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Judgment
ORDER
[ORAL JUDGMENT: Justice Sharad Kumar Sharma, Member (Judicial)]
Under question, in the instant company appeal, is the impugned order of 11.09.2025, that was passed by the Ld. NCLT Chennai, in a proceeding that were held in the shape of CP (IB) l l/CHE/2022, having a resultant bearing, of an admission of Section 95 proceedings of the I & B Code, 2016, as against the present Appellant, who stood as a Personal Guarantor to the loan advances, that were extended by the Respondent No. 1/Financial Creditor, i.e., SBI to the Corporate Debtor, i.e., M/s. Ennore Coke Ltd.
A consortium of Financial Creditors, namely the State Bank of India, State Bank of Hyderabad, Union Bank of India and the Indian Overseas Bank, who were individually referred, as to be the lenders are said to have extended financial assistance to M/s. Ennore Coke Limited (the Corporate Debtor), a public limited company, which stood incorporated thus with its legal status in accordance with the provisions of the Companies Act of 1956. As per the request made by the principal borrower/Corporate Debtor, the lenders are shown to have agreed for a disbursement of a sum of Rs. 36.45 Crores, with a return payable thereafter together with interest, cost, charges, expenses and all other amounts that would be falling due to be paid to the lenders.
The condition for disbursement of the loan was governed under conditions as expressed by the Financial Creditors, was that, the guarantor who was also the promoter of the Corporate Debtor would be bound to furnish the guarantee, thereby guaranteeing the due repayment of loan advances, by the borrower of the said amount as extended by way of financial assistance to the Corporate Debtor by the consortium of Financial Creditors, if the principal borrower (i.e., the Corporate Debtor) defaulted the re-payment of loan.
The covenants of the said deed of Personal Guarantee as it stood executed inter se between the parties on 10.02.2012, its an admitted fact, which is not in controversy, and it goes without saying too that under the contracting laws the terms of said guarantee agreement will have an inter-se binding effect, qua the aspects relating to governing the rights and liabilities, under the lending contract, as agreed to be settled between the Corporate Debtor; Personal Guarantor and the Financial Creditors, who were admittedly the joint signatories to the guarantee deed, which was witnessed by the Financial Creditor, as well as, by the Corporate Debtor.
In accordance with the terms of the Guarantee Deed dated 10.02.2012, the Appellant was under an obligation to meet the financial liabilities, as occurring thereunder against the Corporate Debtor, owing to the default that, has been committed by them on account of the non-remittance of the amount of financial assistance thus taken by the Corporate Debtor. The case before the Ld. Adjudicating Authority had been that, owing to the admitted default as it had occurred in the books of account of the Corporate Debtor, the Financial Creditor had proceeded to classify the account of the Corporate Debtor as a Non-Performing Asset, by an order passed in that regard on 28.10.2015.
It is this cut-off period, which will be the bone of contention in the instant company appeal, which is being attempted to be argued otherwise by the Ld. Counsel for the Appellant/Personal Guarantor, that for the purposes of taking the cutoff period of 3 years as prescribed under Article 137 of the Limitation Act 1963, for the purposes to determine the period of limitation, it has to be construed and determined from 28.10.2015, i.e., the date when the account was declared as a Non-Performing Asset by the Financial Creditor. It is the said classification of the Corporate Debtor's account as Non-Performing Asset (NPA) as on 28.10.2015, has been taken as to be the basis, contending thereof, that the debts to be determined for the purposes of an aspect of default and no other surrounding factors including an admission of the liability, could be considered on the ground of its acknowledgement of debt, owing to the further communication made by the Corporate Debtor on 15.03.2017, be that as it may.
The proceedings under Section 95 of the I & B Code, 2016, stood initiated by the Financial Creditor, by filing the same before the Ld. Adjudicating Authority, contending thereof that, since there is an acknowledgement of debt due to be paid under the terms of the Guarantee Deed dated 10.02.2012, the proceedings of Insolvency Resolution Process (IRP) deserve to be initiated, as against the Appellant for the alleged apparent default. For the aforesaid purpose, the State Bank of India, through its Stressed Assets Management Branch, had submitted Form C, as contemplated under Rule 7 (2), of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, (hereinafter to be called as the Rules of 2019).
The Respondent is said to have issued a demand notice, in Form B, under Rule 7 (1) to Personal Guarantor demanding an amount due of Rs. 88,34,95,187.40/- as on 16.04.2018, which was determined to be along with interest and other charges as payable on it, with effect from 16.04.2018, till the date of the payment or realization. The Respondent No. 1, as per the contents of its Part IV of Form B dated 20.01.2020, apart from classifying the amount of default, showing that has fallen due as on 20.06.2017. The Respondent No. 1 in the application under Section 95 of the I & B Code, 2016, in its Part III, contended that, the amount of debt, which has been sought to be recovered from the Corporate Debtor has fallen due to be paid on 28.10.2015, based on the date of NPA, otherwise in Section 7 of the Code application it has been shown as 28.10.2018.
In accordance with the details provided, it had come on record that, as per the date of default expressed in Part III of the petition under Section 95 of the I & B Code, 2016, that was submitted in the shape of Form C, the date when the notice under Form B was issued to the Personal Guarantor, it showed the existence of a default as against a Personal Guarantor as on 28.10.2015, owing to its determination made at the stage when the account was declared as to be a Non-Performing Asset by the Respondent No. 1. It has been the case of Respondent No. 1 at the time of pursuing the application under Section 95 of the I & B Code, 2016, that the Corporate Debtor, M/s. Ennore Coke Limited, had availed various financial credit facilities from the Petitioner bank (Respondent No.1) from time to time and lastly on 18.06.2011, to the limit of Rs. 110.29 Crores for which, it was Mr. Ganesh Natarajan, the present Appellant, who had executed various banking and guarantee documents in the shape of a deed, assuring the guarantee of due payment and discharge of all the liabilities that would be payable by the Corporate Debtor along with the interest, in case of default by the Corporate Debtor.
