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TMI Blog2019 (5) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... fineries, M/s. Sri Maharaja Industries and M/s. Sri Maharaja Enterprises because all of them failed to repay the loans availed by them despite the principal borrowers as well as this debtor/guarantor put to notice that the principal borrowers failed to repay the dues outstanding. 2. The Creditor submits that it has provided loan facilities to the above borrowers, out of them Maharaja Refineries is a partnership firm, Maharaja Industries is a Proprietary Concern run by a person namely K. Paramasivam and Maharaja Enterprises is another proprietary concern run by another person namely P. Satyamurthy, to which the present Debtor along with its promoter directors stood as Guarantors to pay the dues outstanding as against those loan accounts in the event the principal borrowers failed to repay the same to the Creditor. 3. It is also relevant to mention that the alter ego behind the principal borrowers and this debtor is none other than the promoter directors of this Debtor. These promoter directors of the debtor company are the owners of the proprietary Concerns and partners of the partnership. In a sense, the benefit out of the proprietary concerns and the partnership firm and the deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faulters including this debtor before the Debt Recovery Tribunal, Coimbatore. 8. To prove that the Debtor has defaulted in paying the loans availed by the Principal Borrowers, the creditor annexed the documents by showing the demand notice issued to this Corporate Debtor and also the Debt Recovery Tribunal proceedings initiated against not only the Principal Borrowers, but also against the guarantors whereby it is apparent on record that this Debtor defaulted in paying the dues outstanding against the loans availed by the principal borrowers. 9. The Guarantee executed by this Debtor further reveals that the debtor's liability is not a simpliciter guarantee but also co-extensive liability upon the debtor to pay the loan notwithstanding the borrowers become insolvent. 10. Now on filing this case against the Debtor, the Debtor counsel raised an objection saying that this petition is not maintainable against this Debtor because this Debtor is not a Corporate Guarantor as defined u/s. 5(5A) of the Code and since this Corporate Debtor has not stood as a guarantor to a Corporate Person as defined u/s. 5(5A) of the Code, the debtor counsel says, upon conjoint reading of the definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by a partnership firm and proprietary concerns and whether or not this debt is barred by limitation as stated by the Corporate Debtor counsel. 15. To dispel this ambiguity the debtor counsel raised, it is essential to have overview of various provisions of the Code and their interplay in answering the intricacies visiting the facts of this case, let us riddle out the manifestations coloured over the bare facts of the case. 16. Before going into the landscape of the law relevant to the present let us take out the facts both parties are in agreement. 17. It is an admitted case that the principal borrowers availed loans from the Creditor Bank against the payment of interest on the guarantee given by the debtor, it is an admitted fact that since the principal borrowers failed to repay the loans availed by them, the creditor notified this fact to the debtor/guarantor, against which the debtor has also failed to discharge the liability, it is an admitted fact that all three principal borrowers acknowledged the debt payable by the principal borrowers on 3.10.2016, likewise the debtor has not even disputed the Creditor Bank sending demand notices to the principal borrowers, the Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial creditor as envisaged under clause 7 of section 5, still the creditor cannot proceed against such debtor under section 7 of the Code because section 6 says that for initiation of proceedings either by financial creditor or by operational creditor, the person in default shall be a corporate person. If the person in default is corporate person, then there cannot be any impediment to proceed against such corporate person under section 7 of the Code. In this case, the person in default as per sub-clause (i) of clause 8 of section 5 is a company as envisaged under clause 7 of section 3 of the Code, therefore this creditor can initiate section 7 proceedings against this corporate debtor. Indeed this corporate person in respect to this case will not be treated as corporate guarantor referred in clause (5A) of section 5 of the Code read with section 60(2)&(3) of the Code. It is a case independently filed relying on Clause 8(i) of Section 5 of the Code. 23. This clause (5A) to section 5 of the Code has come into the Code as an amendment with effect from 6.6.2018 along with a simultaneous amendment to Section 60(2) & (3) of the Code to give clarification that CIRP against corporate deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or liquidation processes of the corporate debtor and its corporate guarantor. For this purpose, the term "corporate guarantor" will also be defined". 26. One more thing pertinent here is as to whether principal borrower is a necessary party to proceed against the guarantor, as to this point is concerned, it is made clear in sub-clause (i) of Clause 8 of section 5 of the Code that guarantee is an independent liability and the principal borrower is not a necessary party to proceed against the guarantor/corporate debtor. Otherwise also, it is established proposition of law that creditor can independently proceed against guarantor provided the guarantor failed to discharge its obligation despite after it is put to notice that principal borrower defaulted repaying the loan availed by it. Of course here it is not the case of the debtor that principal borrower is not made as party to the proceeding. 27. The debtor counsel only argument is, since the Corporate Guarantor is defined as a Corporate Person who is the surety in the contract of guarantee to a Corporate Debtor, for the present Corporate Debtor not being the Corporate Guarantor as defined in Section 5 (5A) of the Code, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Person falling within section (5)(8)(i) of the Code, this Petition is maintainable against the Corporate Debtor. 31. As to limitation point is concerned, it is true that this Corporate Debtor has not executed fresh Guarantee Deed in respect to the loans availed by all three Principal Borrowers within three years before filing this Company Petition. But it is true that this Corporate Debtor executed individual Guarantee Deeds on behalf of each of the Principal Borrowers at the time these Principal Borrowers availed loans from the Creditors. 32. It is a settled proposition of law as long as the debt has remained alive against the Principal Borrower, the liability of the Corporate Debtor need not be renewed from time to time so long as Principal Borrower keeps either acknowledging or making part payments within three years before proceeding against the Guarantor. Therefore, merely by not executing the fresh guarantee deed against each of the accounts, it cannot be said that the Creditor cannot proceed against the guarantors in respect to the loan account to which it has not executed fresh guarantee within three years before proceeding against the Corporate Debtor. 33. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principal borrowers, this Bench, by ignoring the mistaken argument made by the Creditors counsel, is of the considered view that the creditor has not only proved existence but also existence of default, therefore this Company Petition is hereby admitted by appointing Mrs. Aneetha Subramaniam as a Resolution Professional looking at the consent given by the IP with the reliefs as follows: I. That Moratorium is hereby declared prohibiting all of the following actions, namely, (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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