Divyang Soni Vs. Bank of Baroda - The amount was recovered by the Respondent Bank due to auction of mortgaged property as a result of decree passed by Debt Recovery Tribunal-II, Ahmedabad. Thus, in terms of Explanation (b) of Section 19 of the Limitation Act, 1963, this recovery would not considered as Debt and therefore does not impact/enhance limitation period as pleaded by the Appellant.

  NCLAT (2025.05.02) in Divyang Soni Vs. Bank of Baroda [(2025) ibclaw.in 333 NCLAT, Company Appeal (AT) (Ins) No. 1988 of 2024] held that.

• The 1963 Act’s Section 19 specifically governs payments toward debt or interest on a legacy, resetting the limitation period if made by the debtor or their authorized agent, provided the payment is acknowledged in writing (except for pre-1928 interest payments). The Limitation Act,1963 explicitly excludes money payable under court decrees from the definition of “debt,” narrowing its application to non-adjudicated liabilities.

• In other words, if a court has already passed a decree or order directing the payment of a certain amount, such an amount is not considered a “debt” for the purposes of Section 19 of the Limitation Act,1963. This means that if a payment is made towards satisfying a court decree or order, such payment will not result in the computation of a fresh limitation period under Section 19 of the Limitation Act,1963.

• The amount was recovered by the Respondent Bank due to auction of mortgaged property as a result of decree passed by Debt Recovery Tribunal-II, Ahmedabad. Thus, in terms of Explanation (b) of Section 19 of the Limitation Act, 1963, this recovery would not considered as Debt and therefore does not impact/enhance limitation period as pleaded by the Appellant.

• It is reiterated that the action based on to decree passed by the DRT was in respect of the mortgaged property held by the Respondent. Hence, it cannot be case of the Appellant that such recovery shall extend the limitation for personal guarantee given by the Appellant. The argument therefore submitted by the Appellant are not tenable.

Blogger’s Comments; In the present case section 94 application of the PG (Personal Guarantor) has been dismissed by the Adjudicating Authority on the grounds that the default of the concerned debt of the CD is time barred on the date of section 94 application. I am of the opinion that section 94 applications are to be governed by the “Doctrine of Debt due and Payable” not by the “Doctrine of Debt due and Recoverable”

Doctrine of "Debts due and payable"

Excerpts of the Order;

# 1. The present appeal has been filed by the Appellant i.e. Divyang Gopalbhai Soni under Section 61 of the Insolvency and Bankruptcy Code, 2016 (‘Code’), challenging the Impugned Order dated 04.09.2024 passed by the National Company Law Tribunal, Ahmedabad, Court-2 (Adjudicating Authority) in C.P.(IB)/ 268 (AHM) 2024.

# 2. Bank of Baroda who is the financial creditor is the Respondent herein.

# 3. The appellant has challenged the Impugned Order dated 04.09.2024 passed by the Adjudicating Authority, in C.P.(IB)/268(AHM)2024, which dismissed the Appellant’s application under Section 94(1) of the Code as not maintainable. The Appellant contended that the Adjudicating Authority passed the Impugned Order dated 04.09.2024 without considering arguments, facts, or circumstances, and asserts that the Impugned Order is a non-speaking order, legally unsustainable, and unsupported by the facts and merits of the case.

# 4. It is the case of the Appellant that the Corporate Debtor despite this recovery, the Appellant’s application under Section 94(1) of the Code was dismissed by the Adjudicating Authority as “not maintainable” without addressing whether the Respondent’s claims persisted post-auction or evaluating compliance with Code’s procedural mandates for personal guarantor insolvency. The Appellant submitted that the order fails to consider the legal effect of recoveries made during the DRT proceedings on the limitation period and does not address the applicability of the Limitation Act and 238A of the Code.

# 5. The Appellant submitted that by virtue of the payments credited by the Corporate Debtor, the limitation period has been revived under Section 19 of the Limitation Act, 1963, thereby enabling the filing of the present application within the prescribed time. The Appellant submitted that his application was well within the limitation period as prescribed under the Code, which mandates computation of limitation from the date of default or the date of last acknowledgment or credit, whichever is later. The Appellant stated that in the present case, the last credit was made on 14.02.2024. The Appellant relies on the judgment of the Hon’ble Supreme Court in Dena Bank v. C. Shivakumar Reddy [(2021) 10 SCC 330], wherein it was held that the decree/order of the Debt Recovery Tribunal constitutes a fresh cause of action, thereby extending the limitation period by three years from the date of the last credit. The Appellant argued that since the present petition CP(IB)/268(AHM)/2024 was filed on 06.08.2024 and registered on 03.09.2024, it was within the limitation period, and the dismissal on limitation grounds is therefore unsustainable.