The Financial Creditor had came up with the case that at the time of execution of the deed of Personal Guarantee on 10.02.2012, the borrower and the guarantor while availing of the credit facilities, besides execution of the guarantee deed they had also executed various other documents, which could on its conjoint reading fortify the fact that, there was a binding and subsisting liability, as against the Personal Guarantor, i.e., the Appellant herein, and in relation thereto, the Respondent No. 1 had placed on record the documents viz the acceptance notice, promissory note, updated repayment schedule and such other documents, which were executed by the Appellant for the purposes of maturing the process of extension of the financial assistance to the Corporate Debtor. If the terms of deed of guarantee dated 10.02.2012, to be read along with the aforesaid supporting documents, are considered that itself would fortify the fact that the Personal Guarantor of the Corporate Debtor, had candidly undertaken the factum of liability to be honored, in an event where the Corporate Debtor was determined as to be a defaulter, which happened so, in the instant case, as soon as the account was declared as an NPA on 28.10.2015.
The Corporate Debtor defaulted in timely remittance of its financial liabilities, and didn't maintain the books of accounts, and even had failed to comply with the terms and conditions of the sanction letter and due to Non-Performance of his undertaken liabilities under the contract of extension of financial assistance, the account was appropriately classified as to be an NPA. Consequentially the notices under Section 13 (2) of the SARFAESI Act, was also issued as against the principal borrower on 10.11.2016, as well as against the Guarantor, demanding a sum of Rs. 58,91,31,035.00/- plus interest payable on it as the amount due to be paid. It is because of that it necessitates the initiation of the proceedings under Section 19 of DRT Act, by filing OA No. 44 of 2017, before the DRT on 04.02.2017, for recovery of the outstanding dues with inherent.
The Financial Creditor had came up with the case that, so far as the liability to pay the debt and to be harnessed upon the Personal Guarantor, that will be governed by the provisions contained under Section 128 of the Indian Contract Act, which contemplates a "surety's liability", and that the principal borrower, as well as the Personal Guarantor are joint and severally liable for the total amount due to be paid under the terms of the loan agreement as well as the deed of Personal Guarantee. The proceedings of CIRP process has commenced against the Corporate Debtor by an order passed on 20.06.2017, by way of proceedings of CP No. 508/IB/2017, and at the stage when the impugned proceedings were being considered by the Ld. Adjudicating Authority, the Corporate Debtor was already facing the liquidation proceedings.
A demand notice in the shape of Form B was issued by Respondent No. 1 to the Personal Guarantor on 20.01.2020, raising a demand of Rs. 88,34,95,187.40/- as shown to be due to be payable, as on 19.02.2019. The proceedings of Section 95 of the I & B Code, 2016, were scrutinized by the IRP, thus appointed by the Ld. Tribunal, which in its report that was submitted under Section 99 of the Code, after collating all the records and information had filed its report bearing number SR No. 4801 dated 01.08.2022. Observing thereof that he doesn't find any logical or sustainable reasons to reject the petition and thus had recommended it for the initiation of the Insolvency Resolution Process (IRP) against the Appellant under Section 95 of the I & B Code, 2016.
Its only upon fresh document, being supplied by the Appellant in the proceedings before the Ld. Tribunal, to fortify the contents of the document those had been submitted by the Appellant in the shape of the additional documents, the same too was directed to be verified by the Ld. Tribunal, while passing an order to the said effect on 26.08.2024, thereby called for a fresh report from the IRP, to which the fresh report was filed vide Diary No. 3305118042462024, observing thereof that the company petition as against the Personal Guarantor is maintainable.
The Ld. Tribunal after considering the fact that, the Personal Guarantor of the Corporate Debtor who had availed the loans from Respondent No. 1 / Petitioner bank, and in lieu thereof it had executed a common loan facility security document that is a joint hypothecation deed of 10.02.2012, and the Appellant had also contended, that he in the capacity of being the Chief Executive Officer of the Corporate Debtor, had entered into a Guarantee Agreement too as a Personal Guarantor in favor of the consortium, for a term loan of Rs. 50 Crores and Rs. 35 Crores pertaining to the letter of credits as, it was got issued. It was ultimately deduced by the Ld. Tribunal that despite having executed the Guarantee Agreement, he resigned from post of president & CEO, but he continued in the said capacity as whole time Director till 31.07.2013 and thereafter, continued as a Non-Executive Director till 31.03.2015. And it’s the case of the Appellant that after cessation of his office with the Corporate Debtor, the default had chanced thereafter only in repaying the loan account after declaration of the same as NPA on 28.10.2015.
The Appellant contested the proceedings and primarily raised their objection from the viewpoint that the entire proceedings would be barred by limitation, as the account was already declared as NPA on 28.10.2015, and since the limitation period had started from 29.10.2015, and as in the instant case, demand notice was issued on 20.01.2020. Hence, they contended that the instant company petition had been filed after a lapse of four years from the date of declaration of the account as NPA, i.e., 28.10.2015. Hence, the proceedings would be barred by limitation.
However, the Ld. Tribunal after holding the proceedings as per the principles of natural justice and having come to the conclusion that, since there had been continuous acknowledgement of the debt by the Corporate Debtor, as apparent from various efforts that were made thereafter by the Corporate Debtor to enter into a One-Time Settlement and for attempting for restructuring of the loan. Hence, it was considered that in light of the provisions contained under Section 18 of the Limitation Act, 1963, a fresh liability would be occurring from the date of fresh acknowledgement of the liability. Secondly, the question which was determined, was that since the execution of the Guarantee Deed dated 10.02.2012 was not disputed, the Appellant in the capacity of the Personal Guarantor, would be liable to pay the amount he has defaulted. Consequently, the proceedings cannot be said to be vitiated in any manner whatsoever.
It is based upon the summary of the above controversy, pertaining to the drawing of the proceeding under Section 95 of the Code, as against the Appellant, (i.e., the Personal Guarantor of the Corporate Debtor). The controversy could be summarized in a wider three points, which the Ld. Counsel for the Appellant has primarily pressed upon in order to attach vitiation to the proceedings under Section 95 of the I & B Code, contending thereof that,
I. Proceedings would be barred by limitation!
II. What would be the impact of release of the Appellant from guarantee deed!
III. How the interpretation would be assigned to the word used “without prejudice” in the letter of 15.03.2017, sent by the Corporate Debtor!
