The term Guarantee is a continuous one and therefore, the ‘right to sue accrues’ when the Guarantee Agreement was invoked and the date when the Corporate Debtor had failed to discharge its obligation, in terms of Guarantee – S. Elangovan Promoter and erstwhile Managing Director of Kaveri Gas Power Pvt. Ltd. Vs. ASREC (India) Ltd. – NCLAT Chennai

NCLAT held that there is no two opinion of a primordial fact that the liability of the Guarantor being coextensive with the Principal Borrower, in terms of the ingredients of Section 128 of the Indian Contract Act, 1872. The liability of a Guarantor will be cemented up on the document like Guarantee Deed, Mortgage by Deposit of Title Deeds, etc. In the instant case, one cannot remain oblivious of the fact that the outstanding debt Viz., the defaulted sum of the Corporate Debtor stood at Rs.1,50,39,59,607.73/-, which was payable on 27.09.2018, on the date when the Account as NPA. It is to be remembered that under the Code, 2016, the Quantum of Liability is not a relevant factor to be taken into account and has no nexus in respect of the initiation of CIRP, in as much as the Default of a Debt is equivalent to Rs.1 Crore and above.

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