2023 (7) TMI 1397 - AT - Insolvency and Bankruptcy

Rejection of Section 7 Application as barred by Section 10A of IBC - Period of limitation - corporate guarantor defaulted to make payment - Principal Borrower can be made liable for default of corporate guarantor or not - HELD THAT - When the Financial Creditor has invoked the corporate guarantee of the corporate guarantor by the notice dated 16.10.2020 and asked the corporate guarantor to make the payment within seven days from the receipt of the notice the default has occurred during the 10A period and the default dated 02.07.2019 which is default alleged against the Principal Borrower can not be put to a default for corporate guarantor. Liability of corporate guarantor although is coextensive of the Principal Borrower but when the Guarantee requires invocation of the guarantee deed default on the guarantor shall be the date when corporate guarantee has been invoked. There are no error in the Order of the Adjudicating Authority dismissing Section 7 Application as barred by time - dismissal of Section 7 Application shall not preclude the Appellant to take other recourse in accordance with law - appeal dismissed.

Summary

Issues Involved:
The judgment involves the rejection of a Section 7 Application filed against a Corporate Debtor on the grounds of being time-barred due to the invocation of a corporate guarantee falling within a specified period.

Issue 1: Rejection of Section 7 Application

The Appeal was filed against the rejection of the Section 7 Application by the Adjudicating Authority, citing it as barred by Section 10A due to the invocation of the corporate guarantee within the relevant period. The default date was a point of contention, with the Appellant arguing that the Adjudicating Authority erred in determining the default date. The notice invoking the guarantee dated 16.10.2020 was crucial in establishing the timeline of events.

Issue 2: Default Date Determination

The Adjudicating Authority considered the date of default as 16.10.2020 based on the notice invoking the corporate guarantee. The Appellant contested this decision, asserting that the actual default date was 02/07/2019, as noted by the Adjudicating Authority itself. The discrepancy in the default date was a significant factor in the legal proceedings.

Key Points:

- The notice invoking the corporate guarantee on 16.10.2020 triggered the default period within the specified timeframe.
- The liability of the corporate guarantor is coextensive with the Principal Borrower, but the default date for the guarantor is when the guarantee is invoked.
- The dismissal of the Section 7 Application was upheld, emphasizing that other legal avenues remain open to the Appellant despite the dismissal.