Second Guarantee Invocation Cannot Revive Time-Barred Section 7 Claim: NCLT Mumbai

Background of the financial facilities

Canara Bank had extended credit facilities to Frost International Limited. Globiz Exim Private Limited furnished a corporate guarantee for the borrower's repayment obligations.

The principal borrower's account was classified as a non-performing asset on 17 July 2018. Recovery proceedings were initiated before the Debt Recovery Tribunal in October 2018.

Frost International was subsequently admitted into the Corporate Insolvency Resolution Process on 9 March 2023. Canara Bank later initiated separate insolvency proceedings against Globiz Exim as corporate guarantor.

First invocation of the corporate guarantee

The bank issued a demand notice invoking the corporate guarantee on 1 September 2018. The notice provided five days for payment.

The NCLT held that limitation against the corporate guarantor began on 6 September 2018, when the stipulated five-day period expired without payment.

Once limitation began to run after the first invocation, it could be extended only through a legally valid acknowledgement or another applicable provision of the Limitation Act.

Second demand notice issued in 2025

Canara Bank issued another demand notice on 20 January 2025 and relied on it while pursuing the Section 7 application against Globiz Exim.

The corporate guarantor argued that the bank could not issue a fresh invocation several years later to create a new default date and revive a claim that had already become barred by limitation.

The Tribunal accepted this limitation objection. It held that the second notice did not erase the legal effect of the first invocation or provide a fresh cause of action under the on-demand guarantee.

Limitation for an on-demand guarantee

A guarantor's liability may depend on the terms of the guarantee. Where the instrument is payable on demand, limitation against the guarantor ordinarily begins when a valid demand is made and the guarantor fails to comply within the stipulated period.

The creditor cannot indefinitely postpone limitation by choosing to issue repeated demands under the same guarantee. Once a valid invocation has triggered the cause of action, a later notice does not automatically restart the clock.

The NCLT therefore examined the September 2018 notice as the operative invocation rather than accepting January 2025 as a fresh starting point.

No valid acknowledgement under Section 18

Section 18 of the Limitation Act may provide a fresh limitation period where the party against whom the right is claimed gives a qualifying written and signed acknowledgement before expiry of the existing limitation period.

The Tribunal found no valid acknowledgement by Globiz Exim after the guarantee invocation dated 1 September 2018 that could extend limitation.

An acknowledgement must satisfy the statutory requirements. A creditor's own record, unilateral action or later demand cannot substitute for an acknowledgement attributable to the debtor or guarantor.

NeSL authentication did not extend limitation

The bank relied on authentication of the debt in the records of National E-Governance Services Limited dated 5 November 2023.

The NCLT rejected the contention that this authentication revived or extended the claim. By that stage, the limitation triggered by the 2018 invocation had already run without a valid acknowledgement from the corporate guarantor.

Information utility records may provide evidence concerning debt and default, but their evidentiary function does not automatically make them acknowledgements under Section 18 of the Limitation Act.

Admission of claim in borrower's CIRP was insufficient

Canara Bank also relied on the treatment or admission of its claim during the insolvency process of the principal borrower, Frost International.

The Tribunal held that admission of a claim by an Interim Resolution Professional or Resolution Professional is an administrative exercise. It does not amount to an acknowledgement of liability by the separate corporate guarantor.

The principal borrower and guarantor are distinct legal persons. An administrative act in the borrower's CIRP cannot, without the required legal basis, extend limitation against the guarantor.

Failure to place the first notice on record

The Tribunal noted that the bank had not placed the original demand notice dated 1 September 2018 before the Bench even though that notice was central to determining the date of invocation.

The order criticised this omission and concluded that the bank had not approached the Tribunal with clean hands on this aspect.

A creditor filing an insolvency application should disclose every earlier invocation, demand, repayment proposal and acknowledgement relevant to limitation. Selective reliance on a later notice can undermine the petition.

Authorities relied upon by the bank distinguished

The bank relied on decisions concerning when limitation begins against a guarantor and the effect of demand under a guarantee.

The NCLT observed that those authorities did not support the proposition that a creditor may issue a second demand after limitation has begun and thereby obtain a new cause of action.

The relevant principle remained that the first valid invocation of an on-demand guarantee starts limitation, subject to a valid extension or acknowledgement recognised by law.

NCLT's final decision

The Mumbai NCLT concluded that the Section 7 application was barred by limitation and rejected it.

The alleged outstanding amount of ₹742.06 crore and the existence of financing documents did not remove the requirement that the insolvency application be filed within the legally permissible period.

The decision was delivered on 8 July 2026 by Nilesh Sharma, Member (Judicial), and Sameer Kakar, Member (Technical).

Practical lessons for banks and financial creditors

• Identify the exact terms of every corporate guarantee, including whether it is payable on demand.
• Preserve and disclose the first invocation notice and proof of service.
• Calculate limitation from the date payment became due after the valid invocation.
• Obtain any acknowledgement of liability before expiry of the existing limitation period.
• Ensure that the acknowledgement is written, signed and attributable to the guarantor where Section 18 is relied upon.
• Do not assume that a second demand notice will create a new default date.
• Do not treat NeSL authentication as a substitute for a statutory acknowledgement.
• Distinguish the borrower's acknowledgement or CIRP claim treatment from an acknowledgement by the corporate guarantor.
• Explain limitation comprehensively in the Section 7 application and attach all relevant documents.

What the ruling does not mean

The decision does not hold that a corporate guarantor can never be proceeded against under Section 7. A financial creditor may initiate insolvency proceedings against a corporate guarantor where debt and default are established and the application is within limitation.

It also does not invalidate every subsequent demand. A later communication may have legal relevance depending on the guarantee terms and surrounding facts, but it cannot by itself revive a cause of action that is already time-barred.

The result in this case followed from the first invocation in September 2018, absence of a valid subsequent acknowledgement and the attempt to rely on a fresh notice issued in January 2025.

Key takeaways

• The case number is C.P. (IB)/595/MB/2025.
• The order was delivered by NCLT Mumbai on 8 July 2026.
• The bank claimed approximately ₹742.06 crore against the corporate guarantor.
• The first demand notice was issued on 1 September 2018.
• Limitation commenced after the five-day payment period expired on 6 September 2018.
• The second demand notice dated 20 January 2025 did not restart limitation.
• NeSL authentication was not a valid acknowledgement by the guarantor.
• Admission of the bank's claim in the principal borrower's CIRP was only an administrative act and did not extend limitation against Globiz Exim.
• The Section 7 application was rejected as time-barred.

Conclusion

Canara Bank Limited v. Globiz Exim Private Limited confirms that repeated invocation cannot be used to bypass limitation under the IBC. Once an on-demand guarantee has been validly invoked and the payment period expires, the creditor must act within limitation or establish a legally recognised extension.

The ruling highlights the importance of accurate default dates, complete disclosure of earlier notices and timely acknowledgements. Insolvency proceedings are not a mechanism for reviving claims that have already become unenforceable due to limitation.