9911796707
TMI Blog2018 (3) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... ity availed by it, these two companies (Corporate Debtor) along with others having agreed to repay the working capital facility loan along with interest accrued upon it in the event Gupta Coal India Pvt. Ltd. failed to repay the same, this Financial Creditor, i.e. Bank of India issued notice to these guarantors to pay off the liability for the principal borrower defaulted in making repayment, as there was no response from these guarantors also, this financial creditor filed these two company petitions against the Corporate Debtors u/s. 7 of Insolvency & Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process. 2. Since the facts and legal proposition in respect to these two company petitions are common, for the sake of brevity and avoiding repetition, instead of dealing with these petitions separately, this Bench hereby passes common order covering both the company petitions with separate reliefs against each of these corporate debtors. 3. As it has been said above, the principal borrower had earlier availed a total financial assistance of Rs. 906 crores, out of which Rs. 196 crores is fund based and remaining Rs. 710 crores is non-fund based. Then a Supple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities together with interest and other expenses whatsoever the lenders incur by reason of default on the part of the borrowers. (f) The interest shall be paid by the guarantors as may be determined by each of the working capital lenders from time to time. The lender shall have full liberty without affecting the guarantee to vary the amounts of the individual limits of the facilities as may be agreed from time to time between the lenders and principal borrower. The lenders shall be at liberty to stipulate, in addition to the subsistence securities, any other securities for the facilities and also to release or forbear to enforce all or any of the remedies upon such security and any collateral security or securities presently held by the working capital lenders and no such release or forbearance as aforesaid shall have the effect of releasing or discharging the liability of the guarantors and the remedies against the guarantors under this Guarantee Deed, the Guarantors shall not be relieved from this liability until their debt is fully satisfied. (g) To give effect to the Guarantee, the lenders are entitled to act as if the Guarantors were the principal debtors to the lenders f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to its default and negligence, benefit of any or other such security or any rights to any or other any security that has been taken. (j) They further agree that they will not prove or seek to claim in the case of liquidation of the borrower, so long as any amount remains unpaid to the lenders under the given facilities. The terms and conditions these guarantors entered into with the lenders can be summed up saying that they agree to repay the loan amount along with interest in the event the borrower defaulted notwithstanding any other impediment that comes in realizing the dues of the lenders either from the borrower or from these guarantors, they have even stated that their guarantee shall not be effected by any change in the constitution or winding up of the borrower or any absorption, merger, amalgamation of the borrower with any other company or any change in the management of the borrower or even takeover of the management of the borrower by the State or the Central Government. 4. On looking at the terms and conditions galore in the deed of guarantee, there could not be any speck of doubt about the binding nature of the guarantee deed upon these corporate debtors. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Bench is judicial discretion, not to wedge into any other perception into it. Why conventional method of trial has been taken out from IBC proceedings is one - obviously to expedite the process and two - perhaps on the reason that parties cannot deny at least the entries showing in the records of companies. 6. In this case, when this principal borrower defaulted in making payment of loan facility availed by him, the account of the principal borrower was declared and classified as non-performing account on 31.03.2014, by this default, the financial creditor i.e. Bank of India recalled the loan vide letter dated 21.12.2016 and brought the default to the notice of the principal borrower as well as the personal guarantors including the corporate debtors herein by stating that these corporate debtors were to make payment of outstanding amount forthwith, but no amount has been paid either by the principal borrower or by these corporate debtors. When no payment was paid, the petitioner issued a SARFAESI (U/S. 13(2)) Act notice to the principal borrower as well as to the guarantors. Perhaps, by looking at the SARFAESI notice issued by the Creditors, this principal borrower approached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein filed these Company Petitions furnishing the documents reflecting the principal borrower entering into Working Capital Consortium Agreement with the Petitioner/Creditor Bank and other Banks thereafter availing loan facility as mentioned in the Company Petition, finally defaulted in making repayment to the Creditor Banks, by which, when these Banks issued SARFAESI notices against the principal borrower and the guarantors, the principal borrower filed company petition u/s. 10 of IB Code, 2016 admitting that the principal borrower defaulted in making repayment to the Petitioner and other creditor banks, likewise another guarantor also filed Section 10 Petition to make themselves clear from the debt liability. 