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2023 (1) TMI 253 - AT - Insolvency and BankruptcyMaintainability of petition - Seeking initiation of CIRP against Guarantor of the Corporate Debtor to make payment - invocation of Bank Guarantee was done or not - Appellant s case was that he having committed default in making the payment in response to the notice dated 04.10.2013 issued by Punjab Sind Bank under Section 13, sub-section (2) of the SARFAESI Act, Section 10 Application deserved to be admitted - HELD THAT - The notice dated 04.10.2013, which is the basis of the default as claimed by the Appellant has been filed along with Section 94 Application. The notice is addressed to M/s Gulati Retails India Ltd., the Corporate Debtor and 5 others persons - Notice under Section 13, sub-section (2) is issued by the Bank for enforcing the security interest. The definition of borrower given in SARFAESI Act under Section-2 (f) is wide enough to include a Guarantor also. Section 13 is for enforcement of security interest. The borrower within the meaning of Section 13, sub-section (2) shall obviously include the Guarantor also. The Bank has filed a reply in this Appeal and the Bank s categorical case in the Appeal is that Bank has not initiated any proceedings against the Appellant for recovery of its balance amount. The learned Counsel for the Appellant may be right in his submission that by virtue of notice issued under Section 13, sub-section (2) dated 04.10.2013, the Appellant was also asked to make the payment of dues, but the undisputed fact is that apart from notice dated 04.10.2013, no steps have been taken by the Bank to recover any dues from the Appellant. The default, if any, committed by the Appellant was in October 2013, when notice was received by the Appellant. When we come to the order passed by the Adjudicating Authority, it is relevant to notice that in the report submitted by the RP, applicability of the Limitation Act was also noticed. The RP came to the conclusion that the Bank has not invoked the guarantee - In its reply, the Bank has submitted that although after sale of the mortgaged asset, part of the facility was realized, but no steps have been taken by the Bank against the Appellant for recovery of any dues. The notice, which is the basis of the Application, was issued on 04.10.2013. Nine years have been passed from issuance of the notice and no steps have been taken by the Bank so far for recovery of any amount from the Appellant. Default, which is claimed by the Appellant, at best can be said to be a technical default and when substantially, no steps have been taken by the Bank and the Bank s categorical case is that guarantee of the Appellant has not been invoked, it is the Bank, who after invoking the guarantee shall proceed against the Appellant. The foundation which was laid down by the Appellant for initiating the CIRP against the Appellant, was not sufficient to admit Section 94 Application and initiate the CIRP against the Appellant - Section 10 Application against the Corporate Debtor has already been admitted and CIRP against the Corporate Debtor had been initiated. The case taken up by the Bank being categorical and clear that no steps have been taken by the Bank against the Appellant, there is no cause for the Appellant to pray for initiation of CIRP against the Appellant the Personal Guarantor. Appeal dismissed.
Issues:
1. Appellant challenging National Company Law Tribunal's order under Section 94 of the Insolvency and Bankruptcy Code, 2016. 2. Interpretation of notice under Section 13(2) of the SARFAESI Act in relation to Guarantor's liability. 3. Applicability of the Limitation Act in invoking the guarantee against the Guarantor. 4. Justification for rejecting the Appellant's application under Section 94 for initiating Corporate Insolvency Resolution Process. Analysis: 1. The Appellant, a Guarantor of the Corporate Debtor, challenged the National Company Law Tribunal's order under Section 94 of the Insolvency and Bankruptcy Code, 2016. The Tribunal dismissed the Appellant's application relying on the Resolution Professional's report, which recommended rejection of the application. 2. The key issue revolved around the interpretation of the notice dated 04.10.2013 under Section 13(2) of the SARFAESI Act. The Appellant argued that the notice invoked the guarantee against him as a Personal Guarantor, as he was mentioned in the notice alongside the Corporate Debtor. However, the Bank contended that the notice was for enforcing security interest related to mortgaged property, not for invoking the guarantee against the Appellant. 3. The Applicability of the Limitation Act was crucial in determining the validity of invoking the guarantee against the Guarantor. The Resolution Professional highlighted the importance of the Limitation Act, stating that the Bank had not taken any steps to recover dues from the Appellant within the limitation period stipulated by the Act. The RP concluded that the Bank had not invoked the guarantee against the Appellant. 4. Ultimately, the Tribunal found that the foundation laid by the Appellant for initiating the Corporate Insolvency Resolution Process was insufficient. The Bank had not taken any action against the Appellant for recovery of dues, and the notice from 2013 did not result in invoking the guarantee. As the Bank's position was clear that no steps were taken against the Appellant, the Tribunal dismissed the Appeal, stating that there was no cause to initiate CIRP against the Personal Guarantor. The Section 10 Application against the Corporate Debtor had already been admitted, further supporting the dismissal of the Section 94 Application.
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