Language of Section 127 of Indian Contract Act, 1872 is clear and unambiguous to also cover past transactions and past promises prior to giving a guarantee or surety | Guarantor cannot invoke the summary jurisdiction of Adjudicating Authority (NCLT) for determination of the genuineness of Deeds of Guarantee/fraud and forgery in respect of contractual documents – Tulip Hotel Pvt. Ltd. Vs. JC Flowers Asset Reconstructions Pvt. Ltd. and Anr. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT held that: (i) The Appellant has not challenged the Deeds of Guarantee before any Court or appropriate forum and also given the fact that the Board Resolution authorising the signing and execution of the Deed of Guarantee has not been questioned in any proceedings before a competent court by the Appellant, raising such a bogey now that the Adjudicating Authority should have looked into the veracity of these documents lacks merit. (ii) Such disputes which involve fraud and forgery in respect of contractual documents cannot be investigated and decided by the Adjudicating Authority which has only been conferred the benefit of summary jurisdiction. (iii) Adjudicating Authority in exercise of summary jurisdiction is not expected to scrutinise handwriting expert’s opinion and rely upon the assessment contained therein. (iv) It is not necessary that grant of loan to the principal debtor by the creditor must be necessarily contemporaneous with the execution of Guarantee Deeds and hence the legality and subsistence of the present Deeds of Guarantee cannot be questioned on this ground. (v) The default by the principal borrower and the guarantor arises on the same date, unless, the terms of contract of guarantee provides that the liability of the guarantor would arise in terms of the Deed of Guarantee.

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