Guarantor Liability Starts on NPA Classification; Limitation Period Resets with Debt Recovery Certificate Under IBC Section 5(7)

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Full Text of the Document

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....The NCLAT affirmed that the guarantor's liability arose upon classification of the loan account as an NPA on 31.10.2015, with limitation commencing from the issuance of the Debt Recovery Certificate (DRC) dated 09.07.2019. Applying the Apex Court's exclusion of the COVID-19 period (15.03.2020 to 28.02.2022), the proceedings initiated on 05.07.2023 fall within the prescribed limitation. The DRC conferred fresh cause of action, establishing the certificate holder as Financial Creditor under Section 5(7) of the IBC, 2016. Notices issued under Rule 7 and Section 13(2) of the SARFAESI Act were valid and continuous, negating any limitation or procedural defect claims. The Tribunal's findings on limitation and notice issuance were upheld as free f.........