NCLAT dismisses Canara Bank insolvency plea against guarantor as time-barred

The National Company Law Appellate Tribunal (NCLAT) in New Delhi has set aside an order of the National Company Law Tribunal (NCLT), Mumbai, that had admitted Canara Bank's petition to start insolvency proceedings against a personal guarantor of Frost International Limited. In its order dated 27 October 2026, the appellate tribunal held that the bank's petition was filed after the limitation period had run out, and dismissed it.

What Happened

According to the order, Canara Bank had given working capital loans to Frost International Limited in 2014 as part of a group of lenders, backed by personal guarantees. The company's account was classified as a non-performing asset on 17 July 2018. The bank filed its petition under Section 95 of the Insolvency and Bankruptcy Code against the guarantor on 8 November 2024. The NCLT admitted it on 6 February 2026.

The NCLT had itself worked out that the three-year limitation period, after excluding the Covid-19 period, ended on 12 March 2024. It still held the petition was in time because the resolution professional in the company's own insolvency process, which began on 9 February 2023 on an application by Bank of India, had admitted the bank's claim. The NCLT treated that as an acknowledgement of debt that extended the time limit.

The NCLAT held that this view relied on an earlier NCLAT ruling that the Supreme Court set aside on 29 April 2026. Citing the Supreme Court, the tribunal held that a resolution professional's admission of a claim is an administrative step and does not amount to an acknowledgement of debt under Section 18 of the Limitation Act. It found the petition was well beyond the limitation period and dismissed it.

What It Means

For personal guarantors of company loans, the ruling means a lender cannot rely on its claim being admitted in the borrower company's insolvency process to keep alive a recovery case it has filed late. For banks, it is a reminder that insolvency petitions against guarantors must be filed within the limitation period counted from when the guarantee was invoked. The NCLAT's order may be appealed to the Supreme Court.

Source: NCLAT order