Acknowledgment of debt and prior recall notice can extend limitation and validly invoke personal guarantees in insolvency proceedings.

An acknowledgment of liability in a borrower's one-time settlement reply can extend limitation under section 18 of the Limitation Act, 1963, so the section 95 application was treated as timely after excluding the Covid period. A prior recall notice addressed to the borrower and guarantors, calling for payment and stating that the bank could proceed against them, was treated as a valid invocation of the personal guarantees. The later notice under rule 7(1) of the Personal Guarantors Rules was only the mandatory pre-filing notice for the insolvency process, not the first invocation of the guarantee. On that basis, the limitation and non-invocation objections failed.

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Issues: (i) Whether the application under section 95 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation; (ii) whether the prior notice dated 29.11.2013 validly invoked the personal guarantees, apart from the statutory notice required under rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.

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

Analysis: The limitation question was examined with reference to the recovery certificate dated 27.06.2019 and, alternatively, the borrower's reply dated 23.09.2019 to the bank's one-time settlement proposal. The exclusion of the Covid period directed by the Supreme Court was also taken into account. The communication dated 23.09.2019 was treated as an acknowledgment of debt, which renewed the period of limitation under section 18 of the Limitation Act, 1963. On that basis, the filing of the application on 10.08.2024 was held to be within time.

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

Issue (ii): Whether the prior notice dated 29.11.2013 validly invoked the personal guarantees, apart from the statutory notice required under rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.

Analysis: The notice dated 29.11.2013 was read as a recall notice addressed to the borrower and the guarantors, calling upon them to pay the dues and expressly stating that the bank could proceed against the mortgaged properties and the guarantors. The later notice under rule 7(1) was treated as the mandatory statutory notice for initiating the section 95 process, not as the first invocation of the guarantee. The record therefore showed that the guarantees had already been invoked before the section 95 application.

Conclusion: The objection that the guarantees had not been invoked was rejected.

Final Conclusion: The appeals failed on both limitation and notice, and the impugned order accepting the section 95 process was sustained.

Ratio Decidendi: A written acknowledgment of liability in the course of an OTS proposal can extend limitation under section 18 of the Limitation Act, 1963, and a prior recall notice addressed to guarantors can validly constitute invocation of the guarantee, while the rule 7 notice remains only the statutory pre-filing notice.

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