Encore Asset Reconstruction ... vs Pandhe Constructions Private Limited

IN THE MATTER OF: Encore Asset Reconstruction Company Pvt. Ltd. A Company Registered under the Companies Act, 1956, and registered as an Asset Reconstruction Company under Section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, acting in capacity of Trustee of EARC- Bank-015-Trust and having its registered office at caddie commercial tower, Regus Business Centre, 5th Floor, Aerocity (DIAL), South-West Delhi, New Delhi-110037 and its corporate office at 5th Floor, Plot No. 137, Sector-44, Gurugram-122002, Haryana. ...Appellant

Versus

Pandhe Constructions Pvt. Ltd. A Company registered under the Companies Act, 1956, having its registered office address at 157, Railway Lines, Sushila Apartment, Solapur- 413001, Maharashtra. ..Respondent

Present: For Appellant : Mr. Tushar A. John, Mr. Midrash Mathew, Advocates. For : Mr. Palash S. Singhai, Mr. Harshal Sareen, Ms. Respondent Aashima Gautam, Mr. Sanjeev Singh, Ms. Sandipa Bhattacharjee, Ms. Anshita Argal, Mr. Jay Rathi, Advocates. JUDGMENT

(Hybrid Mode)

[Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]

The instant appeal has been preferred by the Appellant under Section

61 of the Insolvency and Bankruptcy Code, 2016 (in short 'Code') against

the order dated 11.10.2024 (in short 'impugned order') passed by the NCLT,

Mumbai Bench (in short 'Adjudicating Authority') in CP (IB) No.

995/MB/2023 filed under Section 7 of the Code by the Appellant whereby

the Adjudicating Authority has dismissed the petition as being time barred

and not filed within the period of limitation.

2. The brief facts necessary for the disposal of the appeal are that the

Respondent No. 1 executed a corporate guarantee on 22.03.2014 agreeing to

repay the DNS Bank Ltd. all outstanding amounts granted to Pandhe

Infracons Pvt. Ltd. through a Flexi Overdraft Facility of Rs. 15,00,00,000/-

and due to failure of the CD and the Borrower to repay the outstanding

amounts under the facility, a demand notice was sent by the Financial

Creditor of date 18.02.2022 invoking the deed of guarantee requiring the CD

to pay an amount of Rs. 28,22,36,755/- as on 15.02.2022 along with future

interest until the date of actual payment within the period of 7 days after

receiving the notice.

3. It is further reflected that in part iv of the application, the total

amount in default as on 19.07.2023 has been shown as Rs. 35,38,03,129/-

and the date of default has been specified as 19.11.2019.

4. It is also reflected that the aforementioned facility account,

agreements and all security documents executed by the parties were

Company Appeal (AT) (Ins) No. 2372 of 2024 2 of 29 assigned and transferred by the DNS Bank to the Appellant-Encore Asset

Reconstruction Company Pvt. Ltd. in its capacity as a trustee of EARC Bank

as per the assignment agreement dated 15.05.2019.

5. It is further reflected that the facility granted to the principal borrower

was declared as a Non-Performing Asset (NPA) by the DNS Bank on

30.06.2018 due to continuous defaults committed by the Borrower and

thereafter, a demand notice dated 04.09.2018 was issued under Section

13(2) of the SARFAESI Act for repayment of an amount of Rs.

15,99,70,693.75/- as of 31.08.2018 along with future interest and other

charges within 60 days from the date of the demand notice.

6. It is further reflected that the CD as well as the borrower failed in

paying outstanding amount and another demand notice dated 04.11.2019

was issued by the financial creditor to the borrower, CD/Guarantor and

personal guarantors invoking the guarantees and demanding an amount of

Rs. 19,27,90,856/- as on 29.10.2019 together with further interest up to

the date of realisation within 15 days of receipt of the demand notice. The

CD failed to make the desired payment of the outstanding dues and in

consequence of the same the application under Section 7 has been moved

by the Appellant for initiation of the Corporate Insolvency Resolution

Process (CIRP) against the Respondent No. 1, however, the same has been

dismissed by the Adjudicating Authority.

7. Ld. Counsel for the Appellant submits that the Adjudicating Authority

has committed manifest illegality in dismissing the application moved by the

Appellant on the issue of being barred by limitation and the Adjudicating

Authority failed to appreciate the order passed by the Hon'ble Supreme

Company Appeal (AT) (Ins) No. 2372 of 2024 3 of 29 Court in Suo Motu Writ Petition (C) No. 3 of 2020 and failed to give a correct

interpretation to the said order and the same has been wrongly applied to

the facts and circumstances of the case in hand.

8. It is further submitted that the Adjudicating Authority has also

committed a mistake in holding that the petition has been filed beyond the

limitation and failed to appreciate that period from 15.03.2020 till

28.02.2022 is required to be excluded for the purpose of calculating the

limitation period and has read the order passed by the Hon'ble Supreme

Court in Suo Motu Writ Petition (C) No. 3 of 2020 in parts while the same

was required to be read as a whole and the final order passed by the Hon'ble

Supreme Court on 10.01.2022 was required to be appreciated and read

along with earlier orders passed by the Hon'ble Supreme Court in this

regard.

9. It is vehemently submitted that in the instant case the petition was

filed on 20.08.2023 while demand notice invoking the corporate guarantee

was issued on 04.11.2019 and the period of 15 days was given for making

the payment, hence, the date of default mentioned in the petition is

19.11.2019 which is 16th day after the date of notice i.e. 04.11.2019 and

this has been affirmed by the Adjudicating Authority and computation of the

limitation period was required to be done from 19.11.2019 and as held by

the Hon'ble Supreme Court, the period from 15.03.2020 till 28.02.2022 was

required to be excluded in calculating the limitation and thus the period as

available on 15.03.2020 would be calculated from 01.03.2022 and by this

computation the petition has been filed well within the limitation period on

20.08.2023 i.e within a period of 653 days.

