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2023 (7) TMI 263 - AT - Insolvency and BankruptcyInitiation of CIRP - Period of limitation - Date of default - breach of guarantee - Penalty on tax liability discharged under reverse charge on legal services - Application filed u/s 7 of IBC debarred by law of limitation or not - liability of the Corporate Debtor based on the tripartite agreement and Deed of continuing Guarantee. Time Limitation - HELD THAT - It is seen from the tripartite agreement that certain warranties were given by the Corporate Debtor and the same also contained general conditions of the contract. As per Sub-clause 5 of the tripartite agreement it is responsibility of the Corporate Debtor for making payment in case of default by the farmer - It is therefore clear that the Corporate Debtor was obliged for collection and deduction of principal and interest of the farmers loan and make payment to the Respondent No. 1 . The Deed of Guarantee is continuing one and is to remain in force till such time the borrowers repay the loans. It is also observed that monthly MIS have been provided by the Respondent No. 1 to the Corporate Debtor on regular basis relating to outstanding debts from the farmer borrowers. Subsequently on the default by farmer- borrowers the Financial Creditors invoked the Deed of Guarantee dated 03.10.2013 for repayment of outstanding dues through legal notice dated 07.04.2021 which has been replied by the Corporate Debtor on 16.04.2021 denying outstanding dues. The application under Section 7 was filed by the Respondent No. 1 on the basis of breach of guarantee and inability of the Corporate Debtor to repay the outstanding dues and therefore breach of guarantee date becomes the cause of action as well as the date of default as indicated in Part IV of the Application under Section 7 was 15.04.2021 whereas the Respondent No. 1 filed the application under Section 7 on 24.04.2021 which is fully covered under Limitation Act 1963. Hence averments of the Appellant that the application was barred by limitation does not succeed. Liability of the Corporate Debtor is based on the tripartite agreement and Deed of continuing Guarantee both documents signed on 03.10.2013 - HELD THAT - In the present case as required in the agreement the Respondent No. 1 sent from time to time the list of outstanding debts from the farmer- borrowers to the Corporate Debtor in form of the monthly MIS. It is also undisputed fact that from time to time the Financial Creditor has received the payment of dues and only on the default the legal notice was issued and based on the continuing Deed of Guarantee and the Corporate Debtor was called upon to settle outstanding dues on account of farmer- borrowers loans within seven days and due to non-payment of such loans amounting to Rs. 5, 41, 34, 813/- the date of default was treated as 15.04.2021. Thus it is evident that there was clear liability on the part of the Corporate Debtor to make the payment on demand on breach/ default by farmer- borrowers and hence the Adjudicating Authority has passed correctly the impugned order treating outstanding money as a financial debt of more than Rs. 1 Crore for which default took place on 15.04.2021 and therefore rightly approved initiation of the CIRP against the Corporate Debtor . The other issue raised by the Appellant regarding the applicability of Vidarbha Industries Power Limited 2022 (7) TMI 581 - SUPREME COURT is not directly relevant looking into the various facts and circumstances as brought out in the present appeal. Appeal dismissed.
Issues Involved:
1. Whether the application filed under Section 7 was debarred by the law of limitation. 2. The liability of the 'Corporate Debtor' based on the tripartite agreement and Deed of continuing Guarantee. Summary: Issue 1: Limitation The Appellant argued that the application under Section 7 of the Insolvency & Bankruptcy Code, 2016, was barred by limitation. The 'Corporate Debtor' had provided a Deed of Guarantee dated 03.10.2013, which was a continuing guarantee. The Financial Creditor issued a legal notice on 07.04.2021, invoking the guarantee, and the default was noted on 15.04.2021. The application under Section 7 was filed on 24.04.2021. The Tribunal held that the breach of guarantee date becomes the cause of action, and the application was within the limitation period as per the Limitation Act, 1963. Hence, the argument that the application was barred by limitation did not succeed. Issue 2: Liability of the Corporate Debtor The Corporate Debtor had entered into a tripartite agreement and a Deed of Guarantee with the Financial Creditor and NIIPL on 03.10.2013. The agreement stipulated that the Corporate Debtor would repay the loan amounts on behalf of the farmers in case of default. The Deed of Guarantee was unconditional and irrevocable, and it was a continuing guarantee. The Tribunal examined the clauses of the agreement and the Deed of Guarantee, concluding that the Corporate Debtor was liable to make payments on demand in case of default by the farmers. The Financial Creditor had sent monthly MIS reports to the Corporate Debtor, listing the outstanding debts. Due to non-payment of Rs. 5,41,34,813/-, the default date was treated as 15.04.2021. The Tribunal found that the Adjudicating Authority correctly treated the outstanding money as a financial debt and approved the initiation of CIRP against the Corporate Debtor. Other Considerations: The Appellant's reference to the Vidarbha Industries Power Limited case was deemed not directly relevant. The Tribunal also reviewed the cited judgments and upheld the validity of the continuing guarantee invoked by the Financial Creditor. Conclusion: The appeal was dismissed, and the impugned order was upheld. The Tribunal found no error in the challenged order, and the appeal was deemed devoid of merit.
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