The Appellant in their pleading have submitted that, since the Corporate Debtor on 07.12.2016 had sent a proposal for restructuring of debt, to the Financial Creditor, though at that stage it would be only reflecting a clear acknowledgement of liability by the Corporate Debtor and also an offer in the shape of a proposal given by the Corporate Debtor, acceptance of the repayment of dues, which was falling to be the subject matter of consideration in the process of One-Time Settlement proposal and in response thereto on 06.02.2017 the Financial Creditor had rejected the proposal. This proposal of restructuring of the loan and its consequential rejection on 06.02.2017 would provide continuity to the limitation as it has been attempted to be determined otherwise by the Appellant, construing the same from the date when the account was declared as an NPA, i.e., with effect from 28.10.2015.
We are of the view that, the acknowledgement made by the Corporate Debtor and its communication of the proposal of settlement made on 07.12.2016 will also provide a continuity, to debt, and not even that, when the Corporate Debtor despite the rejection of the offer by the orders of the Financial Creditor vide its letter dated 06.02.2017, had still persisted upon to resort to yet another process by submitting yet another proposal on 23.02.2017, wherein, the Corporate Debtor itself had requested the Financial Creditor for restructuring the debt once again, by making a reference to letter dated 07.12.2016. Another proposal for settlement was sent on 15.03.2017. Thus, the period right from the date of the declaration of the account as to be an NPA on 28.10.2015 until the 2nd proposal of 15.03.2017, for settlement it leaves no room of doubt that so far as the Corporate Debtor is concerned, whose liability is to be identified with the liability of the present Appellant, in the capacity of being the Personal Guarantor in the light of the provisions contained under Section 128 of the Indian Contract Act, 1872. The Personal Guarantor, who had acted under the trust reposed by him to the Corporate Debtor, would too be bound by the actions taken by the Corporate Debtor, for the purposes of elongating the proposals for settlement of the dues by offering a proposal for restructuring of the debt which was lastly proposed by extension on 15.03.2017. Thus, the period as engulfed from 28.10.2015 until this 2nd proposal for restructuring, which was proposed on 15.03.2017, it would provide a continuity to the admission of liability of debt due to be paid by the Corporate Debtor and as such, the determination of limitation has had to be made on the basis of the 2nd proposal made on 15.03.2017 and in the subsequent communications which were made by the Corporate Debtor in which, the Corporate Debtor has finally acknowledged their liability, i.e., the communication of 15.03.2017, would be an issue to be discussed and considered by this Appellate Tribunal, while dealing with both the points pertaining to the aspect of limitation and pertaining to the aspect as to what implication would the term “without prejudice” as being used in the letter of 15.03.2017 would have so far as it relates to the present controversy at hand.
The Ld. Counsel for the Appellant, while interpreting the contents of the letter of 15.03.2017, which was the last communication of admission of liability, he had tried to derive an advantage of the reference of the word “without prejudice” as referred to therein contending thereof that, the expression given “without prejudice” has had to be read in exception and the said proposal of 15.03.2017 would not be read as to be prescribing a continuity of admission of liability, because in accordance with the arguments extended by the Ld. Counsel for the Appellant, it would be relating only to the subject of the cash credit account as referred to in the letter of 15.03.2017 and thus the intention of “without prejudice” used therein the letter of 15.03.2017 would be read as an exception to the admission of liability as it is being derived from the previous communications as referred to hereinabove.
The Ld. Counsel for the Appellant further submitted that the observations that has been made in the letter of 15.03.2017, seeking Bank's advice on any alternative mechanism for dispute resolution and requesting the NOC to be granted so as to enable the operation of the plant, that too will have to be read in exception owing to the language used in the letter of 15.03.2017, using the word “without prejudice”, and the letter of 15.03.2017 itself cannot provide a continuity for exemption of limitation for the purposes of extension of benefit in the light of the provisions contained under Section 18 of the Limitation Act. For the reason being that, it has been interpreted by the Ld. Counsel for the Appellant that if the letter of 15.03.2017 is taken in its entirety, it only intends to seek permission to run the plant on a conversion basis, and request was to the bank for the approval of the proposal for making operational arrangements. But if we look into this letter in its entirety, though we would be dealing with the expression “without prejudice” as used in the letter of 15.03.2017, at a later stage, if we draw the inference as it could be culled out from the observation made in the concluding part of the letter of 15.03.2017 itself observes that in the light of the discussions, which has been made between the Financial Creditor and the Corporate Debtor, on 15.03.2017, it was settled amongst the parties to make the payment of Rs. 0.50 crores on sanction of the NOC by making further borrowing possible from other sources. This excerpt of the communication of 15.03.2017 would yet again amount to be providing a continuity the fact of acceptance of liability, owing to the fact that the basic intention behind the letter dated 15.03.2017 was to make the unit of the Corporate Debtor, operational.
Coming down to the question of limitation, as to how it could be determined to provide it with a continuity to be interpreted and calculated from 15.03.2017, if we see the language used under Section 18 of the Limitation Act, 1963, which is extracted hereunder: -
“18. Effect of acknowledgment in writing.—(1)
Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.
(2)Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.
Explanation.—For the purposes of this section,—
(a)an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right,
(b)the word “signed” means signed either personally or by an agent duly authorised in this behalf, and
(c)an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.”
If the said communication of 15.03.2017, is read with the preceding communications between the parties and particularly, when the communication of 15.03.2017 find reference to the last rejection, as made by the Corporate Debtor on 06.02.2017, and later proposal made on 23.02.2017 and thereafter has proceeded to make an observation with regards to the implication of the letter dated 07.12.2016 and while referring to the discussion of 15.03.2017 it was decided to make the payment of Rs. 0.50 Crore on sanction of the NOC that in itself will amount to be an admission of a liability and it was providing a continuity to the liability as it had arisen from the date of declaration of the account as to be a Non-Performing Asset.