10. In this backdrop, the Petitioner filed these Company Petitions by filing Deed of Guarantee executed by these two Corporate Debtors and two other guarantors along with the principal borrower agreeing as aforementioned, to which, there is no objection or contention from these corporate debtors except to the extent saying that the Deed of Guarantee is insufficiently stamped, that the creditor banks shall not proceed against guarantors until and unless asset distribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this company petition be admitted basing on this deed of guarantee. ii. Whether or not moratorium declared in CP 31/2017 against the principal borrower will have any bearing on this proceeding filed u/s. 7 of Insolvency & Bankruptcy Code against these corporate debtors/guarantors. iii. Whether or not a resolution plan, if any passed, will be binding on this petitioner in proceeding against this guarantor u/s. 7 of IB Code. iv. Whether or not non-crystallization of realizable claim in distribution of assets will have any bearing on these proceedings against the corporate debtors/guarantors. v. Whether or not this deed of guarantee is hit by section 141 of Indian Contract Act vi. Whether these proceedings are liable to be stayed as prayed by the corporate debtors. Issues: Whether or not the deed of guarantee executed by the guarantors is duly stamped and whether or not this company petition be admitted basing on this deed of guarantee. 15. On face of the Guarantee Deed, it appears that this instrument has been executed at Delhi on 12.7.2014 on paying sufficient stamp duty of Rs. 200. Now the argument of the Corporate Debtor Counsel is that this Deed of Guarantee has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in a valid transaction held between the lender and borrower. 18. Since for the reasons stated above, this instrument on its own cannot become an Agreement without support of the instrument executed in between the lenders and principal borrower, therefore, we doubt that it could be seen as an Agreement on its own for the reasons mentioned below: i. This Deed of Letter of Guarantee is incidental to the Loan Agreement executed by the Principal Borrower. ii. No consideration has been passed to the Guarantor, it is only one side promise or undertaking to the consideration passed to the principal borrower. iii. By execution of this instrument, no monetary value has been passed to the guarantor. iv. Whatever guarantee or promise given by the guarantors being in furtherance of the contract entered between the lender and borrower, this instrument cannot stand on its own without support of the loan agreement and other agreement, if any, executed between the lenders and principal borrowers. v. Since it has not been the case of Corporate Debtor that instrument executed in between the principal borrower and the lenders, is insufficiently stamped, this instrument being supporting in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether this instrument is hit by Section 34 of the Stamp Act or not? The facts available before us are that these Corporate Debtors have not denied execution of Deed of Guarantee in favour of the lenders, the Petitioner has not made any direct monetary claim against the Corporate Debtors herein. When totality of situation is taken into consideration, it is undeniable by the Corporate Debtors that the principal borrower availed the loan thereafter defaulted in making repayment likewise when the petitioner made a demand against these guarantors, they also failed to make repayment of the debt liable to be paid by the principal borrower whereby today there is no separate need for this petitioner to prove execution of this Deed of Guarantee by the Petitioner. Requirement of proof of this document will only arise when the opposite side denies execution of such document. When no such denial is there, it has to be treated as an admission in respect to the claim made by the Petitioner. 21. If Evidence Act is looked into, it is evident under Section 58 that facts admitted need not be proved, when proof of document is not required then there could not be any occasion to revisit the validity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main instrument is not stamped, the only ground herein is the deed of guarantee is not sufficiently stamped, therefore the aforesaid proposition is not aptly applicable to the present case, because it has already been said that deed of guarantee cannot be construed as standalone instrument attracting levying of stamp duty basing on the consideration received by the principal borrower. 