the Corporate Insolvency Resolution Process (CIRP) was started and ultimately failed to produce a resolution plan. The bank received partial repayments on specific days during the ongoing liquidation procedure, but the debt was not paid off, thus insolvency proceedings were filed against the personal guarantors.
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According to Article 137 of the Limitation Act, 1963, the respondents (personal guarantors) contested the proceedings, arguing that the petitions were barred by limitation because three years had elapsed from the date of default. The decision in B.K. Educational Services Pvt. Ltd vs. Parag Gupta and Associates, which maintained that the insolvency application had to comply with the statute of limitations, was also referenced by the respondents.
UCO Bank utilized Section 95 of the IBC Code to seek the insolvency proceedings against the persona guarantors due to the ongoing default and the inadequacy of recoveries. Since there was no proof that the guarantors had repaid the amount, the RP was satisfied under Section 95(4) of the IBC and suggested accepting the petitions.
The appellants argued that a default occurred on the bank’s financial facility. They added that the principal debtor’s account was categorized as a non-performing asset and that the loan had not been fully repaid despite multiple attempts at recovery. They claimed that the outstanding amount had to be repaid by the personal guarantors. Insolvency applications were filed against the personal guarantors after the appellant acknowledged that they received partial repayments on specific dates but the debt was not paid off. They claimed that each partial payment of a debt lengthens the statute of limitations in accordance with Section 19 of the Limitation Act, 1963. The parties were therefore within the appeal’s statute of limitations.
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The respondents (personal guarantors) challenged the proceedings, claiming that because three years had passed since the date of default, the applications were precluded by limitation under Article 137 of the Limitation Act, 1963. The respondents further contended that the limitation period under the Limitation Act of 1963 should not be extended since the alleged payments were the outcome of a judicial process, since the clause stipulates that the debtor or an authorized representative must acknowledge or make the payment.
Relying on Section 19 of the Limitation Act, 1963, which permits the limitation period to reset when debt is partially paid, the bench, which was composed of Justice Subrata Kumar Dash (Member Technical) and Justice Ashok Kumar Bhardwaj (Member Judicial), admitted the insolvency applications filed by UCO Bank against the personal guarantors under Section 95 of the Insolvency and Bankruptcy Code (IBC), 2017 and held that the applications were filed within the allotted filing period.
The Tribunal rejected the respondent’s claims about the statute of limitations, stating that they were legally sound. As a result, the tribunal ordered the RP to engage in discussions, placed a moratorium on the personal guarantor’s debts, and let the guarantors to present repayment plans in accordance with Section 105 of the IBC law.
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