Authority: National Company Law Appellate Tribunal, Chennai (Appellate Jurisdiction)
Order Date: 08 July 2026
Case Overview
The appeal was filed by Mr. G. Thiyagarajan, the personal guarantor of M/s. Velohar Infra Private Limited, challenging the order dated 09.06.2026 passed by the NCLT, Division Bench – I, Chennai in CP(IB)/43(CHE)/2024. The NCLT had admitted a petition filed under Section 95 of the Insolvency & Bankruptcy Code, 2016 by Aditya Birla Finance Limited (Respondent No. 1) and directed the commencement of the Insolvency Resolution Process against the Appellant.
The dispute originates from a loan facility availed by Velohar Infra from Aditya Birla Finance, comprising working capital of ₹298 lakhs and an overdraft of ₹52 lakhs, under a loan agreement dated 24.01.2014. The Appellant, along with Mrs. Vijayalakshmi Subburaj, executed a deed of guarantee for this loan on the same date. The Corporate Debtor defaulted on repayment, resulting in the account being classified as NPA on 01.11.2017. A notice under Section 13(2) of the SARFAESI Act was subsequently served. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP) on 29.08.2018.
The Financial Creditor initiated recovery against the Appellant as personal guarantor, sending a legal notice on 20.09.2022 and another invoking the guarantee on 17.10.2022. A demand notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, was issued on 04.03.2023. After receiving the Appellant's reply, the Section 95 application was filed on 21.03.2024.
The principal contention of the Appellant is that the application is time-barred. He argues the date of default was 01.11.2017, and the invocation of the guarantee on 17.10.2022 occurred nearly five years later, well beyond the three-year limitation period. He relies on the Supreme Court judgment in Syndicate Bank vs Channaveerappa Beleri & Ors., which holds that a demand against a guarantor made after the expiry of the limitation period against the principal borrower is not enforceable. The Appellant challenges the NCLT's admission of the petition based on the premise that the deed of guarantee was a 'continuing guarantee' (clauses 3, 12 & 30), allowing invocation at any stage.
The Respondents objected to these contentions, arguing a continuing guarantee can be invoked even after the expiry of the limitation period against the principal debtor.
Final Outcome
The NCLAT bench, comprising Justice Sharad Kumar Sharma (Member-Judicial) and Jatindranath Swain (Member-Technical), found the matter required detailed scrutiny. The Tribunal directed the Respondents to file their respective counter affidavits within three weeks. Granting an interim stay, the bench held that the effect and operation of the impugned NCLT order dated 09.06.2026 would be kept in abeyance until the next date of hearing, noting that irreversible loss could be caused to the Appellant if the stay was not granted.
Topics: Personal Guarantor Insolvency, Limitation Law, Continuing Guarantee