Vijaykumar Ramgopal Gilda vs Janakalyan Sahakari Bank Ltd. Through ...

[(Arising out of the Impugned Order dated 04.02.2025 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Mumbai Bench-IV in C.P. (IB) No. 808/MB/2023)]

IN THE MATTER OF: Ravindra Gopalkrishan Agarwal Central Hanuman, Azad Chowk, Latur - 413512 ...Appellant

Versus

Jankalyan Sahakari Bank Ltd. (A body corporate registered under the Maharashtra Co-operative Societies Act, 1960) Vivek Darshan, 140 Sindhi Society Chembur, Mumbai Maharashtra - 400071 Through Resolution Professional M/s MVK IPE LLP Reg No.: IBBI/IPE-0134/IPA-1/2022-23/50028 Represented by Designated Partner. Mangesh V. Kehre 607-A, Chetak Centre, RNT Marg, Near Hotel Shreemaya, Indore Madhya Pradesh - 452001 ...Respondent

With Company Appeal (AT) (Insolvency) No. 637 of 2025

[(Arising out of the Impugned Order dated 04.02.2025 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Mumbai Bench-IV in C.P. (IB) No. 817/MB/2023)]

IN THE MATTER OF: Sunita Jayprakash Chitkote 24-3/28. Chitkote Chambers, Chandra Nagar, Ukka Marg Near Old Shahu College, ...Appellant Latur - 413512, Maharashtra.

Versus

Jankalyan Sahakari Bank Ltd.

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 1 of 38 (A body corporate registered under the Maharashtra Co-operative Societies Act, 1960) Vivek Darshan, 140 Sindhi Society Chembur, Mumbai Maharashtra - 400071 Through Resolution Professional M/s MVK IPE LLP Reg No.: IBBI/IPE-0134/IPA-1/2022-23/50028 Represented by Designated Partner, Mangesh V. Kehre 607-A, Chetak Centre, RNT Marg, Near Hotel Shreemaya, Indore Madhya Pradesh - 452001 ...Respondent

With Company Appeal (AT) (Insolvency) No. 638 of 2025

[(Arising out of the Impugned Order dated 04.02.2025 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Mumbai Bench-IV in C.P. (IB) No. 836/MB/2023)]

IN THE MATTER OF: Vijaykumar Ramgopal Gilda Ram-Lakhan Shivajinagar, Near Udyog Bhavan, Latur - 413512 Maharashtra ...Appellant

Versus

Jankalyan Sahakari Bank Ltd. (A body corporate registered under the Maharashtra Co-operative Societies Act, 1960) Vivek Darshan, 140 Sindhi Society Chembur, Mumbai Maharashtra - 400071 Through Resolution Professional M/s MVK IPE LLP Reg No.: IBBI/IPE-0134/IPA-1/2022-23/50028 Represented by Designated Partner, Mangesh V. Kehre 607-A, Chetak Centre, RNT Marg, Near Hotel Shreemaya, Indore Madhya Pradesh - 452001 ...Respondent

With Company Appeal (AT) (Insolvency) No. 696 of 2025

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 2 of 38 [(Arising out of the Impugned Order dated 04.02.2025 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Mumbai Bench-IV in C.P. (IB) No. 816/MB/2023)]

IN THE MATTER OF: Ramnivas Vishnudas Agarwal Shantiniwas, Mayurban Road Near COSCIT College Girls Hostel Ambejogai Road Latur - 413512, Maharashtra ...Appellant

Versus

Jankalyan Sahakari Bank Ltd. (A body corporate registered under the Maharashtra Co-operative Societies Act, 1960) Vivek Darshan, 140 Sindhi Society Chembur, Mumbai Maharashtra - 400071 Through Resolution Professional M/s MVK IPE LLP Reg No.: IBBI/IPE-0134/IPA-1/2022-23/50028 Represented by Designated Partner, Mangesh V. Kehre 607-A, Chetak Centre, RNT Marg, Near Hotel Shreemaya, Indore Madhya Pradesh - 452001 ...Respondent

Present: For Appellant : Mr. Pallav Mongia, Ms. Ishita Nayak and Ms. Kashish Lalwani, Advocates.

For Respondent : Ms. Soumya Dhawan, Advocate. CA Ayushi Patidar

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)] The present Appeal has been preferred invoking Section 61(1) of the

Insolvency and Bankruptcy Code, 2016, aggrieved by the order dated

04.02.2025 passed by the Hon'ble National Company Law Tribunal Bench-IV,

at Mumbai in C.P. (IB) NO. 808/MB/2023 titled as 'Janakalyan Sahakari

Bank Limited v. Ravindra Gopalkrishan Agarwal', wherein the Hon'ble NCLT

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 3 of 38 has admitted the petition of the financial creditor under Section 95 of the IBC,

thereby initiating the Personal Insolvency Resolution Process, against the

personal guarantor, i.e., the Appellant herein.

Brief facts of the case

2. Respondent-Janakalyan Sahakari Bank Ltd through Resolution

Professional. The Corporate Debtor - Oasis Alcohol Limited was granted credit

facilities by a consortium of lenders, being co-operative banks, in the year

2010. The consortium involved 11 member banks namely;

1) Janata Sahakari Bank Ltd., Pune [Lead Bank]

2) TJSB Sahakari Bank Ltd.

3) Solapur Janata Sahakari Bank Ltd.

4) The Vaidyanath Urban Co-operative Bank Ltd.

5) Nagpur Nagarik Sahakari Bank Ltd.

6) SVC Co-operative Bank Ltd.

7) Janakalyan Sahakari Bank Ltd. [present Respondent]

8) Janaseva Sahakari Bank (Borivli) Ltd

9) Poornawadi Nagarik Sahakari Bank Ltd.

10) Deogiri Nagari Sahakari Bank Ltd.

11) Bhagyalaxmi Mahila Sahakari Bank Ltd.

The member banks [1-6] assigned their share of financial assistance to

CFM Asset Reconstruction Pvt. Ltd. ["ARC"] whereas the present Respondent

including 04 other member banks did not assign their share to any ARC. The

Appellant including 10 other individuals provided their personal guarantee to

the loans availed by the Corporate Debtor from these member banks.

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 4 of 38

3. The present Respondent has filed applications under Section 95 of IBC,

2016 against all the Personal Guarantors of this CD, including Appellant

before Hon'ble NCLT, Mumbai Bench for initiating insolvency resolution

process against all the personal guarantors. The Hon'ble NCLT, Mumbai

Bench - IV vide order dated 04.02.2025 passed the order under Section 100

of the Insolvency and Bankruptcy Code, 2016 (Code), wherein petition filed

under Section 95 of the code bearing No. C.P. (IB) No. 808/MB/2023 was

admitted and the Insolvency Resolution Process against present Appellant i.e.

