Authority: National Company Law Tribunal, Special Bench, Kolkata, Court-I

Order Date: 18 June 2026

Case Overview

The National Company Law Tribunal (NCLT) Kolkata heard an application filed by Indian Bank (formerly Allahabad Bank) under Section 95 of the Insolvency and Bankruptcy Code, 2016, read with Rule 7(2) of the Personal Guarantors Rules, against Santosh Jhawar, personal guarantor for M/s Burgundy Life Style Pvt. Ltd.

The financial creditor (Indian Bank) had sanctioned various credit facilities including Cash Credit, Packing Credit, and Letter of Credit to the principal borrower (Burgundy Life Style Pvt. Ltd.) in March 2010. Santosh Jhawar executed a Deed of Guarantee dated 27 March 2010 to secure these facilities. The account was classified as Non-Performing Asset (NPA) on 31 March 2016 after defaults in repayment.

The financial creditor issued a demand notice under Section 13(2) of the SARFAESI Act on 4 May 2016, invoking the personal guarantees. The principal borrower acknowledged the debt through several one-time settlement offers dated 21 May 2019, 20 July 2019, 16 August 2019, 22 October 2019, 7 January 2020, and 6 March 2020, and through audited balance sheets for financial years 2019-20 and 2021-22.

On 16 January 2024, the financial creditor issued a demand notice in Form-B under Rule 7(1) to the respondent at his last-known address, which was returned with the remark "item returned no such person in the address." The notice was also published in two newspapers. After the respondent failed to clear dues within 14 days, the application was filed on 10 June 2024.

The respondent raised several objections: (1) the petition was barred by limitation as default occurred on 31 March 2016; (2) no acknowledgment of debt existed in the books of accounts; (3) the demand notice was invalid due to lack of authority of the issuing officer and non-service; and (4) the financial creditor failed to first initiate CIRP against the principal borrower.

The tribunal analyzed the legal position regarding limitation and acknowledgment of debt, citing Supreme Court judgments in Laxmi Pat Surana vs Union Bank Of India and NCLAT judgments in State Bank Of India vs Gourishankar Poddar & Anr. The court held that the liability of the guarantor is co-extensive with the principal borrower, and acknowledgment by the principal borrower extends the limitation period against the guarantor.

The tribunal determined that the limitation period commenced from 4 July 2016 (after expiry of 60 days from the SARFAESI notice), and the acknowledgments by the principal borrower in 2019-2022 extended the limitation period. The last period of limitation commenced from 31 March 2022 and would expire on 30 March 2025, making the petition filed on 10 June 2024 within limitation.

The tribunal rejected all objections raised by the respondent, noting that the financial creditor issued the demand notice to the last known address as provided in the Deed of Guarantee, which constitutes valid service regardless of physical receipt. The court also held that no explanation was needed for not first initiating CIRP against the principal borrower, citing NCLAT's judgment in Anita Goyal v. Vistra ITCL (India) Ltd.

Final Outcome

The tribunal admitted the application under Section 100 of the IBC and initiated insolvency resolution process against Santosh Jhawar. The court declared a moratorium under Section 101 with immediate effect, staying all legal actions/proceedings against the debtor and restricting transfer of assets.

Mr. Chandra Kumar Jain (Registration No. IBBI/IPA-001/IP-P00214/2017-18/10414) was confirmed as the resolution professional and directed to publish a public notice within 7 days inviting claims from all creditors within 21 days. The notice must be published in English and vernacular newspapers, affixed in NCLT premises, and placed on the website.

The resolution professional was directed to prepare a list of creditors within 30 days and assist the debtor in preparing a repayment plan under Section 105. The financial creditor was directed to deposit ₹75,000 to the resolution professional's bank account within one week towards fees. The matter is listed for next hearing on 31 July 2026 for consideration of status report.

Topics: Personal Guarantor Insolvency, Debt Acknowledgment, Limitation Law