Company Appeal (AT) (Ins) No. 2372 of 2024 4 of 29

10. It is further submitted that the Respondent has not set out any

dispute with regard to its liability to pay the Appellant and the issues raised

with regard to the limitation is not having any substance therein and in this

regard the Adjudicating Authority has failed in appreciating the limitation

period of the instant case in the background of law propounded by the

Hon'ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 and

thus, the impugned order is liable to be set aside and the petition filed by

the Appellant is liable to be admitted with consequential directions.

11. Ld. Counsel for the Respondent on the other hand submits that there

is no illegality or to say any irregularity in the impugned order passed by the

Adjudicating Authority and the appeal as is exists today is not maintainable

as the petition has been rightly held by the Adjudicating Authority as time

barred. While drawing our attention towards the list of dates given in para 9

of his reply, Ld. Counsel for the Respondent submits that there are certain

dates which are not in dispute as the loan agreement was executed on

22.03.2014 and the deed of guarantee as well as renewed loan agreements

were executed on 22.03.2014, 09.10.2015 and 30.09.2016 and account of

the Respondent was declared as NPA on 30.06.2018.

12. It is further submitted that there is also no dispute with regard to the

fact that the assignment deed in favour of the Appellant was executed by

DNS Bank Ltd. on 15.05.2019 and the demand notice under Section 13(2)

was issued by the DNS Bank Ltd. on 04.09.2018 (original lender) to

borrower and CD (Corporate Guarantor) and the second demand notice was

issued by the FC on 04.11.2019 and another notice was issued on

Company Appeal (AT) (Ins) No. 2372 of 2024 5 of 29 18.02.2022 and it was on 20.08.2023 the petition was filed by the Appellant

under Section 7 of the Code.

13. It is further submitted that keeping in view the directions given by the

Hon'ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020, the

limitation for filing the petition under Section 7 of the Code had expired on

03.09.2021 and the said period of limitation could only be expanded further

by 90 days w.e.f 01.03.2022 and therefore, the Appellant under some

illusion is wrongly claiming exclusion of entire period from 15.03.2020 till

28.02.2022 and that the balance period for filing of the petition under

Section 7 will become available only from 01.03.2022 onwards.

14. It is further submitted that there is no blanket exclusion of period

from 15.03.2020 till 28.02.2022 in view of the aforesaid order of the Hon'ble

Supreme Court and since the amount has not been paid in pursuance of the

notice issued on 04.09.2018 under Section 13(2) and the guarantee has

been invoked thereon, the limitation would start running from 04.09.2018

and therefore, time up to 03.09.2021 i.e. 3 years, was available for the

Appellant.

15. It is further submitted that if the limitation is calculated on the basis

of the judgment passed by the Supreme Court in Suo Motu Writ Petition (C)

No. 3 of 2020, only 90 days were available to the Appellant w.e.f 01.03.2022

as the period of limitation has expired within the period from 15.03.2020 till

28.02.2022 and therefore including 90 days after 28.02.2022 the last for

filing the petition under Section 7 was 29.05.2022, therefore, the petition

filed by the Appellant has been rightly held as time barred.

Company Appeal (AT) (Ins) No. 2372 of 2024 6 of 29

16. It is further submitted that the date of default as 19.11.2019 has been

wrongly claimed by the Appellant and even if the date of default is taken as

19.11.2019, three years would end on 18.11.2022 and keeping in view the

judgment of the Hon'ble Supreme Court in Suo Motu Writ Petition (C) No. 3

of 2020 the balance period of limitation remaining as on 03.10.2021 shall be

available w.e.f 01.03.2022 and therefore approximately 22½ months from

19.11.2019 would be available till 03.10.2021 and remaining 13½ months

would be available from 01.03.2022 which will end on 15.04.2023,

therefore, even keeping in view the calculation made by the Appellant he

should have filed the petition on or before 15.04.2023 while the petition has

been filed on 20.08.2023 and has been rightly held time barred by the

Adjudicating Authority and in this regard no illegality has been committed,

therefore, the appeal preferred by the Appellant is liable to be dismissed.

17. We have heard Ld. Counsel for the parties and have perused the

record.

18. It is evident that there are certain facts which are not in dispute. It is

not in dispute that the Respondent had stood corporate guarantor to the CD

and the Financial Creditor has assigned the debt / loan to the Appellant on

15.05.2019. It is also not in dispute that the demand notice under Section

13(2) was issued by the original lender DNS Bank Ltd. to the borrower and

corporate guarantor/Respondent on 04.09.2018 and other demand notices

were issued by the FCs to the borrower and CD on 04.11.2019 and

18.02.2022 and ultimately the application under Section 7 of the Code was

filed by the Appellant on 20.08.2023.

Company Appeal (AT) (Ins) No. 2372 of 2024 7 of 29

19. The bone of contention between the parties is the interpretation of the

judgment of the Hon'ble Supreme Court passed in Suo Motu Writ Petition

(C) No. 3 of 2020 and as to whether what would be the date from which the

limitation would run for the purpose of filing of petition under Section 7 of

the Code.

20. It is reflected that in part IV of the application moved before the

Adjudicating Authority the date of default has been mentioned by the

Appellant as 19.11.2019 as 15 days' time was granted to the

Respondent/Corporate Guarantor to pay the default amount by issuing

notice of date 04.11.2019.

