Personal guarantees and insolvency limitation: demand notice, moratorium exclusion, and balance-sheet acknowledgment sustained the insolvency application.

A Section 13(2) demand notice addressed to the corporate debtor and personal guarantors, and referring to the guarantee deed, was treated as a valid invocation of the personal guarantees. The moratorium under Section 14 of the Insolvency and Bankruptcy Code did not protect personal guarantors, because the statutory bar applies to the corporate debtor and expressly excludes sureties in a contract of guarantee. Limitation for the Section 95 insolvency application was extended by acknowledgment of debt in successive balance sheets, and the recovery certificate also supplied a fresh cause of action. The insolvency application against the personal guarantors was therefore upheld.

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Issues: (i) Whether the notice under Section 13(2) of the SARFAESI Act constituted an invocation of the personal guarantees executed by the appellants; (ii) Whether the moratorium in the corporate insolvency resolution process barred proceedings and the recovery certificate against the personal guarantors; (iii) Whether the application under Section 95 of the Insolvency and Bankruptcy Code was within limitation.

Issue (i): Whether the notice under Section 13(2) of the SARFAESI Act constituted an invocation of the personal guarantees executed by the appellants.

Analysis: The notice was addressed to the corporate debtor as well as the personal guarantors and specifically recorded that the financial assistance was secured by their personal guarantees. It called upon them to discharge the outstanding liability within the stipulated period and referred to the guarantee deed in the schedule. The later restructuring and fresh guarantee did not displace the earlier continuing guarantee, since the restructuring documents modified the existing documents only to the extent of inconsistency, and no such inconsistency was shown in the guarantee obligation.

Conclusion: The notice under Section 13(2) validly invoked the personal guarantees, and this contention failed.

Issue (ii): Whether the moratorium in the corporate insolvency resolution process barred proceedings and the recovery certificate against the personal guarantors.

Analysis: The moratorium under Section 14 operates in relation to the corporate debtor, and the statutory text specifically excludes a surety in a contract of guarantee to a corporate debtor from its protection. The recovery proceedings and the recovery certificate, therefore, could not be treated as void merely because CIRP had commenced against the corporate debtor.

Conclusion: The moratorium did not bar proceedings against the personal guarantors, and this challenge failed.

Issue (iii): Whether the application under Section 95 of the Insolvency and Bankruptcy Code was within limitation.

Analysis: The debt was acknowledged in the corporate debtor's balance sheets for successive financial years, and such acknowledgment extended limitation under Section 18 of the Limitation Act. The recovery certificate also provided a fresh cause of action. On that basis, the application was held to be within time.

Conclusion: The Section 95 application was within limitation, and this contention failed.

Final Conclusion: The order admitting the insolvency application against the personal guarantors was upheld, and the appeals were dismissed.

Ratio Decidendi: A demand notice under Section 13(2) addressed to the borrower and personal guarantors and calling upon them to pay the secured dues can operate as a valid invocation of the personal guarantee; the moratorium under Section 14 of the Insolvency and Bankruptcy Code does not extend to personal guarantors; and acknowledgment of debt in balance sheets can extend limitation against the guarantor where the guarantee and surrounding circumstances support such extension.

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