Limitation for Section 95 application commences from actual invocation of guarantee, not mere intimation of default.

The Appellant is a Personal Guarantor for M/s. Smaat India Pvt. Ltd. (Corporate Debtor), which received financial assistance of Rs. 6.39 crores from NABARD (Respondent No. 1) in December 2012

The Appellant executed a Personal Guarantee Deed on January 11, 2013, and subsequently resigned as a Director of the Corporate Debtor on April 1, 2013

Following a default by the Corporate Debtor, NABARD initiated proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) for the recovery of Rs. 6,24,89,526/-

The Appellant challenged the National Company Law Tribunal’s (NCLT) order dated February 20, 2025, which admitted the insolvency resolution process against him, primarily on the grounds of limitation

1. Whether the insolvency resolution process initiated under Section 95 of the IBC was barred by limitation under Article 137 of the Limitation Act, 1963

2. Whether the communications sent by the Creditor in 2016 and 2018 constituted a "loan recall notice" or "invocation of guarantee" for the purposes of determining the starting point of limitation

The court applied Section 95 of the Insolvency and Bankruptcy Code, 2016, which governs the initiation of insolvency resolution processes against personal guarantors

It specifically referred to Section 95(4)(b) regarding the mandatory issuance of a demand notice to the debtor before filing an application

For the calculation of the limitation period, the court relied on Article 137 of the Limitation Act, 1963, which provides a three-year residual period from the date the right to apply accrues

The court evaluated three critical communications to determine the "cut-off" date for limitation.

First, it rejected the Appellant's contention that a letter dated January 29, 2016, triggered limitation, noting it was addressed to the Corporate Debtor—not the Appellant—and merely expressed an "intention" or "entitlement" to recall the loan rather than an actual recall

Second, the court dismissed the letter dated November 30, 2018, as a trigger point because it was an intimation of potential legal action and did not satisfy the requirements of a demand notice under Section 95(4)(b) of the IBC

Finally, the court identified the letter dated August 3, 2020, as the definitive invocation of the guarantee, as it explicitly stated, "We therefore, hereby invoke the aforesaid guarantee"

Connecting the law to these facts, the court reasoned that the right to apply accrued on August 3, 2020; therefore, the Section 95 application filed on February 9, 2023, fell within the three-year window prescribed by Article 137 of the Limitation Act

The court answered the issue of limitation against the Appellant, found the appeal lacking in merit, and dismissed it, thereby upholding the NCLT's order admitting the insolvency process

All pending interlocutory applications were closed