9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (2) TMI 1354 - Tri - Insolvency and BankruptcyCorporate Insolvency Resolution Process - whether a principal debtor cannot be regarded in default - Held that - It cannot be concluded that the Corporate Debtor-guarantor could be regarded as defaulter once no default is deemed to be committed by the principal borrower, namely CJSC CHL International. In view of Clause 4 of the Guarantee Agreement, it is only in the event of default on the part of the principal borrower that the guarantor has assumed the liability to repay. All the three Loan Agreements dated 23.09.2010, 26.08.2010 and 18.03.2015 have been suspended, which were between the Financial Creditor and the principal borrower. As been observed in the case of Industrial Finance Corpn of India Ltd. 2002 (4) TMI 943 - SUPREME COURT that in a case where there is a provision in the agreement to the contrary in respect of co-extensive nature of the liability of a surety then such a provision must be given effect. Therefore, the petition does not warrant admission. We may mention that various other submissions have not been examined as we do not feel the necessity of doing so. We have not been able to persuade ourselves to accept the submissions of Mr. Mehra that there is nothing in the order passed by the Economic Courts at Dushanbe to create a bar for filing of an application under Section 7 of the Code. The arguments with regard to the jurisdiction of the Economic Courts at Dushanbe has not impressed us because the applicant-Financial Creditor has not only surrendered to the jurisdiction but it has filed pleadings. In the present case, we have noticed the orders passed by the Economic Courts at Dushanbe to show the non-existence of liability of Principal Debtor and there could not be any default on its part. Therefore, no liability could be fastened on the guarantor-Corporate Debtor. We are not executing those order so as to require fulfilment of various features of Section 13 and Section 44A of the CPC. As already held the principal debtor cannot be regarded in default in accordance with law and therefore, no liability of guarantor/surety would arise at this stage. Petition dismissed.
Issues Involved:
1. Whether the Corporate Debtor can be considered a defaulter under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. The impact of the Economic Court of Dushanbe’s orders on the liability of the Corporate Debtor. 3. The applicability of Section 128 of the Indian Contract Act, 1872 to the Corporate Debtor's liability. 4. The jurisdiction and enforceability of the Economic Court of Dushanbe's orders in Indian legal proceedings. Detailed Analysis: 1. Whether the Corporate Debtor can be considered a defaulter under Section 7 of the Insolvency and Bankruptcy Code, 2016: The Financial Creditor, Export Import Bank of India, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor, CHL Limited, which guaranteed loans to its subsidiary, CHL International, Tajikistan. The Financial Creditor claimed that the Corporate Debtor guaranteed repayment of USD 32,500,000 along with interest and other charges, and defaulted on this guarantee, making the total amount due USD 36,543,693.76 as of 20 September 2017. 2. The impact of the Economic Court of Dushanbe’s orders on the liability of the Corporate Debtor: The Corporate Debtor argued that the Economic Court of Dushanbe had suspended the operation of the loan agreements between the Financial Creditor and CHL International. Orders dated 06.01.2017, 07.07.2017, and 03.10.2017 from the Economic Court of Dushanbe suspended the loan agreements and prohibited coercive actions by the Financial Creditor against CHL International until the court's final decision. The Corporate Debtor contended that this suspension meant no default could be deemed to have occurred, and thus, the Corporate Debtor's liability as a guarantor could not be enforced. 3. The applicability of Section 128 of the Indian Contract Act, 1872 to the Corporate Debtor's liability: Section 128 of the Indian Contract Act, 1872 states that the liability of the surety is co-extensive with that of the principal debtor unless otherwise provided by the contract. Clause 4 of the Deed of Guarantee specified that the guarantor would be liable only if the principal debtor defaulted. Given the suspension of the loan agreements by the Economic Court of Dushanbe, the principal debtor (CHL International) was not in default, and thus, the Corporate Debtor's liability as a guarantor did not arise. 4. The jurisdiction and enforceability of the Economic Court of Dushanbe's orders in Indian legal proceedings: The Financial Creditor argued that the orders of the Economic Court of Dushanbe had no extra-territorial effect under Indian law and did not prevent the filing of the present application. However, the tribunal noted that the Financial Creditor had submitted to the jurisdiction of the Economic Court of Dushanbe and participated in the proceedings there. The tribunal concluded that the suspension of the loan agreements by the Economic Court of Dushanbe meant that the principal debtor was not in default, and therefore, the Corporate Debtor could not be considered a defaulter. Conclusion: The tribunal dismissed the application, concluding that the Corporate Debtor could not be regarded as a defaulter under Section 7 of the Insolvency and Bankruptcy Code, 2016, due to the suspension of the loan agreements by the Economic Court of Dushanbe. The liability of the Corporate Debtor as a guarantor did not arise as the principal debtor was not in default. The tribunal relied on Section 128 of the Indian Contract Act, 1872, and the specific terms of the Deed of Guarantee, which conditioned the guarantor's liability on the default of the principal debtor.
|
