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2025 (4) TMI 1403 - AT - IBCInvocation of the personal guarantee by issuance of the demand notice - notice was sent to an address different from that specified in the guarantee deed - application filed under Section 95 of the Insolvency and Bankruptcy Code 2016 (the Code) for initiating insolvency resolution process against the personal guarantor was barred by limitation or not. Notice was sent to an address different from that specified in the guarantee deed - HELD THAT - The argument of the Appellant that it has been clearly provided in the guarantee deed that it has to be sent on the address provided in the guarantee deed and can also be sent to a different address with prior intimation of the Appellant is of no consequence because in the entire pleadings both before the Tribunal and before this Court the Appellant has not said a word that the said Notice was never received. Rather the Appellant has taken a technical plea that Notice should have been sent on the address provided in the guarantee deed. In the absence of denial on the part of the Appellant that he did not receive the Notice dated 16th January 2017 having been sent on an address different from the one provided in the deed of guarantee it has to be presumed that the notice was duly received by the Appellant. Moreover Respondent No.1 sent the Notice dated 9.9.2021 under Rule 7 of the Rules addressed to Shri Vipin Shersingh Agarwal Vaishnav Sadan Bungalow No.2 Vikas Classique CHS Behind Bansant Cinema Chembur Mumbai 400074 which was delivered to the Appellant on the same address by hand. In these circumstances the Appellant had duly received the Notice of invoking of guarantee deed dated 16th January 2017 in relation to guarantee deed dated 17th December 2014. Time limitation - HELD THAT - The default occurred on 31st January 2017 for which the application under Section 95 could have been filed up to 31st January 2020. However in between while the period of limitation was continuing the Corporate Debtor acknowledged the debt in the balance sheets which further enlarged to period of limitation from every date of acknowledgement - any admission of liability by the borrower shall be deemed to be admission of debt by the guarantor as well the balance sheets being part of the record of the Tribunal has to be looked into for the purpose of extension of limitation from the date of acknowledgement. It is needless to mention that as per Section 18 the acknowledgement has to be in writing which of course in this case has been signed by the RP on behalf of the Corporate Debtor as well as the guarantor. Conclusion - i) The invocation of the guarantee by the notice dated 16th January 2017 is valid and maintainable despite being sent to an address different from that in the guarantee deed. ii) The application under Section 95 is not barred by limitation due to the acknowledgment of debt extending the limitation period. Appeal dismissed. There are no merit in the appeal - appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were: (a) Whether the invocation of the personal guarantee by issuance of the demand notice dated 16th January, 2017 was valid and maintainable, given that the notice was sent to an address different from that specified in the guarantee deed; (b) Whether the application filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 (the Code) for initiating insolvency resolution process against the personal guarantor was barred by limitation, considering the date of default as 31st January, 2017 and the subsequent issuance of a notice under Rule 7 dated 9th September, 2021; (c) Whether the period of limitation for filing the Section 95 application was extended by virtue of acknowledgements of debt made through balance sheets signed by the Corporate Debtor and the Insolvency Resolution Professional (IRP) during the pendency of the insolvency resolution process; (d) The applicability and interpretation of Section 18 of the Limitation Act, 1963, and the relevant clauses in the guarantee deed regarding acknowledgment of debt and its binding effect on the guarantor. 2. ISSUE-WISE DETAILED ANALYSIS (a) Validity of Invocation of Guarantee Notice Dated 16th January, 2017 Relevant Legal Framework and Precedents: The invocation of a guarantee requires a valid demand notice to be served on the guarantor. The guarantee deed specified an address for service of notices. Precedents emphasize the necessity of proper service of demand notice for invocation of guarantee. Court's Interpretation and Reasoning: The Tribunal noted that the notice was sent to an address different from that mentioned in the guarantee deed. However, the Appellant did not deny receipt of the notice at the address to which it was sent. The Court observed that the Appellant took a technical plea regarding the address but failed to assert non-receipt of the notice in pleadings before the Tribunal or the Appellate Tribunal. Key Evidence and Findings: The Respondent produced the notice dated 16th January, 2017 sent to the address "Shri Vipin Shersingh Agarwal, Vaishnav Sadan, Bungalow No.2, Vikas Classique CHS, Behind Bansant Cinema, Chembur, Mumbai - 400074." Additionally, the notice under Rule 7 dated 9th September, 2021 was sent to the same address and was received by the Appellant by hand, reinforcing the conclusion that the earlier notice was also received. Application of Law to Facts: The Court held that in the absence of any denial of receipt, it must be presumed that the notice was duly received. The technical objection regarding the address was insufficient to invalidate the invocation of the guarantee. Treatment of Competing Arguments: The Appellant argued that the notice should have been sent to the address in the