The Ld. Tribunal, while referring to the letter of 15.03.2017, which has been tried to be read otherwise by the Appellant, arguing in the context that as if the said letter will not be providing a continuity to the aspect of limitation, and had observed that if the contents of the said letter is taken into consideration, it was observed therein by the Corporate Debtor, particularly in the concluding paragraph requesting the bank to take steps for elongating the OTS proposal in terms of the letter of 07.12.2016, and further an advice was solicited for any other alternative mechanism for resolution of the repayment of prevailing due that had fallen due to be paid by the Corporate Debtor. This expression used in the letter of 15.03.2017 cannot be read in isolation for the reason being that the expression given by the Corporate Debtor, itself will amount to be an admission of a liability because he was trying to resort to a via media for settlement of the controversy for the payment to the amount due to be paid to the Financial Creditor.
Further, we are of opinion that, if the expression given in the letter of 15.03.2017 is taken into consideration, we could determine that the Corporate Debtor has offered, that from “5th month onwards, we propose that the income from the sale of power would be credited directly into our loan account with you till our proposal of OTS/sale of assets to ARC is finalized as part of the deal for assigning the assets to the ARC”. This expression, once again as given in the letter of 15.03.2017, cannot be said to be read contrary to what has been intended to be argued by the Ld. Counsel for the Appellant trying to read that the letter of 15.03.2017 as if that was an exception and 15.03.2017 letter will not provide a continuity to the limitation, particularly when the parameters and the ingredients contained therein had always a blend having an impact of the admission of the loan liability and the measures which was offered and agreed to be adopted for the purposes of the payment of the amount.
We are of the view that any communication which is made between the parties, irrespective of the use of the word “without prejudice”, that doesn't attach an independent implication of the letter, once it contains a specific expression where the Corporate Debtor has undertaken a liability to remit an amount owing to the terms and conditions, as it has been offered therein. In view of what has been said in the letter of 15.03.2017, we are of the view that the period of limitation has to be construed from 15.03.2017 and not from 28.10.2015, that is, the date of declaration of the account of Corporate Debtor as NPA. Because most of the contents of the letter of 15.03.2017 was an admission of liability by the Corporate Debtor, which in turn would be an admission of liability by the Personal Guarantor also, in the light of the provisions contained under Section 128 of the Indian Contract Act, 1872 as it has been dealt with by the Hon’ble Apex Court in matter of Laxmi Pat Surana v. Union Bank of India & Anr. as reported in 2021 (8) SCC 481, and the relevant observations has been made therein. Observing thereof that, the moment the Principal Borrower commits default in paying the acknowledged debt, and further he acknowledges the debt due by the Principal Borrower and not the Guarantor, that would not absolve the Guarantor of its liability. The relevant paragraph 44 of the said judgment is extracted hereunder: -
“44.In the present case, NCLT as well as NCLAT have adverted to the acknowledgments by the principal borrower as well as the corporate guarantor-corporate debtor after declaration of NPA from time to time and lastly on 8-12-2018. The fact that acknowledgment within the limitation period was only by the principal borrower and not the guarantor, would not absolve the guarantor of its liability flowing from the letter of guarantee and memorandum of mortgage. The liability of the guarantor being coextensive with the principal borrower under Section 128 of the Contract Act, it triggers the moment principal borrower commits default in paying the acknowledged debt. This is a legal fiction. Such liability of the guarantor would flow from the guarantee deed and memorandum of mortgage, unless it expressly provides to the contrary.”
In the instant case, the triggering of admission of liability would be derived from the contents of the letter of 15.03.2017, qua the Corporate Debtor, which would equally bind the Personal Guarantor too, in the light of the principles laid down by the judgment of Laxmi Pat Surana (Supra) as referred to herein above. The references, which we have made pertaining to the efforts made by the Corporate Debtor for settling the dues that itself will amount to be an admission of liability on part of Corporate Debtor, and ultimately culminating to the letter of 15.03.2017, wherein a proposal of an elongated OTS was extended by the Corporate Debtor for the purposes of remittance of the amount which would bind the Corporate Debtor. Hence, he cannot take a converse stand, then what has been taken by the Corporate Debtor in the light of the implications of the judgment of the Laxmi Pat Surana (Supra), the Appellant herein also equally hold the liability under the terms of Mortgage Deed and Guarantee Agreement.
Besides that, in the light of the judgment of the Hon’ble Apex Court, In re, cognizance for extension of limitation pertaining to the COVID period, which will be an intervening period, lying between the date of declaration of the account as an NPA, and lastly, resulting to the issuance of the letter of 15.03.2017 for OTS proposal that will be falling within the exemption period as provided with effect from 15.03.2020 to 28.02.2022. Hence, the benefit of Article 137 of the Limitation Act to be read with In re cognizance (supra) was expected to be extended for the purposes of determining the limitation for initiation of the proceeding under Section 95, of the I & B Code.
Owing to the above reasons, so far as the first question, which has been argued by the Ld. Counsel for the Appellant pertaining to the determination of limitation, we can ultimately conclude in the following manner: -
I. All the communications that were made by the Corporate Debtor independently, making any effort for settlement of the amount by elongating the period that, would equally bind the Personal Guarantor in the light of the provisions contained under Section 128 of the Indian Contract Act. Hence, even if the Personal Guarantor is not a signatory of any expression of settlement given in the aforesaid communications made by the Corporate Debtor, that would equally bind him in the light of Section 128 of the Indian Contract Act. Thus, for all practical purposes the limitation has to be determined with effect from 15.03.2017, thus the determination, which has been made on the aspect of limitation by the impugned order doesn't suffer from any apparent error.
On the aspect of limitation, it was the case of the Financial Creditor that the persistent and admitted communications, between the Corporate Debtor, as well as the Personal Guarantor, each of the communications thereafter would be giving birth to a fresh reckoning of the limitation to the payability of the loan liability on the Personal Guarantor. The benefit of Section 18 of the Limitation Act, should have been extended, and the petition under Section 95 of the I & B Code, 2016, could not have been dismissed on the ground of limitation as pleaded by the Appellant.
