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2022 (2) TMI 966 - AT - Insolvency and BankruptcyWithdrawal of the CIRP against the Principal Borrower - bar for the Respondent/Lender in initiating fresh CIRP against the Guarantor or not - HELD THAT - It is a well settled preposition in Law that the creditor is not bound to exhaust his/its remedy against the Principal Borrower before invoking the Guarantor or suing the Guarantor for payment of outstanding sum(s), (unless otherwise agreed to in the Guarantee Deed). A suit can be maintained against the Guarantor for payment of outstanding sums in connection with the Loan extended to the Borrower even if the Borrower itself has not been sued by the Lender. This Tribunal is of the considered opinion that the Lender has an independent access to the Guarantor issued by the Principal Borrowers. Therefore, this Tribunal holds that withdrawal of Section 7 Petition filed under the IBC Code, 2016 against the Principal Borrower is not a fetter in initiating CIRP against the Guarantor in accordance with Law. This Tribunal finds force in the contention of the Learned Counsel for the Respondent that the withdrawal of the proceedings was brought to the notice of the Adjudicating Authority as the Order copies are part of the record before the Learned Adjudicating Authority. It is not in dispute that the Principal Borrower had committed default in repayment of the outstanding Financial Debt and the Tripartite Guarantee Agreement executed by the Appellant/Corporate Debtor in favour of the Respondent evidences the liability of the Appellant herein to pay the amounts due and payable - A Perusal of the Sanction Letters to the Principal Borrowers establishes that the credit facilities was executed towards meeting working capital requirements and it cannot be said that Respondent/Lender has only a security interest towards the Corporate Debtor. At the cost of repetition, the Appellant herein stood as a Guarantor and stepped into the shoes of the Principal Debtor and viewed from any angle it cannot be construed that Lender has only a security interest over the assets of the Corporate Debtor. This Tribunal comes to an irresistible and inescapable conclusion that the Appellant being the Corporate Guarantor of the two Principal Borrowers viz. M/s. Roshni Jewellers Pvt. Ltd. and M/s. J.B. Gold Pvt. Ltd., is liable to pay the amounts in question. Accordingly, this Tribunal holds that mere withdrawal of the CIRP against the Principal Borrower will not be a bar for the Respondent/Lender in initiating fresh CIRP against the Guarantor who is the Appellant herein - Appeal dismissed.
Issues Involved:
1. Validity of ex-parte order and sufficiency of service of notice. 2. Classification of the Respondent as a Financial Creditor. 3. Liability of the Corporate Guarantor under the Guarantee Agreement. 4. Impact of withdrawal of CIRP against Principal Borrowers on proceedings against the Guarantor. Detailed Analysis: 1. Validity of Ex-Parte Order and Sufficiency of Service of Notice: The Appellant contended that the Impugned Order was passed ex-parte without due notice. The Tribunal examined the service of notice and found that the notice was served via email to the registered email ID on the Company Master Data and to the personal email ID of a Director, as well as through WhatsApp. The Tribunal concluded that the service was legally sufficient and upheld the ex-parte order due to the Appellant's non-appearance on multiple dates. 2. Classification of the Respondent as a Financial Creditor: The Appellant argued that the Respondent, being a mortgagee or Indirect Secured Creditor, does not qualify as a Financial Creditor under Section 5(8) of the Insolvency and Bankruptcy Code (IBC). The Tribunal referred to the Supreme Court's judgment in 'Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited Vs. Axis Bank Limited,' which distinguished between Financial Creditors and those holding only security interests. However, the Tribunal found that the Respondent had a direct engagement with the Corporate Debtor through the Guarantee Agreement, making it a Financial Creditor. 3. Liability of the Corporate Guarantor under the Guarantee Agreement: The Tribunal analyzed the Guarantee Agreement, which stated that the Guarantor's liability is co-extensive with that of the Principal Debtor. Under Section 128 of the Indian Contract Act, 1872, the Guarantor's liability is equivalent to that of the Principal Debtor. The Tribunal cited various judgments, including 'Central Bank of India Vs. C.L. Vimla and Others,' affirming that the creditor can proceed against the Guarantor without first exhausting remedies against the Principal Debtor. The Tribunal concluded that the Appellant, as the Corporate Guarantor, is liable for the outstanding debts. 4. Impact of Withdrawal of CIRP against Principal Borrowers on Proceedings against the Guarantor: The Appellant argued that the withdrawal of CIRP against the Principal Borrowers precludes proceedings against the Guarantor. The Tribunal rejected this argument, stating that the creditor is not required to exhaust remedies against the Principal Borrower before proceeding against the Guarantor. The Tribunal emphasized that the withdrawal of CIRP against the Principal Borrowers does not bar initiating CIRP against the Guarantor, as the Guarantor's liability is independent and co-extensive. Conclusion: The Tribunal upheld the Adjudicating Authority's order, affirming the initiation of CIRP against the Corporate Guarantor. The Tribunal dismissed the appeal, reinforcing the principle that the Guarantor's liability is co-extensive with that of the Principal Debtor and that the creditor can independently proceed against the Guarantor.
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