Rakesh Jolly vs Indian Bank & Anr

(Arising against the impugned order dated 24.07.2023 passed by the Hon'ble National Company Law Tribunal, New Delhi in IA No. 4675/ND/2022 & CP (IB) No. 573/ND/2022)

IN THE MATTER OF:

Shri Rakesh Jolly Having Registered office at: ...Appellant 114, G.T. Road, Delhi Gate Ghaziabad, U.P.

Versus

Indian Bank SAM Large Branch 17, First Floor, Parliament Street, New Delhi, ...Respondent No. 1

Mr. Rakesh Misra, Add:- B- 403, Rosewood Apartment, Mayur Vihar, Phase I Extn., ...Respondent No. 2 Delhi.

Present:

For Appellant: Mr. Sunil Fernandes, Sr. Advocate, Mr. Amit Dhall, Ms. Diksha Dadu, Mr. Rajat Srivastava, Advocates. For Respondents: Mr. Brijesh Kumar Tamber and Mr. Prateek Kushwaha, Advocates.

J U D G M EN T (3rd July, 2025)

INDEVAR PANDEY, MEMBER (T)

The present Appeal has been preferred under Section 61 of the

Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as 'Code')

challenging the impugned order dated 24.07.2023 passed by the National

Company Law Tribunal (Adjudicating Authority), New Delhi in I.A. No.

Cont'd..../ -2-

4675/ND/2022 and CP IB 573/ND/2022. The said order was passed

pursuant to an application filed by the Indian Bank/ Respondent No. 1

herein under Section 95 of the Code, seeking initiation of insolvency

resolution process against the Shri Rakesh Jolly/ Appellant, in this case,

who stood as a personal guarantor to M/s Aravali Infrapower Ltd./

Principal Borrower.

2. The Adjudicating Authority admitted the application based on the

recommendations of the Resolution Professional/ Respondent No. 2

herein, under Section 99 of the Code, thereby initiating insolvency

proceedings against the Appellant. Aggrieved by the admission of the said

application and alleging that it was filed beyond the prescribed limitation

period and without proper cause of action, the Appellant has approached this

Hon'ble Appellate Tribunal.

Brief facts of the case

3. Brief facts of the case are given below:

(i) The Indian Bank, Respondent No. 1, sanctioned a credit facility of Rs.

58.35 crores on 31.10.2012 as part of a Corporate Debt Restructuring

(CDR) scheme to M/s Aravali Infrapower Ltd., wherein Shri Rakesh

Jolly, the Appellant, executed a Deed of Guarantee dated 13.02.2013

in favour of State Bank of India, the lead bank of the lending

consortium. The said guarantee had all the members of the consortium

as the parties.

Company Appeal (AT) (Ins.) No. 1267 of 2023 -3-

(ii) The account of M/s Aravali Infrapower Ltd. (hereinafter called Principal

Borrower) was classified as a Non-Performing Asset (NPA) on

29.10.2012 by the Respondent Bank, citing default in repayment

obligations.

(iii) A Demand Notice under Section 13(2) of the SARFAESI Act was issued

by the Indian Bank to the Appellant/Personal Guarantor on

13.06.2016, invoking the personal guarantee and demanding

repayment of Rs 109,43,77,905.11 (109.43 Crores).

(iv) On 11.01.2017, an Original Application (OA No. 07/2017) was filed

before the Debt Recovery Tribunal (DRT-II), Delhi by the consortium of

banks (including Indian Bank the Respondent 1 here) before DRT-II,

Delhi under the RDDBFI Act, 1993, for recovery of dues from the

borrower and guarantors.

(v) The Principal Borrower submitted an OTS proposal to the State Bank

of India the lead member of the consortium on 19.03.2018 in view of

the failure of the Corporate Debt restructuring of the Principal

Borrower M/S Aravali Infrapower Ltd. This proposal however was not

accepted by the Consortium of lenders.