Mr. Ravindra Gopalkrishan Agarwal commenced. Pursuant to admission of

the application, Resolution Professional made a Public Announcement u/s

102 of code to invite the claim from the stakeholders of the applicant. The last

date for receipt of claim was 01.03.2025. The claims were duly submitted and

a list of creditors has already been issued by the Resolution Professional

appointed. It is stated that the present Appellants despite repeated

communications has admittedly not submitted repayment plan.

Submissions of the Appellant/PG- Ravindra Gopikrishan Agarwal

4. M/s Oasis Alcohol ("Company") availed various credit facilities to the

tune of ₹ 6.5 crores and 2.50 crores from the Respondent since 2010. The

Appellants have executed Personal Guarantee Deeds on 20.03.2010 and

08.08.2011 in favour of the Respondent. A supplementary inter-se agreement

was too executed between the lending institutions recognising Janata

Sahakari Bank ("lead bank") as the lead bank of the Janata Consortium, in

respect of various credit facilities those were extended by them to M/s Oasis

Alcohol Ltd. The account of the Company was declared NPA on 30.09.2013

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 5 of 38 and a demand notice under S. 13(2) of the SARFAESI, was issued to the

Company on 13.06.2016.

5. On 22.02.2017, the Respondent and other consortium members

entered into consent terms with the company, ultimately culminating in an

arbitral award dated 23.03.2017, whereby the Appellant became jointly and

severally liable to pay under reference by the Award. Subsequently, the

Company executed a MOU and lease agreement dated 16.12.2017 with M/s

Rajlakshmi Petrochem Pvt. Ltd. ("Corporate Guarantor"), transferring its

properties thereto, with the Corporate Guarantor undertaking to settle all

liabilities. The said arrangement was thereafter acknowledged by the lead

bank too in its sanction letter dated 05.06.2018, whereby the Corporate

Guarantor was obligated to abide by the terms agreed between the parties.

Hon'ble NCLT admitted the Section 7 Petition [CP(IB)-3619/I&BP/MB/2018],

initiating CIRP against the Company on 06.03.2019. Further, O.A. No.

132/2017 filed by the Respondent before the DRT, Pune was dismissed for

want of evidence on 12.07.2019. Notably, on 21.08.2020, the Respondent

unconditionally assigned the loans and underlying security interest to M/s

CFM Asset Reconstruction Pvt. Ltd. ("Assignee"), a material fact, which was

withheld and suppressed by the Respondent before the Tribunal, having vital

bearing. The said assignment also stands duly recorded in the order dated

01.12.2022 that was passed by the Hon'ble NCLT, whereby the CIRP against

the Company was withdrawn on account of irregularities in procedural

compliance by the RP. On 04.08.2021, the property offered as security by the

Appellant in his capacity as personal guarantor was sold by the assignee for

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 6 of 38 a sum of ₹1,25,00,000/. Another demand notice under Rule 7(1) of the

Insolvency and Bankruptcy (Application to Adjudicating Authority for

Insolvency Resolution Process for Personal Guarantors to Corporate Debtors)

Rules, 2019 was issued by the Respondent on 01.09.2021, to which the

Appellant filed a detailed reply. Thereafter, on 09.05.2023, the Respondent

filed C.P. (IB) No. 808/MB/2023 under Section 95 of the IBC against the

Appellant for an alleged debt of ₹22,42,01,475.68/- as due on 25.03.2023.

Vide Impugned Order dated 04.02.2025, the Hon'ble NCLT admitted the

petition and initiated personal insolvency proceedings against the Appellant,

giving rise to the present Appeal.

6. The Appellant contends that the arbitral award dated 23.03.2017 has

altered the legal position of the parties from being a guarantor to a co-

borrower. Pursuant to the passing of the arbitral award, the relationship

between the parties underwent a material alteration. The Appellant, who was

earlier a guarantor to the loan transaction, stood converted into a co-

debtor/co-borrower by virtue of the express terms of the consent award itself.

In particular, Clause 7 of the arbitral award dated 23.03.2017, expressly

records that the opponents (including the Appellant) shall pay "jointly and

severally" to the lead bank for itself and on behalf of all other consortium

banks including the Respondent. This unequivocally establishes that both

parties were thereafter jointly and severally liable for the entire outstanding

amount. Unlike a guarantor, whose liability arises only upon the default of

the principal debtor, a co-borrower's liability is immediate and primary,

independent of any default by another. The Appellant claims that the above

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 7 of 38 position finds direct support from two judicial pronouncements. In Vyravan

Chettiar v. Official Assignee of Madras, ILR (1932) 55 Mad 949, the

Hon'ble Madras High Court categorically held that a contract of guarantee

under Section 126 of the Indian Contract Act is strictly confined to cases

where one party agrees with the creditor to discharge the liability of a third

person upon the latter's default, and that persons who are jointly and

severally liable for the same debt, equally owed by both, they do not fall within

the definition of a contract of guarantee. This position is further fortified by

Lima Leitao and Co. Ltd. v. Union of India, MANU/GO/0034/1967, where

the Hon'ble High Court of Bombay at Goa, held that the liability of a guarantor

is inherently secondary and contingent, presupposing the existence of an

independent liability of the principal debtor. Since Clause 7 of the arbitral

award expressly imposes joint and several liabilities upon all opponents

including the Appellant too, the Appellant's obligation is no longer secondary

or contingent but primary with that of the principal borrowers. Further, the

Respondent's contention that the arbitral award did not alter the terms of the

original guarantee is explicitly negated by the letter dated 12.02.2021 issued

by the lead bank, wherein it was categorically recorded that the arbitral award

had finally and conclusively determined all rights and liabilities of all

signatories, and that as a consequence thereof, all earlier documents had lost

their significance and stood crystallised in the form of the consent award. The

Respondent cannot therefore contend that the guarantee remains of a

subsisting nature. This position is further reinforced by the express terms of

the arbitral award itself, which stipulate that "in the event of any default for

any reason whatsoever, in payment of the agreed sum, in the agreed time limit,

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 8 of 38 by the Opponents....the concession or relaxation in payment of the dues under

Clause No. 5 and 7 shall stand automatically cancelled..." . Such a stipulation

necessarily presupposes that the prior liabilities stood extinguished and

regularised by virtue of the award. Furthermore, that the award contained no

provision, express or implied, contemplating a reversion to the original

guarantee arrangement in the event of default by the Appellant. Had the

parties ever intended for the original guarantee obligations to survive or be

restored upon default, such an intention would necessarily have found

explicit expression in the award. The deliberate absence of any such provision,

in the award leads to the irresistible conclusion that neither party ever

intended for the original guarantee agreement to be revived or for the

Appellant to be restored to the position of a guarantor.

