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TMI Blog2017 (6) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor Bank. Usually, the loan procured by a subsidiary overseas is secured by a guarantee provided by the Indian parent entity, the same is the thing happened here. Corporate Guarantee is not valid for want of RBI approval - HELD THAT:- May be the debtor has not put its efforts to see it reached to the RBI because guarantee is more than its limits. Since this duty is cast upon the Corporate Debtor to intimate to RBI about giving guarantee, the person, done wrong by not ensuring intimation reached to the RBI, today cannot come out with a defence stating since intimation has not reached to the RBI, the liability arising under this agreement is not enforceable against the corporate debtor. Therefore, there are no merit saying that not sending intimation to RBI about execution of guarantee will make this transaction invalid. No law says a person made a gain out of a transaction can vilify the same saying by so and so glitch in the law he has become free from the obligation owed upon him. More so, even if any transaction is irregular in the teeth of any regulation, mere irregularity per se will not make an act illegal. Another objection raised by the Corporate Debtor is that since the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is every likelihood diminution of the value of the corporate debtor company if initiation of Insolvency Resolution process is prevaricated. Since it is a known fact that unless and until the moratorium is declared, the corporate debtor company is at free to alienate the assets of the company or to dilute the assets of the company, since it is not in doubt that the corporate debtor executed guarantee agreement the direction for impounding will not cause any impediment for admitting this petition. This Bench hereby directs the creditor for impounding guarantee agreement as per law - this Bench being satisfied that the principal borrower drew down the loan facility given by the petitioner thereafter defaulted in making repayment for the principal borrower having defaulted the contingent liability against the guarantor has become crystallised into a definite liability falling within a definition given for financial debt for this corporate debtor has also not paid, this Bench hereby admit this Company Petition - Petition admitted. - B.S.V. Prakash Kumar, Member (J) And V. Nallasenapathy, Member (T) For the Appellant : Fredun E. De'Vitre, Sr. Advocate i/b Lex Firmus, Sanjeev Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor, it had passed a Board Resolution on 2.12.2008 agreeing to give corporate guarantee to the aforesaid loan taken by RPML from the Financial Creditor (Board Resolution at Page 122 of CP). In furtherance of it, on 26.3.2009, the Debtor Company, through Mr. Sumegh Mody, executed an irrevocable and unconditional corporate guarantee in favour of the Creditor for full repayment of all monies as agreed by RPML in the event RPML defaulted in making repayment of USD 30 million availed through Facility Agreement. 3. This guarantee agreement executed in favour of a Foreign Bank located in Mauritius having fallen within the ambit of FDI through automatic route, since the debtor company is under an obligation to make post facto intimation of the same to RBI, this debtor company on 26.3.2009 forwarded the copy of this corporate guarantee to its dealer Bank, namely Bank of Baroda along with Form ODI to enable the Bank to send it to RBI. This fact is also not denied by the corporate debtor. Interesting part is, even the letter written to the Bank of Baroda is signed by the same Mr. Sumegh Mody as director of the Debtor Company. To prove that FDI guidelines have been complied with, this Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Company on the same claim, because the Bank is entitled to proceed against the guarantor as well. On such filing, the Corporate Debtor made a bald denial before Mauritius Supreme Court that the Corporate Debtor did not execute the agreement, but this debtor has never denied the letter written to the Bank of Baroda for sending the copy of this guarantee agreement to RBI and the covering letter dated 1.4.2009 sent to the creditor along with Agreement of Guarantee stating that dealer Bank has been instructed to send the copy of the agreement to RBI for post facto approval. Of course, this debtor made the same denial to the demand notice sent by the creditor Bank on 26.5.2016. 6. Since the efforts to realise its money with the help of one or other jurisdiction not being fructified, the creditor filed this Company petition before this Bench u/s. 7 of the Insolvency and Bankruptcy Code. 7. On receipt of notice in this case, the Corporate Debtor principally raised the following objections to admit this Petition: i. Since this Corporate Debtor has not executed Corporate Guarantee to the creditor on RPML behalf, this proceeding being summary in nature with narrow conspectus, this issue be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown as signed upon Corporate Guarantee agreement. The man said to have executed loan agreement has not denied execution of the loan agreement on RPML behalf. If we see the loan agreement executed by the Principal Borrower, it is evident that loan agreement discloses