Acknowledgment of debt and continuing guarantee extend limitation against a personal guarantor; "without prejudice" does not erase liability.

An acknowledgment of debt by the principal borrower within the limitation period extended time for proceedings against the personal guarantor, because the guarantor's liability was coextensive with the borrower's liability. Correspondence dated 07.12.2016, 23.02.2017 and 15.03.2017 was treated as continuing acknowledgment, and the 15.03.2017 letter was read as a whole as a restructuring and settlement proposal. A unilateral request for release from an unconditional, absolute and irrevocable continuing guarantee did not extinguish liability under the guarantee deed. The words "without prejudice" did not negate an otherwise clear acknowledgment of liability.

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Issues: (i) Whether the insolvency proceedings against the personal guarantor were barred by limitation in view of the date of declaration of the account as non-performing asset, and whether subsequent correspondence extended limitation; (ii) Whether the appellant's request for release from the guarantee deed terminated liability under the personal guarantee; (iii) Whether the words "without prejudice" in the letter dated 15.03.2017 negated acknowledgment of liability.

Issue (i): Whether the insolvency proceedings against the personal guarantor were barred by limitation in view of the date of declaration of the account as non-performing asset, and whether subsequent correspondence extended limitation.

Analysis: The correspondence issued by the corporate debtor on 07.12.2016, 23.02.2017 and 15.03.2017 was treated as continuing acknowledgment of liability. The letter dated 15.03.2017 was read as a whole and not in isolation, and its contents showed a live proposal for restructuring and settlement. On that basis, the period of limitation was held to run from the later acknowledgment, not from the date of classification of the account as non-performing asset. The acknowledgment by the principal borrower was held to bind the personal guarantor because the guarantor's liability was coextensive with that of the borrower.

Conclusion: The objection of limitation failed and the proceedings were held to be within time.

Issue (ii): Whether the appellant's request for release from the guarantee deed terminated liability under the personal guarantee.

Analysis: The guarantee deed was treated as an unconditional, absolute and irrevocable continuing guarantee. A unilateral request for release could not override the contractual terms, and the appellant's later communication did not extinguish the liability undertaken under the guarantee. The Court also noted that the alleged revocation letter was not part of the record before the Adjudicating Authority in the manner required for reliance.

Conclusion: The plea of release from the guarantee deed was rejected.

Issue (iii): Whether the words "without prejudice" in the letter dated 15.03.2017 negated acknowledgment of liability.

Analysis: The phrase "without prejudice" was held not to be ative by itself. The letter had to be construed in its entirety, and its substance showed an acknowledgment of liability coupled with proposals for payment and restructuring. The label did not erase the underlying admission where the communication otherwise disclosed a clear debt acknowledgment.

Conclusion: The expression "without prejudice" did not defeat acknowledgment of liability.

Final Conclusion: The impugned order admitting the personal guarantor proceedings was upheld, and no interference was warranted in appellate jurisdiction.

Ratio Decidendi: An acknowledgment of liability by the principal borrower within the limitation period extends limitation under Section 18 of the Limitation Act, 1963 and binds the personal guarantor by virtue of co-extensive liability under Section 128 of the Indian Contract Act, 1872, while a mere "without prejudice" label does not negate an otherwise clear acknowledgment of debt.

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