7. The Appellant also claims that the Respondent lacked locus standi to

initiate proceedings under section 95 of the IBC. Record itself reveals that,

vide sanction letter dated 11.03.2010, the company had availed credit facility

of ₹ 6.5 Crores from Respondent, in pursuance whereof an irrevocable Power

of Attorney was executed by the directors and mortgagors of the Company in

favour of the officers of the Respondent Bank, empowering them to execute

and register the mortgage deeds in respect of the properties offered as

security. Further, by virtue of the Inter se Agreement dated 21.06.2010,

Janata Sahakari Bank was designated as the lead bank amongst the

consortium of cooperative lenders, in respect of the total credit facility availed

by the Company. In the present case, the entire debt of the Company along

with all underlying security interests stood unconditionally assigned to the

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 9 of 38 assignee, which is not merely an assertion, but rather a matter of record, as

reflected in the Order dated 01.12.2022 and the letter dated 12.02.2021

issued on behalf of the lead bank, which categorically states: "...all the debts

availed of by M/s Oasis Alcohol Ltd. are assigned and transferred to the ARC..."

It is further fortified by the fact that the Assignee sold the very property

mortgaged in favour of the Respondent as security for the said credit facility,

being land admeasuring 3252.66 sq. mtrs., Gata No. 36/2/B/1, Village

Khadgaon, Latur vide Sale Certificate dated 04.08.2021. The sale of the

mortgaged property by the assignee in itself is a conclusive proof that the

debt, together with all underlying security interests, had validly vested in the

assignee prior to such sale, for it is only upon a valid and subsisting

assignment of the debt and the accompanying security that the assignee could

have assumed the power to sell the said mortgaged property. The

Respondent's contention that it did not assign its debt to the Assignee and

that no Assignment Agreement was executed by it is directly contradicted by

the documents on record which have a precedentary evidentiary value. It is

further pertinent to note that the Respondent has failed to produce or place

on record the deed of assignment before this Hon'ble Tribunal. In the absence

of the deed of assignment, an adverse inference must be drawn against the

Respondent, and it must be presumed that the debt, along with the

corresponding rights under the guarantee, stood assigned to the assignee,

which could be governed by the binding terms of assignment deed.

Consequently, only the assignee could have maintained proceedings against

the Appellant as personal guarantor, and the Respondent lacked the locus

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 10 of 38 standi to initiate proceedings under Section 95. Accordingly, the Impugned

Order deserves to be set aside.

8. It is contended by the appellant that the debt of the Company was

assigned in favour of CFM Asset Reconstruction Pvt. Ltd and thereafter the

loan was restructured by the assignee. In the present case, the assignment of

debt in favour of the assignee and the subsequent restructuring thereof

amounts to variation in the terms of the contract, thereby discharging the

guarantor from all liability under Section 133 of the Indian Contract Act,

1872.

9. The liability of the Appellant also stood discharged pursuant to the

MOU dated 16.12.2017, whereby the Company entered into a lease agreement

with the Corporate Guarantor, transferring all its moveable and immovable

properties, and with the Corporate Guarantor expressly undertaking to settle

all prior liabilities of the Company. The said arrangement was duly

acknowledged by the lead bank vide sanction letter dated 05.06.2018.

Pursuant to the aforesaid arrangement, the Corporate Guarantor repaid 11

instalments aggregating to ₹ 6,30,63,689/-, which were accepted without

objection by the consortium banks, including the Respondent. The

acceptance of such payments under the revised arrangement clearly

evidences that the liabilities stood assumed by the Corporate Guarantor,

thereby discharging the Appellant from his obligations as Personal Guarantor.

10. The Appellant further claims that the assignment of debt is a material

fact, the omission of which vitiates the proceedings. The appellant further

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 11 of 38 contends that the Respondent has suppressed the material fact that by

assignment agreement dated 21.08.2020, the debt of the Company along with

the underlying securities have been assigned to the assignee. The existence

of such an agreement is duly recorded by the Hon'ble NCLT in its Order dated

01.12.2022. However, no such agreement has been placed on record before

the Hon'ble NCLT in the impugned proceedings. It is submitted that the

Respondent's attempt to disown the assignment of debt and underlying

securities to the assignee on the ground that it did not itself execute such

assignment and that the assignment agreement was entered into between the

lead bank and the assignee is a deliberate misdirection. The consortium of

lenders acted as a collective body under the Inter-Se Agreement dated

21.06.2010 and any enforcement of rights by any one consortium member

through CFM Asset Reconstruction Pvt. Ltd. necessarily affects the composite

debt and corresponding guarantees in their entirety. It is respectfully

submitted that the assignment of debt without the consent of the personal

guarantor, fundamentally altered the rights and liabilities of the parties and

thereby amounted to a novation of contract as per Section 62 of the Indian

Contract Act, 1872. It is further submitted that the Appellant's secured

property was sold by CFM Asset Reconstruction Pvt. Ltd. as assignee of the

debt of the consortium members, vide Sale Certificate dated 4th August 2021

and the proceeds thereof have already extinguished the secured liability. The

Respondent cannot be permitted to ignore the benefit derived from such

recovery while simultaneously initiating further insolvency proceedings

against the Appellant. Moreover, the failure to disclose the assignment

agreement and the benefit of recovery derived from the sale of the Appellant's

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 12 of 38 mortgaged property constitutes a material omission that strikes at the very

root of the Section 95 proceedings and vitiates the same in their entirety.

11. The Appellant contends that the liability of the appellant cannot in any

case exceed the contractual cap and cannot result in unjust enrichment. Even

if the guarantee continues to subsist, it is submitted that the liability of the

Appellant cannot in any event exceed the contractual cap expressly prescribed

in the respective guarantee agreements. In terms of the guarantee agreement

dated 20.03.2010, the liability of the Appellant is capped at ₹ 6.5 crores, and

in terms of the guarantee agreement dated 08.08.2011, the same is capped at

₹ 2.5 crores. Therefore, any claim preferred by the Respondent in excess of

such contractual cap would result in unjust enrichment of the Respondent at

the expense of the Appellant. In the instant case, the property mortgaged by

way of security has been disposed of and the proceeds have been applied in

furtherance of the debt. No adjustment has been made in order to reflect the

payments already made by co-sureties through the sale of mortgaged

property. The Respondent, therefore, cannot seek recovery in excess of its

proportionate contractual entitlement, as that would amount to unjust

enrichment.

12. The Appellant also contends that the petition is barred by limitation.

Firstly, the arbitral award dated 23.03.2017, having been entered into with

the mutual consent of all concerned parties, constituted a novation of the pre-

existing contractual arrangement within the meaning of Section 62 of the

Indian Contract Act, 1872. Consequently, all alleged prior defaults stood

regularised under the terms of the said Award. In such circumstances, the

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 13 of 38 Respondent's assertion that the date of default is 31.07.2015 is ex facie

erroneous and misconceived. Secondly, the period of limitation in respect of a

personal guarantor under an on-demand guarantee commences from the date

of demand made upon the guarantor under Section 13(2) of the SARFAESI.

