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2019 (12) TMI 1596 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Time Limitation - guarantor of the loan is the individual and not the corporate person - HELD THAT - Section 5A of IBC 2016 states Corporate Guarantor means the corporate person who is surety in contract guarantee to a Corporate Debtor. Section 3(8) of IBC defines Corporate Debtor means corporate person who owes a debt of any person. In this case It is not in dispute that by virtue of deed of guarantee the Corporate Debtor herein who is the corporate person owes debt to the Bank. Hence the Corporate definition in Section 5A of IBC 2016 of corporate guarantor cannot be considered for exclusion of this proceeding from consideration for a simple reason that the definition Is just explanatory definition as to who could be called as corporate guarantor. In this case the Corporate Debtor is the guarantor of the individual. The definition of the corporate guarantor relied on by him in Section 5A cannot be used to show applicability or Inapplicability of provisions of IBC against him as it hi just explanatory definition - the Financial Creditor proved that the financial debt is due and payable by the Corporate Debtor and he has committed default in paying the same. The application is filed well within period of limitation - application filed by the Financial Creditor under section 7 of the Insolvency Bankruptcy Code 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor M/s Surana Metals Ltd. is hereby admitted - moratorium declared.
Issues:
Application under Section 7 of Insolvency and Bankruptcy Code, 2016 to start Corporate Insolvency Resolution Process against Corporate Debtor - Union Bank of India as Financial Creditor vs. M/s. Surana Metals Limited as Corporate Guarantor. Analysis: 1. Debt Default and Guarantee: The Financial Creditor filed the application citing a default in paying a financial debt of Rs. 23,90,35,759 by the Corporate Debtor, a guarantor of the principal borrower. The Corporate Debtor executed a continuing guarantee in favor of the Bank for a term loan granted to the original borrower, M/s. Mahaveer Construction, owned by Mr. Laxmi Pat Surana. The Corporate Debtor, being a director of M/s. Surana Metals Limited, undertook to repay the loan in case of default by the original borrower. 2. Acknowledgment of Debt: Both the original borrower and the Corporate Debtor admitted and acknowledged the debt on multiple occasions. Despite acknowledgment and promises to pay, defaults continued, leading to the initiation of the Corporate Insolvency Resolution Process. The Corporate Debtor's defense of the debt not being due and payable was dismissed, emphasizing the continuing guarantee and obligation to clear the outstanding debt. 3. Time Barred Claim: The Corporate Debtor argued that the claim was time-barred, referring to a Supreme Court ruling. However, the Tribunal found that the claim was within the limitation period as both the original borrower and the Corporate Debtor acknowledged the debt after the default occurred, ensuring the application's timeliness. 4. Corporate Guarantor Definition: The Corporate Debtor contended that as a guarantor to an individual and not a corporate person, the proceedings under IBC, 2016 were not maintainable. The Tribunal rejected this argument, stating that the Corporate Debtor, by executing the guarantee and owing debt to the Bank, falls within the definition of a corporate guarantor as per the IBC provisions. 5. Admission and Order: After thorough consideration of the evidence and arguments, the Tribunal admitted the application under Section 7 of the IBC, 2016, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor. A moratorium was declared, and an Interim Resolution Professional was appointed to manage the process. Detailed directions were provided regarding the conduct of the resolution process, fee payments, and communication of the order to all concerned parties. This comprehensive analysis covers the key legal aspects and decisions outlined in the judgment by the National Company Law Tribunal, Kolkata.
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