Limitation in personal guarantor insolvency must track default and acknowledgments; Form B notice does not itself invoke the guarantee.

Limitation for applications under Section 95 of the Insolvency and Bankruptcy Code is to be computed under Article 137 of the Limitation Act from the legally cognizable default, with any valid acknowledgment or fresh cause of action from a decree examined on the record. A Form B demand notice under the personal guarantor insolvency rules does not by itself invoke the guarantee; invocation must follow the guarantee deed. Because the tribunal had not dealt with the alleged acknowledgments, claim admission, and the effect of the decree on limitation, the matter required fresh adjudication and the impugned orders could not be sustained.

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Issues: (i) whether the applications under Section 95 of the Insolvency and Bankruptcy Code, 2016 against the personal guarantors were barred by limitation; (ii) whether the demand notice in Form B could be treated as invocation of the guarantee and whether the decree obtained under the Gujarat Co-operative Societies Act, 1961 and subsequent acknowledgments affected limitation.

Issue (i): whether the applications under Section 95 of the Insolvency and Bankruptcy Code, 2016 against the personal guarantors were barred by limitation

Analysis: Limitation under the Code is governed by Article 137 of the Limitation Act, 1963, and the right to initiate insolvency proceedings accrues when default occurs. A decree or judgment for money may provide a fresh cause of action, but the actual limitation computation must account for the operative dates, any exclusion of time during the COVID-19 period, and any valid acknowledgment of liability made before expiry of the then current limitation period. The record showed that the adjudicating authority did not address the effect of the alleged acknowledgments dated 17.03.2022 and 12.07.2022 or the claim admission in the corporate debtor's CIRP before concluding on limitation.

Conclusion: The limitation question was not correctly or fully determined and required fresh adjudication.

Issue (ii): whether the demand notice in Form B could be treated as invocation of the guarantee and whether the decree obtained under the Gujarat Co-operative Societies Act, 1961 and subsequent acknowledgments affected limitation

Analysis: A personal guarantor becomes liable only when the guarantee is invoked in terms of the guarantee deed, and Form B notice under the personal guarantor insolvency rules is not a substitute for invocation of guarantee. The earlier decree based on the summary suit could constitute a fresh starting point for limitation, but its effect could not be concluded in isolation because the tribunal below had also omitted to examine the alleged acknowledgments and claim admission relied upon by the creditor. In the absence of findings on these material aspects, the limitation defence could not be finally resolved.

Conclusion: Form B notice could not by itself amount to invocation of guarantee, and the impact of the decree and acknowledgments on limitation remained undecided on the present record.

Final Conclusion: The impugned orders could not be sustained and the matters were sent back for a reasoned decision after considering the limitation issues afresh.

Ratio Decidendi: In proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016, limitation must be computed from a legally cognizable default and any valid acknowledgment or decree affecting limitation must be specifically examined; a Form B demand notice does not itself invoke the guarantee.

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