In the present case, the guarantee was first invoked on 13.06.2016 by

issuance of a notice under Section 13(2) of the SARFAESI. Thereafter, the debt

was regularised by the arbitral award dated 23.03.2017, by virtue of which

the Appellant's liability novated from that of a "guarantor" to a "co-debtor.

Accordingly, any default subsisting prior to the arbitral award stands

extinguished and regularised by virtue thereof, and the period of limitation

must therefore be computed from the date of default, if any, under the arbitral

award alone, and not from any prior date. Thirdly, the payments made by the

Appellant/Corporate Debtor pursuant to the arbitral award cannot be

construed as an acknowledgment of debt so as to extend the period of

limitation under Section 19 of the Limitation Act, 1963. Explanation (b) to

Section 19 categorically provides that payment made on account of a decree

or order of a court does not extend the period of limitation. The arbitral award,

being in the nature of a deemed decree, falls squarely within the purview of

the said explanation, and any payments made pursuant thereto cannot

operate to extend the period of limitation against the Appellant. Fourthly, the

Respondent's belated attempt to shift the date of default to '13.09.2020' is

equally untenable. The mere issuance of a demand notice under Section 13(2)

of the SARFAESI does not extend limitation or give rise to a fresh cause of

action under Article 137 of the Limitation Act, 1963. Consequently, the

Respondent's reliance upon the subsequent notice dated 16.07.2020 as

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 14 of 38 constituting a fresh cause of action is wholly misplaced. Lastly, the demand

notice in Form-B dated 01.09.2021 issued under Rule 7(1) of the Insolvency

and Bankruptcy (Application to Adjudicating Authority for Insolvency

Resolution Process for Personal Guarantors to Corporate Debtors) Rules,

2019 does not constitute an acknowledgment of debt within the meaning of

Section 18 of the Limitation Act, 1963. Section 18 specifically requires that

the "acknowledgment be in writing and signed by the party against whom the

right is claimed," which necessarily implies that such acknowledgment must

emanate from the debtor himself. A unilateral demand notice issued by the

creditor, therefore, cannot amount to an acknowledgment so as to extend or

revive the period of limitation. In view of the above, the Respondent cannot

allege that their petition was within limitation.

Submissions of the Respondent

13. The applicant contends that by virtue of the arbitral award dated

23.03.2017, which was based on a settlement, the legal relationship between

the parties changed - from guarantor to co-debtor. The applicant argues that

the original default date of 31.07.2015 was regularised and replaced by new

obligations. It is further claimed that the co-debtors made payments under

the award, affecting both limitation and the outstanding debt quantum, and

that the impugned order erroneously recorded the date of default, which

should render it liable to be set aside.

14. On the changing the legal relationship between the parties from

guarantor to co-debtor after rendering of the arbitral award on 23.03.2017,

the Respondent being a multi-state cooperative bank is governed by the

provisions of The Multi-State Co-Operative Societies Act, 2002 ["MSCS Act"].

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 15 of 38 The provisions of Section 84 of MSCS Act, empowers the bank to refer the

dispute to arbitration. Accordingly, the majority of the member banks decided

to refer the matter related to default of loan by CD and its PGs to Arbitration

proceedings. As a result of such proceedings, an arbitral award dated

23.03.2017 was delivered in terms of consented terms settled between the

parties. This arbitral award has not, in any manner, extinguished or altered

the terms of original loan agreement and has neither altered the original

contract of guarantee executed by the applicant nor his status as "Personal

Guarantor". The award simply provided for a fresh repayment

structure/timeline towards the debt already due and under default. The

applicant's claim that they ceased to be a guarantor and became a co-debtor

is not supported either by the terms of the award or by law. The arbitral award

clearly stipulates "that in the event of any default..................... , the Opponents

personally and their properties and their legal heirs, legal representatives,

.................... etc. shall be liable to pay the entire amount...... ". Moreso, neither

any fresh loan documentation as such was required as a result of this award

or was entered into with or by either party. The appellant did not bother to

annexe the arbitral award along with its appeal, but the same was placed on

record by the respondent. Furthermore, the contention regarding incorrect

calculation of quantum of debt is absurd and clearly unwarranted. The loan

account statements forming part of Section 95 petition filed by the

Respondent clearly demonstrates that the amount under default is beyond

the threshold prescribed under I&B Code, even after duly factoring the

payments made pursuant to arbitral award delivered in March 2017 and

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 16 of 38 hence, does not require detailed explanation on the part of present

Respondent.

15. The Appellant argues that the assignment of the Corporate Debtor's

debt and its underlying securities to CFM Asset Reconstruction Pvt. Ltd.

under an Assignment Agreement dated 21.08.2020. The failure to disclose

such a pivotal information is a material omission goes into the root of the

matter. The assignee has disposed of the properties of personal guarantor,

thus discharging the guarantees. Such suppression of material facts renders

the adjudication procedurally flawed, and the impugned order deserves to be

set aside on this ground alone. The Respondent Bank submits that the

allegation made by the applicant regarding non-disclosure of the assignment

of debt to CFM Asset Reconstruction Pvt. Ltd. (CFM ARC) by the respondent

is factually incorrect and misleading. In fact, such an allegation is completely

baseless that even the Appellant could not support this allegation with

documentary evidence. It is clarified that various member banks in the

consortium have independently assigned their debt to CFM ARC. However,

the present Respondent did not assign its debt and has therefore, not

executed any assignment agreement dated 21.08.2020 with CFM ARC as

alleged by the Appellant. In fact, the assignment agreement which the

appellant purports to, is between Janata Sahakari Bank Ltd., Pune [Another

bank in consortium] and CFM ARC. In case, if the Appellant is in possession

of any such an agreement which suggests assignment of debt by the present

Respondent, he should have brought the same before this Hon'ble AA in his

appeal. Therefore, this allegation by the Appellant is nothing but a blatant lie,

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 17 of 38 in order to disrupt the smooth conduct of insolvency resolution proceeding

and appeal deserves to be dismissed on this very ground. Moreover, the

appellant's assertion that the personal guarantors' liabilities stand discharged

due to enforcement actions by CFM ARC is factually and legally untenable

because neither the Respondent has assigned the debt to CFM ARC nor is in

line with the provisions of Section 128 of the Indian Contract Act, 1872 which

states that, the liability of a guarantor is co-extensive with that of the principal

debtor unless the entire debt is satisfied. Mere sale of assets by an assignee

of another loan does not, in itself, extinguish the guarantee. Therefore, no

procedural irregularity or suppression of material facts can be attributed to

the Respondent, and there is no ground to set aside the impugned order.

