In Brief
A bank extended loans to a proprietary firm with a corporate company providing guarantee. After the loans turned non-performing in 2010, the bank initiated insolvency proceedings against the corporate guarantor in 2019. The guarantor argued the proceedings could not be brought against it since the principal borrower was not a corporate person and the claim was time-barred after three years. The Supreme Court held that a corporate guarantor becomes a corporate debtor when the principal borrower defaults, triggering the guarantor's coextensive liability. Further, a fresh period of limitation under the Limitation Act accrued from the guarantor's written acknowledgment of the guarantee in 2018, making the 2019 proceedings timely. The appeal was disposed of, upholding the initiation of insolvency proceedings.
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