Service of guarantee notice and balance sheet acknowledgements extended limitation, defeating the personal guarantor's challenge

A personal guarantor could not avoid service of a guarantee invocation notice by objecting only to the address used, where receipt of the notice was not specifically denied and related notices were received at the same address. The notice was therefore treated as duly served. Limitation for the Section 95 IBC application was also held to be extended by written acknowledgements in balance sheets made within the limitation period, because such acknowledgements attract Section 18 of the Limitation Act, 1963 and, under the guarantee deed, bound the guarantor. On both service and limitation, the challenge failed and the impugned order was affirmed.

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Issues: (i) Whether the notice invoking the guarantee was duly served on the personal guarantor despite being sent to an address different from the one stated in the guarantee deed; (ii) Whether the application under Section 95 of the Insolvency and Bankruptcy Code, 2016 was within limitation in view of the alleged acknowledgements in the balance sheets.

Issue (i): Whether the notice invoking the guarantee was duly served on the personal guarantor despite being sent to an address different from the one stated in the guarantee deed.

Analysis: The guarantor did not specifically deny receipt of the notice dated 16 January 2017. The objection was confined to the address used for service. The same address was also used for the subsequent notice under Rule 7 of the 2019 Rules, which was received by hand. In the absence of a categorical denial of receipt, and in light of the surrounding circumstances, service of the invocation notice was treated as duly effected.

Conclusion: The notice invoking the guarantee was held to have been duly received by the appellant.

Issue (ii): Whether the application under Section 95 of the Insolvency and Bankruptcy Code, 2016 was within limitation in view of the alleged acknowledgements in the balance sheets.

Analysis: The default date was treated as 31 January 2017, but the limitation period was held to have been extended by acknowledgements made in the balance sheets during the subsistence of limitation. The guarantee deed itself provided that acknowledgements by the borrower would bind the guarantor. Since acknowledgements in writing attract Section 18 of the Limitation Act, 1963, each valid acknowledgement gave rise to a fresh period of limitation. The application was therefore not treated as time-barred.

Conclusion: The application under Section 95 was held to be within limitation.

Final Conclusion: The impugned order was affirmed and the challenge failed on both service and limitation.

Ratio Decidendi: A personal guarantor cannot avoid service of an invocation notice by a mere technical objection to the address when receipt is not specifically denied, and a written acknowledgement of debt in balance sheets, made within the limitation period, extends limitation under Section 18 of the Limitation Act, 1963 and binds the guarantor where the guarantee deed so provides.

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