2022 (5) TMI 1475 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate guarantor of borrower - Section 13(2) of SARFESI Act, 2002 - HELD THAT - This is an application filed under Section 7 of the IB Code by the Financial Creditor, IDBI Bank Limited against corporate Guarantor of the Borrower to whom loan was disbursed by the applicant under Consortium funding, namely, M/s. Doshion Water Solution Private Limited (the Borrower) under the Bank of Baroda Consortium finance - On perusal of the record it appears that on 24.04.2014 the sanction letter under restructuring was issued by the applicant to the Borrower wherein corporate debtor had duly acknowledged such sanction as corporate Guarantor. The corporate debtor, by Board resolution dated 20.06.2014, had resolved to acknowledge guarantee for credit facilities upto Rs. 408.64 crores and further resolved for issuance of requisite deeds of guarantee. Corporate debtor had executed deed of guarantee dated 27.06.2014 in favour of the security trustee who had acted as an agent on behalf of all Banks/lenders under Consortium funding. As per clause No. 7 9 of guarantee agreement, such guarantee would be enforced as if corporate debtor was principal debtor to the lenders. As per clause 8, such guarantee of corporate debtor was continuing and such guarantee of corporate debtor is irrevocable and enforceable notwithstanding any dispute between Borrower and lenders. Further clause 18 makes guarantee deed executed by corporate debtor independent and distinct from any other security agreement. Subsequently, the Borrower and corporate debtor had executed the revival letter dated 07.03.2017 acknowledging the debt. As per said revival letter, the corporate debtor had acknowledged the entire outstanding debts in terms of section 18 of Limitation Act - It is settled legal position that application under Section 7 of IBC is not a recovery proceeding. Therefore, in terms of clause 7.5 of inter-se agreement dated 26.11.2013, any lender is at liberty to take any decision or action on any other matter and is not required to take any approval from any other lender, the applicant would not be restricted to take independent recourse. As per clause 4 of inter-se-agreement dated 26.11.2013, the rights and obligations of each lender are joint and several thereby meaning in absence of contractual obligation by any other lender, the applicant would not be restricted to take independent recourse. As per Part IV, Form I, the date of default being NPA date is 30.04.2016 and application is filed on 26.10.2018, which is within the period of limitation and not barred by law - the registered office of the corporate debtor is situated in Ahmedabad, Gujarat State and, therefore, this Tribunal has jurisdiction to entertain and try this application. The present application is complete in terms of Section 7(5) of the Code. The applicant is entitled to claim its dues, establishing the default in payment of the financial debt beyond doubt. In light of the facts and records the present application is admitted and CIRP is ordered to be initiated against corporate debtor. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Validity of the Corporate Guarantee.
2. Limitation period for initiating insolvency proceedings.
3. Authority to file the application.
4. Invocation of the Corporate Guarantee.
5. Jurisdiction of the Tribunal.
6. Financial Creditor's entitlement to claim dues.

Detailed Analysis:

1. Validity of the Corporate Guarantee:
The applicant, IDBI Bank Ltd., filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency process against the Corporate Debtor, who had provided a corporate guarantee for securing financial assistance to M/s. Doshion Water Solution Private Limited. The corporate debtor had executed a Corporate Guarantee Agreement dated 27.06.2014, which was deemed irrevocable and unconditional, securing credit facilities amounting to Rs. 408.64 crores. The Tribunal found that the corporate debtor had acknowledged the guarantee and executed requisite documents, making the guarantee valid and enforceable.

2. Limitation Period for Initiating Insolvency Proceedings:
The applicant issued a recall notice on 20.09.2016 and a guarantee invocation notice on 04.11.2016. The Borrower's loan account was classified as NPA on 30.04.2016. The present application was filed on 26.10.2018. The Tribunal held that the application was within the limitation period, considering the revival letter dated 07.03.2017, which acknowledged the debt, thereby extending the limitation period.

3. Authority to File the Application:
The corporate debtor contested the authority of the person filing the application on behalf of the applicant Bank. The Tribunal examined the "Delegation of Powers" approved by the Board of Directors of the applicant Bank, which empowered the Deputy General Manager (DGM) to act on behalf of the Bank. The Tribunal found that the application was filed under valid authorization, as the delegation of power was duly approved by the Deputy Managing Director on 18.11.2017.

4. Invocation of the Corporate Guarantee:
The corporate debtor argued that the guarantee was not formally invoked. The Tribunal found that the applicant had issued a recall notice on 20.09.2016 and invoked the corporate guarantee on 04.11.2016. The corporate debtor had acknowledged the debt in the revival letter dated 07.03.2017. The Tribunal held that the guarantee was validly invoked, and the corporate debtor was liable to pay the outstanding dues.

5. Jurisdiction of the Tribunal:
The registered office of the corporate debtor is situated in Ahmedabad, Gujarat State. Therefore, the Tribunal held that it had jurisdiction to entertain and try the application.

6. Financial Creditor's Entitlement to Claim Dues:
The Tribunal found that the applicant had established the default in payment of the financial debt beyond doubt. The corporate debtor executed documents binding itself for the liability of the principal Borrower as a guarantor to repay the debt jointly and severally. The Tribunal admitted the application and ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor.

Conclusion:
The application was complete in terms of Section 7(5) of the Code, and the applicant was entitled to claim its dues. The Tribunal admitted the application and appointed Mr. Ramchandra Dallaram Choudhary as the Interim Resolution Professional (IRP). The Tribunal directed the Financial Creditor to deposit a sum of Rs. 2.00 lacs with the IRP for meeting the expenses of the CIRP. The Tribunal also imposed a moratorium as envisaged under Section 14(1) of the Code, prohibiting certain actions against the corporate debtor during the insolvency process.