NCLAT Rejects Appellant’s Corporate Guarantee Claim as Time-Barred, Holds 388-Day Delay Violates IBC S.12 [Read Order]

The Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) rejected the appellant’s corporate guarantee claim as time-barred and held that the 388-day delay violates the provisions of Section 12 of the Insolvency and Bankruptcy Code, 2016.

In this case, the appeal was filed by Moneywise Financial Services Private Limited under Section 61 of the Insolvency and Bankruptcy Code, 2016, National Company Law Tribunal, New Delhi Bench.

Coming to the facts of the case, the appellant is the Financial Creditor of the Corporate

Debtor, M/s Dream Procon Pvt. Ltd., and granted a loan of Rs. 5 crores to the latter for the

construction of a real estate project. Indirapuram Habitat Centre Pvt. Ltd. (IHCPL), a group concern of the corporate debtor Dream Procon Pvt. Ltd., received a Rs. 10 crore loan from the appellant for the construction of a commercial project in Ghaziabad.

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The Corporate Debtor agreed to be held accountable for IHCPL's debt obligations by signing a corporate guarantee in favour of the Appellant in order to ensure the loan's repayment. A Joint Declaration and Undertaking, signed by the Corporate Debtor and IHCPL, further formalised the guarantee by attesting to cross-collateralization and cross-guarantee agreements. Based on the corporate guarantee signed by the Corporate Debtor, the appellant filed a claim in Dream Procon Pvt. Ltd.'s CIRP after IHCPL defaulted and a CIRP was started against it.

The Resolutional Professional rejected the Appellant’s claim by noting that the debt was not disbursed to the Corporate Debtor and hence did not qualify as “financial debt” under Section 5(8) of the IBC.

There were 3 main issues before the bench of consideration, and one of them was whether the appellant’s claim was barred by limitation under the Code.

The appellant contended that the claim in question arises from an ongoing contractual obligation in the nature of a corporate guarantee and that the limitation for enforcing such a claim must be calculated from the date of default, which in this case is post-2019.

It was asserted by the respondent that the appellant’s claim was filed way beyond the limitation period. The respondents argued that the appellant was not able to give sufficient justification for the 388-day delay and contended that the appellant was well aware of the CIRP proceedings and its timelines.

The tribunal noted that the appellant failed to give a proper explanation for the delay.

The tribunal, by relying on the Supreme Court’s judgement in ‘RPS Infrastructure Ltd. v. Mukul Kumar & Anr., (2023) 10-28- Company Appeal (AT) (Ins.) No. 310 of 2024 SCC 718’, observed that the Code does not permit revival of stale or belated claims once the resolution plan has achieved finality.

The bench further noted that “the appellant’s argument that it should still be allowed to participate merely because the claim arose before plan approval is not tenable. The delay was not minimal or excusable, it was gross, unexplained, and disruptive.”

The bench held that the appellant’s claim was barred by limitation.

The NCLAT, comprising Justice Rajesh Kumar Jain (Judicial Member), Naresh Salecha (Technical Member), and Indevar Pandey (Technical Member), dismissed the appeal.

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