21. The Adjudicating Authority in the impugned order after appreciating

the material and evidence available on record concluded as under: -

4.6 We find that in the present case, the Deed of Guarantee dated 30.09.2016 was invoked by the Financial Creditor vide its notice dated 04.11.2019, wherein the Corporate Debtor/Guarantor was called upon to make payment of the outstanding amount within a period of 15 days from the notice, failing which the Financial Creditor would initiate appropriate legal action.

The notice period provided in the invocation notice expired on 18.11.2019, and accordingly, the date of default has been mentioned in Part-IV of the Application as 19.11.2019. It is settled law that for the purposes of guarantors, including corporate guarantors, when a demand invoking the guarantee is raised in accordance with the terms and the guarantee is payable on demand, the default occurs when the demand notice is issued and the guarantor fails to comply with the demand. Therefore, we find that the Financial Creditor has rightly relied on the judgment passed by the Hon'ble National Company Law Appellate Tribunal in Pooja Ramesh Singh v. State Bank of India & Anr. (supra).

4.7 In view of this legal position, we are unable to accept the Corporate Debtor's plea for treating the Demand Notice dated 04.09.2018 as the notice of invocation of corporate guarantee and for computing limitation accordingly. In this connection, it is pertinent to mention that the Demand

Company Appeal (AT) (Ins) No. 2372 of 2024 8 of 29 Notice dated 04.09.2018 was issued under Section 13(2) of the SARFAESI Act, 2002 which was meant for enforcement of security interest. It is true that the said notice dated 04.09.2018 was addressed to the Borrower as well as the Personal/Corporate Guarantors, etc., and also contained reference of Corporate Guarantee dated 30.09.2016 executed by the Corporate Debtor. However, there is nothing in the said notice dated 04.09.2018 to indicate that the Bank had sought to invoke the aforesaid Corporate Guarantee in the guise of notice under Section 13(2) of SARFAESI Act, 2002. Thus, we find that the date of default in the present case will be 19.11.2019 as the present Application has been filed against the Corporate Guarantor.

4.9 Considering the facts of present case in light of above directions, we find that the three-year limitation period reckoned from 19.11.2019 (the date of default in case of Corporate Debtor) would have expired on 18.11.2022. In other words, the limitation period would have ended beyond the period comprised between 15.03.2020 and 28.02.2022. Hence, Direction III contained in aforesaid judgment of Hon'ble Apex Court will not apply here and the issue will have to be considered in accordance with Directions I and II. Therefore, on applying Directions I and II, it is observed that the balance period of limitation remaining from 03.10.2021 to 18.11.2022 is 411 days which will be available with effect from 01.03.2022 and will accordingly expire on 16.04.2023. Consequently, the Application ought to have been filed not later than 16.04.2023. However, it is observed that the Financial Creditor filed the present Application on 20.08.2023 which clearly falls outside the permitted period of limitation.

4.10 In view of the above discussion, we are of the considered view that this Application being beyond limitation is not legally maintainable. Therefore, the Application is liable to be rejected.

22. We also notice that while arriving at the aforesaid conclusion the

Adjudicating Authority has considered the judgment of the Hon'ble Supreme

Court in Suo Motu Writ Petition (c) No. 3 of 2020 of date 10.01.2022 which

is also reproduced as under: -

Company Appeal (AT) (Ins) No. 2372 of 2024 9 of 29 "5. Taking into consideration the arguments advanced by learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of the M.A. No. 21 of 2022 with the following directions:

I. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-

judicial proceedings.

II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022.

III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply.

IV. It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings".

23. The Adjudicating Authority while considering the aforesaid law laid

down by the Hon'ble Supreme Court for exclusion of the limitation period for

the period of Covid Pandemic is of the view that though the guarantee dated

30.09.2016 was invoked by the FC vide its notice dated 04.11.2019 whereby

the guarantor was called upon to make the payment of outstanding amount

within the period of 15 days from the notice, the notice period provided in

Company Appeal (AT) (Ins) No. 2372 of 2024 10 of 29 the invocation notice (of date 04.11.2019) expired on 18.11.2019 and

accordingly the date of default mentioned in part IV as 19.11.2019 and

therefore, concluded that the default has occurred on 19.11.2019 and while

counting the limitation period from 19.11.2019 it is stated that the said

period would have expired on 18.11.2022 and since the limitation period

would have ended beyond 28.02.2022 (the date specified in the judgment of

the Hon'ble Supreme Court) the issue will have to be considered in

accordance with direction no. I and II of the order of the Hon'ble Supreme

Court and thereafter by applying direction I and II it is concluded that the

balance period of limitation remaining from 03.10.2021 to 18.11.2022 would

be 411 days which would be available w.e.f 01.03.2022 and would expire

from 16.04.2023 while the application has been moved on 20.08.2023 and

the same is barred by limitation.

24. This Appellate Tribunal in Pooja Ramesh Singh vs. SBI (2023) SCC

OnLine NCLAT 193 held as under:

"24. The scheme of I&B Code clearly indicate that both the Principal Borrower and the Guarantor become liable to pay the amount when the default is committed. When default is committed by the Principal Borrower the amount becomes due not only against the Principal Borrower but also against the Corporate Guarantor, which is the scheme of the I&B Code. When we read with as is delineated by Section 3(11) of the Code, debt becomes due both on Principal Borrower and the Guarantor, as noted above. The definition of default under Section 3 (12) in addition to expression 'due' occurring in Section 3(11) uses two additional expressions i.e "payable" and "is not paid by

Company Appeal (AT) (Ins) No. 2372 of 2024 11 of 29 the debtor or corporate debtor". The expression 'is not paid by the debtor' has to be given some meaning. As laid down by the Hon'ble Supreme Court in "Syndicate Bank v. Channaveerappa Beleri" (supra), a guarantor's liability depends on terms of his contract. There can be default by the Principal Borrower and the Guarantor on the same date or date of default for both may be different depending on the terms of contract of guarantee. It is well settled that the loan agreement with the Principal Borrower and the Bank as well as Deed of Guarantee between the Bank and the Guarantor are two different transactions and the Guarantor's liability has to be read from the Deed of Guarantee.

