### Limitation for Section 95 Application against Personal Guarantor Commences from Issuance of Demand Notice under Guarantee Deed

The Appellants are Personal Guarantors for Videocon Industries Ltd. (Corporate Debtor), which availed Rupee Term Loan and Working Capital facilities from the State Bank of India (SBI).

Following defaults by the Corporate Debtor in 2016 and the commencement of its CIRP in 2018, SBI issued Demand Certificates to the Appellants on 02.02.2018 and 20.02.2018.

Subsequently, SBI issued statutory demand notices in Form B on 23.07.2020 and filed applications under Section 95 of the IBC on 31.08.2020.

The Adjudicating Authority (NCLT Mumbai) admitted the applications on 04.06.2024 and 14.06.2024.

The Appellants challenged these orders, primarily contending that the debt was time-barred since the limitation period should have commenced from the date of the Principal Borrower’s default in 2016.

Whether an application under Section 95 of the IBC against a Personal Guarantor is barred by limitation if filed more than three years after the default of the Principal Borrower but within three years of the demand notice invoking the guarantee.

The Court applied Section 95 of the Insolvency and Bankruptcy Code (IBC), 2016, regarding the initiation of insolvency resolution processes against personal guarantors.

It relied on the principle from *Syndicate Bank v. Channaveerappa Beleri* (2006) 11 SCC 504, which stipulates that limitation against a guarantor runs from the date of demand and refusal, provided the debt is live against the principal debtor at the time of demand.

The Court also distinguished *Laxmi Pat Surana v. Union Bank of India* (2021) 8 SCC 481, noting it established that a lender’s right to proceed against a guarantor triggers upon the principal borrower’s default, but did not override specific contract clauses requiring a demand notice.

Furthermore, it followed *Pooja Ramesh Singh v. State Bank of India* (2023), holding that if a Guarantee Deed is "on-demand," the default arises only after the demand notice is issued.

The Court rejected the Appellants' argument that the limitation period began automatically on 05.03.2016 when the Principal Borrower first defaulted.

It scrutinized the specific terms of the Deed of Guarantee (Clause 8) and the Supplemental Joint Deed of Guarantee (Clause 2.1), both of which mandated that the Guarantors pay "on demand".

The Court reasoned that while the right to sue may arise upon the principal borrower’s default, the contractually agreed-upon "trigger" for a guarantor’s specific default is the issuance of a demand certificate.

Since the Bank issued the demand notices on 02.02.2018 and 20.02.2018, the cause of action against the Appellants accrued on those dates.

Therefore, the Section 95 applications filed on 31.08.2020 were well within the three-year limitation period prescribed under Article 137 of the Limitation Act.

The Tribunal affirmed the orders of the NCLT Mumbai admitting the Section 95 applications and dismissed both appeals.

No resolution plan is to be finalized until further orders as per previous interim directions.