Additionally, the fact that the Assignment Agreement dated 21.08.2020 was

not brought on record by the Respondent is irrelevant, as the Respondent is

not a party to that agreement. The agreement relates to the assignment

between other lender in consortium and CFM ARC. As such, the question of

concealment or suppression of that document by the Respondent does not

arise.

16. On the argument of the appellant that there was a restructuring of the

loan by the assignee i.e. M/s CFM ARC without the personal guarantor's

consent and appellants 'claims that constitutes a material variation in terms

of the original contract for which the guarantee was executed, and thereby

discharges the guarantor from liability under Section 133 of the Indian

Contract Act, the Respondent denies the allegation that any restructuring of

the loan or alteration of contractual terms was carried out by it. The Appellant

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 18 of 38 is grossly misinformed and hence, making false accusations. It is reiterated

that the Respondent has never assigned its debt to CFM Asset Reconstruction

Pvt. Ltd., has not entered into restructuring as alleged by the Appellant and

hence, there arises no question of variance in terms and discharging of surety

from the liabilities, as a result of restructuring by Assignee. As such, the

question of variation of contract terms by the Respondent does not arise, and

Section 133 of the Indian Contract Act, 1872, which discharges a surety upon

material variation of the contract without their consent, is wholly inapplicable

in the present case. Since there is no assignment, and absolutely no

restructuring on the part of Respondent, thus, there cannot be novation or

alteration to the original loan contract executed between the Corporate

Debtor, the Respondent and Personal Guarantor/Appellant. Consequently,

the applicant's status as guarantor vis-a-vis the Respondent's debt remains

unaffected. Furthermore, Section 133 only discharges a guarantor where a

valid and binding variation of contract terms takes place between the

principal debtor and the creditor. In this case, the Respondent has neither

made any such variation or modification nor has ever been party to the alleged

restructuring done by the Assignee. It is also significant that the applicant

has failed to produce any specific evidence or documentation which suggests

that Respondent was a party to such alleged variation resulting in novation

in the terms of contract. Accordingly, the applicant's claim that they are

discharged from their guarantee on the basis of Section 133 of the Indian

Contract Act, 1872, is not just legally untenable but factually baseless so far

as the Respondent's claim is concerned. This sets out another ground for

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 19 of 38 outright rejection of the present appeal without getting into other allegations

raised by the Appellant.

17. With respect to the contention of the Appellant that the Liability of

Appellant cannot exceed the contractual obligations, the Respondent opposes

it and brings to our notice that the contention advanced by the Appellant is

factually incorrect and contrary to the express terms of the guarantee

agreements. The liability of the guarantors is not confined merely to the

principal loan amount as erroneously alleged by the Appellant. Because under

the terms of Clause 19 of the Guarantee Agreements dated 20.03.2010 and

08.08.2011, the guarantors have undertaken liability not only towards

repayment of the disbursed loan amount, but also towards accrued interest,

liquidated damages, costs, charges, expenses, and all other consequential

liabilities arising therefrom. Accordingly, the Appellant's attempt to restrict

the scope of liability is untenable and contrary to the contractual stipulations

binding upon the parties. [Clause 19 of Guarantee Agreements, Annexure R/2

- relevant page no. 40 to 46].

18. On the contention of the appellant that the petition is time barred, the

respondent brings to our notice that after a careful reading of the various

assertions made by the Appellant shows that the appellant is clearly confused

as to its status as "Guarantor" or "Co-debtor" and further, as to the fact that

when has default actually taken place. On one hand, he has claimed that the

debt was regularized as a consequence of an arbitral award whereas on the

other hand, claiming that the petition is filed beyond 8 years of the alleged

date of default. Going by the appellant's view, the default stood regularised in

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 20 of 38 March 2017 [due to arbitral award], therefore, the subsequent default

occurred only when the CD/Guarantors could not abide by the repayment

schedule agreed upon in the arbitration proceedings. Without getting into

further averments of the appellant particularly in reference to limitation/time

barred debt, the Respondent has presented herein a breakdown of the

timeline in order to substantiate the validity/limitation in the matter:

Date Particulars 13.06.2016 Issuance of notice u/s 13(2) of SARFAESI Act, as also acknowledged in arbitral award and subsequent notice u/s 13(2).

23.03.2017 Matter was referred by member banks of consortium to Arbitration and passing of Arbitral Award, thereby, Restructuring/Revival of the debt.

March 2017 - Repayment by borrower [as also evident in March 2019 loan account statements]

16.07.2020 Issuance of Demand Notice u/s 13(2) of SARFAESI upon Borrower as well as Guarantors, including Appellant demanding payment within 60 days.

13.09.2020 Debt remained unpaid despite demand from the borrower as well as Guarantors, constituting "Date of Default".

01.09.2021 Demand Notice under Form B [Rule 7(1)] issued by the Respondent-Bank.

19.05.2023 Filing of Petition under section 95 of IBC, 2016 by the Respondent-Bank, within a limitation period of 03 years from the default pursuant to demand notice dated 16.07.2020.

19. Given these timelines of events, the application filed in May 2023 is

clearly within the permissible time frame and the impugned order is

indisputable. These facts were also brought to the attention of Hon'ble NCLT

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 21 of 38 by way of an additional affidavit dated 13.11.2024 [e-filed on 15.11.2024] and

presented during the course of adjudication/arguments upon S.95 petition.

Hon'ble Adjudicating Authority has taken due cognizance of the same in their

admission order dated 04.02.2025. It is pertinent to mention here that the

Guarantee given by the Appellant was in the nature of an on-demand

guarantee [clause 3 of guarantee agreement], and the notice u/s 13(2) of

SARFAESI Act dated 16.07.2020, addressed to Appellant also as Guarantor

demanding dues, was issued only after default was committed in repayment

of dues ensuing arbitral award. For the sake of easy reference, a copy of

guarantee agreement and notice dated 16.07.2020 are annexed hereto as

"Annexure - R/2 and Annexure - R/3" respectively. Reliance is also placed on

the judgement of this Hon'ble Appellate Tribunal in the matter of "Asha

Basantilal Surana vs State Bank of India & Ors. [Company Appeal (AT)

(Ins.) No. 84/2025]", as also in the matter of "Mavjibhai Nagarbhai Patel vs

State Bank of India & Ors [Company Appeal (AT) (Insolvency) No. 1702 of

2024)". Another averment of the Appellant [i.e. Hon'ble NCLT erred in not

considering whether payments made towards the arbitral award could be

construed as an acknowledgement of debt under Section 19 of Limitation Act,

1963, particularly with reference to Explanation 2 under Section 19], is

answered under this ground only as it is in reference to the repayments

mentioned in the table above. It is submitted that an arbitral award is not a

"decree or order of a court" for the purpose of Explanation (b) to Section 19 of

the Limitation Act. A decree is an adjudication by a "Court" within the

meaning of the CPC, whereas an arbitral award is rendered by a private

arbitral tribunal based on a contractual agreement.

