Case Note & Summary
The National Company Law Appellate Tribunal (NCLAT) at Chennai, by a common judgment dated 22.10.2024, allowed two appeals filed by the State Bank of India (SBI) against the rejection of its applications under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) against two personal guarantors, Dr. Jitendra Das Maganti and Dr. Renuka Rani Maganti, who were directors of M/s Seven Hills Health Care Pvt Ltd (the corporate debtor). The corporate debtor had defaulted on loans taken from SBI, and the bank had invoked personal guarantees. The NCLT, Amaravati Bench, had rejected the Section 95 applications on the ground that they were barred by limitation, holding that the limitation period commenced from the date of the NCLT order admitting the corporate debtor into corporate insolvency resolution process (CIRP). The NCLAT reversed this finding, holding that the limitation for filing an application under Section 95 against a personal guarantor commences from the date of default in the demand notice under the guarantee contract, not from the date of the NCLT order admitting the corporate debtor. The court noted that the demand notices were issued on 30.09.2019 and the applications were filed on 30.09.2022, within three years, and thus were not barred by limitation. The court set aside the impugned orders and remanded the matters back to the NCLT for fresh consideration on merits.
Headnote
A) Insolvency and Bankruptcy Code - Personal Guarantor - Limitation - Section 95 of Insolvency and Bankruptcy Code, 2016 - The issue was whether the application under Section 95 filed by the financial creditor against the personal guarantors was barred by limitation. The court held that the limitation period for filing an application under Section 95 commences from the date of default in the demand notice under the guarantee contract, and not from the date of the NCLT order admitting the corporate debtor. The court found that the applications were filed within three years from the date of default in the demand notice and thus were not barred by limitation. (Paras 1-20)
B) Insolvency and Bankruptcy Code - Personal Guarantor - Limitation - Section 95 of Insolvency and Bankruptcy Code, 2016 - The court also considered the applicability of Article 137 of the Limitation Act, 1963 to applications under Section 95. It held that the period of limitation for such applications is three years from the date when the right to apply accrues, which is the date of default in the demand notice under the guarantee contract. (Paras 15-20)
Issue of Consideration
Whether the application under Section 95 of the Insolvency and Bankruptcy Code, 2016 filed by the financial creditor against the personal guarantors was barred by limitation, and what is the relevant date for computing limitation.
Final Decision
The NCLAT allowed the appeals, set aside the impugned orders dated 22.07.2024 passed by the NCLT, Amaravati Bench, and remanded the matters back to the NCLT for fresh consideration on merits, in accordance with law.
Law Points
- Limitation for Section 95 application under IBC
- 2016 commences from date of default in demand notice under guarantee contract
- not from date of NCLT order admitting corporate debtor
- Section 95 of Insolvency and Bankruptcy Code
- 2016
- Limitation Act
- 1963
Case Details
2024 LawText (NCLAT) (01) 55
Company Appeal (AT) (CH) (Ins) No.360/2024 and Company Appeal (AT) (CH) (Ins) No.361/2024
Justice Sharad Kumar Sharma (Member Judicial)
Mr. Pranava Charan for Appellant, Mr. Dwarakesh Prabhakaran for Respondent No.1
Dr. Jitendra Das Maganti and M/s Seven Hills Health Care Pvt Ltd (in Comp App 360/2024); Dr. Renuka Rani Maganti and M/s Seven Hills Health Care Pvt Ltd (in Comp App 361/2024)
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Nature of Litigation
Appeals against rejection of applications under Section 95 of IBC, 2016 for initiation of insolvency resolution process against personal guarantors.
Remedy Sought
The appellant, State Bank of India, sought to set aside the impugned orders dated 22.07.2024 passed by NCLT, Amaravati Bench, rejecting its applications under Section 95 of IBC, 2016 against the personal guarantors, and sought remand for fresh consideration.
Filing Reason
The NCLT rejected the Section 95 applications on the ground of limitation, holding that the limitation period commenced from the date of NCLT order admitting the corporate debtor into CIRP, whereas the appellant contended that limitation runs from the date of default in the demand notice under the guarantee contract.
Previous Decisions
The NCLT, Amaravati Bench, by orders dated 22.07.2024 in CP (IB)/49/95/AMR/2022 and CP (IB)/50/95/AMR/2022, rejected the applications under Section 95 of IBC, 2016 filed by State Bank of India against Dr. Jitendra Das Maganti and Dr. Renuka Rani Maganti respectively, holding them barred by limitation.
Issues
Whether the application under Section 95 of IBC, 2016 filed by the financial creditor against the personal guarantors was barred by limitation.
What is the relevant date for computing limitation for filing an application under Section 95 of IBC, 2016 against a personal guarantor?
Submissions/Arguments
The appellant argued that the limitation for filing an application under Section 95 against a personal guarantor commences from the date of default in the demand notice under the guarantee contract, and not from the date of the NCLT order admitting the corporate debtor.
The respondents argued that the limitation period should be computed from the date of the NCLT order admitting the corporate debtor into CIRP, and since the applications were filed beyond three years from that date, they were barred by limitation.
Ratio Decidendi
The limitation period for filing an application under Section 95 of the Insolvency and Bankruptcy Code, 2016 against a personal guarantor commences from the date of default in the demand notice under the guarantee contract, and not from the date of the NCLT order admitting the corporate debtor into corporate insolvency resolution process.
Judgment Excerpts
The limitation for filing an application under Section 95 against a personal guarantor commences from the date of default in the demand notice under the guarantee contract, not from the date of the NCLT order admitting the corporate debtor.
The applications were filed within three years from the date of default in the demand notice and thus were not barred by limitation.
Procedural History
The State Bank of India filed applications under Section 95 of IBC, 2016 before the NCLT, Amaravati Bench, against Dr. Jitendra Das Maganti and Dr. Renuka Rani Maganti, personal guarantors of M/s Seven Hills Health Care Pvt Ltd. The NCLT rejected the applications by orders dated 22.07.2024 on the ground of limitation. Aggrieved, the bank filed two appeals before the NCLAT, which were heard together and allowed by judgment dated 22.10.2024.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: 95
- Limitation Act, 1963:
