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

NCLAT Principal Bench dismissed appeal challenging admission of Section 95 application filed by financial creditor against personal guarantor. Appellant argued application was time-barred as guarantee was invoked in 2016 making three-year limitation period expire in 2019, but application filed in 2021. NCLAT held Declaration cum Undertaking constituted acknowledgment of debt under Section 18 Limitation Act, extending limitation period. Supreme Court's COVID-19 exclusion order further protected application from time bar. Court rejected challenges regarding resolution professional's authority to file application and unstamped guarantee document, noting financial creditor's status was established in earlier Section 7 proceedings against corporate debtor.

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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.

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