(vi) On 10.05.2022, Indian Bank issued a fresh Demand Notice under Rule

7(1) of the Insolvency and Bankruptcy (Application to Adjudicating

Authority for Insolvency Resolution Process of Personal Guarantors to

Corporate Debtors) Rules, 2019, demanding payment of Rs. 200.90

crores as due from the Appellant.

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(vii) The Appellant replied to the Demand Notice on 23.05.2022, denying

liability and contending that the claim was time-barred.

(viii) Subsequently, on 03.08.2022, the Indian Bank filed an application

under Section 95(1) of the Code before the NCLT, New Delhi Bench, for

initiating insolvency proceedings against the Appellant as a personal

guarantor.

(ix) The NCLT vide its order dated 12.09.2022 admitted the application for

examination and appointed Mr. Rakesh Mishra as the Resolution

Professional (RP), directing him to submit a report under Section 99 of

the Code within 10 days.

(x) The RP issued notice to the Appellant seeking documentary evidence

of repayments and invited submissions under Section 99(2) of the

Code.

(xi) The Appellant submitted a detailed response to the RP on 23.09.2022,

denying execution of the guarantee deed knowingly, alleging that it was

obtained deceitfully, and reiterating that the claim was barred by

limitation. The Appellant in his response further submitted that the

Guarantee Deed was not validly invoked, and the cause of action, if

any, had already lapsed on 13.06.2019, being three years from the

SARFAESI notice date of 13.06.2016.

(xii) The RP submitted his report vide I.A. No. 4675/ND/2022 on

29.09.2022, recommending the acceptance of the Section 95

Company Appeal (AT) (Ins.) No. 1267 of 2023 -5-

application. He rejected the Appellant's limitation objection and upheld

the validity and enforceability of the Deed of Guarantee.

(xiii) On 24.07.2023, the NCLT passed the impugned order, accepting the

RP's report and admitting the application under Section 95 of the IBC,

thereby initiating the insolvency process against the Appellant.

(xiv) The Appellant, aggrieved by this decision, filed the present Appeal

before NCLAT on 29.08.2023, asserting that the claim was time-

barred, the Guarantee was not validly invoked, and the RP failed to

apply the settled legal principles regarding limitation and the date of

default.

Submissions of the Appellant

4. Ld. Counsel for the Appellant submitted that the application filed by

Indian Bank under Section 95 of the Insolvency and Bankruptcy Code, 2016

(IBC) is completely barred by limitation. The application was filed on

19.07.2022, but the Corporate Debtor's account had been declared as Non-

Performing Asset (NPA) way back on 29.10.2012, which was also mentioned

by the Bank itself as the date of default in its own Demand Notice dated

10.05.2022. Therefore, the limitation period of three years, as prescribed

under Article 137 of the Limitation Act, expired on 29.10.2015. The

application is thus grossly delayed and should have been dismissed.

5. Ld. Counsel for the Appellant further submitted that Indian Bank

issued a Demand Notice under Section 13(2) of the SARFAESI Act to both the

Corporate Debtor and the Appellant, on 13.06.2016 giving 60 days' time for

Company Appeal (AT) (Ins.) No. 1267 of 2023 -6-

making payment. Even if, the Guarantee is considered as being invoked on

13.08.2016, still the limitation period of three years would have expired on

13.08.2019. The present Section 95 application filed in July 2022 is,

therefore, time-barred even on that basis.

6. Ld. Counsel for the Appellant emphasized that the Adjudicating

Authority wrongly ignored the Notice dated 13.06.2016 issued by Indian Bank

itself and instead referred to a different notice dated 26.05.2016 issued by

State Bank of India, which is not even the party in the present proceedings.

The Appellant had placed the correct 13.06.2016 notice on record in the

written submissions and the same should have been considered as the

relevant invocation of the Guarantee. The Authority's failure to consider this

is a serious oversight.

7. Ld. Counsel further pointed out that the NCLT erroneously accepted

that the limitation against a personal guarantor starts only from the date of

the Demand Notice issued under Rule 7 of the IBBI Rules, which in this case

was issued on 10.05.2022. However, the law is clear that limitation begins

when the default occurs or when the guarantee is first invoked, not when a

Rule 7 notice is issued. The Appellant relied on the decision of the NCLAT in

State Bank of India v. Deepak Kumar Singhania, where it was held that a

notice under Rule 7(1) cannot be treated as a valid invocation of a personal

guarantee.