26.The judgment of the Hon'ble Supreme Court in "Syndicate Bank v. Channaveerappa Beleri" has categorically laid down that liability of the Guarantor depends on the terms of his contract. The relevant clauses of the Deed of Guarantee, as noted above, clearly contemplate demand by the Bank upon the Guarantor. Clause 1 provides that "the Guarantors shall forthwith on demand pay to the Bank the whole of such principal sum not exceeding Rs. 186,60,00,000/- together with interest".

Similarly, Clause 13 uses expression, "the Guarantors shall forthwith on demand made by the Bank deposit with the Bank....".

Clause 20 again makes it clear that what was guaranteed by the Guarantor was that amount shall be payable to the Bank on serving the Guarantor with notice requiring payment of the amount.

27. In view of the clear stipulation in the Deed of Guarantee, default on the part of the Guarantor cannot be

Company Appeal (AT) (Ins) No. 2372 of 2024 12 of 29 treated to be on 05.09.2019, when it is alleged that the Principal Borrower committed default, nor the default on the part of the Guarantor can be on date of NPA i.e. 05.12.2019 for the purpose of present case. In the present case, admittedly, the Bank has issued notice dated 01.10.2020 to the Principal Borrower as well as to the Guarantor - Essel Infraprojects Ltd. Notice dated 01.10.2020 which has been brought on the record indicate that notice is addressed to the Principal Borrower and to Guarantors. In Para 8 of the notice following has been stated:

"8. Our Clients states that, You Nos. 2 to 4, executed Deed of Guarantee on respective dates inter alia agreeing to pay on demand and without demur to our clients alongwith interest, cost, charges, expenses and/or other money due thereon from time to time in terms of the Agreement of Loan for overall limits, Agreement of Hypothecation of Goods and Assets and Supplemental Agreements."

25. Hon'ble Supreme Court again in Syndicate Bank vs.

Channaveerappa Beleri. (2006)11 SCC 506 held as under:

"9. A guarantor's liability depends upon the terms of his contract. A "continuing guarantee" is different from an ordinary guarantee. There is also a difference between a guarantee which stipulates that the guarantor is liable to pay only on a demand by the creditor, and a guarantee which does not contain such a condition. Further, depending on the terms of guarantee, the liability of a guarantor may be limited to a particular sum, instead of the liability being to the same extent as that of the principal debtor. The liability to pay may arise, on the principal debtor and guarantor, at the same time or at

Company Appeal (AT) (Ins) No. 2372 of 2024 13 of 29 different points of time. A claim may even be time-barred against the principal debtor, but still enforceable against the guarantor. The parties may agree that the liability of a guarantor shall arise at a later point of time than that of the principal debtor. We have referred to these aspects only to underline the fact that the extent of liability under a guarantee as also the question as to when the liability of a guarantor will arise, would depend purely on the terms of the contract".

26. This Appellate Tribunal in Ujjwal Gupta v. Union Bank of India,

2026 SCC On Line NCLAT 8 held as under:

31. This Appellate Tribunal in Asha Basantilal Surana (Supra), which is a three member's decision, after considering Amanjyot Singh (Supra) and Mavjibhai Nagarbhai Patel (Supra) clearly holds that in a case where notice under Section 13(2) makes a demand as per the guarantee agreement between the parties, the notice has to be treated as a notice for invocation of bank guarantee.

This appellate Tribunal in the above case has also distinguished the law laid down by this Appellate Tribunal earlier in Amanjyot Singh (Supra), to be a case confined to its own facts, by observing in para 12 of the judgment, that the dismissal of the appeal in Amanjyot Singh case was on the facts of the said case and has no application in the facts of the case under scrutiny and also that the invocation of personal guarantee has to be in accordance with the terms of the guarantee agreement. We reproduce the para no. 12 of the aforesaid judgment (Asha Basantilal Surana) (Supra) for convenience herein below: --

"12. Thus, the dismissal of the Appeal in the Amanjyot Singh's case was on the facts of the said case and has

Company Appeal (AT) (Ins) No. 2372 of 2024 14 of 29 no application in the facts of the present case. The invocation of personal guarantee has to be in accordance with the terms of the Guarantee Agreement which is a settled law. Clause 7 of the Guarantee Agreement does not require any particular mode and manner of the demand notice. When demand notice is issued against the personal guarantor asking the personal guarantor to discharge its liabilities, the guarantee stands invoked. Whether notice under Section 13(2) in a particular case invoked the guarantee or not depends on the words and intent of the notice. For finding out as to whether Notice under Section 13 (2) invoked the personal guarantee, the letters and words of the Notice has to be looked into to come to any conclusion that whether personal guarantor has been asked to discharge its liabilities or not. In the facts of the present case, we are of the considered opinion that the Notice under Section 13(2) issued by the State Bank of India is a clear demand notice from the Appellant to pay the amount of Rs. 28,56,64,336.06/."