The Ld. Counsel for the Appellant has consistently tried to impress upon this Appellate Tribunal as to what will be the effect of the word “without prejudice” as referred into the communication of 15.03.2017. Though we have already dealt with the issue, while dealing with the aspect of limitation in the instant judgment. Apart from the contents of the letter of 15.03.2017, which finds reference to the word “without prejudice”, we are of the view that the said communication has to be read in its entirety and that is what has been laid down by the Hon’ble Apex Court in the matter of Laxmi Pat Surana (Supra) in its para 48 which provides that, even if any communication is sent, while referring to the word “without prejudice” by the Corporate Debtor nevertheless, it does acknowledge the liability of the Corporate Debtor (Principal Borrower) and of Corporate Guarantee having been an offer made by the Corporate Debtor. The said liability in itself would amount to be triggering of the amount due to be paid by the Corporate Debtor, and will be an aspect to be considered for the purposes of drawing an implication flowing from Article 137 of the Limitation Act. Para 48 of the said judgment is extracted hereunder: -
“48.Indeed, this communication has been sent "without prejudice" by the corporate guarantor (corporate debtor). Nevertheless, it does acknowledge the liability of M/s Mahaveer Construction (principal borrower); and of corporate guarantee having been offered by the corporate debtor in that behalf. As aforesaid, the liability of the corporate guarantor (corporate debtor) is coextensive with that of the principal borrower and it gets triggered the moment the principal borrower commits default in paying the debt when it had become due and payable. The liability of the corporate debtor (corporate guarantor) also triggers when the principal borrower acknowledges its liability in writing within the expiration of prescribed period of limitation, to pay such outstanding dues and fails to pay the acknowledged debt. Correspondingly, right to initiate action within three years from such acknowledgment of debt accrues to the financial creditor. That however, needs to be exercised within three years when the right to sue/apply accrues, as per Article 137 of the Limitation Act. This is the effect of Section 18 of the Limitation Act. In that, a fresh period of limitation is required to be computed from the time when the acknowledgment was so signed by the principal borrower or the corporate guarantor (corporate debtor), as the case may be, provided the acknowledgment is before expiration of the prescribed period of limitation. Thus, the conclusion reached [Union Bank of India v. Surana Metals Ltd., 2019 SCC OnLine NCLT 9859] by NCLT and affirmed [Laxmi Pat Surana v. Union Bank of India, 2020 SCC OnLine NCLAT 217] by NCLAT on the basis of the asservation in the application under Section 7 IBC, read with the relevant undisputed correspondence, is a possible view.”
In the light of the observation made by the Hon’ble Apex Court and the ratio propounded therein para 48 Laxmi Pat Surana (Supra), the judgments of the Hon’ble Supreme Court of India and the letters of 07.12.2016, 23.02.2017 and 15.03.2017 of the Corporate Debtor, which are to be treated as an acknowledgement of debt for the purposes of determining the aspect of limitation and to answer as to what would be the effect of “without prejudice” as referred to in the communication of 15.03.2017.
In yet another judgment, as rendered by the Hon’ble Apex Court in Civil Appeal No. 1031 of 2022, Vidyasagar Prasad vs UCO Bank. The Hon’ble Apex Court, therein, had dealt with, as to how, the term “without prejudice” is to be interpreted, and accordingly, the Hon’ble Apex Court has drawn its conclusion in para 12 of the said judgment. And in accordance with the principle laid down, therein by the Hon’ble Apex Court, it prescribes that, for the purposes of interpreting the word “without prejudice”, the basic elements that are required to be satisfied are that it has to be an unequivocal acknowledgement of liability of the Corporate Debtor. But if any communication, which is attached with the rider, that could be taken into consideration as to give an exception to the said correspondence. But owing to what has been discussed above and particularly in the light of the contents of the letter of 15.03.2017, the terminology used “without prejudice” therein doesn't mean that the said letter was at all eradicating the liability of payment of the amount due and as agreed by the Corporate Debtor in the various communications, which has been placed on record.
Owing to the aforesaid when the Principal Borrower and the Guarantor admits and acknowledges their liability upon the declaration of the account as NPA, before the expiry of three years limitation period, including the fresh period of limitation as expanded to be granted due to successive acknowledgements it will not be possible to extricate those periods of the renewed limitation, where there has been continuous subsequent and recurring acknowledgements in the light of the provisions contained under Section 18 of the Limitation Act. But with the restriction that such acknowledgement must be before the expiration of the prescribed period of limitation of 3 years including the fresh period of limitation which stands extended due to the acknowledgement of the date from time to time, which would be the case at hand, which has to be derived in the light of the communications as referred to herein rejecting the proposal of the restructuring of the plan and thereafter the communication where once again of 15.03.2017 was altogether giving a similar expression.
“12.Both these factors, acknowledgment of debt in the balance-sheet as well as in the one-time settlement proposal, have been considered by the National Company Law Appellate Tribunal while dismissing the appeal. The relevant portion of the National Company Law Appellate Tribunal findings, after considering balance-sheet entries and one-time settlement letter are as follows [ See page 635 of 251 Comp Cas.] :
“The company's balance-sheet is prepared in the statutory format as per Schedule III to the Companies Act, 2013, which does not provide for giving the specific name of every secured or unsecured creditor.
It is further observed that the corporate debtor has not denied that there are no outstanding dues to the UCO Bank. A perusal of extract of register of charges submitted with the Registrar of Companies, at serial No. 3, shows that a charge of rupees one hundred and seventy-five crores created by the corporate debtor has not been satisfied and remains outstanding…
In the instant case, we also find that the corporate debtor issued a letter dated June 7, 2016 (annexure A page 11 of their reply affidavit of respondent No. 1) wherein it has given one-time settlement proposal. Based on the ratio of the judgment of the hon'ble Supreme Court in the case of Lakshmirattan Cotton Mills Co. Ltd. [Lakshmirattan Cotton Mills Co. Ltd. v. Aluminium Corporation of India Ltd., (1971) 1 SCC 67. Paragraphs 7, 8, 9.] and further reiterated in Dena Bank's [Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy, (2021) 15 Comp Cas-OL 558 (SC); (2021) 10 SCC 330.] case that there is an acknowledgment of subsisting liability of the corporate debtor. However, it may not necessarily specify the exact nature of the liability. But it indicates the jural relation between the parties, and in any event, the same can also be derived by implication. Further, the said letter is not ‘without prejudice’ basis and, therefore, amounts to an unequivocal acknowledgment of liability of the corporate debtor. A reading of the documents above reveals that the corporate debtor has acknowledged/subsisting liability to attract the provisions of section 18 of the Limitation Act, 1963.”