8. Ld. Counsel for the Appellant argued that under Clause 9 of the

Guarantee Deed dated 13.02.2013, the Bank had the right to invoke the

personal guarantee by making a demand. The Bank exercised this right on

Company Appeal (AT) (Ins.) No. 1267 of 2023 -7-

13.06.2016. The next demand was made after six years, on 10.05.2022. Since

no steps were taken to keep the claim alive in the interim, the limitation period

had already lapsed long before the application was filed under Section 95.

9. It was further argued by the Ld. Counsel that the Resolution

Professional (RP)/ Respondent No. 2, submitted a report under Section 99

without properly applying his mind to the objections raised by the Appellant.

The RP merely repeated the Bank's assertions without conducting an

independent review. This goes against the purpose of a Section 99 report,

which requires the RP to verify facts objectively and give reasoned findings.

10. Ld. Counsel for the Appellant further submitted that the Appellant had

clearly stated in his reply to the Demand Notice and to the RP that the

Guarantee was not enforceable and that the Bank's claim was time-barred.

These objections were not properly considered either by the RP or by the

Adjudicating Authority. The RP incorrectly concluded that the limitation

started afresh from the 2022 demand, which is legally untenable.

11. The Appellant's counsel pointed out that the Bank and the RP have now

tried to rely on a One-Time Settlement (OTS) proposal dated 19.03.2018 to

claim that the limitation was extended until 19.03.2021. This OTS document

was never placed before the NCLT and was introduced for the first time in the

appeal proceedings. The OTS was also never accepted by the Bank, and

therefore cannot be treated as a valid acknowledgment of debt under Section

18 of the Limitation Act.

Company Appeal (AT) (Ins.) No. 1267 of 2023 -8-

12. Ld. Counsel submitted that since the OTS proposal was not a concluded

agreement and did not result in any action or payments, it cannot be treated

as valid contract, which can be used to extend limitation. Additionally, the

fact that this OTS was not relied upon before the NCLT shows that it is an

afterthought, and its introduction at the appellate stage is not permissible.

13. Ld. Counsel for the Appellant also submitted that the application under

Section 95 was filed not by the Lead Bank (State Bank of India), but by Indian

Bank, which was only one of the members of the lending consortium. As per

the terms of the CDR and consortium arrangements, enforcement actions

against the borrower and guarantors were to be undertaken by the Lead Bank.

The unilateral action by Indian Bank is, therefore, contrary to the agreed

procedure and not maintainable.

14. The Ld. Counsel for the Appellant further submitted that proceedings

in O.A. No. 07/2017 filed before the Debt Recovery Tribunal (DRT) by the

lending consortium are still pending. The Bank has already taken action

under an alternate legal forum and is now trying to initiate parallel insolvency

proceedings after a delay of over five years. This constitutes forum shopping

and an abuse of process.

15. Ld. Counsel further argued that the impugned order of the NCLT dated

24.07.2023 does not show proper reasoning. The order fails to deal with the

Appellant's detailed objections and does not even mention the crucial

13.06.2016 demand notice from the Indian Bank. It also does not consider

the fact that the Rule 7 demand notice issued in 2022 cannot revive a time-

barred debt.

Company Appeal (AT) (Ins.) No. 1267 of 2023 -9-

16. Summing up his arguments Ld. Counsel for the Appellant submitted

that the application under Section 95 was filed after the expiry of limitation,

without proper invocation of the guarantee, and without any valid legal basis.

The impugned order passed by the NCLT is contrary to facts and settled legal

principles and therefore deserves to be set aside.

Submissions of the Respondent No.1

17. The Respondent No.1 Indian Bank is the answering respondent in this

case. The Resolution Professional/ Respondent No. 2 is a proforma party.

