Borrower’s Acknowledgement Extends Limitation Against Personal Guarantor Under Guarantee Clause: NCLAT Principal Bench

The National Company Law Appellate Tribunal upheld insolvency proceedings against a personal guarantor, holding that the borrower’s balance‑sheet acknowledgement bound him under his guarantee deed despite earlier invocation.

The National Company Law Appellate Tribunal (NCLAT) has held that an acknowledgement of debt by the principal borrower extends limitation against a personal guarantor where the guarantee deed expressly makes the borrower’s acknowledgements binding on the guarantor, and has upheld the admission of an application under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) [Manoj Kumar Agarwal v. IL & FS Financial Services Ltd. & Ors., 2026-juristway.com-3374-NCLAT(New Delhi-[PB])-IBC].

Justice Mohammad Faiz Alam Khan, Member (Judicial), wrote the order for a Bench with Naresh Salecha, Member (Technical). IL&FS Financial Services Limited lent to Adhunik Meghalaya Steels Private Limited under an agreement dated 27 Feb 2015, against which ₹24,44,44,456 was disbursed. The account was classified as a non‑performing asset on 1 Mar 2018, and the facility was recalled on 10 Aug 2018. The Section 95 application against the guarantor was filed on 8 May 2024 and admitted by the National Company Law Tribunal (NCLT), Guwahati on 9 Sep 2026.

The guarantor argued that limitation against him ran from invocation of the guarantee in 2018 and expired on 29 Jul 2023 even after excluding the COVID‑19 period, and that a borrower’s later acknowledgement cannot revive a claim against a guarantor whose cause of action had already accrued.

The Tribunal held that the rights of the parties depend on the guarantee deed. Clause 5(f) provides that, for limitation, any written acknowledgement by the borrower binds the guarantor and is treated as given on his behalf. The deed also makes his liability joint, several and co‑extensive with the borrower’s, and declares the guarantee continuing.

In Civil Appeal No. 5787 of 2025, decided on 30 Jul 2025, the Supreme Court had treated the borrower’s balance sheet for 2019‑20, signed on 12 Aug 2020, as a valid acknowledgement and held the creditor’s Section 7 application filed on 15 Jan 2024 within time. Under Clause 5(f), that acknowledgement was deemed to be the guarantor’s as well.

The Tribunal relied on Laxmi Pat Surana v. Union Bank of India (2021) and on its own ruling in State Bank of India v. Bernard John (2025), noting that the Supreme Court declined to interfere with the latter on 15 May 2026. Finding no illegality in the admission, the NCLAT dismissed the appeal.

2026-juristway.com-3374-NCLAT(New Delhi-[PB])-IBC