Limitation Period For Both Corporate Debtor And Personal Guarantor Will Commence From Same Date: NCLT Hyderabad

The NCLT Hyderabad bench of Sri Rajeev Bhardwaj and Sri Sanjay Puri has held that the Personal Guarantor should be treated on an equal legal footing with the Corporate Debtor, as it is clearly established by the law that the liability of Corporate Debtor and Personal Guarantor are co-extensive in nature. The petitioner submitted that the Guarantee Agreement is a guarantee "on demand", and the limitation period in respect thereof commences from the date of demand by the Petitioner and that the present Petition satisfies all the ingredients of Section 95 of IBC Decision of The Tribunal: In State Bank of India v. Ghanshyam Surajbali Kurmi, 2022 this tribunal has held that “the Financial Creditor is also at liberty to initiate Insolvency Resolution Process against the Personal Guarantor; the resolution plan approved by the Adjudicating Authority is not for recovery but for revival. Further as per Section 134 of the Indian Contract Act, 1872, a guarantor is discharged of its liability towards the creditor only if the creditor on its own instance discharges the principal debtor through voluntary act of the creditor and not due to operation of law.” Further, the Supreme court in Lalit Kumar Jain v. Union of India & others, 2021 has held that It is therefore clear that the sanction of a resolution plan and finality imparted to it by Section 31 does not per se operate as a discharge of the guarantor's liability. Notwithstanding the foregoing reference, the tribunal further observed that “such discharge shall be limited to the Corporate Debtor and shall not operate to release the persons who have provided guarantees, from their obligations to satisfy any payments to the creditors as mandated by the terms of the relevant contracts to which they are parties.” The tribunal also noted that in cases of unequivocal guarantees, the guarantor's liability persists, and in the present case, there is no contract between the FC and the Corporate Debtor that could discharge the guarantor under Section 134 of the Indian Contract Act, 1872. The tribunal further noted that “the Personal Guarantor should be treated on an equal legal footing with the Corporate Debtor, as it is clearly established by the law that the liability of Corporate Debtor and Personal Guarantor are co-extensive in nature” It was observed “therefore, the provisions of the Limitation Act, the tribunal observed, must be applied consistently to both the Corporate Debtor and the Personal Guarantor.