18. Ld. Counsel for the Respondent No. 1/ Indian Bank Stated that the

Adjudicating Authority in the I.A. No. 4675/2022 filed under Section 99 of the

Code by the Resolution Professional passed the Impugned Order dated

24.07.2023. The Adjudicating Authority had accepted the report of the

Resolution Professional/ Respondent No. 2, which has recommended for the

initiation of the insolvency resolution process of the personal guarantor of the

Principal Borrower. The said order has been assailed by the Appellant only on

the ground that the application filed by the Respondent Bank was barred by

limitation. The basis of the objection taken by the Appellant regarding the

limitation was on the basis of the date of NPA which is 29.10.2012 and the

application was filed on 19.07.2022.

19. Ld. Counsel submitted that the corporate debtor namely M/s Aravali

Infra Power Limited was already enjoying the facility granted by the

Consortium of Banks including Answering Respondent/ Indian Bank. The

Corporate Debtor has failed to maintain the Financial Discipline, the account

Company Appeal (AT) (Ins.) No. 1267 of 2023 -10-

of the Corporate Debtor was classified as Non-Performing Asset (NPA) on

29.10.2012. Thereafter, the Corporate Debtor has applied for restructuring of

Working Capital facilities. The Answering Respondent, vide its letter no.

NDM/CDR/2012-13 dated 31.10.2012, sanctioned the Corporate Debt

Restructuring facilities to the Corporate Debtor. Accordingly, Master Debt

Restructuring Agreement (MRA) dated 27.12.2012 was executed between the

Corporate Debtor and the Consortium of the Lenders lead by State Bank of

India and the Indian Bank was one of the members of the Consortium. As per

the terms of the sanction and terms of the MRA, the Appellant has secured

the loan by way of extending personal guarantee vide Deed of Guarantee dated

13.02.2013. It is submitted that the one of the conditions of the MRA was that

the account will be classified into the standard category, and in case the

borrower defaults again, the account will be reclassified as NPA w.e.f.

29.10.2012, the original date of default.

20. Ld. Counsel submitted that the Corporate Debtor and the Appellant

herein has signed the Acknowledgment of Debt dated 04.12.2014 and Revival

Letter dated 21.01.2015. As the Corporate Debtor failed to maintain the

financial discipline in terms of the MRA dated 27.12.2012, the account was

reclassified as NPA w.e.f. 29.10.2012. Further the legal action was initiated

against the borrower as per of the Section 13(2) SARFAESI Act, 2002. A Notice

dated 26.05.2016 under Section 13(2) of SARFAESI Act, 2002 was issued by

the State Bank of India (SBI), lead member of the consortium. The Respondent

Bank issued notice under Section 13(2) of SARFAESI Act, 2002 on 13.06.2016

giving 60 days' time to the Appellant to make payment. Ld. Counsel further

Company Appeal (AT) (Ins.) No. 1267 of 2023 -11-

submitted that the guarantee deed dated 13.02.2013 executed by the

Appellant was invoked by the said notice.

21. Ld. Counsel stated that pursuant to the invocation of guarantee dated

13.06.2016 the Appellant has failed to make payment within 60 days i.e., by

12.08.2016. Thereafter, the Appellant has approached SBI, the lead member

of the consortium of lenders by way of an OTS letter dated 19.03.2018 for the

settlement of dues of the Corporate Debtor and thereby has also

acknowledged the liability.

22. Ld. Counsel further stated that due to outbreak of Covid 19, the Hon'ble

Supreme Court has passed an order dated 10.01.2022 for extending the

period of limitation from 15.03.2020 to 31.05.2022 for all purposes. It is

submitted by ld. Counsel that before the expiry of the said period the

Respondent Bank has issued the Demand Notice dated 10.05.2022 under

Rule 7 (2) of the Insolvency and Bankruptcy (Application of Adjudicating

Authority for Insolvency Resolution Process for Personal Guarantors to

Corporate Debtors) Rules, 2019. In terms of the Demand notice dated

10.05.2022 the Appellant sent a reply dated 23.05.2022 and has failed to

make payment of outstanding debt of Rs. 200,90,24,194.19 (Rupees Two

Hundred Crores Ninety Lacs Twenty Four Thousand Two Hundred and

Seventy One Only).

