2024 (5) TMI 676 - AT - Insolvency and Bankruptcy

Financial creditor's Section 95 application against personal guarantor upheld despite time-bar challenge under Limitation Act

Shrenik Ashokbhai Morakhia Versus Reliance Asset Reconstruction Company Ltd., Mahesh R. Sureka

NCLAT Principal Bench dismissed appeal challenging admission of Section 95 application filed by financial creditor against personal guarantor. Appellant ... Admission of Section 95 application filed by the Financial Creditor - Personal Guarantor of the Corporate Debtor - date of default - time limitation - Insolvency petition which has been filed by the Financial Creditor has been signed by Resolution Professional who was not the authorized officer of Respondent No.1 - Personal Guarantee dated 25.07.2012 executed by the Appellant in favour of Dena Bank is an unstamped document. Time limitation - Submission of the Appellant is that the Deed of Guarantee dated 25.07.2012 was invoked by Recall Notice dated 04.03.2016, hence, three years’ period of limitation ended on 04.03.2019 and application filed by the Financial Creditor on 10.08.2021 was barred by time - HELD THAT:- On looking into the Declaration cum Undertaking, which was issued by the Appellant, it is clear that said declaration contained the acknowledgement of debt of the company towards the Financial Creditor. The acknowledgment of debt in writing is sufficient to extend the period of limitation as per Section 18 of the Limitation Act. Thus, the said Declaration cum Undertaking will extend further period of three years from date of undertaking and the application under Section 95 which was filed on 10.08.2021 cannot be said to be barred by time. The Hon’ble Supreme Court by Suo Motu Writ Petition (Civil) No. 03 of 2020 [2021 (3) TMI 497 - SC ORDER] has excluded the period from 15.03.2020 to 28.02.2022 and in the present case the application was filed on 10.08.2021 i.e. during the aforesaid period. The three years’ period from date of Declaration cum Undertaking came to an end on 28.01.2021 i.e. within the period which as excluded by the Hon’ble Supreme Court - thus, the application cannot be said to be barred by time. Insolvency petition which has been filed by the Financial Creditor has been signed by Resolution Professional who was not the authorized officer of Respondent No.1 - HELD THAT:- Section 95(1) permits a creditor to file an application through a Resolution Professional for initiating the insolvency resolution process. Thus, the submission of application by the Financial Creditor through Resolution Professional is clearly permitted by Section 95(1) - there are no defect in the application which warrants dismissal of application on this ground. No defect was pointed out by the Adjudicating Authority to the Financial Creditor, which fact is undisputed. Personal Guarantee dated 25.07.2012 executed by the Appellant in favour of Dena Bank is an unstamped document - HELD THAT:- The Application under Section 7 was filed by the Financial Creditor against the Corporate Debtor with regard to same loan facility, which was admitted by the Adjudicating Authority vide its order dated 19.02.2020. Thus, when Financial Creditor’s status was accepted in Section 7 proceeding and the application under Section 7 was admitted against the Corporate Debtor, the status of Financial Creditor as Assignee of the Bank cannot be questioned by the Appellant in this proceeding. We do not find any substance in the submission of the Appellant. There are no error in the order passed by the Adjudicating Authority admitting Section 95 application. There is no merit in the appeal - appeal dismissed. Issues involved:The appeal challenges the order admitting a Section 95 application filed by the Financial Creditor against the Corporate Debtor. The main issues include the timeliness of the application and the validity of the assignment of debt to the Respondent.Timeliness of Application:The Appellant argues that the application filed on 10.08.2021 is time-barred as the three-year limitation period ended on 04.03.2019. However, the Declaration cum Undertaking issued by the Appellant on 29.01.2018 acknowledged the debt, extending the limitation period as per Section 18 of the Limitation Act. The Declaration cum Undertaking was deemed sufficient to extend the limitation period, making the application filed on 10.08.2021 timely.Authorization of Resolution Professional:The Appellant contends that the insolvency petition was signed by a Resolution Professional who was not an authorized officer of the Respondent. Section 95(1) permits a creditor to file an application through a Resolution Professional for initiating the insolvency resolution process. The Resolution Professional was authorized to sign the application on behalf of the Financial Creditor, as evidenced by the written consent in Form A submitted with the application. The application was found to be in compliance with the legal requirements.Validity of Guarantee and Assignment:The Appellant raised concerns about the validity of the Deed of Guarantee dated 25.07.2012 and the non-disclosure of the Assignment Agreement. However, the acknowledgment of debt by the Appellant through the Declaration cum Undertaking and the acceptance of the Financial Creditor's status in the Section 7 proceeding indicated no fault in admitting the Section 95 application. The status of the Financial Creditor as the Assignee of the Bank was upheld, and no substantial issues were found in the submission made by the Appellant.Conclusion:The National Company Law Appellate Tribunal upheld the order admitting the Section 95 application, finding no errors in the decision of the Adjudicating Authority. The appeal challenging the order was dismissed, concluding that there was no merit in the arguments presented by the Appellant.