(Emphasis Supplied)

32. Thus, what has been highlighted by the aforesaid judgment is that it would be the terms and conditions of the agreement executed between the parties with regard to the guarantee which would be relevant to assess as to whether the guarantee has been sufficiently invoked or not. Therefore, whether a guarantee may be invoked by giving notice under Section 13(2) of the SARFAESI Act depends on the terms of the guarantee and the content of the notice. If the notice clearly demands payment from the personal guarantor in terms of the guarantee, it can be

Company Appeal (AT) (Ins) No. 2372 of 2024 15 of 29 treated as an invocation of the guarantee. The facts and the wording of the notice are crucial in this determination".

27. We notice that admittedly the notice under Section 13(2) was given by

the Financial Creditor on 04.09.2018 to the principal debtor and guarantor

/ CD and another notice to the borrower as well as to the CD/ Guarantor

was given by the Financial Creditor on 04.11.2019 and even thereafter one

more notice was given to the principal debtor as well as guarantor on

18.02.2022. Admittedly, Section 7 application has been filed by the

Appellant/Financial Creditor on 20.08.2023. The Adjudicating Authority in

Para no. 4.6, 4.7 of the impugned judgment has stated that guarantee was

invoked by the financial creditor vide notice dated 04.11.2019 and thus

fixed the date of default as 19.11.2019. The relevant paragraphs of the

impugned judgment are reproduced as under:

"4.6 We find that in the present case, the Deed of Guarantee dated 30.09.2016 was invoked by the Financial Creditor vide its notice dated 04.11.2019, wherein the Corporate Debtor/Guarantor was called upon to make payment of the outstanding amount within a period of 15 days from the notice, failing which the Financial Creditor would initiate appropriate legal action. The notice period provided in the invocation notice expired on 18.11.2019, and accordingly, the date of default has been mentioned in Part-IV of the Application as

19.11.2019. It is settled law that for the purposes of guarantors, including corporate guarantors, when a demand invoking the guarantee is raised in accordance with the terms and the guarantee is payable on demand, the default occurs when the demand notice is issued and the guarantor fails to comply with the demand. Therefore, we find that the Financial Creditor has rightly relied on the judgment passed by the Hon'ble National Company Law Appellate Tribunal in Pooja Ramesh Singh v. State Bank of India & Anr. (supra).

Company Appeal (AT) (Ins) No. 2372 of 2024 16 of 29 4.7 In view of this legal position, we are unable to accept the Corporate Debtor's plea for treating the Demand Notice dated 04.09.2018 as the notice of invocation of corporate guarantee and for computing limitation accordingly. In this connection, it is pertinent to mention that the Demand Notice dated 04.09.2018 was issued under Section 13(2) of the SARFAESI Act, 2002 which was meant for enforcement of security interest. It is true that the said notice dated 04.09.2018 was addressed to the Borrower as well as the Personal/Corporate Guarantors, etc., and also contained reference of Corporate Guarantee dated 30.09.2016 executed by the Corporate Debtor. However, there is nothing in the said notice dated 04.09.2018 to indicate that the Bank had sought to invoke the aforesaid Corporate Guarantee in the guise of notice under Section 13(2) of SARFAESI Act, 2002. Thus, we find that the date of default in the present case will be 19.11.2019 as the present Application has been filed against the Corporate Guarantor".

28. The Respondent appears to be aggrieved by this finding, however has

not challenged these findings by filing any appeal and has contended that

these findings may be challenged by him in this appeal which has been filed

by the Appellant. Ld. Counsel for the Appellant on the other hand has relied

on the law laid down by the Hon'ble Supreme Court in Union of India v.

S.P. Sharma (2014) 6 SCC 506, reproduced as under:

"80. In M. Nagabhushana v. State of Karnataka39 this Court held that the doctrine of res judicata is not a technical doctrine but a fundamental principle which sustains the rule of law in ensuring finality in litigation. The main object of the doctrine is to promote a fair administration of justice and to prevent abuse of process of the court on the issues which have become final between the parties. The doctrine is based on two age-old principles, namely, interest reipublicae ut sit finis litium which means that it is in the interest of the State that there should be an end to litigation and the other principle is nemo debet bis vexari, si constat curiae quod sit pro una et eadem causa meaning thereby that no one ought to be vexed twice in a litigation if it appears to the court that it is for one and the same cause.

81. Thus, the principle of finality of litigation is based on a sound firm principle of public policy. In the absence of such

Company Appeal (AT) (Ins) No. 2372 of 2024 17 of 29 a principle great oppression might result under the colour and pretence of law inasmuch as there will be no end to litigation. The doctrine of res judicata has been evolved to prevent such anarchy".

29. Having considered all the facts and circumstances and the law placed

above we are not in agreement with the submissions made by Ld. Counsel

for the Respondent as aforesaid findings would be binding on the

Respondent unless the impugned judgment or findings are not set aside by

any higher Forum.

30. It is also recalled that Ld. Adjudicating Authority while treating the

Notice dated 4.11.2019 as a notice for revocation of guarantee counted the

limitation period from 19.11.2019 i.e. the date of default and hold that since

the limitation period would have ended beyond 28.02.2022 (the cut-off date

specified in the judgment of the Hon'ble Supreme Court) the issue will have

to be considered in accordance with direction no. I and II of the order of the

Hon'ble Supreme Court and held that the balance period of limitation

remaining from 03.10.2021 to 18.11.2022 would be 411 days which would

be available w.e.f 01.03.2022 and would expire on16.04.2023 while the

application has been moved on 20.08.2023 and the same is barred by

limitation.

31. At this juncture, keeping in view the law as placed above, we are

constrained to observe that the judgment of the Hon'ble Supreme Court

passed in Suo Motto writ petition No, 03 of 2020 has not been appreciated

in right prospective by the Adjudicating Authority.