that this Corporate Debtor would stand as guarantor to this loan, corroborating to this fact, the Corporate Debtor company passed a resolution to stand as a guarantor to this loan taken by RMPL, thereafter in the year 2009 Annual Report, the corporate debtor stated that it would meet the contingent liabilities of RPML, in furtherance of it, the Corporate Debtor company itself forwarded a letter to the Bank of Baroda, their dealer bank to send post facto intimation to the RBI stating that Corporate Loan Guarantee Agreement has been executed by this Corporate Debtor to a company situated in Mauritius. Moreover, in the respective year financial statements it has been showing that Corporate Guarantee has been given to RMPL which is 100% subsidiary of this Corporate Debtor. This loan in fact has been taken to acquire shares of one of the Corporate Debtor group companies. By analysing the totality of the situation, no othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quity. After all these mischievous acts of the debtor, can today this debtor back out from the promise of guarantee given to a loan availed by its wholly owned subsidiary of it? Hundred percent subsidiary means what, the acts of subsidiary are nothing but acts based on the wish of the holding company. Where this loan money has gone? It has gone to one of its group companies. If at all this approval from RBI has to be obtained prior to obtaining loan or execution of Corporate Guarantee, then it may be said that the guarantee dehors intimation is bad, in this case, it is only a post facto intimation, not making such intimation will not vitiate or frustrate the agreement or rights of the creditor. Why it has not gone to RBI, we can't make any guess work on it, but it is a fact that this debtor sent a letter on 29.3.2009 to the creditor Bank stating that corporate debtor already sent post facto intimation to the RBI by sending a letter addressed to Bank of Baroda to the creditor Bank to make them believe that execution of guarantee agreement to this loan has been intimated to the RBI. May be the debtor has not put its efforts to see it reached to the RBI because guarantee is more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admission of this case. 14. The Corporate Debtor has also raised another objection that the guarantee agreement being unstamped instrument, unless said instrument has been sent for impounding, this instrument cannot be looked into by any court of law therefore unless the document is impounded, the petition cannot be admitted. To which, by looking at the ratio placed by the petitioner and as well as the corporate debtor, it appears to us that case basing on an unstamped or insufficiently stamped instrument could be simultaneously admitted by ordering for impounding the instrument impugned herein. Since this Bench has already held that this Court has not believed the defence of the Corporate Debtor saying that no Corporate Guarantee Agreement has been executed in favour of the applicant, once such instrument has been sent for impounding it will automatically get impounded provided requisite stamp has been paid, moreover nothing is left to decide once this administrative act of impounding is done. It is a curable defect; therefore it will not become an impediment to initiate Insolvency Resolution Process. This Bench has not gone into as to whether a foreign instrument not chargeable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrower has not availed loan and has not defaulted in repayment, therefore nothing much have to say over availing loan and defaulting in repayment. 17. The applicant relied upon Aditya Birla Finance Ltd. v. Coastal Projects Ltd. (Arbitration Petition (L) No. 1603/2013 dated 29.10.2013 - Bombay High Court) to say that guarantee deed in want of stamp duty can be relied upon for seeking interim relief, if deficiency of duty is there, court can impound it at evidence stage. 18. The applicant relied upon SRM Exploration Pvt. Ltd. v. N S N Consultants S.R.O. (2012) 129 DRJ 113 (Delhi HC) to say that there is no absolute bar to act upon basis of unstamped document and it cannot be lost sight of the fact that the documents in the case supra i.e., Guarantee Declaration as well as Promissory Note were executed outside India. 19. The applicant relied upon ICICI Bank Ltd. v. Classic Diamonds (India) Ltd. to say that in respect to winding up matters, it must be seen as to whether the company is unable to pay debts or not, not otherwise. In the case supra, when an argument has been set out saying that the corporate guarantee executed outside Maharashtra when comes to State of Maharashtra, the req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crystallised into a definite liability falling within a definition given for financial debt for this corporate debtor has also not paid, this Bench hereby admit this Company Petition with the relief as follows: i. That this Bench hereby prohibits 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; transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; 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; the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. ii. That the supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period. iii. That the provision ..... 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