(MENAFN- KNN India) Mumbai, Nov 22 (KNN) The National Company Law Tribunal (NCLT) Mumbai has ruled that the date of default for a personal guarantor must be calculated from the date on which the guarantee is invoked, and not from the date the borrower's loan account is declared a non-performing asset (NPA).

The order was issued by a Bench comprising Judicial Member K.R. Saji Kumar and Technical Member Anil Raj Chellan, while hearing a personal insolvency application filed by Bhavna Ravi Matta, guarantor to North American Mercantile India Pvt Ltd.

Matta had initially treated December 9, 2019, the date the loan was classified as NPA, as the default date. However, the Tribunal held that the correct default date was April 25, 2020.

It noted that the personal guarantee was effectively invoked sixty days after the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) demand notice issued on February 25, 2020.

The Bench observed that,“In the case of personal guarantors, the date of default is the date when the guarantee is invoked. In the present case, the demand notice under Section 13(2) has to be considered for the invocation of guarantee.”

Matta sought initiation of insolvency proceedings against herself under Section 94 of the Insolvency and Bankruptcy Code (IBC), citing a default of Rs 9.55 crore.

The loan, originally sanctioned by Abhyudaya Cooperative Bank, was supported by two personal guarantees and later assigned to Asrec India Ltd.

Asrec opposed the application, arguing that insolvency proceedings were being used to avoid enforcement actions under SARFAESI and that security enforcement would result in better recovery.

The Tribunal, however, rejected these objections and held that the application was within limitation.

It noted that neither the borrower nor the guarantor had made any repayment and clarified that proceedings under Section 94 of the IBC operate independently of SARFAESI actions.

With the limitation period confirmed, the NCLT admitted the personal insolvency application and ordered initiation of the insolvency resolution process.

(KNN Bureau)

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