Simply because a CIRP is pending against Principal Borrower or that some Resolution Plan is under consideration, is by itself not a ground to dismiss application filed u/s 7 of IBC against the Corporate Guarantor – M/s. Edelweiss Asset Reconstruction Company Ltd. Vs. Sadguru Multitrade Pvt. Ltd. – NCLT Mumbai Bench
In this case, it has been argued on behalf of the Corporate Guarantor/Respondent that since the principal borrower is already in an advanced stage of CIRP and a Resolution Plan is likely to be approved, the debt of the principal borrower is likely to be resolved and if that happens, the liability of the Corporate Guarantor shall also come to an end and will get extinguished automatically. Therefore, the Corporate Guarantor should not be admitted into Insolvency as it will be an exercise in futility.
The Adjudicating Authority held that (i) it is a settled position of law that a Financial creditor can initiate insolvency proceeding against the Corporate Debtor as well as the Corporate Guarantors of the Corporate Debtor under Section 7 of the Code. (ii) as per the law laid down in Athena Energy Ventures (2020) ibclaw.in 344 NCLAT, the Financial Creditor can proceed simultaneously against the Principal Borrower and the Corporate Guarantor. Therefore, simply because a CIRP is pending against the Principal Borrower or that some Resolution Plan is under consideration, is by itself not a ground to dismiss the Petition filed against the Corporate Guarantor.
