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Mr. Nimit Kalsi, Insolvency Professional – IBBI Disciplinary Committee Read Post »
Hon’ble NCLAT held that:
(i) The fact that guarantee has not been invoked, does not absolve the Corporate Guarantor from debt. The debt which is Corporate Guarantor, the Company has been given corporate guarantee and undertaken to pay the debt.
(ii) The liability of Corporate Guarantor is co-extensive with the Lenders and the Lenders are at liberty to require the performance by the Guarantor of its obligation.
(iii) The submission of the Appellant that since guarantee has not been invoked there is no debt cannot be accepted. Guarantee continues to bind the Corporate Guarantor to discharge its liability and the fact that as on date, guarantee has not been invoked, cannot be a ground for Appellant to be liquidated under Section 59 of the IBC.
NCLAT held that law is well settled that proceeding under Section 7 can be initiated against both the Principal Borrower and Corporate Guarantor and there is no inhibition in proceeding against the Corporate Guarantor although proceeding against Principal Borrower under Section 7 was admitted.
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Simplex Housing Projects Ltd. Vs. State Bank of India – Rajasthan High Court Read Post »
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Zee Entertainment Enterprises Ltd. Vs. Indusind Bank Ltd. And Anr. – Delhi High Court Read Post »
In this case, finance creditor assigned the loan after approval of resolution plan under IBC. Thereafter assignee issue a notice to the guarantor of the Corporate Debtor under SARFAESI Act, 2002. The notice of the SARFAESI Act was responded by the Guarantor stating that pursuant to repayment of amount in terms of the approved resolution plan, all the claims of Assigner stand extinguished and consequently, no claim can be made by the assignee for the same default and that no amount is due and payable to assignee.
Thereafter the Appellant instituted a Civil Suit before the High Court of Madras and the same was dismissed observing that the civil court’s jurisdiction is barred in view of Section 34 of the SARFAESI Act and only DRT had competence to decide the matter.
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Nailesh Dresswala Vs. MTC ECOM Pvt. Ltd. – NCLT Mumbai Bench Read Post »
The Hon’ble High Court has clarified lots of questions including right to apply for insolvency does not arise out of a contract between the parties; Resolution plan is neither nor a compromise or composition nor voluntary compromise with the corporate debtor; Section 14 of the Code of 2016 does not apply to a personal guarantor; The existing contracts between the surety, principal debtor and the creditor remains unaffected during the moratorium under Section 14; Principal debtor has gone into liquidation would not have any effect on the liability of the guarantor; Pre insolvency right of the creditor does not undergo any metamorphosis on the principle; When, the creditor is dealing with the principal debtor in terms of the Code of 2016, the consent of the surety is not required; The sanctioned Resolution Plan cannot be construed to be a variation of the terms of the contract between the principal debtor and the creditor and held that the issue is answered in the negative and liability of the personal guarantor is not extinguished upon approval of the resolution plan. In view of the answer to the issue being in the negative, no relief can be granted to the writ petitioner.
NCLAT held that by virtue of Deed of Guarantee Corporate Debtor being a Corporate Person owes debt to the Bank and that the ‘Financial Debt’ includes a ‘Debt’ owed to a Creditor by ‘Principal’ and ‘Guarantor’. A just Omission or failure to pay on the part of a Guarantor to pay the ‘Financial Creditor’, When the Principal sum is claimed/demanded certainly, will come with the scope of ‘Default’ under Section (3),(12) of the Code. The proceedings under Section 7 of the Code can be triggered by a ‘Financial Creditor’ who had taken Guarantee in respect of ‘Debt’ against ‘Guarantor’ for failure to repay the money borrowed by the ‘Principal Borrower’. To put it explicitly (Ms/ Surana Metals Ltd.) is the ‘Corporate Debtor’ and that the Appellant is the proprietor of the Firm of M/s Mahaveer Construction.
NCLAT held that Once the Financial Creditor’s claim has been collated and admitted by the IRP in its entirety, invoking of jurisdiction of the Adjudicating Authority at its instance for triggering a fresh CIRP against the Corporate Guarantor would amount to duplicity of claims being pressed. The fact that the Resolution Plan is yet to be approved by the Adjudicating Authority and the Financial Creditor may be faced with the prospect of taking a haircut is no ground to trigger a fresh resolution process against the Corporate Guarantor. Assuming but not holding that the Corporate Guarantors liability is coextensive with that of the Principal Borrower in the instant case with no proof of record that there is no contract to the contrary within the meaning of Section 128 of the Indian Contract Act and there has been no subsequent variance in terms of contract between the Financial Creditor and the Principal Borrower, apprehension of Financial Creditor that in the resolution process initiated against the Principal Borrower, which is still underway, its total claim will not be satisfied has to be termed as speculative and a figment of imagination. This being a second application for same set of claim and arising out of the same default cannot be admitted against the ‘Corporate Guarantor’ while CIRP initiated against the ‘Principal Borrower’ is still subsisting.