What implication would the word "without prejudice:, would have was an aspect that was considered by the Hon’ble Apex Court in 2004, Volume 2, SCC Page 663, Chairman & M.D., N.T.P.C. Limited versus M/s. Reshmi Constructions, Builders & Contractors in para 33 to 35. Where the Hon’ble Apex Court, while deriving its implication from the earlier judgment of Cutts v. Head, (1984) 2 WLR 349, had come down to the conclusion that in any letter or correspondence, which uses the expression “without prejudice” its always a subject matter of interpretation, which is capable of being given various interpretations and usage according to the contents of the letter itself, which has to be read in its totality. It is prescribed that the rule, which has been provided as a protection to give a privilege over a communication, it depends partly on the public policy and partly on the parameters given therein to facilitate the compromise, to settle or to impede an agreement. The relevant paras are extracted hereunder: -
"33.What would be the effect of without-prejudice offer has been considered in Cutts v. Head [(1984) 2 WLR 349 : (1984) 1 All ER 597 : 1984 Ch 290 (CA)] wherein Oliver, L.J. speaking for the Court of Appeal held: (All ER p. 613e-g)
“In the end, I think that the question of what meaning is given to the words ‘without prejudice’ is a matter of interpretation which is capable of variation according to usage in the profession. It seems to me that, no issue of public policy being involved, it would be wrong to say that the words were given a meaning in 1889 which is immutable ever after, bearing in mind that the precise question with which we are concerned in this case did not arise in Walker v. Wilsher [(1889) 23 QBD 335 (CA)] and the court did not deal with it. I think that the wide body of practice which undoubtedly exists must be treated as indicating that the meaning to be given to the words is altered if the offer contains the reservation relating to the use of the offer in relation to costs.”
"34.Yet again in Rush & Tompkins Ltd. v. Greater London Council [(1988) 1 All ER 549 : 1989 AC 1280 : (1988) 2 WLR 533 (CA)] it was held: (All ER pp. 551g-552b)
“The rule which gives the protection of privilege to ‘without prejudice’ correspondence ‘depends partly on public policy, namely the need to facilitate compromise, and partly on implied agreement’ as Parker, L.J. stated in South Shropshire DC v. Amos [(1987) 1 All ER 340 : (1986) 1 WLR 1271 (CA)] (All ER at p. 343, WLR at p. 1277). The nature of the implied agreement must depend on the meaning which is conventionally attached to the phrase ‘without prejudice’. The classic definition of the phrase is contained in the judgment of Lindley, L.J. in Walker v. Wilsher [(1889) 23 QBD 335 (CA)] , QBD at p. 337:
‘What is the meaning of the words “without prejudice”? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted a complete contract is established, and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one.’
Although this definition was not necessary for the facts of that particular case and was therefore strictly obiter, it was expressly approved by this Court in Tomlin v. Standard Telephones and Cables Ltd. [(1969) 3 All ER 201 : (1969) 1 WLR 1378 (CA)] , All ER at pp. 204, 205, WLR at pp. 1383, 1385, per Danckwerts, L.J. and Ormrod, J. (Although he dissented in the result, on this point Ormrod, J. agreed with the majority.) The definition was further cited with approval by both Oliver and Fox, L.JJ. in this Court in Cutts v. Head [(1984) 2 WLR 349 : (1984) 1 All ER 597 : 1984 Ch 290 (CA)] , All ER at pp. 603, 610, Ch at pp. 303, 313. In our judgment, it may be taken as an accurate statement of the meaning of ‘without prejudice’, if that phrase be used without more. It is open to the parties to the correspondence to give the phrase a somewhat different meaning e.g. where they reserve the right to bring an offer made ‘without prejudice’ to the attention of the court on the question of costs if the offer be not accepted (see Cutts v. Head [(1984) 2 WLR 349 : (1984) 1 All ER 597 : 1984 Ch 290 (CA)] ) but subject to any such modification as may be agreed between the parties, that is the meaning of the phrase. In particular, subject to any such modification, the parties must be taken to have intended and agreed that the privilege will cease if and when the negotiations ‘without prejudice’ come to fruition in a concluded agreement.”
"35.Meaning of the words “without prejudice” came up for consideration before this Court in Supdt. (Tech. I), Central Excise v. Pratap Rai [(1978) 3 SCC 113] wherein it has been held: (SCC p. 117, paras 6-7)
“The Appellate Collector has clearly used the words ‘without prejudice’ which also indicate that the order of the Collector was not final and irrevocable. The term ‘without prejudice’ has been defined in Black's Law Dictionary as follows:
‘Where an offer or admission is made “without prejudice”, or a motion is denied or a bill in equity dismissed “without prejudice”, it is meant as a declaration that no rights or privileges of the party concerned are to be considered as thereby waived or lost, except insofar as may be expressly conceded or decided. See, also, Dismissal without prejudice.’
Similarly, in Wharton's Law Lexicon the author while interpreting the term ‘without prejudice’ observed as follows:
‘The words import an understanding that if the negotiation fails, nothing that has passed shall be taken advantage of thereafter; so, if a defendant offers, “without prejudice”, to pay half the claim, the plaintiff must not only rely on the offer as an admission of his having a right to some payment. The rule is that nothing written or said “without prejudice” can be considered at the trial without the consent of both parties — not even by a judge in determining whether or not there is good cause for depriving a successful litigant of costs. … The word is also frequently used without the foregoing implications in statutes and inter partes to exclude or save transactions, acts and rights from the consequences of a stated proposition and so as to mean “not affecting”, “saving” or “excepting”.’
In short, therefore, the implication of the term ‘without prejudice’ means (1) that the cause or the matter has not been decided on merits, (2) that fresh proceedings according to law were not barred.”
