Limitation law: contractual guarantee claims are time-barred; parallel SARFAESI/DRT proceedings do not exclude limitation.

Applications under the contractual guarantee regime filed on 05.04.2023 were held time-barred under the limitation governing contracts because the right to proceed against guarantors accrued on invocation of the guarantee and on declaration of default/NPA, and no lawful tolling was shown; accordingly the applications were not maintainable. The contention that parallel enforcement proceedings before SARFAESI/DRT excluded limitation under the doctrine permitting exclusion where a party was prevented from prosecuting its remedy was rejected because the facts did not establish prevention from prosecuting the Section 94 remedy; therefore exclusion of time was not attracted and the appeals fail on limitation grounds.

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Issues: (i) Whether applications filed under Section 94 of the Insolvency and Bankruptcy Code, 2016 by personal guarantors on 05.04.2023 are barred by limitation under Article 137 of the Limitation Act; (ii) Whether the pendency of SARFAESI/DRT/related proceedings can exclude time under the doctrine in Sesh Nath Singh (i.e. exclusion under Section 14 principles) so as to render the Section 94 applications within limitation.

Issue (i): Whether the Section 94 applications filed on 05.04.2023 are time-barred under Article 137 of the Limitation Act.

Analysis: Article 137 prescribes a three-year limitation period for suits founded on a contract or other liability. The right to proceed against guarantors accrued on invocation of the guarantee and on realization of default facts (including declaration of NPA and invocation dates). The applications were filed several years after the dates on which the guarantees were invoked and after the dates when NPA was declared. The delay was not shown to have been tolled by any event that would lawfully extend or exclude the limitation period.

Conclusion: The Section 94 applications filed on 05.04.2023 are barred by limitation and therefore not maintainable. This conclusion is against the appellants (in favour of the respondents).

Issue (ii): Whether the pendency of proceedings under the SARFAESI Act/DRT prevented the running of limitation for the Section 94 applications by operation of the principles in Sesh Nath Singh.

Analysis: The Sesh Nath Singh principle concerning exclusion under Section 14 applies where proceedings were prosecuted in a wrong forum or where the party was prevented from proceeding in the chosen forum by reasons that justify exclusion. The facts here show independent proceedings under the SARFAESI Act and pending OAs before the DRT; however, those proceedings do not operate to automatically exclude the limitation for a Section 94 application. The circumstances relied upon do not establish that the appellants were prevented from prosecuting their Section 94 rights within the statutory period so as to attract exclusion under the Sesh Nath Singh reasoning.

Conclusion: The doctrine in Sesh Nath Singh does not apply to exclude time in these cases; the contention based on pendency of SARFAESI/DRT proceedings is rejected. This conclusion is against the appellants (in favour of the respondents).

Final Conclusion: The appeals are dismissed for being time-barred; the Section 94 applications filed on 05.04.2023 are barred by limitation and the proviso relied upon from Sesh Nath Singh is inapplicable in the present factual matrix.

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