23. Ld. Counsel submitted that based on the acknowledgement by the

Corporate Debtor on 19.03.2018 the limitation period of three years in terms

of Article 137 of the Limitation Act would have ended on 18.03.2021. This

date was in the Covid exemption period in terms of Hon'ble Supreme Court's

Company Appeal (AT) (Ins.) No. 1267 of 2023 -12-

suo-motu order which extended the Limitation period in such cases. Ld.

counsel submitted that the Demand Notice dated 10.05.2022 was sent within

the extendable period of Supreme Court Suo Motu order i.e., before

31.05.2022. The Respondent Bank was within the period of limitation which

provides for the period of limitation of 3 years from the date when the right to

apply accrues. The Respondent Bank has filed its application well within 3

years, hence the Application filed by the Bank was well within the period of

limitation and in view of the above there is no infirmity in the impugned order.

24. The Ld. Counsel for the Respondent Bank has given a sequence of

events to show that the application filed by the Bank was well within the

period of limitation. The same is extracted below:

Date Events 31.10.2012 Sanction of loan to the Corporate Debtor 29.10.2012 Account of the Corporate Debtor was Classified as NPA 31.10.2012 Corporate Debtor restructuring facilities were sanctioned 27.12.2012 Master Debt Restructuring Agreement was executed 13.02.2013 Deed of Guarantee executed by the Appellant 04.12.2014 Debt was Acknowledged by the Corporate Debtor/ Appellant 21.01.2015 Revival letter executed by the Corporate Debtor/ Appellant 13.06.2016 Notice under Section 13(2) was given to the Corporate Debtor as well as to the guarantors 12.08.2016 60 days in terms of notice under Section 13 (2) which will be the default date. 19.03.2018 OTS was proposed by the Appellant to the Consortium of Banks which includes the Indian Bank. 15.03.2020 Limitation period between 15.03.2020 to 31.05.2022 to has been excluded by the Hon'ble Supreme Court for 31.05.2022 all purposes. 10.05.2022 Demand Notice under Rule 7 (2) of the Insolvency and

Bankruptcy (Application of Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 was

Company Appeal (AT) (Ins.) No. 1267 of 2023 -13-

served to the Appellant giving a cause for filing of Section 95 Application.

19.07.2022 Application under section 95 was filed by the Indian Bank

25. Ld. Counsel for the respondent submitted that there is no infirmity in

the impugned order passed by the Adjudicating Authority and the present

appeal is liable to be dismissed in view of these submissions.

Analysis and findings

26. We have gone through the documents on record including the written

submission of both the parties and heard the Ld. Counsels at great length.

27. The first issue raised by the Appellant herein is that the Respondent

Bank has introduced fresh document viz. the OTS proposal dated 19.03.2018

submitted by the Principal Borrower /Aravali Infrapower Ltd. Their

submission is that this document was not produced before the Adjudicating

Authority and the same cannot be taken into consideration at the appeal

stage. The OTS was also never accepted by the Bank, and therefore cannot be

treated as a valid acknowledgment of debt under Section 18 of the Limitation

Act. Since the OTS proposal was not a concluded agreement and did not result

in any action or payments, it cannot be treated as valid contract which can

be used to extend limitation.

28. The Respondents on the contrary submit that this document is very

vital to the proceedings as this was submitted by Rakesh Jolly, the Appellant

herein, in his capacity as Director of Principal Borrower/ Corporate Debtor,

to the lead Member of consortium of lenders (SBI). Appellant is also the

Company Appeal (AT) (Ins.) No. 1267 of 2023 -14-

personal guarantor of the Borrower and he cannot deny the submission of the

document to the lead member of the consortium SBI.

29. We take a look at the OTS proposal dated 19.03.2018 the relevant pages

of the same are extracted below:

Company Appeal (AT) (Ins.) No. 1267 of 2023 -15-

"OTS Proposal

AIPL is engaged in the manufacturing of Transmission line towers & accessories and Overhead Aluminum Conductors as well as undertaking EPC contracts for transmission and distribution lines, civil infrastructure - roads & bridges on turnkey basis.