Thus, in the light of the ratio given by the Hon’ble Apex Court, in the matters of Chairman & M.D., N.T.P.C. Limited (Supra) the word “without prejudice” as used in the communication of 15.03.2017, cannot be said that in the light of the contents of the letter of 15.03.2017, which we have already discussed above, this letter could not be exempted to be read for the purposes of determination of the limitation particularly when its intention was altogether expressed differently, which could be apparently derived from the contents of the letter in its entirety.
Another issue, which has been argued by the Ld. Counsel for the Appellant was with regards to the issue of release of Appellant from the guarantees. It was argued by the Ld. Counsel for the Appellant that, as back as on 02.08.2013, he has sent a letter to the DGM of the Financial Creditor (SBI, Respondent No.1 herein) seeking release from the Personal Guarantee Deed dated 10.02.2012 that was issued in favour of the Corporate Debtor (M/s. Ennore Coke Ltd). In the said communication of 02.08.2013, the Personal Guarantor has only expressed itself as to be a professional, "CEO of the company", and there he has neither shown himself as to be promoter nor a shareholder of the company. But however, even if we see the expression as given in Clause B of the terms of the Deed of Guarantee Agreement dated 10.02.2012. In fact, the extension of the guarantee was a condition precedent which was required to be satisfied and furnished by the guarantors, who are also the promoters of the principal borrower, to the lender for the purposes of availing the financial benefits. And if we see the binding conditions given therein, the personal Guarantor has specifically accepted, that the guarantee thus extended by the personal Guarantor is unconditional, absolute and irrevocable bank guarantee.
The aspect of irrevocability of the bank guarantee, by the person, by way of personal guarantee was considered by the Hon’ble Apex Court in the matters of Sita Ram Gupta v Punjab National Bank and Others as reported in 2008, Volume 5, SCC, Page 711, whereas in Para 7, 8 and 10 of the judgment, which are extracted hereunder: -
“7.We have carefully examined the submissions made on behalf of the parties and also the relevant clauses in the agreement of guarantee. In our view, the High Court was perfectly justified in holding that the appellant was liable to pay the decretal amount to the Bank in view of the clause, as mentioned hereinearlier, in the agreement of guarantee itself. The agreement of guarantee clearly provides that the guarantee shall be a continuing guarantee and shall not be considered as cancelled or in any way affected by the fact that at any time, the said accounts may show no liability against the borrower or may even show a credit in his favour but shall continue to be a guarantee and remain in operation in respect of all subsequent transactions. This was an agreement entered into by the appellant with the Bank, which is binding on him. Therefore, the question arises whether the statutory provision under Section 130 of the Act shall override the agreement of guarantee. In our view, the agreement cannot be said to be unlawful nor the parties have alleged that it was unlawful either before the trial court or before the High Court. Let us, therefore, keep in mind that the agreement of guarantee entered into by the appellant with the Bank was lawful.”
“8.The question is whether the appellant, having entered into such an agreement of guarantee with the Bank, had waived his right under the Act. In our view, the High Court has rightly held and we too are of the view that the appellant cannot claim the benefit under Section 130 of the Act because he had waived the benefit by entering into the agreement of guarantee with the Bank. In Lachoo Mal v. Radhey Shyam [(1971) 1 SCC 619] this Court observed that the general principle is that everyone has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity which may be dispensed with without infringing any public right or public principle. In Halsbury's Laws of England, Vol. 8, 3rd Edn., it has been stated in Para 248 at p. 143 as under:
“248.Contracting out.—As a general rule, any person can enter into a binding contract to waive the benefits conferred upon him by an Act of Parliament, or, as it is said, can contract himself out of the Act, unless it can be shown that such an agreement is in the circumstances of the particular case contrary to public policy. Statutory conditions may, however, be imposed in such terms that they cannot be waived by agreement, and, in certain circumstances, the legislature has expressly provided that any such agreement shall be void.”
“10.Keeping this principle in mind, we now look at the clause in the agreement of guarantee, as noted hereinearlier. There cannot be any dispute that the appellant had clearly agreed that the guarantee that he had entered into with the Bank was a continuing guarantee and the same was to continue and remain in operation for all subsequent transactions. Having entered into the agreement in the manner indicated above, in our view, it was, therefore, not open to the appellant to turn around and say that in view of Section 130 of the Act, since the guarantee was revoked before the loan was advanced to Defendants 1 to 4 and 6, he was not liable to pay the decretal amount as a guarantor to the Bank as his guarantee had already stood revoked. In this view of the matter, we are not in a position to accept the submissions of the learned counsel for the appellant and we hold that in view of the nature of guarantee entered into by the appellant with the Bank, the statutory provision under Section 130 of the Act shall not come to his help. The findings arrived at by the High Court while deciding the first appeal were that the amount shown due in the accounts of the Bank against the appellant and the defendants was neither cleared by the defendants nor by the appellant. Therefore, even if a letter was written to the Bank by the appellant on 31-7-1980 withdrawing the guarantee given by him, it was contrary to the clause in the agreement of guarantee, as noted hereinearlier. Therefore, it was not open to the appellant to revoke the guarantee as the appellant had agreed to treat the guarantee as a continuing one and was bound by the terms and conditions of the said guarantee. For this reason, it is difficult to accept the submissions of the learned counsel for the appellant that in view of the statutory provision under Section 130 of the Act, after the revocation of the guarantee by the appellant, he was not liable to pay the decretal amount to the Bank. No other point was raised by the learned counsel for the appellant. Accordingly, there is no merit in this appeal. The appeal is thus dismissed. There will be no order as to costs.”
The Hon’ble Apex Court hereinabove, had laid down that wherever in there in the clauses of the Guarantee Agreement it provides an aspect of irrevocability, the right to revoke stands explicitly waived off and therefore any revocation letter, even if it is submitted after signing the Deed of Guarantee, will not help in limiting his liability flowing from guarantee document.