32. The Hon'ble High Court of Delhi, in Sudhanshu Bhardwaj vs. AIR

India Ltd., 2023 SCC OnLine Del 8177 held as under:

Company Appeal (AT) (Ins) No. 2372 of 2024 18 of 29 "12. Thus, the entire period from 15.03.2020 to 28.02.2022 is required to be excluded in computing the period of limitation. It follows that the period of limitation would stop running on 15.03.2020 and would start running again on 01.03.2022. Consequently, the balance period of limitation remaining as on 03.10.2021 as contemplated in para 5 (II) would be the same as balance period of limitation remaining as on 15.03.2020.

13. It is incongruous to suggest that while the period from 03.10.2021 to 28.02.2022 is to be excluded for the purpose of calculating period of limitation, the same is not to be done for the period from 15.03.2020 to 02.10.2021.

Doing so would be inconsistent with the plain language of para 5 (I) of the order dated 10.01.2022.

14. The order dated 10.01.2022 cannot be construed to reach the conclusion that limitation continues to run till 04.10.2021 but will stop running during the period 03.10.2021 till 28.03.2022. This would be contrary not only to the purport of the order dated 10.01.2022 but also to the expressed language of para 5 (I) of the said order dated 10.01.2022".

33. This Appellate Tribunal in Indospirit Distribution Ltd. v. Kristal

Spirits India (P) Ltd., 2025 SCC OnLine NCLAT 87 held as under:

5. The limitation period for filing a Section 9 Petition under IBC is 3 years or 36 months. Now if the period from 15.03.2020 to 28.02.2022 is excluded then 23 months and 15 days' stands excluded, and if the said 23 months and 15 days are excluded then total number of months remaining as on 28.02.2022 for the limitation to expire in

Company Appeal (AT) (Ins) No. 2372 of 2024 19 of 29 the present case would be 31 months and 16 days which consequently would expire on 17.10.2024 and as Section 9 Petition was filed on 31.08.2023 it is well within the limitation period.

5. The Appellant categorically falls within the ambit of Para I of the said judgment whereby the period from 15.03.2020 to 28.02.2022 would stand excluded from the period of limitation. Even per Para IV of the judgment the limitation would extend. In Captain Sudhanshu Bhardwaj v. AIR India Limited (2023 SCC OnLine Del 8177), High Court of Delhi while interpreting the judgment of In Re:

Cognizance for Extension of Limitation, expressly held that the period from 15.03.2020 till 28.02.2022 stood excluded for the purposes of the limitation. The court held: "... 12. Thus, the entire period from 15.03.2020 to 28.02.2022 is required to be excluded in computing the period of limitation. It follows that the period of limitation would stop running on 15.03.2020 and would start running again on 01.03.2022. Consequently, the balance period of limitation remaining as on 03.10.2021 as contemplated in para 5 (II) would be the same as balance period of limitation remaining as on 15.03.2020.

13. It is incongruous to suggest that while the period from 03.10.2021 to 28.02.2022 is to be excluded for the purpose of calculating period of limitation, the same is not to be done for the period from 15.03.2020 to 02.10.2021.

Doing so would be inconsistent with the plain language of para 5 (I) of the order dated 10.01.2022. ..."

6. Thus the period from 15.03.2020 to 28.02.2022 stood excluded for limitation purposes and it results in the enlargement of time of limitation. Delhi High Court, while propounding this position, placed reliance on the judgment

Company Appeal (AT) (Ins) No. 2372 of 2024 20 of 29 of Prakash Corporate v. Dee Vee Projects Limited ((2022) 5 SCC 112) passed by the Hon'ble Supreme Court wherein the Hon'ble Supreme Court held:

"... "28 As regards the operation and effect of the orders passed by this Court in SMWP No. 3 of 2020, noticeable it is that even though in the initial order dated 23-3-2020 [Cognizance for Extension of Limitation, In re, (2020) 19 SCC 10: (2021) 3 SCC (Cri) 801], this Court provided that the period of limitation in all the proceedings, irrespective of that prescribed under general or special laws, whether condonable or not, shall stand extended w.e.f. 15-3- 2020 but, while concluding the matter on 23-9-2021 [Cognizance for Extension of Limitation, In re, (2021) 18 SCC 250], this Court specifically provided for exclusion of the period from 15-3-2020 till 2 -10-2021. A look at the scheme of the Limitation Act, 1963 makes it clear that while extension of prescribed period in relation to an appeal or certain applications has been envisaged under Section 5, the exclusion of time has been provided in the provisions like Sections 12 to 15 thereof. When a particular period is to be excluded in relation to any suit or proceeding, essentially the reason is that such a period is accepted by law to be the one not referable to any indolence on the part of the litigant, but being relatable to either the force of circumstances or other requirements of law (like that of mandatory two months' notice for a suit against the Government). The excluded period, as a necessary consequence, results in enlargement of time, over and above the period prescribed."

7. In the view of law settled above, we hold the petition under Section 9 IBC filed on 31.08.2023 is well within limitation, hence the petition is restored to its original

Company Appeal (AT) (Ins) No. 2372 of 2024 21 of 29 number before Ld. NCLT. The appeal is thus allowed. Pending application, if any, are disposed of.

