SARFAESI Notice Deemed Valid Invocation: NCLT Orders Insolvency Against Personal Guarantor [Read Order]
The guarantor's claim that the approval of the corporate debtor's resolution plan had discharged his personal liability, which it held arises from an independent contract.
The National Company Law Tribunal (NCLT), Mumbai Bench, has admitted an application to initiate the insolvency resolution process against a personal guarantor, holding that a notice issued under the SARFAESI Act constituted a valid invocation of the guarantee and that the application was filed within the period of limitation.
Solapur Janata Sahakari Bank filed the application against Mr. Mukund Pandharinath Kulkarni, who had provided personal guarantees for loans advanced to Shetkari Sakhar Karkhana (Chandrapuri) Limited. The bank initiated proceedings after the corporate debtor defaulted.
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The core legal issues were whether a Section 13(2) SARFAESInotice could be considered a valid invocation of the personal guarantee, whether the application was barred by limitation, and if the guarantor was discharged by the corporate debtor's resolution plan.
The bench, comprising Shri Anil Raj Chellan (Member Technical) and Shri K. R. Saji Kumar (Member Judicial), analysed the contentions. It held that the SARFAESI notice, which was addressed to the guarantors and demanded payment, satisfied the terms of the guarantee deed and constituted a valid invocation.
Regarding limitation, the Tribunal relied on a Supreme Court precedent to rule that the Arbitration Award passed in March 2019 acted as a fresh acknowledgement of debt, resetting the limitation period and making the November 2021 application timely. The NCLT also followed a Supreme Court judgment to reject the guarantor's claim that the approval of the corporate debtor's resolution plan had discharged his personal liability, which it held arises from an independent contract.
The NCLT admitted the application under Section 95 of the IBC and initiated the insolvency resolution process against Mr. Kulkarni. The Tribunal declared a moratorium, appointed a Resolution Professional, and directed them to follow the due process, including inviting claims from creditors and formulating a repayment plan, in accordance with the provisions of the IBC.
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