guarantee deed, or with prior intimation if sent elsewhere. The Court rejected this on the ground of lack of denial of receipt and the fact that subsequent notices were sent to the same address and received. Conclusion: The invocation of the guarantee by the notice dated 16th January, 2017 was valid and maintainable. (b) Limitation Period for Filing Application under Section 95 Relevant Legal Framework and Precedents: Section 95 of the Code read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 governs initiation of insolvency resolution against personal guarantors. The Limitation Act, 1963, particularly Article 137 and Section 18, governs limitation periods and extension by acknowledgment. Court's Interpretation and Reasoning: The default date was 31st January, 2017, making the limitation period expire on 31st January, 2020. The Appellant contended that the application filed on 2nd March, 2022 was barred by limitation and that the limitation should be counted from the date of default, not from the notice dated 9th September, 2021. The Tribunal held that limitation should be counted from the notice dated 9th September, 2021, but even if this was not accepted, the application was within limitation due to acknowledgment of debt. Key Evidence and Findings: The balance sheets of the Corporate Debtor, signed by the Insolvency Resolution Professional post admission under Section 7, acknowledged the debt. Clause 12 of the guarantee deed stated that any acknowledgment or admission of liability by the Corporate Debtor shall be binding on the guarantors. The balance sheets for 2019-2020 were also signed by the Appellant. Application of Law to Facts: Section 18 of the Limitation Act provides that the limitation period restarts from the date of acknowledgment of debt in writing. The Tribunal relied on this provision and the guarantee deed clause to conclude that the limitation period was extended beyond 31st January, 2020. Treatment of Competing Arguments: The Appellant argued that the Tribunal failed to consider the balance sheets and that limitation should start from the default date. The Respondent countered that the Tribunal had considered the pleadings, including the balance sheets, and that the acknowledgment extended limitation. Conclusion: The application under Section 95 was within the period of limitation due to acknowledgment of debt by the Corporate Debtor, which extended the limitation period as per Section 18 of the Limitation Act. (c) Effect of Clause 12 of the Guarantee Deed and Acknowledgment of Debt Relevant Legal Framework: Clause 12 of the guarantee deed stipulates that any balance confirmation, acknowledgment of debt, admission of liability, promise, or part payment by the Corporate Debtor or its authorized agent shall be deemed to be made by the guarantors and binding upon them. Court's Interpretation and Reasoning: The Tribunal observed that the balance sheets signed by the Corporate Debtor's IRP during the insolvency resolution process constituted acknowledgment of debt by the Corporate Debtor, which, per Clause 12, extended to the guarantors. Key Evidence and Findings: The balance sheets for the financial years including 2019-2020 were signed by the Appellant and the IRP, confirming the debt and thereby extending the limitation period. Application of Law to Facts: The Court applied the principle that acknowledgment in writing restarts limitation and held that the guarantor was bound by the acknowledgment made by the Corporate Debtor, as per the guarantee deed. Treatment of Competing Arguments: The Appellant did not dispute the balance sheets but argued that the Tribunal did not consider them in its limitation analysis. The Tribunal clarified that the balance sheets were part of the record and considered. Conclusion: The acknowledgment of debt by the Corporate Debtor, binding on the guarantor under the guarantee deed, extended the limitation period for filing the Section 95 application. 3. SIGNIFICANT HOLDINGS "In the absence of denial on the part of the Appellant that he did not receive the Notice dated 16th January 2017, having been sent on an address different from the one provided in the deed of guarantee, it has to be presumed that the notice was duly received by the Appellant." "Any admission of liability by the borrower shall be deemed to be admission of debt by the guarantor as well." "As per Section 18 of the Limitation Act, the acknowledgement has to be in writing which of course in this case has been signed by the RP on behalf of the Corporate Debtor as well as the guarantor." "The application filed under Section 95 is within the limitation period." Core principles established include: (i) Technical objections regarding the address of service of demand notice for invocation of guarantee are insufficient if the notice is received and there is no denial of receipt; (ii) The limitation period for filing an insolvency application against a personal guarantor under Section 95 of the Code can be extended by written acknowledgment of debt by the Corporate Debtor, which binds the guarantor under the terms of the guarantee deed; (iii) The Insolvency Resolution Professional's signing of balance sheets acknowledging debt during the insolvency process constitutes valid acknowledgment for the purpose of extending limitation under Section 18 of the Limitation Act. Final determinations: - The invocation of the guarantee by the notice dated 16th January, 2017 was valid and maintainable despite being sent to an address different from that in the guarantee deed; - The application under Section 95 was not barred by limitation due to the acknowledgment of debt extending the limitation period; - The Appeal was dismissed for lack of merit.
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