# 6. The Appellant contends that the Adjudicating Authority exhibited a prejudiced mindset when passing the Impugned Order dated 04.09.2024, failing to adequately consider the Appellant’s submissions and rushing to a decision. The Appellant alleged that Adjudicating Authority, overlooked vital aspects and ignored compelling evidence, disposing of the petition in the Impugned Order dated 04.09.2024 despite the Appellant demonstrating the existence of ongoing proceedings. The Appellant requested this Appellate Tribunal to set aside the Impugned Order.

# 7. It is noted that M/s Shree Mukt Jewellers Baroda Pvt Ltd (hereinafter referred to as the Corporate Debtor) had approached Bank of Baroda (the Financial Creditor/ Respondent) to avail credit facilities. The Financial Creditor sanctioned certain credit facilities to the Corporate Debtor, and the Appellant, as a personal guarantor, executed a Guarantee Agreement dated 28.09.2013 in favor of the Respondent, guaranteeing the total sanctioned amount of Rs. 201 Crores in respect of the cash credit facilities availed by the Corporate Debtor.

# 8. It is also taken into account that the Corporate Debtor was classified as a Non-Performing Asset (NPA) by the Respondent on 27.02.2016. Subsequently, the Respondent issued a Demand Notice dated 06.08.2016 and invoked the personal guarantee furnished by the Appellant. The invocation of the personal guarantee was effected through the said notice dated 06.08.2016, read in conjunction with the terms and conditions of the Guarantee Agreement executed by the Appellant. This invocation was consequent to the default by the Corporate Debtor in repayment of the sanctioned cash credit facilities guaranteed by the Appellant.

# 9. We note that in order to recover the outstanding dues from the Corporate Debtor, the Respondent filed Original Application No. 551/2016 before the Debt Recovery Tribunal-II, Ahmedabad, which was allowed by way of a decree/order dated 09.01.2017. Subsequently, Recovery Certificate No. 14/2017 was issued, now recorded as TRP No. 02/2023. In the said Recovery Proceedings, the DRT scheduled the auction of the mortgaged property on 30.01.2024, which was successfully conducted with the Respondent Bank receiving a highest bid of Rs. 22.42 Cr. for the property in question. Further, as per the Statement of Account filed by the Respondent Bank in TRP No. 02/2023, the highest bidder has deposited the entire sale consideration, thereby completing the auction process in accordance with the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

# 10. We note that the Adjudicating Authority by its order dated 04.09.2024, dismissed the petition filed by the Appellant as not maintainable, holding that recoveries made from the auction of mortgaged properties pursuant to a recovery certificate do not constitute repayment by the principal borrower or guarantor and, therefore, cannot extend the limitation period for the personal guarantor in terms of the Limitation Act, 1963. The Adjudicating Authority further observed that the petition, filed on 06.08.2024, was beyond the prescribed period of limitation and did not comply with Section 238A of the Code, and accordingly disposed of the matter as not maintainable.

# 11. The facts regarding the loan given by the Financial Creditor to M/s Shree Mukt Jewellers Baroda Pvt. Ltd. as Corporate Debtor has not been disputed by the Appellant. Similarly, the Appellant did not dispute that he has signed the guarantee agreement dated 28.09.2013 in favour of the Respondent for Rs. 201 Crores in respect of cash credit facilities available by the Corporate Debtor. Hence, these facts are being taken as undisputed facts.

# 12. At this stage, we take into consideration the guarantee agreement dated 28.09.2013, which reads as under :-  . . . . . . . . .

# 13. Thus, we take into account the fact that the guarantee agreement dated 23.09.2013 is stated to be continuing and binding personal guarantee on the part of the Appellant in favour of the Respondent. The guarantee agreement, clause 2, further stated that the guarantee is an additional and without prejudice for any security for application which bank may have from the personal guarantor on the principal borrower and for which of rights and remedies in respect of are reserved. The Clause 3 of the guarantee deed categorically mentioned that the guarantee shall be continuing guarantee and shall not be considered as wholly or partially satisfied or exhausted by any payment from time to time made to the bank or any statement of any account or reason of account being created or any other at any time or from time to time. This clause 3 further states that guarantee shall continue in force notwithstanding the discharge of the principals by operation of law. We note that similar rights have been accrued in favour of the Respondent bank in clause 4, 5, 6 etc.