34. The Hon'ble Supreme Court again in Arif Azim Co. Ltd. vs. Aptech

Ltd., (2024) 5 SCC 313 held as under:

"84. Thus, in ordinary circumstances, the limitation period available to the petitioner for raising a claim would have come to an end after an expiry of three years, that is, on 27-3-2021. However, in March 2020, the entire world was taken under the grip of the deadly Covrn-19 Pandemic bringing everyday life and commercial activity to a complete halt across the globe. Taking cognizance of this unfortunate turn of events, this Court vide order dated 23- 3-2020 passed in Cognizance for Extension of Limitation, In re 19 directed the period commencing from 15-3-2020 to be excluded for the purposes of computation of limitation. The said extension of limitation was extended from time to time by this Court in view of the continuing pandemic. As a result, the period from 15-3-2020 to 28-2-2022 was finally determined to be excluded for the computation of limitation. It was provided that the balance period of limitation as available on 15-3-2020 would become available from 1-3-2022.

85. The operative part of the order dated 10-1-2022 is extracted herein below: (Cognizance for Extension of Limitation, In re case SCC pp. 119-20, para 5) "5. Taking into consideration the arguments advanced by the learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of MA No. 21 of2022 with the following directions:

Company Appeal (AT) (Ins) No. 2372 of 2024 22 of 29 5.1. The order dated 23-3-202019 is restored and in continuation of the subsequent orders dated 8-3-2021 21, 27-4-2021 22 and 23-9-2021 23, it is directed that the period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.

5.2. Consequently, the balance period of limitation remaining as on 3-10-2021, if any, shall become available with effect from 1-3-2022.

5.3. In cases where the limitation would have expired during the period between 15-3-2020 till 28-2-2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 1-3-2022. In the event the actual balance period of limitation remaining, with effect from 1-3-2022 is greater than 90 days, that longer period shall apply. 5.4. It is further clarified that the period from 15-3-2020 till 28-2-2022 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29-A of the Arbitration and Conciliation Act, 1996, Section 12-A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings."

86. The operation and effect of the aforesaid order was considered and explained by a two-Judge Bench of this Court in Prakash Corporates v. Dee Vee Projects Ltd. as follows: (SCC p. 141, para 28)

Company Appeal (AT) (Ins) No. 2372 of 2024 23 of 29 "28. As regards the operation and effect of the orders passed by this Court in SMWP No. 3 of 2020, noticeable it is that even though in the initial order dated 23-3- 202019 , this Court provided that the period of limitation in all the proceedings, irrespective of that prescribed under general or special laws, whether condonable or not, shall stand extended w.e.f. 15-3-2020 but, while concluding the matter on 23-9-202123, this Court specifically provided for exclusion of the period from 15- 3-2020 till 2-10-2021. A look at the scheme of the Limitation Act, 1963 makes it clear that while extension of prescribed period in relation to an appeal or certain applications has been envisaged under Section 5, the exclusion of time has been provided in the provisions like Sections 12 to 15 thereof When a particular period is to be excluded in relation to any suit or proceeding, essentially the reason is that such a period is accepted by law to be the one not referable to any indolence on the part of the litigant, but being relatable to either the force of circumstances or other requirements of law (like that of mandatory two months' notice for a suit against the Government25 ). The excluded period, as a necessary consequence, results in enlargement of time, over and above the period prescribed."

(emphasis supplied)

87. The effect of the above referred order of this Court in the facts of the present case is that the balance limitation left on 15-3-2020 would become available w.e.f. 1-3-2022. The balance period of limitation remaining on 15-3-2020 can be calculated by computing the number of days between 15-3-2020 and 27-3-2021, which is the day when the limitation period would have come to an end under ordinary circumstances. The balance period thus

Company Appeal (AT) (Ins) No. 2372 of 2024 24 of 29 comes to 1 year 13 days. This period of 1 year 13 days becomes available to the petitioner from 1-3-2022, thereby meaning that the limitation period available to the petitioner for invoking arbitration proceedings would have come to an end on 13-3-2023".

35. Now we discuss various scenarios which would emerge in view of the

admitted position of facts between the parties.

36. If , as per the contention of Ld. Counsel for the Respondent, we take

the notice given to the borrower under Section 13(2) on 04.09.2018 as the

date on which, by issuing this notice, guarantee has been invoked, the

period till 03.09.2021 was available to the Financial Creditor for preferring

any application in this regard and as the limitation period has expired

between 15.03.2020 to 28.02.2022 (the period highlighted by the Hon'ble

Supreme Court in the aforesaid order) then, as argued by Respondent, only

90 days would be available more to the Appellant/FC for preferring any

application under Section 7 of the Code in view of the direction no. 1 of the

order of the Hon'ble Supreme Court which would end on 28.05.2022 and as

the petition has been filed on 20.08.2023 the same would be barred by

limitation.

37. At this juncture, it is to be recalled that the aforesaid appreciation of

the facts has been made in view of the submissions made by the Ld.

Counsel for the Respondent that by issuing notice under Section 13(2), the

guarantee has been invoked but we find that in the impugned order a

crystal clear finding has been recorded by the Adjudicating Authority with

regard to the fact that guarantee has been invoked by the Financial Creditor

by issuing notice of date 04.11.2019 and the period till 18.11.2019 was

Company Appeal (AT) (Ins) No. 2372 of 2024 25 of 29 given for the payment of outstanding dues and the date of default has been

rightly mentioned in part (iv) of the Application as 19.11.2019. At the cost of

repetition, we state that this finding has not been challenged by the

Respondent No. 1 by filing any appeal and it is argued before us that since it

is a legal question, it may be raised at any stage by the Respondent No. 1

without filing any appeal. As stated earlier we are not inclined to endorse the

submissions made by Ld. Counsel for the Respondent No. 1 as without filing

any appeal any finding emerging against a party may not be challenged in

the appeal filed by other party.

