Case Note & Summary
The National Company Law Appellate Tribunal (NCLAT) heard two appeals filed by IDBI Bank Ltd. against orders of the NCLT, Indore Special Bench, rejecting its Section 95 applications under the Insolvency and Bankruptcy Code, 2016 (IBC) against personal guarantors Hemangi Patel and Noopur Patel. The corporate debtor, Great Logistic and Parking Services Pvt. Ltd., had defaulted on cash credit facilities, leading to NPA classification on 31.03.2016. IDBI Bank issued a guarantee invocation notice to the personal guarantors on 24.10.2016 and filed an Original Application before the Debt Recovery Tribunal (DRT) on 31.03.2017, resulting in a recovery certificate on 25.01.2019. The bank filed Section 95 applications in 2024, which were rejected by the NCLT on the grounds that the guarantee invocation notice and DRT recovery certificate did not constitute a 'debt' under the IBC and that the applications were barred by limitation. The NCLAT held that the guarantee invocation notice and DRT recovery certificate clearly establish a 'debt' under Section 3(10) read with Section 3(11) of the IBC, and 'default' under Section 3(12). The NCLAT also found that the DRT recovery certificate and subsequent correspondence amounted to acknowledgment of debt under Section 18 of the Limitation Act, 1963, extending the limitation period. Consequently, the NCLAT set aside the impugned orders and directed the Adjudicating Authority to admit the Section 95 applications and proceed in accordance with law.
Headnote
A) Insolvency and Bankruptcy Code - Personal Guarantor - Section 95 Application - Debt and Default - Guarantee invocation notice and DRT recovery certificate constitute a 'debt' under Section 3(10) read with Section 3(11) of the IBC, 2016, and default under Section 3(12) of the IBC, 2016 - The Adjudicating Authority erred in holding that the guarantee invocation notice and DRT recovery certificate do not constitute a debt under the IBC - Held that the creditor had established the existence of debt and default, and the Section 95 application was maintainable (Paras 8-10). B) Limitation - Section 95 Application - Acknowledgment of Debt - Section 18 of the Limitation Act, 1963 - The DRT recovery certificate dated 25.01.2019 and subsequent correspondence constitute acknowledgment of debt, extending limitation - The Section 95 application filed in 2024 was within limitation - Held that the application was not barred by limitation (Paras 11-12).
Issue of Consideration
Whether the Adjudicating Authority was correct in rejecting the Section 95 application filed by the creditor against the personal guarantor on the ground that the guarantee invocation notice and DRT recovery certificate do not constitute a debt under the IBC, and whether the application was barred by limitation.
Final Decision
The NCLAT allowed the appeals, set aside the impugned orders dated 05.05.2025, and directed the Adjudicating Authority to admit the Section 95 applications and proceed in accordance with law.
Law Points
- Section 95 of Insolvency and Bankruptcy Code
- 2016
- personal guarantor
- debt
- default
- guarantee invocation notice
- DRT recovery certificate
- Section 3(10) IBC
- Section 3(11) IBC
- Section 3(12) IBC
- Section 7 IBC
- Section 60 IBC
- limitation
- Section 18 of Limitation Act
- 1963
- acknowledgment of debt
