Continuing guarantee remains enforceable despite renewal of credit facilities, with no novation or discharge on mere variation.

A continuing guarantee remained enforceable for renewals and variations of the underlying credit facilities where the guarantor had agreed that extensions of time and reallocation of limits would not discharge liability. No novation or discharge arose because the later sanction letters were treated as renewals of the existing arrangement, and there was no written revocation of the guarantee in the prescribed manner. The insolvency application under Section 95 of the Insolvency and Bankruptcy Code, 2016 was within limitation because the Section 13(2) SARFAESI notice was treated as the operative trigger for default, and parallel SARFAESI proceedings did not bar recourse under the Code given its overriding effect. Admission against the personal guarantor was therefore upheld.

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Issues: Whether the personal guarantor's liability continued under a continuing guarantee despite subsequent renewal or variation of the credit facilities, whether there was novation or discharge of the guarantee, and whether the application under Section 95 of the Insolvency and Bankruptcy Code, 2016 was within limitation and fit to be admitted.

Analysis: The guarantee deed was found to be a continuing guarantee covering future transactions and renewals within the sanctioned limit. The guarantor had agreed that variations in the loan terms, including extension of time and reallocation of limits, would not discharge the contractual obligation. In the absence of any written revocation of the guarantee, the later sanction letters were treated as renewal of the existing facilities and not as novation under the Contract Act. The invocation notice under Section 13(2) of the SARFAESI Act, 2002 was treated as the operative trigger for default, and the insolvency application filed thereafter was held to be within limitation. The pendency of SARFAESI proceedings did not bar the insolvency application in view of the overriding effect of the Insolvency and Bankruptcy Code, 2016.

Conclusion: The guarantee remained enforceable, there was no novation or discharge, the application was within limitation, and admission of the insolvency resolution process against the personal guarantor was upheld.

Ratio Decidendi: A continuing guarantee remains enforceable for subsequent renewals and variations of the underlying facility unless revoked in the manner prescribed by law, and such liability is not displaced by mere renewal of credit terms or parallel recovery proceedings.

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