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 22 of 38 The respondent has relied on the following judgments to press upon the

point relating to the arbitral award:

o Paramjeet Singh Patheja v. ICDS Ltd. (AIR 2007 SC

168): The Hon'ble Supreme Court unequivocally held that an arbitral award is not a decree as defined under Section 2(2) of the CPC. It can be enforced under Section 36 of the 1996 Act read with the CPC, but it doesn't become a decree in itself.

o State of U.P. and Ors. v. Shri Raj Veer Singh (Allahabad High Court, 2024): This case further reinforced the distinction, stating that while an arbitral award is to be enforced "as if it were" a decree, it is not actually a decree, and objections under Section 47 of CPC are not permissible.

20. Consequently, the exclusion in Explanation (b) to Section 19 of the

Limitation Act, which refers to "money payable under a decree or order of a

court," does not apply to an arbitral award. Since an arbitral award does not

originate from a "court" in the traditional sense, payments made towards it

are not payments made towards a "decree or order of a court" as contemplated

by that Explanation.

Analysis and findings.

21. We have heard the submissions of both sides and have carefully

perused the material placed on record. The issues raised by the Appellant are

interrelated and can conveniently be summarised under the following heads:

(i) Whether the petition filed by the Financial Creditor against the

Personal Guarantor under Section 95 of the Insolvency and

Bankruptcy Code, 2016 is maintainable?

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 23 of 38

(ii) Whether the arbitral award dated 23.03.2017 altered the status of

the Appellant from a Personal Guarantor to a co-borrower or co-

debtor?

(iii) Whether the alleged assignment of debt and the sale of the

Appellant's property by CFM Asset Reconstruction Pvt.

Ltd. discharged the Appellant or deprived the Respondent of locus

standi?

(iv) Whether any restructuring or variation discharged the Appellant

under Section 133 of the Indian Contract Act, 1872?

(v) Whether the Section 95 petition is barred by limitation? and

(vi) Whether the liability of the Appellant is confined to the amounts

stated by him as the contractual cap?

22. At the outset, we note that the present appeal arises from the order

dated 04.02.2025 that was passed by the Ld. Adjudicating Authority, whereby

CP (IB) No. 808/MB/2023 filed under Section 95 of the Code against the

Appellant was admitted. The Insolvency Resolution Process against the

Appellant was consequently commenced. The question before us is whether

the impugned order suffers from any error of law or material irregularity

warranting interference by this Appellate Tribunal.

Arbitral award dated 23.03.2017 and vis-à-vis status of the Appellant

23. The Appellant strongly argues that, as per the arbitral award dated

23.03.2017, the relationship between the parties underwent a material

alteration. The Appellant, who was earlier a guarantor to the loan transaction,

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 24 of 38 stood converted into a co-debtor/co-borrower as per the express terms of the

consent award itself. The Appellant has relied on Clause 7 of the arbitral

award, which provides that the opponents, including the Appellant, shall pay,

"jointly and severally", to the lead bank for itself and on behalf of all the

consortium banks, including the Respondent.

24. We are unable to accept this contention. The use of the expression

"jointly and severally" in the arbitral award does not, by itself, establish that

the original contract of guarantee was extinguished. It also does not establish

that the Appellant acquired the legal status of a co-borrower. Because the

consent award, will not alter the status of Appellant acquired under

uncontroverted and subsisting contract of guarantee which was still binding

the contracting parties, unless rescinded by law.

25. The Award was passed in proceedings under Section 84 of the Multi-

State Co-operative Societies Act, 2002. The Award provided a revised manner

and schedule for payment of the existing liability. There is no fresh loan

documentation or other document placed on record which establishes that

the original guarantee was cancelled and substituted by a new borrowing

arrangement. Hence legally deed of guarantee is still alive under law.

26. The terms of the Award are also significant. The Award expressly

provides:

"in the event of default for any reason whatsoever...., the concession or relaxation in payment of dues under clause 5 & 7 of consent terms shall stand automatically cancelled and the opponents personally, and their

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 25 of 38 properties and legal heirs.....etc., shall be liable to pay the entire amount.....".

[Clause vi of Arbitral Award].

27. The above stipulation is clearly inconsistent with the Appellant's

contention that the original guarantee stood extinguished. There cannot be

an automatic extinguishment of contract i.e. deed of guarantee, only by way

of inference assigned to it by the consenting award. The Award contemplated

continued liability in the event of default. It therefore cannot be read as

creating a new relationship which completely displaced the original contract

of guarantee.

28. Particularly when the original guarantee also contains a specific

provision dealing with variations and alterations and that has not been

invoked, the deed under law will still continue to exist in the eyes of law. It

states:

".. The guarantor/s agree that the liability under this guarantee shall in no manner be affected by any such variations, alterations, modifications, waiver, dispensation with or release of security and that no further consent of the guarantors is required for giving effect to any such variations, alterations, modification, waiver, dispensation with or release of security."

29. Furthermore, in Clause 16 of the Guarantee Agreement expressly

stipulates that the guarantee is continuing and irrevocable in nature and shall

remain valid and binding until all loans and monies due and payable by the

borrower are fully repaid to the Bank hence, such a deed will fall under

Section 129 of the Contract Act. The Clause is extracted as below:

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 26 of 38 "16. The guarantee shall be irrevocable and the obligations of the guarantor/s hereunder shall not be conditional on the receipt of any prior notice by the guarantor or by the borrower. The demand or notice by the bank, as provided in clause 20 hereof, shall be sufficient notice to or demand on the guarantor/s."

30. These provisions are important for reference here because they

demonstrate the intention of the parties that the guarantee would continue

until the secured dues were fully discharged. There is no material on record

to show that the Respondent expressly released the Appellant from the

guarantee or entered into a substituted contract with him.

31. The Appellant has placed reliance on two judgments which are being

discussed herein. The Appellant claims that in Vyravan Chettiar v. Official

Assignee of Madras, ILR (1932) 55 Mad 949, the Hon'ble Madras High

Court categorically held that a contract of guarantee under Section 126 of the

Indian Contract Act is strictly confined to cases where one party agrees with

the creditor to discharge the liability of a third person upon the latter's default,

and that persons who are jointly and severally liable for the same debt, equally

owed by both, do not fall within the definition of a contract of guarantee. This

position is further fortified by Lima Leitao and Co. Ltd. v. Union of India,

MANU/GO/0034/1967, where the Hon'ble High Court of Bombay at Goa,

held that the liability of a guarantor is inherently secondary and contingent,

presupposing the existence of an independent liability of the principal debtor.