# 14. From this, it becomes very clear that the Respondent has absolute right to invoke the guarantee agreement signed by the Appellant despite any operation of law and other factors as discussed above.

# 15. The only point raised by the Appellant is regarding limitation based on which application was filed by the Appellant under Section 94 of the Code which had been dismissed by the Adjudicating Authority. In this connection, we note that the Respondent has invoked the guarantee of the Appellant vide notice dated 06.08.2016, therefore, the filing of appeal against the same should have been done by 05.08.2019 whereas the application was indeed filed under Section 94 of the Code by the Appellant before the Adjudicating Authority vide C.P.(IB)/268 (AHM) 2024 on 04.09.2024, which is apparently much beyond the limitation period.

# 16. The Appellant has made out the case that the Respondent has filed Original Application No. 551/2016 before the Debt Recovery Tribunal-II, Ahmedabad, which was allowed by way of a decree/ order dated 09.01.2017 and decree passed Recovery Certificate No. 14/2017 was issued, which is now recorded das TRP No. 02/2023. The Appellant submitted as per auction of the mortgaged property the Respondent Bank has received Rs. 22.42 Crores qua the property in question. It is the case of the Appellant that since the bank has received the amount on 30.01.2024, hence, the law of limitation in respect of his application filed under Section 94 of the Code before the Adjudicating Authority should have been counted from 30.01.2024 rather than from 06.08.2016.

# 17. The Appellant also cited the judgement of Dena Bank (Supra), where in the Hon’ble Apex Court held that the judgment and order/ decree of the DRT gave a fresh cause of action and therefore there is an extension of three years from the last credit, i.e., 14.02.2024, as the C.P.(IB)/268 (AHM) 2024 was filed on 06.08.2024 and the same was registered on 03.09.2024, hence the said petition was well within the limitation period. 

# 18. In this regard, we take into account the relevant para of Dena Bank (Supra) which reads as under :-

“It is well settled that entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgement under Section 18 of the Limitation Act.”

From above, it is noted that the judgment of Dena Bank (Supra) was w.r.t., entries in the books of accounts of the Corporate Debtor w.r.t., acknowledgement under Section 18 of Limitation Act.

# 19. In this regard, we have also taken into account Section 19 of the Limitation Act, 1963 which reads as under :-

• “Section 19. Effect of payment on account of debt or of interest on legacy.

• Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made:

• Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the handwriting of, or in a writing signed by, the person making the payment.

• Explanation.—For the purposes of this section,—

• (a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment; 

• (b) “debt” does not include money payable under a decree or order of a court.   (Emphasis Supplied)

# 20. We would also like to see old provision for same as contained in the Section 20 of the Limitation Act,1908 which reads as under:

• “Effect of payment on account of debt or of interest on legacy.— [(1) Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy, or by his duly authorised agent, a fresh period of limitation shall be computed from the time when the payment was made:]

• [Provided that * * * an acknowledgment of the payment appears in the handwriting of, or in a writing signed by, the person making the payment.]

• (2) Effect to receipt of procedure of mortgaged land. Where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment for the purpose of sub-section (1).

• Explanation.–Debt includes money payable under a decree or order of Court.” (Emphasis Supplied)

# 21. Section 19 of the Limitation Act, 1963, and Section 20 of the Limitation Act, 1908, differ in scope, structure, and applicability. The 1963 Act’s Section 19 specifically governs payments toward debt or interest on a legacy, resetting the limitation period if made by the debtor or their authorized agent, provided the payment is acknowledged in writing (except for pre-1928 interest payments). The Limitation Act,1963 explicitly excludes money payable under court decrees from the definition of “debt,” narrowing its application to non-adjudicated liabilities. In contrast, Section 20 of the 1908 Act broadly covered interest and part-payments of principal, requiring acknowledgment for all payments and including court-decreed debts. Structurally, the 1963 Act introduced a streamlined format with a proviso and explanatory clauses. Additionally, the 1963 Act’s exemption for pre-1928 interest payments reflects legislative intent to address historical liabilities pragmatically, whereas the 1908 Act imposed uniform acknowledgment rules. These distinctions highlight the 1963 Act’s focus on clarity and procedural precision, particularly in segregating court-decreed obligations from ordinary debts.