AIPL has been in business since 2002 and had been on a successful business model till it entered into EPC segment. Based on the growth prospective contractions of the economy, a large number of companies entered the EPC segment of Infrastructure. The growth prospective did not materialize leading to a highly competitive market, unrealistic tender conditions, extremely delayed payments and lack of skilled & good manpower etc. The EPC segment which was earlier having EBITA margin of 15%-25% had witnessed drastic decline in EBITA margins to 2% 3% mainly due to high level of competition in the segment. Cost escalations and arbitrary deductions led to most contracts becoming losing propositions. Due to intense competition, the margins on the contracts were very low for all the players. Cost of outsourced services or bought out components escalated beyond initial estimates which could not be passed on to the customers leading to losses.

Mos. of the mid-sized companies operating in this sector were running into heavy losses and faced financial instability to unsustainable business conditions namely Jyoti structure Ltd., U.B. Engineering Ltd, ICCOM Power Transmission Ltd., A2Z Infrastructure Limited, Teracom Limited, Hythro Power Corporation Ltd., Era Infrastructure Limited, C & C Construction Company, Aster Transmission Ltd, B.S. Ltd., IVRCL Infrastructure Limited, Ramkey Infrastructure Ltd., Lanco Power Ltd., Vijay Electricals Itd., Spic Sumo Itd., Isolux Ltd of spain,, Suzana Towers Ltd., ICSA Ltd. and Jyoti Power Transmission Pvt. Ltd. etc. etc..

Company Appeal (AT) (Ins.) No. 1267 of 2023 -16-

To counter the low margins, the company went for rapid expansion to get buying efficiencies as well as to have the overheads defrayed over higher volume. However, this entailed higher Inventories and receivable levels. This led to higher working capital requirements - which were arranged by high cost borrowing outside the consortium. The debt became unsustainable and company went for CDR in 2012

FAILURE OF CDR

As per CDR scheme, the revival of the company was based on acquisition of new profitable EPC contracts in the power transmission & distribution sector. The company had strong technical qualification coupled with large manufacturing base to bid for high value government contracts in power transmission and distribution sector.

The CDR package had a cut-off date of 31 Dec 2011 but was approved on 07-11-2012 and the legal documentation was completed on 15.03.13 consuming period of 14.5 months from the cut-off date to start of implementation of CDR package. Effective moratorium of only 6-7 months was available for our company as against 24 months as an envisaged in the TEV study. To achieve the CDR scheme, the Promoters had arranged the equity of Rs. 26.75 crore in the company as well as gave additional collateral security worth Rs. 5 crore to the consortium.

Que to delay in implementation of the package, the company could not procure new contracts in the years 2012-13 and 2013-

14. Finally, during 2014-15, the company obtained new orders for Rs. 1107 crore which would have resulted in profit of Rs. 165 crore. These contracts were funded by the central government public sector undertakings. These were to be completed between December 14 and September 16. At the behest of lenders ITCOT Consultancy and Services Ltd. carried out the viability study of these contracts and concluded that the new contract of Rs. 1107 crore would generate the profit of Rs. 148 crore if the contract were completed on time. As per the terms of these contracts, the

Company Appeal (AT) (Ins.) No. 1267 of 2023 -17-

performance guarantees to the tune of Rs 116 crore were required which were not released despite the CDR scheme providing for the same.

In terms of the CDR scheme, non-fund base facilities of Rs. 238 crores were to be released. Despite this, the bid bonds were not made available to the company. As the bonds were not provided to the company, the new contracts of Rs. 1107 crore obtained by the company were terminated resulting in losses to the company as considerable sums had been spent to win these bids as well as in starting up the work. Besides, the company had incurred substantial expenditure in retaining the infrastructure required to bid for new contracts as well as exécute the existing and new contracts. This further eroded the company's liquidity and increased loses.

