Skip to main content

Simultaneous application against Debtor and its Guarantor under I & B Code

IN THE MATTER OF Bijay Kumar Agarwal, Ex-Director of M/s Genegrow Commercial Pvt. Ltd. Vs. State Bank of India and Anr., appeal was filed by the Applicant/Appellant on the ground that the Learned Adjudicating Authority while admitting the claim had failed to appreciate that the liability of the ‘Principal Borrower’ and the ‘Guarantor’ is co-extensive for the purpose of recovery.

The NCLAT observed that it is not in dispute that the ‘Corporate Debtor’ (Being Corporate Guarantor of the Principal Borrower ‘Gee Pee Infotech Pvt. Ltd.) had executed the Guarantee Deed on 05.10.2011 in respect of overall Limit and sanctioned in favour of the ‘Financial Creditor’. Also that a supplementary Guarantee Deed was executed between ‘Corporate Guarantor’ & and the ‘Financial Creditor’.

As per Section 145 of the Indian Contract Act, 1872 in every ‘contract of ‘Guarantee’, there is an implied promise by the ‘Principal Debtor’ to indemnify the ‘Surety’. This court pertinently points out that a ‘Financial Debtor’ includes Debt owed to the Creditor by both the Principal and the Guarantor. Section 3(11) of ‘I&B’ Code refers to a sum that it is due from any person including ‘Corporate Debtor’. A mere failure of the Guarantor to pay the ‘Financial Creditor’ when the principal sum is demanded will come within the purview of default u/s 3(12) of the Code. A ‘Financial Creditor’ who has a ‘Guarantee’ on the Debt due can commence proceedings u/s 7 of ‘I&B’ Code against the ‘Guarantor’ for failure to repay the sum borrowed by the Principal Borrower.

It is to be remembered that if the ‘Contract of Guarantee’ itself mentions that the liability of a Guarantor will be independent and separate than that of ‘Principal Debtor’s liability, then an application against the Guarantor as per Section 7 is maintainable. The only rider will be that a Creditor is not permitted to do the same, sue the principal Debtor and claim in the Guarantor’s Insolvency at the same time.

It may not be necessary to start ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’ before initiating against the ‘Corporate Debtor’. Even without resorting to ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’ it is always open to the ‘Financial Creditor’ to commence ‘Corporate Insolvency Resolution Process’ u/s 7 of the ‘I&B’ Code against the ‘Corporate Debtor’ / Guarantor.

There is no two opinion of a prime fact that there is no fetter in ‘I&B’ for projecting simultaneously two applications u/s 7 of IBC against (i) the Principal Borrower as well as (ii) the Corporate Guarantor(s) or against both the Guarantors but if, for the same set of claim, when an Application filed by the ‘Financial Creditor’ is admitted against one of the ‘Corporate Debtor’/’Principal Borrower’ or Corporate Guarantor, the second application filed by the same ‘Financial Creditor’ for the same set of claim and default is not to be admitted against the other ‘Corporate Debtor’ (The Corporate Guarantor(s) or the Principal Borrower.

As far as the present case is concerned, the Learned Adjudicating Authority had admitted the application u/s 7 of the ‘I&B’ filed by the Principal Borrower on 02.08.2019 in CP(IB)No.353/KB/2018. Also, on 02.08.2019 itself, the Learned Adjudicating Authority had admitted an application filed u/s 7 of the ‘I&B’ Code filed by the ‘Financial Creditor’ against the ‘Corporate Debtor’ ‘Gengrow Commercial Pvt. Ltd. being the ‘Corporate Guarantor’ of the ‘Principal Borrower’ viz. ‘Gee Pee Infotech Pvt. Ltd.’ for the very same debt/claim it is impermissible. Viewed in that perspective, this Tribunal comes to a consequent conclusion that the Application u/s 7 of the ‘I&B’ Code filed by the 1st Respondent/Bank/’Financial Creditor’ against the ‘Corporate Debtor’ Gengrow Commercial Pvt. Ltd. is not maintainable in law and the same is accordingly dismissed but without costs.


Comments

Post a Comment

Most viewed this month

Amendment of plaint under Order VI Rule 17 of the CPC explained

Cause Title :  Ganesh Prasad vs Rajeshwar Prasad, SLP (C) NO. 28377 OF 2018, Supreme Court Of India Date of Judgment/Order : 14/3/2023 Corum : J. B. Pardiwala, J. Citied:  Revajeetu Builders and Developers v. Narayanaswamy & Sons and Others reported in (2009) 10 SCC 84 North Eastern Railway Administration, Gorakhpur v. Bhagwan Das reported in (2008) 8 SCC 511 P.A. Jayalakshmi v. H. Saradha and Others reported in (2009) 14 SCC 525 B.K. Narayana Pillai v. Parameswaran Pillai and Another reported in (2000) 1 SCC 712 A.K. Gupta and Sons Ltd. v. Damodar Valley Corporation reported in AIR 1967 SC 96 Life Insurance Corporation of India v. Sanjeev Builders Private Limited and Another, Civil Appeal No. 5909 of 2022 dated 01.09.2022 Firm Sriniwas Ram Kumar v. Mahabir Prasad and Others reported in AIR 1951 SC 177 G. Nagamma and Another v. Siromanamma and Another reported in (1996) 2 SCC 25 Praful Manohar Rele v. Krishnabai Narayan Ghosalkar and Others reported in (2014...
Post a Comment
Read more

Owner of vehicle is not expected to verify the genuineness of the driving license before appointing a driver

Cause Title : Rishi Pal Singh Versus New India Assurance Co. Ltd & Ors., Civil Appeal No. 4919 Of 2022, The Supreme Court Of India Date of Judgment/Order : July 26, 2022 Corum : Hemant Gupta; J., Vikram Nath; J. Background the truck owned by the appellant met with an accident. The owner deposed before the court that before employing the driver, he had taken his driving test and that he was driving the vehicle satisfactorily and  that the driver was employed with him for 3 years before the date of the accident. He produced his driving license. This was reaffirmed by the driver who deposed that the driving license was obtained from the driver and it was issued from Nagaland, but no such license was produced on record. Both the Motor Accident Claims Tribunal and the High Court have held that the owner has alleged that the driver had a driving license from Nagaland but the same was not produced and therefore, the Insurance Company is entitled to recover the awarded amount...
Post a Comment
Read more

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more