38. Coming to the second scenario, the date of default in petition has been

shown as 19.11.2019 and it is concluded by the Adjudicating Authority that

the date of default is 19.11.2019 as the time, as per the notice given on

04.11.2019 was available to the CD to pay the outstanding dues till

18.11.2022. In this scenario 3 years' limitation would have expired on

18.11.2022. Since the last date of the limitation period was falling beyond

the date stipulated in the order of the Hon'ble Supreme Court i.e.

28.02.2022 the whole of the period provided in direction no. 1 of the order of

the Hon'ble Supreme Court i.e. from 15.03.2020 till 28.02.2022 would be

excluded and thereafter the whole period which was available to the

Appellant for filing of the appeal, on 15.03.2020 would be available to the

Appellant and thus by assuming the date of default as 19.11.2019, which

has been endorsed by the Adjudicating Authority, the petition of the

Appellant was within the period of limitation.

39. Now coming to the another scenario which has been apparently

overlooked by the Adjudicating Authority. In para 2.7 of the impugned order,

Company Appeal (AT) (Ins) No. 2372 of 2024 26 of 29 it is recorded as submitted by the Ld. Counsel for the FC that the borrower

has acknowledged the outstanding debt concerning the facility granted by

the DNS Bank Ltd. in its proposal for settlement of dues dated 10.11.2019,

which was sent to the financial creditor and thereafter the financial creditor

once again issued a demand notice dated 18.02.2022 to the CD invoking

corporate guarantee wherein the demand of Rs. 28,22,36,755/-,

outstanding as on 15.02.2022, was made and the CD was called upon to

pay the same within 7 days from the receipt of the notice, however, the

outstanding amount remains unpaid till date. Thus, in the background of

this averment, the OTS proposal is shown to have been moved by the

principal borrower on 10.11.2019 which was within the limitation period till

03.09.2021. If we take the limitation as canvased by the Ld. Counsel for the

Respondent No. 1 from the notice given under Section 13(2) of date

04.09.2018, than the acknowledgment made vide OTS dated 10.11.2019

(within three years from 04.09.2018) has further extended the limitation

period till 10.11.2022, by virtue of section 18 of the Limitation Act and in

this scenario also since the last day of limitation period was falling beyond

the stipulated period as highlighted by the Hon'ble Supreme Court (from

15.03.2020 to 28.02.2022) this whole period would be fully excluded from

computation of limitation and the petition filed on 20.08.2023 would be

within the period of limitation. Need not to say that acknowledgement by the

principal debtor is the acknowledgement by the guarantor as responsibility

to pay the outstanding debt of the principal and guarantor is coextensive

and the liability of the guarantor depends upon the default committed by

the principal borrower.

Company Appeal (AT) (Ins) No. 2372 of 2024 27 of 29

40. Therefore, the aforesaid factual and legal position would suggest that

the Adjudicating Authority has not considered the law laid down by the

Hon'ble Supreme Court in Suo Motu Writ Petition (c) No. 3 of 2020 in its

correct prospective and has also failed to take into cognizance Section 18 of

the Limitation Act as also the averments made by the financial creditor with

regard to acknowledgment of debt by principal borrower, which has been

duly recorded by the Adjudicating Authority in para 2.7 of the impugned

order. Therefore, in our considered opinion, the judgment passed by the

Adjudicating Authority may not with stand the test of the law and therefore

is liable to be set aside.

41. We also notice that none of the contesting party has placed any

documentary evidence with regard to the acknowledgment made by the

principal borrower vide OTS proposal dated 10.11.2019 and the only

reference of it has been found in the impugned judgment, that too, only in

the submissions of the Appellant. Thus keeping in view the fact that there is

no material before us with regard to the acknowledgment made by the

principal borrower vide OTS proposal dated 10.11.2019 and in this scenario

a fresh exercise is required to be done by the Adjudicating Authority wherein

the contention of the Respondent No. 1 with regard to the invocation of

guarantee from the notice given under Section 13(2) may also be considered

by the Adjudicating Authority, the matter is required to be remanded back

to the Ld. Adjudicating Authority for afresh consideration.

42. However, it is clarified and has also been held by this Court in catena of judgments that whether the guarantee may be invoked by issuing a notice under Section 13(2) would depend on the facts and circumstances of each and every case, keeping in view the provisions stipulated in this regard in

Company Appeal (AT) (Ins) No. 2372 of 2024 28 of 29 the guarantee deed and it is also to be considered that in a particular case the guarantee may be deemed to have been invoked by giving notice under Section 13(2), but in another case where notice under Section 13(2) of the SARFAESI Act has been given as well as a specific notice for invoking the guarantee has been issued whether in that case also the notice issued under Section 13(2) of the SARFAESI Act can be deemed to have invoked the guarantee, would be for the Adjudicating Authority to explore and to arrive at just and reasonable conclusions.

43. For the reasons and the law mentioned herein before, the impugned Judgment passed by the Adjudicating Authority is hereby set aside. The Appeal filed by the Appellant is allowed.

44. The matter is remanded back to the Ld. Adjudicating Authority to dispose it afresh after providing an opportunity of being heard to the parties including tendering of fresh documentary evidence and for this purpose the Company Petition No. 995/MB/2023 is revived on the board of Ld. Adjudicating Authority.

45. There shall be no order as to costs. I.A.s, if any pending, are hereby closed.

[Justice Mohd. Faiz Alam Khan] Member (Judicial)

[Arun Baroka] Member (Technical)

[Indevar Pandey] Member (Technical) New Delhi.

17.02.2026.

sr/sc

Company Appeal (AT) (Ins) No. 2372 of 2024 29 of 29