32. The aforesaid judgments do not assist the Appellant under the facts of

the present case. The question before us is not merely whether a person who

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 27 of 38 is jointly and severally liable can, in law, be a guarantor. The question is

whether the documents executed between these parties show that the original

guarantee was extinguished and replaced by a new contract. The material on

record does not establish such novation, ventured to be placed before us, it

remained unsubstantiated.

33. The arbitral award did not contain any clause exonerating the

Appellant from his existing guarantee. On the contrary, it contemplated

consequences in an event of default and preserved the liability of the parties.

No fresh loan documentation or subsequent agreement or even a guarantee

was ever executed so as to extinguish or alter the pre-existing guarantee.

Earlier dues continue to exist, undeterred by the arbitral award. We therefore

hold that the Appellant continued to remain a Personal Guarantor.

Locus of the Respondent under Section 95 and alleged assignment

34. The Appellant contends that the entire debt of the Company, along with

the underlying securities, was assigned to CFM Asset Reconstruction Pvt.

Ltd. and that, consequently, the Respondent ceased to have any right to

proceed against the Appellant.

35. The material on record does not support this contention.

36. The consortium consisted of eleven member banks. The record shows

that member banks at serial numbers 1 to 6 assigned their share to CFM

Asset Reconstruction Pvt. Ltd., whereas the present Respondent did not

assign its share. The Appellant has relied upon the Assignment Agreement

dated 21.08.2020. However, the Respondent has specifically stated that it was

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 28 of 38 not a party to that agreement and that the agreement was between Janata

Sahakari Bank Ltd., Pune and CFM ARC.

37. The Appellant, who asserts that the Respondent assigned its debt, was

required to place material establishing such assignment. No assignment deed

executed by the Respondent has been shown to us. The existence of an

assignment between another consortium lender and CFM ARC cannot, by

itself, establish assignment of the Respondent's independent debt.

38. The fact that CFM ARC sold the property of the Appellant also does not

within itself lead to a different conclusion. The sale could have been pursuant

to the rights acquired by CFM ARC from the lender or lenders whose debt was

assigned to it. Such sale does not, without further evidence, establish that the

Respondent assigned its own debt or the rights arising under its guarantee.

39. The Appellant has also relied upon the MOU dated 16.12.2017 and the

payments made by the Corporate Guarantor. Even assuming that the

Corporate Guarantor undertook to discharge the liabilities of the Corporate

Debtor, such an arrangement does not automatically by itself amount to a

release of the Personal Guarantor by the Financial Creditor.

40. There is no material before us showing that the Respondent expressly

by executing any document had released the Appellant from his continuing

guarantee or accepted a substituted contract in its place. The payments made

under the revised arrangement are relevant for determining the amount

outstanding. They do not, however, extinguish the existing unrescinded

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 29 of 38 guarantee unless the secured liability has been fully discharged or the

guarantor has otherwise been expressly released.

41. The Respondent has correctly relied upon Section 128 of the Indian

Contract Act, 1872. The liability of the guarantor is co-extensive with that of

the principal debtor unless the contractual terms provide otherwise. The

enforcement of a security by another creditor or assignee does not, by itself,

extinguish the liability towards a creditor whose debt has not been assigned.

42. As has been submitted by the Respondent:

"Moreover, the disposal of properties of PG by assignee does not ipso

facto discharge the guarantors. Also, neither the Respondent has

assigned the debt to CFM ARC nor it is in line with the provisions of

Section 128 of the Indian Contract Act, 1872 which states, that the

liability of a guarantor is co-extensive with that of the principal debtor

unless the entire debt is satisfied. Mere sale of assets by an assignee of

another loan does not, in itself, extinguish the guarantee."

43. We find substance in the above submission. The Appellant has failed to

establish that the Respondent assigned its debt or that the entire liability

owed to the Respondent stood discharged.

44. Consequently, the Respondent continued to have locus standi to invoke

the guarantee and to file the application under Section 95 of the Code.

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 30 of 38 Section 133 of the Indian Contract Act, 1872

45. The Appellant further contends that the restructuring of the debt by

CFM ARC amounted to a material variation without his consent and

discharged him under Section 133 of the Indian Contract Act, 1872.

This submission also cannot be accepted.

46. For Section 133 to apply, there must be a variation in the contract

between the principal debtor and the creditor without the consent of the

surety. In the present case, there is no material to establish that the

Respondent itself entered into such a variation with the Corporate Debtor.

47. The alleged restructuring by CFM ARC relates to the debt which was

assigned to CFM ARC by other consortium lender(s). The Appellant has not

established that the Respondent was a party to such restructuring or that the

Respondent altered the terms of its own contract with the Appellant.

48. There is also a specific clause in the guarantee as noted herein earlier

in para 28 providing that the liability of the guarantor would not be affected

by variations, alterations, modifications, waiver, dispensation with or release

of security. In the absence of proof that the Respondent released the Appellant

or entered into a substituted contract, the plea under Section 133 cannot

succeed.

Whether the petition was time-barred

49. The Appellant contends that the petition is barred by limitation.

According to the Appellant, the original default occurred much earlier and the

arbitral award dated 23.03.2017 could not create a fresh period of limitation.

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 31 of 38

50. The Respondent, on the other hand, relies upon the subsequent

repayment arrangement, the demand notice dated 16.07.2020 and the default

which occurred after expiry of the period granted under that notice.

The relevant chronology appearing from the record is as follows:

Date Particulars 13.06.2016 Invocation of guarantee by issuance of 13(2) demand notice under SARFAESI Act, as also acknowledged in Arbitral Award.

23.03.2017 Passing of Arbitral Award, thereby, restructuring/reviving the debt.

March 2017-2019 Repayment by the borrower [reflecting in loan a/c statements].

16.07.2020 Demand notice u/s 13(2) of SARFAESI used upon Borrower & PGs, with 60 days' timeline for payment [Guarantee of PG was on- demand guarantee, as referred to in clause 3 of the guarantee agreement (Relevant clause at Page No. 37 & 43 of Reply)]

13.09.2020 Date of default, considering expiry of 60 days' timeline for payment

05.05.2023 Filing of petition u/s 95 of IBC, 2016

51. The above chronology is material. The petition was filed in May 2023,

within three years from 13.09.2020, which is the subsequent date of default

relied upon by the Respondent.

52. The Appellant has argued that payments made pursuant to the arbitral

award cannot be treated as acknowledgment of debt under Section 19 of the

Limitation Act, 1963. Explanation (b) to Section 19 categorically provides that

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 32 of 38 payment made on account of a decree or order of a court does not extend the

period of limitation. The arbitral award, being in the nature of a deemed

decree, falls squarely within the purview of the said explanation, and any

payments made pursuant thereto cannot operate to extend the period of

limitation against the Appellant. However, in the facts of the present case, it

is not necessary to determine the limitation issue only on the basis of such

payments. The Respondent relies upon the subsequent default dated

13.09.2020. The Section 95 petition was filed within three years from that

date. The Appellant has not established that the subsequent repayment

arrangement had permanently extinguished the Respondent's rights or that

the continuing guarantee ceased to operate.

