A guarantor’s unilateral OTS proposal cannot extend limitation under Section 18 of the Limitation Act.

The Appellant, a personal guarantor of OSIL Exports Limited (“Corporate Debtor”), had executed deeds of personal guarantee dated 21 May 2014 and 21 February 2015 in favour of a consortium of five banks led by Bank of India.

The Corporate Debtor’s loan account was classified as an NPA on 31 December 2015. Bank of India’s application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) was admitted on 31 January 2018, and the Corporate Debtor was ordered into liquidation on 17 October 2019 after no viable resolution plan was approved.

Bank of India invoked the Appellant’s personal guarantee through a demand notice under Section 13(2) of the SARFAESI Act on 10 September 2019 and subsequently took symbolic possession of her assets under Section 13(4) on 25 November 2019.

The Appellant submitted one-time settlement proposals on 16 April 2021 and 3 April 2023.

The Appellant filed an application under Section 94 of the IBC in December 2025. Although the Resolution Professional appointed under Section 97 recommended admission of the application, Bank of India objected that it was barred by limitation. The National Company Law Tribunal, Chandigarh Bench, dismissed the application on 26 May 2026, holding that the limitation period had commenced upon invocation of the guarantee and had expired on 9 September 2022.

During the appeal, the Liquidator issued an auction notice dated 30 June 2026 for the leasehold rights in the subject property and the building constructed thereon. The Appellant challenged the auction notice through I.A. No. 4477 of 2026.

Whether the Appellant’s application under Section 94 of the IBC was barred by limitation, and whether limitation commenced from the invocation of the personal guarantee under the SARFAESI Act?

Whether the Appellant’s OTS proposals constituted an acknowledgment of liability under Section 18 of the Limitation Act, 1963, capable of extending or renewing the limitation period in her favour?

Whether the pendency of liquidation proceedings against the Corporate Debtor or recovery proceedings against the Appellant kept the guaranteed debt enforceable so as to preserve the right to file a Section 94 application?

Whether the Appellant was entitled to challenge or obtain a stay of the Liquidator’s auction notice in the pending appeal?

Section 94 of the IBC permits a personal guarantor to initiate insolvency resolution proceedings, but such an application is subject to limitation under Article 137 of the Limitation Act, 1963, which prescribes a three-year period for applications.

For a personal guarantor, the cause of action arises upon invocation of the guarantee, including through a notice under Section 13(2) of the SARFAESI Act; the pendency of recovery or liquidation proceedings does not indefinitely postpone limitation.

Section 18 of the Limitation Act extends limitation only where, before expiry of the prescribed period, an acknowledgment of liability is made in writing and signed by the party against whom the right is claimed. A party cannot rely on its own unilateral act or acknowledgment to extend limitation in its own favour.

The Tribunal relied on Zameer Pawan Kumar Agarwal v. Pankaj Prabhudayal Goenka (RP) & Ors., Yogesh Kumar Thakkar v. Indian Overseas Banks & Ors., and Suyog Jain v. Arvind Kumar, which recognise that limitation for proceedings by a personal guarantor under Section 94 commences from invocation of the guarantee and that an OTS proposal made by the guarantor does not extend limitation in the guarantor’s favour.

The Tribunal also noted that the Liquidator may deal with contractual and proprietary interests forming part of the liquidation estate under Sections 36(3)(d) and 3(27) of the IBC, subject to applicable law.

The Appellant admitted that her guarantee was invoked on 10 September 2019. Applying Article 137, the Tribunal held that the three-year limitation period for filing the Section 94 application expired on 9 September 2022.

The Appellant’s reliance on the OTS proposals dated 16 April 2021 and 3 April 2023 was rejected because those proposals were her own admissions and were not acknowledgments made by the creditor against whom the right was asserted.

Under Section 18, the acknowledgment must be made and signed by the party against whom the right is claimed; a debtor or guarantor cannot unilaterally reset limitation by making an OTS proposal.

The Tribunal further held that the pendency of the Corporate Debtor’s liquidation and recovery proceedings did not prevent limitation from running after invocation of the guarantee. Since the Section 94 application was filed only in December 2025, it was clearly beyond the prescribed period.

In consequence, the Tribunal found it unnecessary to examine the Respondents’ allegations that the application had been filed to trigger the interim moratorium under Section 96 and obstruct the proposed auction.

It held that the Section 94 application was barred by limitation because limitation commenced upon invocation of the personal guarantee on 10 September 2019 and expired on 9 September 2022.

The OTS proposals did not extend limitation under Section 18 of the Limitation Act because they were unilateral admissions made by the Appellant herself.

I.A. No. 4477 of 2026 challenging the auction notice was also dismissed, and all pending interlocutory applications were disposed of. There was no order as to costs.