The tight liquidity position, delay in implementation of CDR package and shortage of skilled man power let to termination of old contracts of about Rs. 1200 crore. The company's position deteriorated further as future orders could not be obtained and past orders which were running since 2011 got inordinately delayed due to liquidity crunch. This led to cost overruns and imposition of liquidated damages. Consequently, our receivables became sticky

The net worth of the company got fully eroded in the financial year 14-15 and in accordance with the requirement of section 15(A) of the Sick Industrial Companies (Special Provisions) Act, 1985 the company filed on 20.05.2015 the reference with Board for Industrial and Financial Reconstruction. The BIFR vide its order dated 12.08.15 registered a company under Sick Industrial Companies (Special Provisions) Act. However, the BIFR was abolished on 31.12.16 and consequently the endeavours of the company to rehabilitate itself under the act got abated. Consequent to the failure of CDR package, the CDR EG at the instance of the lenders conformed the exit of the company from the CDR mechanism on 27.01.16. Thereafter the lenders initiated

Company Appeal (AT) (Ins.) No. 1267 of 2023 -18-

the recovery proceeding against the company by invoking the provisions SARFAESI Act and filing recovery suits against the company and the promoters."

(Emphasis supplied)

30. We observe the following from the extracted portion of letter and the

attachment:

(i) The letter is addressed to Asst. General Manager of SBI, which is the

lead Bank of a consortium;

(ii) States that the company is suffering from huge losses from the last

three to four years;

(iii) A detailed OTS proposal is attached with the letter;

(iv) The letter is signed by Sh. Rakesh Jolly the appellant (personal

guarantor herein) in his capacity of Director of the Principal Borrower.

(v) In the OTS proposal it is stated that net worth of the company was fully

eroded in FY 2014-15. The company had filed a petition before BIFR

and under Section 15(A) of the Sick Industrial Companies (Special

Provisions) Act, 1985;

(vi) The borrower acknowledges the failure of CDR package, and states that

the CDR EG, at the instance of the lenders conformed the exit of the

company from the CDR mechanism on 27.01.2016;

(vii) Thereafter the lenders initiated the recovery proceeding against the

company by invoking the provisions SARFAESI Act and filing recovery

suits against the company and the promoters.

Company Appeal (AT) (Ins.) No. 1267 of 2023 -19-

31. It is a settled principle that proceedings before this Appellate Tribunal

in CIRP matters are proceedings in Rem. This principle has been reiterated by

Hon'ble Supreme Court in 'GLAS Trust Company LLC vs. BYJU Raveendran &

Ors. [Civil Appeal No.9986 of 2024 with SLP(c) No. 21023 of 2024]'. In this case

the OTS proposal given by the Principal Borrower is very important document

having material impact on the limitation issue. We are also aware that huge

amount of public money more than Rs. 200 Cr is involved in this matter. Such

document, which has direct bearing on deliverance of substantive justice

cannot be ignored as the proceedings in this Tribunal are proceeding in-rem,

a continuation of the proceedings of the Adjudicating Authority.

32. The contention of Appellant that the letter dated 19.03.2018 was only

a proposal by the Appellant and the Respondent along with consortium of

bankers did not take any action on the aforesaid proposal. We are not able to

accept this contention as the letter constitutes an acknowledgment of debt by

the Principal Borrower and therefore has the effect of extending the limitation

period. It cannot be ignored merely on the ground that there is no contract

between the Appellant and Respondent due to such letter. The letter dated

19.03.2018 is by the appellant in his capacity of Director of the borrower is

very important to the proceedings as it proposes a OTS; acknowledges the

failure of Master Restructuring Agreement; and also acknowledges the

proceedings initiated by lenders under SARFAESI Act.

33. We now take up the issue of limitation which is the main contention of

Appellant that the petition against the Appellant is barred by limitation. It is

his submission that the account of the Principal Borrower became NPA on

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29.10.2012 and the demand notice under Rule 7 (2) of the Insolvency and

Bankruptcy (Application of Adjudicating Authority for Insolvency Resolution

Process for Personal Guarantors to Corporate Debtors) Rules, 2019 was

issued to the appellant on 10.05.2022 giving a cause for filing of Section 95

Application.

