2022 (3) TMI 1225 - AT - Insolvency and Bankruptcy

Maintainability of application - guarantee with regard to facility agreement was given - facility agreement was subsequently renewed and extended - Application under Section 7 filed on the basis of the subsequent facility dated 14.12.2017 - whether the Appellant guarantee shall continue to the subsequent facility? - HELD THAT - On reading of the guarantee executed on 10.10.2016 by the Appellant and the facility agreement executed on 14.12.2017, no error is found in the view taken by the Adjudicating Authority that the guarantee executed by the Appellant shall continue even for the facility agreement dated 14.12.2017. No error has been committed by the Adjudicating Authority in the impugned order by admitting the Application under Section 7. Learned Counsel for the Appellant submits that there is variation of the contract, therefore, the guarantee could not enure with regard to the subsequent contract - on going through facility agreement and guarantee deed, it is found that the guarantee continues and also apply to subsequent renewal of the facility agreement. There are no substance in the arguments of the Learned Counsel for the Appellant - appeal dismissed.

Summary

Issues:
Delay in filing the appeal due to COVID pandemic, Admittance of application under Section 7 of the Insolvency and Bankruptcy Code, 2016, Interpretation of guarantee in relation to subsequent facility agreement, Variation of contract affecting guarantee validity.

Analysis:
The judgment addressed an application for condonation of a 14-day delay in filing the appeal due to the COVID pandemic, which was granted. The appeal was filed against the order passed by the Adjudicating Authority admitting an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Appellant had provided a guarantee related to a facility agreement dated 10.10.2016, which was subsequently renewed and extended. The main argument presented was that the guarantee should not apply to the subsequent facility agreement dated 14.12.2017 as no further guarantee was taken after the initial agreement. The Adjudicating Authority found no error in admitting the application under Section 7 based on the guarantee executed by the Appellant for the subsequent facility agreement.

The judgment delved into the clauses of the guarantee executed on 10.10.2016 and the subsequent facility agreement dated 14.12.2017 to determine the continuity of the guarantee. It was observed that the guarantee was a continuing one, extending to the ultimate balance of the obligations regardless of any intermediate payment or discharge. The Adjudicating Authority's decision to admit the application under Section 7 was upheld as the guarantee was found to apply to the subsequent facility agreement as well. The argument of variation in the contract affecting the guarantee's validity was dismissed by the Tribunal.

In conclusion, the Tribunal dismissed the appeal, affirming the Adjudicating Authority's decision to admit the application under Section 7 based on the interpretation of the guarantee in connection with the subsequent facility agreement. The judgment emphasized the continuing nature of the guarantee and its applicability to renewals and extensions of the initial agreement, rejecting the argument of variation in the contract affecting the guarantee's validity.