# 22. We would like to go in detail on the Explanation (b) of Section 19 of the Limitation Act,1963 states “debt” does not include money payable under a decree or order of a court. Thus, we note that the term “debt” in the context of Section 19 of the Limitation Act, 1963 specifically excludes any money that is payable under a decree or order of a court. In other words, if a court has already passed a decree or order directing the payment of a certain amount, such an amount is not considered a “debt” for the purposes of Section 19 of the Limitation Act,1963. This means that if a payment is made towards satisfying a court decree or order, such payment will not result in the computation of a fresh limitation period under Section 19 of the Limitation Act,1963. The benefit of extending the limitation period through part payment is only available for debts that are not yet decreed by a court. We may see implication by a hypothetical situation. For instance in case, A owes B Rs.1 Cr. and makes a part payment before B files a suit and obtains a decree, the limitation period for B to file a suit can be extended as per Section 19 of the Limitation Act,1963.However, if B has already obtained a court decree for Rs.1 Cr. against A, any payment made by A towards this decreed amount will not extend the limitation period for execution of the decree under Section 19 of the Limitation Act.1963.

# 23. In this backdrop, we note that in appeal before us, the amount was recovered by the Respondent Bank due to auction of mortgaged property as a result of decree passed by Debt Recovery Tribunal-II, Ahmedabad. Thus, in terms of Explanation (b) of Section 19 of the Limitation Act, 1963, this recovery would not considered as Debt and therefore does not impact/enhance limitation period as pleaded by the Appellant. In fact, this goes against the cause of the Appellant.

# 24. From above, it is noted that payment on account of debt is required to be made by the person liable to pay for getting fresh period of limitation which be computed from the time of the payment was made. In this connection, we observe that no payment was made by the Corporate Debtor or the personal guarantor for the outstanding loan of Rs. 201 Crores. It is only on the sale of the mortgaged property by the Respondent Bank based on the decree of the DRT in his favour which was done in January, 2024 which has nothing to do with the payment which should have been made by the Corporate Debtor or the personal guarantor to take the benefit of the Section 19 of the Code.

# 25. In this connection, we also note Section 238 A of the Code which reads as under :-

• “Section 238A: The provisions of the Limitation Act, 1963 shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.”

(Emphasis Supplied)

# 26. The aforesaid Section 238A of the Code stipulates that the provisions of the Limitation Act shall be applicable to the proceedings before the Adjudicating Authority. The same has also been taken into consideration by the Adjudicating Authority in the Impugned Order.

# 27. At this stage, it will be worthwhile to take into consideration the order passed by the Adjudicating Authority dated 04.09.2024 where the issue of limitation raised by the Appellant has been dealt and the application of the Appellant was rejected. The order reads as under :-

• “Heard the Ld Counsel for the applicant. This application has been filed under sec 94 of IBC 2016 with a further affidavit on 06.08.2024. The applicant had executed a guarantee on 28.09.2013 for Rs 201.00 crores to the financial creditor (Bank of Baroda) to enable the Corporate Debtor Shree Mukt Jewellers Baroda P Ltd to obtain certain facilities and also mortgaged his property in favour of the financial creditor. The account was classified as NPA and a demand notice was issued on 06.08.2016 recalling the loan and invoking the guarantee and an application was filed before the DRT Ahmedabad. The DRT passed an order decreeing the debt due and payable on the Corporate Debtor and the guarantors vide its order dated 09.01.2017 and recovery certificate was issued. It is further observed that the financial creditor has been executing the order and auctioning the properties of the mortgaged properties and other assets. Such receipts of recoveries do not pertain to the repayment of the principal borrower or guarantor/s and is out of the mortgaged properties on which a recovery certificate has been issued, cannot extend the limitation period for the personal guarantor who is not complying with the provisions of Sec 36 of Limitation Act 1963.

Further, this petition has been filed on 06.08.2024 which is beyond the period of limitation and does not comply with Sec 238 A of the IBC 2016. In view of the same, CP(IB) 268 of 2024 stands disposed of as not maintainable.”

(Emphasis Supplied)

# 28. To recapitulate, we observe that the default by the Corporate Debtor and subsequently notice to Appellant invoking the bank guarantee are undisputed. We also note that the bank has issued guarantee which is in nature of continuing and unconditional guarantee which has been legally invoked by the Respondent Bank. We further observe that the DRT proceedings are under the Recovery of Debts and Bankruptcy Act, 1993. It is reiterated that the action based on to decree passed by the DRT was in respect of the mortgaged property held by the Respondent. Hence, it cannot be case of the Appellant that such recovery shall extend the limitation for personal guarantee given by the Appellant. The argument therefore submitted by the Appellant are not tenable.

# 29. In conclusion, we do not find any error in the Impugned Order. The Appeal devoid of any merit stand rejected. No cost. I.A., if any, are closed.

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