In that eventuality, we are of the view, that the Appellant's contention, that the Appellant has written a letter on 02.08.2013, sending a letter to the DGM of SBI for release of the Personal Guarantee Deed dated 10.02.2012, will have no bearing so far as it relates to the restrictions of being Personal Guarantor. For the reason being that the guarantee was in the shape of an unequivocal and irrevocable guarantee. There couldn't have been any unilateral release based upon the letter of 02.08.2013, in terms of the provisions contained under Section 130 of the Indian Contract Act because it was a continuing guarantee and that would continue, until and less it is permissible under law to be revoked by the surety as to the future transactions. However, even so much so, when the said communication of alleged revelation dated 02.08.2013, had never been placed on record before the Ld. Tribunal, nor it was permitted or sought to be interpreted or considered. Hence filing of the said communication by way of a memo dated 24.02.2025 which is not a reckoned process of law to take document on record in a judicial proceedings, to be read in evidence, cannot be treated as to be a document, which was part of the record of the proceedings of the company petition, which could have been utilized by the Appellant to be read in evidence to establish that there was a revocation of the guarantee as extended by the Appellant in terms of the Guarantee Agreement dated 10.02.2012, we are of the view filing a document by memo not a procedure prescribed under law, enabling the document to be read for the purposes of deciding the case, unless it is procedurally made as part of record, enabling an opportunity to avail one opportunity to rebut its contents.
The second question, which has been pressed upon by the Ld. Counsel for the Appellant, with regards to the aspect of limitation, we are of the considered view that the answer exists as it has been extended by the Ld. Tribunal in the impugned order of determining it from the date of the correspondence dated 15.03.2017 that was lastly made, acknowledging the liability and payability of amount and that has been rightly interpreted by the Ld. Tribunal by observing that, the contents of the document, i.e., letter 15.03.2017, is to be read in its entirety, particularly when the Corporate Debtor, who was attempting to restructure the loan it will amount to be an admission of liability and any communication thus made in furtherance to it would be read as a communication on behalf of the Corporate Debtor also. In that eventuality, the aspect of limitation as decided by the Ld. Tribunal, does not suffer from any apparent error calling for any interference?
A very peculiar argument has been was raised by the Appellant at this stage, and for first time, that the communication of 15.03.2017, as it was signed by the Corporate Debtor and addressed to the Financial Creditor, it will not amount to be an acknowledgement of liability qua the Personal Guarantor, as it would and should have been limited to be read for acknowledgement of liability only on the part of the Corporate Debtor, and thus the restructuring proposal that was sent on 07.12.2016, which was not accepted by the Financial Creditor, is taken into consideration, where it had admitted the liability. Hence, if the period of limitation is even construed from the date of restructuring proposal of 07.12.2016, then too the limitation would expire on 06.12.2019. And since the petition itself was preferred on 28.11.2021. It was a case of the Appellant that the proceedings would be barred by limitation in the light of the provisions contained under Article 137 of the Limitation Act is not acceptable by this Appellate Tribunal because even the proposal of Corporate Debtor for whom the Appellant was Personal Guarantor would bind him too, under the terms of irrevocable guarantee agreement.
In continuation to the aforesaid argument, in the proceedings of the instant company Appeal, the Ld. Counsel for the Appellant, has almost reiterated the issue that were raised earlier, and particularly, he has subscribed himself to the major issue of limitation. Since the initiation of the CIRP process had been on 28.11.2021, he has pleaded that the application under Section 95 of the I & B Code, 2016, preferred by the Respondent No. 1 herein ought to have been dismissed on the grounds of limitation. What has been attempted to be argued by the Ld. Counsel for the Appellant that in the communication of 15.03.2017, and its contents since it is preceded by a term used “without prejudice” would be restricted to the rights and contentions of the Corporate Debtor, he reads the said communication as to be a privileged communication, which will be without prejudice to the rights of the parties and would not be admissible in evidence for the purposes of determining of any rights and liabilities and cannot be utilized for the purposes of fixation of liability, an acknowledgement of debt or an admission of debt, to bring it or to treat it to be within limitation.
Though the same was argued to the contrary by the Financial Creditor in the light of the provisions contained under Section 23 of the Evidence Act. An exception has been attempted to be carved out by the Learned Counsel for the Personal Guarantor on the ground that, when a proposal by the Corporate Debtor for restructuring of the loan has been sent on 07.12.2016 to the Financial Creditor, which has been argued to be an acknowledgement of the liability by the Corporate Debtor and also the proposal of the Corporate Debtor for the repayment of the said dues through an OTS proposal. It was submitted by the Appellant that the letter of 15.03.2017 or a restructuring proposal of 07.12.2016 was an exclusive communication, which was made by the Corporate Debtor addressed to the Financial Creditor, which does not acknowledges the liability on part of the Corporate Debtor. Hence, it cannot be said that the observations which have been made in those two communications of 07.12.2016 and 15.03.2017 would be amounted to be the acknowledgement of debt for the purposes of attracting Section 18 of the Limitation Act.
And based upon the aforesaid fact, the Appellant contended that the period of limitation is required to be calculated from 07.12.2016, because of which the limitation would be expiring on 06.12.2019, and the application thus preferred on 28.11.2021 would be barred by limitation. We are of the considered view that the contention as raised by the Appellant cannot be accepted as we have discussed above, as any acknowledgement of liability by the Corporate Debtor, would an acknowledgement qua the Corporate Guarantor too, as per conditions of co-extensive liability because of the implications of the Contract Act.
Since we have already sufficiently dealt with the aspect of what implication the word “without prejudice” in the communication of 15.03.2017 will have, we are not repeating it to clarify the same and for the logic which we have assigned by this Appellate Tribunal and for the reasoning as assigned by the Ld. Tribunal in the impugned order of 11.09.2025, we don't find any scope of interference in the exercise of our appellate jurisdiction, more particularly when the aspect of liability and the restrictions of the Personal Guarantor were admittedly flowing from the Guarantee Deed which was irrevocable and that itself is having a binding character in the shape of a contract, the Appellant cannot take an advantage of its waiver as of now because of its irrevocability.
Owing to the above, the ‘company appeal’ lacks ‘merit’ and the same is accordingly ‘dismissed’.