Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has reiterated that amendment of the date of default in insolvency proceedings against a personal guarantor is permissible before final adjudication, and that the issue of limitation must be examined at the stage when the insolvency application is decided on merits. Dismissing an appeal, the Appellate Tribunal upheld an order of the NCLT, Mumbai, which had allowed the creditor to amend the date of default in a petition filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC).

Also Read: NCLAT: Amounts Reflected as ‘Other Advances’ in Balance Sheet Cannot Be Treated as Financial Debt Under IBC

The Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that it is well settled that amendments to pleadings are permissible in applications under Sections 7 and 95 of the IBC. It held that permitting an amendment does not amount to expressing any opinion on the merits of the insolvency application and does not prejudice the defences available to the personal guarantor.

The dispute arose out of credit facilities extended by State Bank of India to A A Estates Pvt. Ltd. One Saranga Agarwal had executed a personal guarantee in February 2012. The borrower defaulted and the account was declared non-performing asset (NPA) in February 2015. Proceedings under the SARFAESI Act were initiated, followed by a loan recall notice dated April 5, 2016. An insolvency application under Section 95 of the IBC was filed in January 2022.

During the course of proceedings before the NCLT, the bank was unable to trace proof of service of the earlier demand notice relied upon for establishing default. In this background, the bank filed an interlocutory application seeking amendment of the date of default from March 2, 2015 to April 5, 2016, being the date of the loan recall notice. The NCLT allowed the amendment, granting liberty to the personal guarantor to file a reply to the amended petition.

Also Read: NCLT Ahmedabad Refuses To Condon 384-Day Delay In Filing Reply, Says Administrative Difficulties Not “Sufficient Cause” Under Section 5 of Limitation Act

Challenging this order before the NCLAT, the personal guarantor contended that the amendment introduced a time-barred claim and took away her defence regarding invocation of the guarantee. It was argued that the bank had sought the amendment belatedly and that allowing such amendment would amount to permitting a fresh, barred cause of action through the backdoor.

Rejecting these contentions, the Appellate Tribunal held that allowing an amendment does not determine the issue of limitation. It observed that whether the amended date of default renders the insolvency application time-barred is a matter that must be examined by the Adjudicating Authority while deciding the application on merits. The Tribunal emphasised that the personal guarantor had been expressly granted the opportunity to raise all defences, including limitation.

The NCLAT relied on the Supreme Court’s decision in Dena Bank v. C. Shivakumar Reddy, reiterating that amendments and additional documents can be permitted at any stage before final adjudication. It further observed that by allowing the amendment, the NCLT had neither withdrawn any admission nor taken away any vested defence of the personal guarantor.

Also Read: NCLAT: Homebuyer Association Can File Section 7 Insolvency Plea Only With Individual Authorisation From All Allottees

“Whether the notice by which the entire loan is recalled is barred by limitation is a question which needs to be considered while hearing the application on merits,” the Appellate Tribunal noted, adding that permitting amendment only facilitates effective adjudication of the real controversy. Holding that no prejudice was caused to the personal guarantor and that all objections remained open for consideration at the final stage, the NCLAT found no infirmity in the order of the NCLT. Accordingly, the appeal was dismissed, and the amendment of the date of default was allowed to stand, subject to adjudication on merits in the pending insolvency proceedings.

Appearance

For Appellant: Senior Advocate Arvind Nayar with Advocates J Rajesh, Aniruth Prushottam, Md. Arsalan Ahmed, Yashwardhan Agarwal

For Respondents: Advocates Harshit Khare, Prafful Saini, Ayuj Agrawal, Abhishek Anand, Karan Kohli, Palak Kalra

Cause Title: Saranga A. Aggarwal vs State Bank of India and Anr.

Case No: Company Appeal (AT) (Insolvency) No. 1788 of 2025

Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member)