The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal filed by Shri Rakesh Jolly, challenging the initiation of insolvency proceedings against him as a personal guarantor to M/s Aravali Infrapower Ltd. The proceedings were initiated by Indian Bank under Section 95 of the Insolvency and Bankruptcy Code (IBC), 2016, and had been admitted by the National Company Law Tribunal (NCLT), New Delhi, through an order dated July 24, 2023. The appeal was filed under Section 61 of the IBC, questioning the maintainability of the insolvency application on grounds of limitation and improper invocation of guarantee.
The appellant argued that the application filed by Indian Bank was time-barred. He submitted that the principal borrower’s account was declared a Non-Performing Asset (NPA) as early as October 29, 2012, and a demand notice under Section 13(2) of the SARFAESI Act was issued on June 13, 2016, invoking his personal guarantee. According to him, this triggered a limitation period that expired by August 2019.
A central point of contention in the appeal was a One-Time Settlement (OTS) proposal dated March 19, 2018, submitted by the appellant as Director of Aravali Infrapower to the lead bank, State Bank of India. The appellant claimed the document had not been placed before the NCLT and could not constitute acknowledgment of debt. However, the NCLAT found the OTS proposal to be a valid acknowledgment under Sections 18 and 19 of the Limitation Act. It held that clauses in the Deed of Guarantee explicitly stated that any acknowledgment or admission made by the borrower would bind the guarantor. Hence, the limitation period was extended, and the demand notice dated May 10, 2022, fell well within the permissible time frame.
The Tribunal also took note of the Supreme Court’s suo motu extension of limitation periods due to the COVID-19 pandemic, which excluded the period from March 15, 2020, to May 31, 2022, for the purpose of limitation. This exclusion further supported the view that the insolvency application filed on July 19, 2022, was not barred by time.
The appellant’s claim that Indian Bank, being a member and not the lead bank in the lending consortium, lacked the authority to file the insolvency application was also rejected. The NCLAT held that there is no legal restriction preventing a consortium member from initiating proceedings independently under the Code.
In conclusion, the NCLAT upheld the NCLT’s findings that the insolvency application against the personal guarantor was within limitation and legally maintainable. The appellate tribunal found no infirmity in the Resolution Professional’s report or the adjudicating authority’s order. Accordingly, the appeal was dismissed with no order as to costs, and any pending interim applications were closed.