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2024 (2) TMI 1315 - AT - Insolvency and BankruptcyInitiation of CIRP - Admission of main company petition - liability of Guarantor of loan - acknowledgment of debt by the Principal Borrower shall be binding on the Guarantor or not - plea of the Appellant is that the action as far as the Corporate Guarantor is concerned, the same is barred by Limitation and that Article 137 of Limitation Act 1963 applies - HELD THAT - As per the decision of Hon ble Supreme Court in Laxmi Pat Surana s case 2021 (3) TMI 1179 - SUPREME COURT , the liability of the Guarantor being co-extensive with the Principal Borrower under Section 128 of the Indian Contract Act, 1872 it triggers the moment the Principal Borrower commits default in paying the acknowledge debt and this being a legal fiction and such a liability of the guarantor will flow from the Guarantee Deed and Memorandum of Mortgage created therein . On a careful consideration of respective contentions, this Tribunal , taking note of the facts and circumstances of the instant case in an encircling manner, and ongoing through the impugned order passed by the Adjudicating Authority/NCLT Kochi Bench, comes to a resultant conclusion that the conclusion arrived at by the Adjudicating Authority/Tribunal in admitting main petition holding that the debt has not been paid by the Corporate Guarantor is free from any legal flaws. Application dismissed.
Issues Involved:
1. Limitation Period for Filing Petition 2. Creditor-Debtor Relationship and Default 3. Acknowledgment of Debt and Its Impact on Limitation 4. Liability of Corporate Guarantor Summary: 1. Limitation Period for Filing Petition: The Appellant contested that the petition was barred by limitation, arguing that the default date should be considered from when the account was declared as NPA on 30.09.2015. The Tribunal, however, concluded that the continuous cause of action and various acknowledgments by the Corporate Debtor and Principal Borrower extended the limitation period. The Tribunal noted that the limitation period was also excluded during the appeal process as per the order dated 09.09.2021. 2. Creditor-Debtor Relationship and Default: The Tribunal confirmed the existence of a creditor-debtor relationship, noting that the Financial Creditor had paid money to the Corporate Debtor, which was acknowledged in the counter affidavit. The Tribunal found that the application satisfied all definitions of "Financial Creditor," "Default," and "Financial Debt," thus qualifying for the Insolvency and Bankruptcy Code (IBC). The Corporate Debtor's procedural hurdles could not absolve its responsibility to repay the borrowed amount. 3. Acknowledgment of Debt and Its Impact on Limitation: The Tribunal emphasized that acknowledgments of debt by the Principal Borrower were binding on the Corporate Guarantor. Various acknowledgments and One Time Settlement (OTS) proposals extended the limitation period. The Tribunal referred to the Hon'ble Supreme Court's decision in Laxmi Pat Surana's case, which held that the liability of the guarantor is co-extensive with the principal borrower and triggers the moment the principal borrower defaults. 4. Liability of Corporate Guarantor: The Tribunal held that the Corporate Guarantor's liability is co-extensive with that of the Principal Borrower under Section 128 of the Indian Contract Act, 1872. The Tribunal dismissed the Appellant's plea that the guarantee was not invoked against the Guarantor, noting that the guarantee was invoked on 29.12.2017, and the limitation period was reckoned from that date. The Tribunal concluded that the Corporate Debtor's liability was valid and enforceable. Conclusion: The Tribunal dismissed the appeal, upholding the Adjudicating Authority's order dated 22.12.2023, which admitted the main Company Petition for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Guarantor. The Tribunal found no legal flaws in the Adjudicating Authority's conclusion that the debt had not been paid by the Corporate Guarantor. The appeal was dismissed with no costs, and connected pending IAs were closed.
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