Personal Guarantor Cannot Extend Limitation Through Own OTS Proposals: NCLAT New Delhi

The National Company Law Appellate Tribunal (NCLAT), New Delhi, on 21 August held that a personal guarantor cannot use her own one time settlement (OTS) proposals to extend limitation under Section 18 of the Limitation Act, 1963, while reiterating that limitation for initiating personal insolvency proceedings begins from the date of invocation of the guarantee.

A Bench of Judicial Member Justice Mohd Faiz Alam Khan and Technical Member Naresh Salecha dismissed an appeal filed by Kanta Gupta, holding that her petition under Section 94 of the Insolvency and Bankruptcy Code, 2016 (IBC) was barred by limitation. It observed:

“An OTS, which has been moved by the guarantor, is nothing but an admission of liability. Having regard to the general principles of admissions, a party making an admission cannot use the same for his own benefit. Rather, the admission made by a party can be proved against him by the other party. The OTS, which has been moved by the Appellant as a personal guarantor, could be used by the bank for invoking Section 18 of the Limitation Act, but the same could not be used by the Appellant/Guarantor himself in order to extend the limitation.”

Gupta, a personal guarantor of OSIL Exports Limited, challenged the order passed by the Chandigarh Bench of the National Company Law Tribunal (NCLT), which dismissed her petition under Section 94 of the IBC as barred by limitation.

OSIL Exports Limited had availed credit facilities from a consortium of five banks led by Bank of India. Gupta executed personal guarantees in May 2014 and February 2015. Following default, the loan account was classified as a non performing asset (NPA) in December 2015.

On 31 January 2018, the corporate debtor was admitted into the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC. As no resolution plan was approved, the corporate debtor was ordered to be liquidated on 17 October 2019.

Meanwhile, Bank of India invoked Gupta's personal guarantee on 10 September 2019 by issuing a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets Enforcement of Security Interest Act, 2002 (SARFAESI Act). A possession notice was subsequently issued under Section 13(4) of the SARFAESI Act. Gupta submitted OTS proposals in April 2021 and April 2023, offering amounts towards settlement of the outstanding liability.

On 18 December 2025, Gupta filed a petition under Section 94 of the IBC before the NCLT, Chandigarh, seeking initiation of personal insolvency proceedings. The Resolution Professional recommended admission of the petition, while Bank of India objected on the ground that it was barred by limitation. On 26 May 2026, the NCLT dismissed the petition as time barred.

Before the NCLAT, Gupta contended that limitation had not expired as recovery proceedings were still pending and no recovery certificate had been issued. She argued that her OTS proposals constituted acknowledgements of liability under Section 18 of the Limitation Act, 1963 and therefore extended the limitation period.

She also contended that limitation should not run from the first invocation of the guarantee but from subsequent causes of action, including issuance of a recovery certificate. Further, she submitted that the corporate debtor remained under liquidation and that the liquidation process had not concluded. Therefore, the debt remained enforceable and her Section 94 petition could not be treated as barred by limitation. She maintained that Section 18 of the Limitation Act applied equally to debtors and creditors.

Bank of India and the liquidator opposed the appeal, submitting that limitation began from invocation of the personal guarantee on 10 September 2019 and expired on 10 September 2022. Since the Section 94 petition was filed only in December 2025, they argued that it was beyond the three year limitation period under Article 137 of the Limitation Act, which applies where no specific limitation period is prescribed.

The NCLAT noted that Section 18 of the Limitation Act provides for a fresh period of limitation where the person against whom a right is claimed acknowledges the liability in writing and signs the acknowledgement before the prescribed period expires. It observed:

“In simple words, if the acknowledgement has been made by the opposite party in writing against whom any right is being asserted, the same acknowledgement may enhance the period of limitation. However, a party, by making any document, himself, cannot extend the period of limitation by invoking section 18 of the Indian Limitation Act.”

Relying on Zameer Pawan Kumar Agarwal v. Pankaj Prabhudayal Goenka (RP) and Ors., the Bench held that the mere submission of an OTS proposal by Gupta to the bank could not give her any benefit under Section 18 of the Limitation Act.

The Tribunal observed that the limitation period for filing a petition under Section 94 of the IBC commenced on 10 September 2019, when Bank of India invoked the personal guarantee. The limitation period therefore expired on 10 September 2022, making Gupta's petition filed on 18 December 2025 time barred.

Accordingly, the NCLAT dismissed the appeal.

For Appellants: Senior Advocates Krishnendu Datta & Neeraj Malhotra with Advocates Nipun Gautam & Harsh

For Respondents: Advocates Vadlamani Seshagiri, Christy Nameirakpam, Ananya Kukreti & Deepanshi Kaushik for R1; Advocates Eshna Kumar & Astha Agrawal; Advocates Sandeep Bajaj, Akshit Awasthi, Mayank Biyani & Tanishka Kapoor