Limitation for personal guarantor insolvency runs from demand-triggered default, and authorised bank filing was upheld

In proceedings under Section 95 of the Insolvency and Bankruptcy Code against a personal guarantor, limitation runs from the demand-triggered default fixed by the contract of guarantee, not necessarily from the principal borrower's default; on that basis, the application was within time. The filing was also upheld because the signatory acted under the bank's internal delegation and authorised signing framework, so the objection to authority failed. The insolvency proceedings against the personal guarantors were therefore sustained without interference.

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Issues: (i) whether the application under Section 95 of the Insolvency and Bankruptcy Code, 2016 against the personal guarantor was barred by limitation; (ii) whether the application was filed by a duly authorised person on behalf of the creditor bank.

Issue (i): whether the application under Section 95 of the Insolvency and Bankruptcy Code, 2016 against the personal guarantor was barred by limitation

Analysis: The liability of a guarantor is governed by the terms of the contract of guarantee, and the date of default for the guarantor may differ from that of the principal borrower. The guarantee deed in question was a continuing guarantee and made payment by the guarantor exigible on demand. The personal guarantor was served with a demand notice under Section 13(2) of the SARFAESI Act, and the subsequent notice under Rule 7(1) of the 2019 Rules recorded the debt as due on that demand date with default following on expiry of the stipulated period. On that basis, the Section 95 application filed later was within time.

Conclusion: The limitation objection was rejected and the application was held to be within limitation.

Issue (ii): whether the application was filed by a duly authorised person on behalf of the creditor bank

Analysis: The filing was supported by an authority letter issued in accordance with the bank's internal delegation and the public notification conferring signing power on officers of the relevant grade under the State Bank of India framework. The objection that the signatory lacked authority was therefore not accepted.

Conclusion: The application was held to be validly filed by an authorised person.

Final Conclusion: The appeals were found to lack merit, and the insolvency proceedings against the personal guarantors were sustained without interference.

Ratio Decidendi: In proceedings against a personal guarantor, limitation runs from the demand-triggered default fixed by the contract of guarantee, and a filing is valid when instituted by an officer empowered under the bank's authorised signing framework.

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