23. To which the Petitioner's Counsel relied upon L&T Finance Ltd. v. Damodar Surya Bandekar [2014] (2) BOM CR 575 para 14 saying that the aforesaid SMS Tea Pvt. Ltd. judgment has been distinguished by the Hon'ble High Court of Bombay saying that where the instrument has been adequately stamped in a state where it has been executed there cannot be any impediment to look into the same at least for passing an order and thereafter to send the document for impounding within three months from thereof. 24. In view of the reasons aforesaid, we hereby hold that we have not found any merit of in the argument the Corporate Debtors Counsel submitted saying that the Deed of Guarantee is not admissible on the ground it is insufficiently stamped. "Whether or not moratorium declared in CP 31/2017 against the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s permitted against the guarantor, the guarantor may not be in a position to exercise his right under sections 140 & 141 because the Insolvency proceedings have already been initiated against the principal borrower. 28. To which, the petitioner Counsel submits that in the Deed of Guarantee itself, these Guarantors unconditionally agreed in Clause 21 that the guarantee given by them is independent and distinct from any security that the lenders have taken and these guarantors will not claim to be discharged notwithstanding the provisions of Sections 140 and 141 of Indian Contract Act or any other section of law by attributing failure to working capital lenders in taking security from the principal borrower. 29. On analysis of the provisions relating to guarantee, it is ascertainable that u/s. 140 of Contract Act on payment or performance of all that is liable to be payable by the principal borrower, the surety is invested with all rights which the creditor had against the principal debtor. It is a right vested with the guarantor to step into the shoes of the Creditor. It is the discretion of the surety/guarantor whether to waive that right or to reserve that right to exercise afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned, Sections 140 and 141 of the Indian Contract Act will not have any bearing on the creditor proceeding against these guarantors. Whether or not a resolution plan, if any passed, will be binding on this petitioner in proceeding against this guarantor u/s. 7 of IB Code. 32. The Corporate Debtor Counsel relied upon Sanjeev Shriya v. State Bank of India to say that unless liability against the principal borrower has not been crystallised, the creditor shall not proceed against the corporate guarantors moreover, when CIRP process is in progress, it can't be said that how much will come to the creditors in the liquidation out of the total asset of the company, 33. To which, the petitioner Counsel submits that the liability of the surety to pay the guaranteed amount to the creditor does not extinguish even if liquidation proceedings are initiated against the principal borrower, for which the counsel has relied upon Maharashtra State Electricity Board v. Official Liquidator High Court Ernakulam [1982] 3 SCC 358 para 7, Punjab National Bank v. State of UP [2001] 5 SCC 8 para 5, Jagannath Ganeshram Agarwala v. Shivnarayan Bhagirath [1941] 11 Comp. Cas. 11 (Bom.). He further submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to pay the loan notwithstanding the CIRP in progress in the CP filed against the principal borrower. 35. On careful reading of Insolvency and Bankruptcy Code especially liquidation process chapter, it has nowhere mentioned that the Company will be discharged after distribution of assets of the company unlike in the cases of individual bankruptcy cases. It is nowhere mentioned that the right of claim against the guarantors will get extinguished after distribution of assets of the principal borrower. As long as such provision is nowhere present under Insolvency and bankruptcy code, the claimant is very much entitled to recover his residuary claim from the guarantors. On reading the guarantee deed, it is very much evident that these guarantors are none other than group companies of the principal borrower. How these guarantors/Corporate Debtors, who put all kinds of restraints upon themselves by saying that they will be bound to pay off the loan amount notwithstanding fact of principal borrower entering into liquidation, notwithstanding the fact of nationalization or discharge of loan against the corporate debtor by operation of law, now say that the moratorium passed over the aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al showing existence of debt and default by the principal borrower, these Company Petitions are in fact fit to be admitted for declaration of moratorium as envisaged under Section 14 of the Code. 40. As the Creditor has proceeded against Gupta Infrastructure (India) Pvt. Ltd., Corporate Debtor in CP 1397/2017 and against Gupta Infratec Pvt. Ltd., Corporate Debtor in CP 1398/2017, relief under Section 14 are separately given as mentioned below: CP 1397/2017 (I) (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act); (d) the recovery of any property by an owner or lessor where such pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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