Acknowledgment of debt can extend limitation against a personal guarantor, and Covid exclusion kept the insolvency filing timely.

A written acknowledgment of liability in a one-time settlement proposal can extend limitation for proceedings against a personal guarantor where the guarantee terms bind the guarantor to the borrower's acknowledgment. The proposal signed by the director was treated as an acknowledgment of debt, and the later insolvency application under Section 95 of the Insolvency and Bankruptcy Code was held to be within limitation. The limitation period was computed from the acknowledgment date and then adjusted for the Supreme Court's exclusion of limitation during the Covid period, leaving the proceedings timely.

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Issues: (i) Whether the one-time settlement proposal dated 19.03.2018 constituted an acknowledgment of debt extending limitation for proceedings against the personal guarantor. (ii) Whether the application under Section 95 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.

Issue (i): Whether the one-time settlement proposal dated 19.03.2018 constituted an acknowledgment of debt extending limitation for proceedings against the personal guarantor.

Analysis: The proposal was signed by the appellant in his capacity as director of the corporate debtor and referred to the failure of the restructuring package, the lenders' recovery actions, and the borrower's financial distress. In proceedings of this nature, the document was treated as material and capable of amounting to an acknowledgment of liability. The guarantee terms also provided that acknowledgment by the borrower would bind the guarantor.

Conclusion: The proposal amounted to an acknowledgment of debt and extended limitation against the guarantor.

Issue (ii): Whether the application under Section 95 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.

Analysis: The Court accepted the demand notice dated 13.06.2016 as the relevant invocation of the guarantee, but held that the later acknowledgment on 19.03.2018 restarted the limitation period. Three years from that acknowledgment would have expired on 18.03.2021, a period substantially covered by the exclusion of limitation ordered by the Supreme Court for the Covid period. The demand notice under the personal guarantor rules was therefore within time, and the application filed thereafter was not time-barred.

Conclusion: The application under Section 95 was within limitation and the challenge on that ground failed.

Final Conclusion: The insolvency admission against the personal guarantor was upheld because the acknowledgment in the settlement proposal extended limitation and the subsequent proceedings were commenced within the legally available time.

Ratio Decidendi: A written acknowledgment of liability by the borrower, binding on the guarantor under the guarantee terms, extends limitation for proceedings against the personal guarantor, and the computation must also give effect to any applicable exclusion of limitation directed by the Supreme Court.

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