53. Strongly refuting, the respondent brings to our notice that an arbitral

award does not partake the character of a decree passed by a civil court and,

therefore, the bar contemplated under Section 19 is inapplicable to such

payments. Consequently, payments made towards satisfaction of the arbitral

award constitute valid acknowledgment and extension of limitation in law.

The Respondent relies on the judgments of Hon'ble Supreme Court and the

Hon'ble High Court and claims that aforesaid position stands fortified through

the judgment of the Hon'ble Supreme Court in Paramjeet Singh Patheja vs

ICDS Ltd., 13 SCC 322 [Case No. Appeal (Civil) 4130 of 2006], as well as

the decision of the Hon'ble Allahabad High Court, in State of UP vs Shri

Rajveer Singh [2024:AHC:66171], delivered on 18.03.2024. Thus, the

Appellant's contention that payments made pursuant to the Arbitral Award

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 33 of 38 cannot constitute acknowledgment of debt in view of Explanation 2 to Section

19 of the Limitation Act, 1963 is therefore dismissed.

54. In view of the subsequent default relied upon by the Respondent and

the filing of the petition in May 2023, we find no merit in the plea that the

Section 95 petition was barred by limitation.

Liability of the Appellant and alleged contractual cap

55. The Appellant contends that his liability is capped at ₹ 6.5 crores under

the guarantee dated 20.03.2010 and at ₹ 2.5 crores under the guarantee

dated 08.08.2011. The Respondent disputes this interpretation and relies

upon Clause 19 of the Guarantee Agreements.

56. The liability of the guarantor has to be determined from the terms of

the guarantee documents. The Respondent has specifically relied upon Clause

19, under which the guarantors have undertaken liability not only towards

repayment of the disbursed loan amount but also towards accrued interest,

liquidated damages, costs, charges, expenses, and other consequential

liabilities arising therefrom.

57. The Appellant has not demonstrated that the claim made by the

Respondent is contrary to the express terms of the guarantee. At the stage of

considering the maintainability of the Section 95 petition, the mere dispute

regarding computation of the amount does not invalidate the proceedings

when the existence of the debt and default is otherwise established.

58. It is also necessary to clarify that the insolvency process cannot result

in double recovery. Any amount recovered from the Corporate Debtor, co-

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 34 of 38 sureties, enforcement of securities or any other source has to be duly

accounted for while determining the amount ultimately payable. Such

accounting, however, does not invalidate the initiation of insolvency

proceedings against the Personal Guarantor.

59. The Appellant's contention regarding unjust enrichment, therefore,

does not furnish a ground for setting aside the impugned order.

Effect of the MOU dated 16.12.2017

60. The Appellant has also relied upon the MOU dated 16.12.2017 and the

alleged sanction letter dated 05.06.2018 to contend that the Corporate

Guarantor had undertaken the liabilities of the Corporate Debtor and that the

Appellant was consequently discharged.

61. We are unable to accept this contention. Even assuming that the

Corporate Guarantor agreed to discharge the liabilities of the Corporate

Debtor, there is no sufficient material to establish that the Respondent

expressly released the Appellant from his continuing and irrevocable

guarantee.

62. The mere assumption of liability by a third party does not, in the

absence of a binding release or novation by the creditor, extinguish the

existing guarantee. The payments relied upon by the Appellant also do not

establish complete satisfaction of the Respondent's debt.

63. The guarantee documents continued to remain in force. In the absence

of proof of full satisfaction of the secured liability or an express release by the

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 35 of 38 Respondent, the Appellant cannot claim discharge merely on the basis of the

MOU or the payments made pursuant thereto.

Overall findings

64. On a consideration of the entire material placed on record, we find that

the Respondent continued to be a creditor in respect of its share of the

consortium debt. It also continued to have the contractual right to invoke the

Appellant's continuing guarantee.

65. The Appellant has failed to establish that the Respondent assigned its

debt to CFM ARC. The assignment relied upon by the Appellant relates to

another consortium lender or lenders. The sale of the Appellant's property by

CFM ARC does not, by itself, establish that the Respondent's debt or its rights

under the guarantee were assigned.

66. We further find that the arbitral award dated 23.03.2017 did not novate

or extinguish the original guarantee. The Award provided a repayment

arrangement and expressly contemplated continuing liability in the event of

default. There is no material to establish that the Respondent released the

Appellant from the guarantee or substituted the guarantee with a new

contract.

67. There is also no material to establish a variation by the Respondent

which could attract Section 133 of the Indian Contract Act, 1872. The

guarantee itself contains provisions relating to variations and continuing

liability.

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 36 of 38

68. The petition under Section 95 was filed within the period of limitation

on the basis of the subsequent default dated 13.09.2020 relied upon by the

Respondent. The plea of limitation, therefore, has no merit.

69. The objection regarding the extent of liability also does not render the

Section 95 petition non-maintainable. The amount ultimately payable has to

be determined in accordance with the guarantee documents and after giving

due credit for all recoveries.

70. We therefore find that the Adjudicating Authority has rightly admitted

the Section 95 petition. No jurisdictional error, material irregularity or

perversity has been demonstrated in the impugned order. There is

consequently no ground for interference by this Appellate Tribunal.

Conclusions

71. In view of the foregoing discussion, we hold that:

(i) the Respondent had locus standi to initiate proceedings under

Section 95 of the Code;

(ii) the arbitral award dated 23.03.2017 did not alter the status of the

Appellant from Personal Guarantor to co-borrower;

(iii) the Appellant has failed to establish that the Respondent assigned

its debt, along with the underlying rights under the guarantee, to

CFM Asset Reconstruction Pvt. Ltd.;

(iv) the assignment by other consortium lender(s), and the subsequent

sale of the Appellant's property by CFM ARC, do not by themselves

extinguish the Respondent's rights against the Appellant;

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 37 of 38

(v) the Appellant has failed to establish any variation or novation by

the Respondent so as to attract Section 133 of the Indian Contract

Act, 1872;

(vi) the petition filed under Section 95 of the Code is not barred by

limitation; and

(vii) the dispute regarding the extent of liability or contractual cap does

not furnish any ground to set aside the order admitting the Section

95 petition.

Accordingly, we find no merit in the present Appeal.

Orders

72. The Appeal is dismissed. All connected IAs, if any, are also disposed of

accordingly. The interim order, if any, stands vacated. The insolvency

resolution process against the Appellant shall proceed in accordance with law.

The parties shall bear their own costs.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Arun Baroka] Member (Technical)

[Indevar Pandey] Member (Technical) New Delhi.

September 17, 2026.

pawan

Company Appeal (AT) (Insolvency) Nos. 636 - 638 and 696 of 2025 38 of 38