2024 (3) TMI 290 - AT - Insolvency and Bankruptcy

Admission of Section 7 application filed by the Financial Creditor - invocation of guarantee - application filed by the Financial Creditor is barred by Section 10A of IBC or not - first submission is that notice dated 22.02.2020 was not notice for invoking guarantee of the Corporate Guarantor and guarantee of the Corporate Debtor was only invoked by notice dated 12.02.2021 - non-service of notice dated 22.02.2020 - HELD THAT - The notice clearly indicates that by the notice Borrower and Guarantors were asked to pay the outstanding amount and the notice clearly mention that in event of failure of payment within seven days, the Financial Creditor shall initiate proceedings under SARFAESI Act including proceedings under the I B Code - the notice dated 22.02.2020 was notice by which guarantee stood invoked and submission of the Appellant that said notice was not notice of invocation of guarantee, cannot be accepted. In so far as, subsequent notice which was given to the Financial Creditor being notice dated 12.02.2021, it has been submitted by the Financial Creditor that since no payment was made in pursuance of the notice dated 22.02.2020 another letter was issued on 12.02.2021 - Section 7 application filed by the Financial Creditor has been brought on record, which clearly mentioned the notice date as 22.02.2020 which has been referred as Recall Notice issued by the Financial Creditor. When Recall Notice has been issued by the Financial Creditor, the Principal Borrower and Guarantors, liability to pay arises on all and the submission of the Corporate Debtor relying on subsequent notice dated 12.02.2021 cannot affect the right of the Financial Creditor to initiate proceeding on the basis of notice dated 22.02.2020. Even though subsequent notice dated 12.02.2021 was during 10A period but Recall Notice having been issued on 22.02.2020, the Financial Creditor was entitled to initiate Section 7 proceedings against the Principal Borrower as well as the Guarantors. From the facts brought on the record, it is clear that after April, 2018 no payments have been made either by the Principal Borrower or the Corporate Guarantor towards the loan. Certificate issued by NeSL was also brought on the record in support of Application under Section 7 where default has been proved. It is true that date of default i.e. 15.04.2018 was initially date of default of Principal Borrower but Loan Recall Notice had been issued on 22.02.2020 which was addressed to Principal Borrower as well as all Guarantors including the Corporate Debtor M/s Earthbuild Greencity Private Limited. The application filed by the Financial Creditor cannot be held to be barred by Section 10A. There are no grounds have been made out to interfere with the impugned order passed by the Adjudicating Authority admitting Section 7 application - Appeal is dismissed.

Summary

Issues involved:
- Challenge to the order admitting Section 7 application filed by the Financial Creditor
- Invocation of guarantee during the 10A period
- Failure to serve notice on the Corporate Debtor
- Maintainability of the application and grounds for appeal

Challenge to the order admitting Section 7 application:
The appeal was filed by the Suspended Director of the Corporate Debtor against the order admitting the Section 7 application filed by the Financial Creditor, Piramal Capital and Housing Finance Limited. The loan agreement, corporate guarantee, default in repayment, and subsequent notices were crucial aspects leading to the initiation of the Corporate Insolvency Resolution Process. The Adjudicating Authority admitted the Section 7 application and appointed the IRP, prompting the appeal by the Appellant.

Invocation of guarantee during the 10A period:
The Appellant argued that the guarantee was invoked during the 10A period, rendering the application barred by Section 10A. However, the Respondent contended that the notice invoking the guarantee was issued before the 10A period, making the application maintainable. The Adjudicating Authority found that no appearance was made on behalf of the Corporate Debtor despite opportunities for defense.

Failure to serve notice on the Corporate Debtor:
The Appellant claimed that the notice dated 22.02.2020 was not served on the Corporate Debtor and that the subsequent notice dated 12.02.2021 invoked the guarantee. However, the Respondent provided evidence that the notice was duly served on the Corporate Debtor through substituted service, as directed by the Adjudicating Authority.

Maintainability of the application and grounds for appeal:
The Adjudicating Authority found that the application was based on the Loan Recall Notice dated 22.02.2020, which was not refuted by the Corporate Debtor. Despite the submission of the Appellant, the Adjudicating Authority concluded that the application was not barred by Section 10A. The appeal was dismissed as no grounds were established to interfere with the order admitting the Section 7 application.