34. The Appellant has submitted that the findings of the Adjudicating

Authority treating 10.05.2022 as the date of invocation of guarantee and

consequently the counting of limitation period from that date is not correct

and based on the same the appeal needs to be allowed due to such incorrect

finding of Adjudicating Authority. The appellant has also relied on the fact

that first demand for payment of outstanding debt of Principal Borrower/ CD

on him as Personal Guarantor was considered by Adjudicating Authority as

26.05.2016 i.e. the date on which the State Bank of India, the lead member

of the consortium issued the notice to him under Section 13 (2) of the

SARFESI Act, 2002. The Appellant has stated that a separate notice was

issued to him on 13.06.2016 by the respondent bank. The Adjudicating

Authority has failed to take the correct notice on record. In view of such patent

errors on the part of Adjudicating Authority the Appeal should be allowed.

35. We have seen from the submissions of the Respondent bank that they

have relied on their Section 13 (2) notice issued on 13.06.2016 for

computation of limitation. A 60 days period was given to the Principal

Borrower and the Guarantor to make outstanding payments to the

Respondent Bank. The 60 days period ended on 12.08.2016, accordingly the

three-year period of limitation starts from 13.08.2016.

Company Appeal (AT) (Ins.) No. 1267 of 2023 -21-

36. We have also seen and noted that an OTS was proposed by the

Appellant on 19.03.2018 as Director of Principal Borrower to the consortium

of banks led by SBI in which Indian Bank was a member. This letter is an

acknowledgement of debt by the Principal Borrower. In terms of Clauses 12

& 19 of the Guarantee Agreement, this acknowledgement by the Principal

Borrower is deemed to have been made by the Guarantor also. These clauses

of the Guarantee Agreement are extracted below:

"12. The Guarantor affirms, confirm and declare that any balance confirmation and/or acknowledgment of debt and/or admission of liability given or promise or part payment made by the Borrower or the authorised agent of the Borrower to the Lenders shall be deemed to have been made and/or given by or on behalf of the Guarantor themselves and shall be binding upon each of them.

19. The Guarantor agrees that any admission or acknowledgment in writing signed by the Borrower of the liability or indebtedness of the Borrower or otherwise in relation to the above mentioned Facilities and or any part payment as may be made by the Borrower towards the principal sum of Facilities hereby guaranteed or any judgement, award or order obtained by the Lenders against the Borrower shall be binding on the Guarantor and the Guarantor accepts the correctness of any statement of account that may be served on the Borrower which is duly certified by any Officer of the Lead Bank and the same shall be binding and conclusive as against the Guarantor also and the Guarantor further agree that in the Borrower making as acknowledgment or making a payment the Borrower shall in addition to his personal capacity be deemed to act as the Guarantor's duly authorised agent in the behalf for the purposes of Sections 18 and 19 of the Limitation Act of 1963."

(Emphasis Supplied)

Company Appeal (AT) (Ins.) No. 1267 of 2023 -22-

37. We have noted that the limitation period from 15.03.2020 to

31.05.2022 has been excluded by the Hon'ble Supreme Court for all purposes

vide their suo motu Writ Petition (C) No.-3 of 2020 vide their Order dated

10.01,2022. The directions of Hon'ble SC in the Suo-Motu case (supra) are

extracted below:

"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."

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38. The three years limitation period from last date of acknowledgment of

debt i.e. 19.03.2018 ends on 18.03.2021 which is within the excluded period

specified by Hon'ble SC. The demand notice under Rule 7 (2) of the Insolvency

and Bankruptcy (Application of Adjudicating Authority for Insolvency

Resolution Process for Personal Guarantors to Corporate Debtors) Rules,

2019 was served to the Appellant on 10.05.2022 this was well within the

limitation period. We therefore hold that the application was filed well within

the limitation period.

39. In view of the above findings, we find no merit in the appeal.

Accordingly, the appeal is dismissed. Pending IAs, if any, are closed. No order

as to costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

SA/Pragya (LRA)

Company Appeal (AT) (Ins.) No. 1267 of 2023