NCLT Mumbai dismisses Bank of Maharashtra’s insolvency plea against personal guarantor as time-barred

The Mumbai Bench of the National Company Law Tribunal (Court III) has dismissed a petition filed by Bank of Maharashtra seeking initiation of insolvency resolution proceedings against Sunil Kumar Prabhakaran Menon, the personal guarantor of Narayana Farm Produce Private Limited, holding that the application was ex facie barred by limitation.

Background

The petition was filed under Section 95 read with Section 100 of the Insolvency and Bankruptcy Code, 2016, in respect of an alleged default amounting to approximately ₹228.48 crore. The Financial Creditor relied on loan facilities extended to the principal borrower in 2010, secured by a continuing personal guarantee executed by the respondent. While the Tribunal noted that the existence of debt and execution of the personal guarantee were undisputed, the core issue before the Bench was whether the petition had been filed within the prescribed limitation period. The Tribunal observed that the personal guarantee stood invoked through a demand notice issued under Section 13(2) of the SARFAESI Act on August 20, 2013, which granted 60 days for repayment. Accordingly, the cause of action arose on October 19, 2013.

Tribunals Finding

The Bench held that the limitation period of three years, as prescribed under Article 137 of the Limitation Act, 1963, expired on October 18, 2016. Since the Section 95 petition was filed only on September 14, 2022, nearly six years after expiry of limitation, the application was not maintainable. Rejecting the Financial Creditor’s reliance on subsequent correspondence and demand notices, the Tribunal clarified that a Form-B demand notice under the IBC cannot be treated as a valid invocation of a personal guarantee for limitation purposes. The Bench also relied on the Supreme Court’s reiteration of the mandatory nature of limitation law and its own earlier decision involving another guarantor for the same loan transaction.

Consequently, the Tribunal dismissed the petition, held that no insolvency resolution process stood initiated against the personal guarantor, and declared that the moratorium under Section 96 of the Code would cease to operate.