Limitation Against Personal Guarantor Starts From Guarantee Invocation, Not Corporate Default: NCLT Kolkata

The National Company Law Tribunal (NCLT), Kolkata Bench, has reiterated that the limitation period for initiating insolvency proceedings against a personal guarantor runs from the date of invocation of the guarantee and not from the date of default of the corporate debtor.

The bench of Judicial Member Bidisha Banerjee and Technical Member Rekha Kantilal Shah observed, “We rely on the judgment of the Hon'ble Supreme Court, in Civil Appeal No. 6894 of 1997 (Syndicate Bank vs. Channaverappa Beleri & Ors.), by an order dated April 10, 2006, held that the limitation period of three years for proceedings against a guarantor begins from the date of invocation of the bank guarantee and not from the date of default of the corporate debtor. It provides that the limitation starts on expiry of 15 days from the date the demand is made by the bank, and a suit filed within three years from such demand is timely."

In the present case, the Financial Creditor issued a demand notice on November 22, 2021 invoking the personal guarantee and calling upon the guarantor to clear the dues by November 30, 2021. The tribunal held that the date of default was therefore November 30, 2021.

The Section 95 application (considered under Section 99) was filed on April 04, 2025, which was beyond the three-year limitation period. Accordingly, the Tribunal held that the application was barred by limitation.

The tribunal noted that the Resolution Professional had not mentioned the date of invocation of the personal guarantee in the report, despite recommending admission.

Relying on Pooja Ramesh Singh vs. SBI, the tribunal reiterated that the notice to the guarantor constitutes the date of default upon receipt of such notice.

The tribunal also referred to Laxmi Pat Surana, Babulal Vardharji Gurjar, B.K. Educational Services Pvt. Ltd., and Jignesh Shah, reiterating that limitation is triggered from the date of default and not from the date of declaration of NPA.

Accordingly, the tribunal held that the application was not maintainable and dismissed the petition as being filed beyond the period of limitation.