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2022 (1) TMI 1073 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Appellant submits that the Appellant/Corporate Debtor is not the Principal Borrower but who issued a Guarantee which stood discharged from all the obligations by operation of Law in terms of the Indian Contract Act 1872 - time limitation - Right of Surety - Contract of Guarantee - Indian Contract Act 1872 - HELD THAT - This Tribunal significantly points out that when a Demand is made on the Guarantor and when the 1st Respondent/Bank had invoked the Bank Guarantee against the Corporate Debtor on 08.12.2014 and also issued a Demand Notice to the Corporate Debtor on 25.08.2017 and a Reply was furnished to the 1st Respondent/Bank by the Corporate Debtor on 27.09.2017 wherein at paragraph 2 the Corporate Debtor had stated in a crystalline and unequivocal term that it was required to pay to the Bank due amount of Rs. 48.39 crores and also at paragraph 6 had made a request to the 1st Respondent/Bank not to initiate any action under IBC etc. and in the teeth of the Debt being not time barred against the Principal Debtor the Limitation begins to run only cementing on the Demand made for the repayment of due amount as opined by this Tribunal . As a matter of fact in the Reply dated 27.09.2017 of the Corporate Debtor addressed to the 1st Respondent/Bank the Corporate Debtor had mentioned GNIC has failed to pay its dues to IDBI as a result of which IDBI has invoked the abovementioned Guarantees and called upon Wizcraft to pay IDBI their due of Rs. 48.39 crores . Therefore the aforesaid contents of Reply dated 27.09.2017 of the Corporate Debtor is an acknowledgement of liability . Also that a Debt liability of a person can be projected and enforced by a Creditor through initiation of numerous proceedings known to Law - If an Acknowledgement is valid then there is no fetter in Law whereby the liability against the particular person/entity can be enforced in accordance with Law. In Law an Acknowledgement of Liability merely extends the limitation period and does not create a new right of action . A Guarantor is one who Guarantees to perform the promise of or discharge the liability of a person for whom he stands Guarantee. In regard to any Debt incurred by Principal during the currency of Guarantee the Surety is liable as long as the Debt is recoverable from Principal . It does not matter that the Principal has kept the Debt alive by an acknowledgement under Section 19 of the Limitation Act 1963 or by payments under Section 20 of the Limitation Act for by these actions there is no Renewal of Debt and no new Debt is created which is not covered by Guarantee . As a matter of fact the Debt remains the same viz. the Debt Guaranteed and only the bar of time against recovery is postponed - An Agreement executed by a Guarantor is a separate and collateral contract distinct from the contract of debt between Principal Debtor and Creditor . It cannot be brushed aside that an Acknowledgement of Liability will save liability only against the person who acknowledges the liability. A Financial Creditor is entitled to initiate CIRP against a Guarantor or Surety although the Creditor holds enough security over the assets. A Surety has no right to dictate terms to the Creditor as to how he ought to make a recovery and pursue his remedies against the Principal Debtor at his instance - The Financial Creditor has the option of commencing the Insolvency proceeding against the Corporate Grantor only without even resorting to any legal proceeding against the Corporate Debtor . Admittedly there is an undischarged live liability and the amount due to the Bank has not been paid by the Corporate Debtor/Guarantor of the Principal Debtor . For the undischarged live liability for which the Guarantor /Corporate Debtor has obliged by its three Corporate Guarantee Agreements dated 26.06.2009 25.02.2010 and 14.01.2013 it is undoubtedly responsible for the liability of Principal Debtor - this Tribunal unhesitatingly comes to a consequent conclusion that the Guarantor had waived all rights as Surety and assumed more liability. As far as the present case is concerned the Corporate Debtor through its Reply/letter dated 27.09.2017 addressed to the 1st Respondent/Bank had mentioned that it understood the GNIC/Principal Borrower had failed to pay its dues to IDBI (1st Respondent) of which the IDBI had invoked the Bank Guarantees and called upon the Corporate Debtor/Guarantor to pay the Bank the dues of Rs. 48.39 crores and also the Corporate Debtor/Guarantor had requested the 1st Respondent/Bank not to initiate any action under the I B Code etc. and this Letter/Reply dated 27.09.2017 is an Acknowledgement of the Debt which extends the period of Limitation in conformity with Section 18 of the Limitation Act 1963 - In order to sustain an Application under Section 7 of the Code an applicant must satisfy the conscious of the Adjudicating Authority about the existence of Debt which is due from the Corporate Debtor . It is true that the Adjudicating Authority is to find out whether there is Debt and Default committed by the Corporate Debtor . Always it is open to the Corporate Debtor that a Default had not occurred. Moreover it is open to the Corporate Debtor to point out that the Debt is not payable by it either in Law or in fact. In the instant case the Corporate Debtor/Guarantor had committed Default as per the ingredients of Section 3(2) of the Code. The Section 7 Application under the Code was filed before the Adjudicating Authority on 01.08.2019 by the 1st Respondent/Bank. Notwithstanding the fact that the Account of the Principal Borrower (Great Indian Nautanki Company Private Limited) was classified as Non-Performing Asset by the First Respondent/Bank in the instant case on hand in regard to the Debt incurred by the Principal Borrower for the Loans availed by it and that the Corporate Guarantee Agreements dated 26.06.2009 25.02.2009 and 14.01.2013 were executed by the Corporate Debtor /Promoter Company of the Principal Borrower and since there is an undischarged Live Liability in that the Debt due and payable to the First Respondent/Bank was not paid by the Principal Debtor by virtue of the aforesaid three Corporate Guarantee Agreements ( Corporate Guarantee ) the Corporate Debtor is responsible for the liability of the Principal Borrower / Great Indian Nautanki Company Private Limited. This Tribunal keeping in mind of a primordial fact that the Debt Liability is arising from the Guarantee which is due and payable as per the invocation of Corporate Guarantee by the First Respondent/Bank on 08.12.2014 and the Guarantee Agreements are Independent Rights containing separate and reciprocal obligations and taking note of the fact that the Corporate Debtor had issued a Reply on 27.09.2017 to the Demand Notice of the First Respondent/Bank dated 25.08.2017 which is an Acknowledgment of Liability of the Corporate Debtor which extends the period of Limitation from 27.09.2019 to 26.09.2020 under the Limitation Act 1963 (even though the Account of the Principal Borrower was classified as NPA on 29.07.2014) and as such the Section 7 Application filed by the First Respondent/Bank on 01.08.2019 is well within the period of three year s Limitation Period as held by this Tribunal - the impugned order of admitting the Application filed by the First Respondent/Bank (under Section 7 of the I B Code 2016) against the Corporate Debtor by the Adjudicating Authority is free from legal flaws. Application dismissed.
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