Bank's Section 95 applications against personal guarantors upheld despite limitation and authorization challenges

NCLAT dismissed appeals challenging Section 95 applications filed by a bank against personal guarantors. The tribunal held that the Section 95 petition filed on 18.06.2022 was within limitation period as the guarantee was on-demand nature and limitation commenced from the demand notice dated 04.06.2021, with default occurring on 04.08.2021 after expiry of 60-day notice period. The application was validly filed by an AGM authorized under SBI regulations and Gazette notification dated 02.05.1987, which empowered SMGS-IV grade officers and above to sign documents for bank business. All technical objections regarding authorization and limitation were rejected.

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Issues Involved:

1. Whether the Section 95 application filed by the Respondent No. 1 Bank was time-barred.
2. Whether the Section 95 application was filed by a duly authorized person.

Issue-wise Detailed Analysis:

1. Time-Barred Application:

The primary contention of the Appellant was that the Section 95 application filed by the Respondent No. 1 Bank was time-barred. The Appellant argued that the date of default mentioned in the application was 31.07.2013, and thus the three-year limitation period expired in 2016. The Appellant further contended that any acknowledgment of debt after the expiration of the limitation period, such as the letter dated 11.01.2022, could not revive or extend the limitation period. The Respondent No. 1 Bank argued that the Personal Guarantee was invoked through a Demand Notice dated 04.06.2021 under Section 13(2) of the SARFAESI Act, and since the Appellant did not make the payment within the stipulated period, the application filed on 18.06.2022 was within the limitation period.

The Tribunal examined the Deed of Guarantee and noted that it was a continuing guarantee, and the liability of the guarantor was to be read from the Deed of Guarantee. The Tribunal referred to the judgment in Pooja Ramesh Singh Vs. State Bank of India, which stated that the liability of a guarantor stems from the contract of guarantee, and the date of default can differ from that of the principal borrower. The Tribunal concluded that the Demand Notice dated 04.06.2021 was a valid invocation of the guarantee, and the Section 95 application filed on 18.06.2022 was within the limitation period as the default occurred on 04.08.2021, the expiry of the period specified in the Demand Notice.

2. Authorization of the Application:

The Appellant challenged the validity of the Section 95 application on the ground that it was signed by an Assistant General Manager (AGM) of the Respondent No. 1 Bank, who was allegedly not authorized to do so. The Appellant argued that the application did not disclose the authority under which the AGM signed the application, and the Authority Letter was not backed by a resolution from the Central Board of Directors of the Respondent No. 1 Bank.

The Respondent No. 1 Bank countered this argument by stating that the AGM was authorized to file the application as per a Gazette Notification dated 02.05.1987, issued under the State Bank of India General Regulations, 1955. This notification authorized officers in the grade of SMGS-IV and above to exercise signing power in respect of documents connected with the bank's business. The Tribunal found this explanation satisfactory and held that the Section 95 application was validly filed by an authorized person.

Conclusion:

The Tribunal dismissed the appeals filed by the Appellant, holding that the Section 95 application was neither time-barred nor filed by an unauthorized person. The Tribunal found no merit in the Appellant's arguments and upheld the impugned orders initiating the insolvency resolution process against the Personal Guarantor. The appeals were dismissed without costs.

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