Tribunal dismisses challenge on Guarantor's guarantee under Insolvency and Bankruptcy Code

The National Company Law Tribunal dismissed the Appellant's challenge under Section 94 of the Insolvency and Bankruptcy Code, 2016. The Tribunal found that the notice under Section 13(2) of the SARFAESI Act did not invoke the guarantee against the Guarantor, as it pertained to enforcing security interest on mortgaged property. Due to the Bank's inaction within the limitation period specified by the Limitation Act, the Tribunal concluded that the guarantee was not invoked. As no action was taken against the Guarantor, the Tribunal rejected the application to initiate Corporate Insolvency Resolution Process, as the Bank had already admitted the Section 10 Application against the Corporate Debtor.

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Issues:
1. Appellant challenging National Company Law Tribunal's order under Section 94 of the Insolvency and Bankruptcy Code, 2016.
2. Interpretation of notice under Section 13(2) of the SARFAESI Act in relation to Guarantor's liability.
3. Applicability of the Limitation Act in invoking the guarantee against the Guarantor.
4. Justification for rejecting the Appellant's application under Section 94 for initiating Corporate Insolvency Resolution Process.

Analysis:
1. The Appellant, a Guarantor of the Corporate Debtor, challenged the National Company Law Tribunal's order under Section 94 of the Insolvency and Bankruptcy Code, 2016. The Tribunal dismissed the Appellant's application relying on the Resolution Professional's report, which recommended rejection of the application.

2. The key issue revolved around the interpretation of the notice dated 04.10.2013 under Section 13(2) of the SARFAESI Act. The Appellant argued that the notice invoked the guarantee against him as a Personal Guarantor, as he was mentioned in the notice alongside the Corporate Debtor. However, the Bank contended that the notice was for enforcing security interest related to mortgaged property, not for invoking the guarantee against the Appellant.

3. The Applicability of the Limitation Act was crucial in determining the validity of invoking the guarantee against the Guarantor. The Resolution Professional highlighted the importance of the Limitation Act, stating that the Bank had not taken any steps to recover dues from the Appellant within the limitation period stipulated by the Act. The RP concluded that the Bank had not invoked the guarantee against the Appellant.

4. Ultimately, the Tribunal found that the foundation laid by the Appellant for initiating the Corporate Insolvency Resolution Process was insufficient. The Bank had not taken any action against the Appellant for recovery of dues, and the notice from 2013 did not result in invoking the guarantee. As the Bank's position was clear that no steps were taken against the Appellant, the Tribunal dismissed the Appeal, stating that there was no cause to initiate CIRP against the Personal Guarantor. The Section 10 Application against the Corporate Debtor had already been admitted, further supporting the dismissal of the Section 94 Application.

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