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TMI Blog2024 (12) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... as 'Impugned Order') passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench-I) in C.P/IB/205/AHM/2022, C.P/IB/206/AHM/2022 and C.P/IB/215/AHM/2022 respectively. By the impugned order, the Adjudicating Authority has admitted the application filed by the Respondent No.1- State Bank of India under Section 95(1) of IBC initiating insolvency resolution process of the Appellant- Mavjibhai Nagarbhai Patel being the Personal Guarantor of the Corporate Debtor. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant. 2. The significant dates and sequence of events which require to be noticed for deciding the matter at hand are as placed below: * The Corporate Debtor-Vrundavan Ceramic Pvt. Ltd. had been sanctioned loan facilities by the Respondent No.1- Bank. The Personal Guarantor-Appellant had executed a Deed of Guarantee dated 09.04.2005 followed by Supplemental Deeds of Guarantees until 2010 in respect of credit facilities extended by the Respondent No. 1-Bank to the Corporate Debtor. * The Loan Account of the Corporate Debtor was declared as Non- Performing Asset ("NPA" in short) on 31.07.2013 and recalled by the Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the Section 95 application has been admitted by the Adjudicating Authority in these two cases are predicated on the same facts and grounds as in the case of Mavjibhai Nagarbhai Patel, we have chosen to confine ourselves to the pleadings made in Company Appeal No. 1702 of 2024 to decide these three Appeals at hand. 4. Making his submissions, the Learned Counsel for the Appellant- Personal Guarantor stated that the Adjudicating Authority had erroneously passed the impugned order allowing the Section 95 application even though it was badly time-barred. Since the date of default mentioned by the Respondent No.1 Bank in Form-C of the Section 95 application is 31.07.2013, the three- year period of limitation expired in 2016. Hence, the application under Section 95 of IBC filed in June 2022 by the Respondent No.1 Bank seeking insolvency resolution of the Appellant was grossly time-barred. Submission was pressed by the Appellant that the Respondent No. 1 had relied on a letter dated 11.01.2022 to claim that the Section 95 application was filed within the limitation period. It was pointed out that when the three-year period of limitation stood expired in 2016, the letter of 11.01.2022 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o enclose the authorization document in that regard. It was submitted that the Adjudicating Authority failed to consider that the Section 95 application did not disclose the authority under which the AGM had signed the application on behalf of the Respondent No.1 Bank. The stand-alone purported Authority Letter signed by a Deputy General Manager in favour of an AGM without the backing of a resolution by the Central Board of Directors of the Respondent No.1 Bank in favour of the said signatory was not sufficient to meet the criteria of disclosure of authorisation as required under Form-C of the said rules. Since this was not a valid authorization, the application under Section 95 was defective and liable to be dismissed on this ground alone. 8. Refuting the contentions made by the Appellant, the Ld Counsels for the Respondents submitted that the Personal Guarantor-Appellant had executed a Deed of Guarantee dated 09.04.2005 followed by Supplemental Deeds of Guarantees in respect of credit facilities extended by the Respondent No. 1- Bank to the Corporate Debtor. The clauses of the Deed of Guarantee clearly stated that the guarantee was in the nature of a continuing guarantee and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor was 31.07.2013. 13. Before we dwell upon the issues delineated by us at para 11 above, at the very outset, we would like to advert attention to the judgement of this Tribunal in Pooja Ramesh Singh Vs. State Bank of India in CA(AT) (Insolvency) No.329 of 2023 wherein it has been held that the liability of a borrower and guarantor is co-extensive but the liability of a Guarantor stems from the contract of guarantee and therefore the date of default in the case of the guarantor depends on the terms of contract of guarantee. The date of default for the principal borrower and the guarantor can be different depending on the terms of the Contract of Guarantee in terms of this judgment. The relevant excerpts of the judgment are extracted as below: 24. The scheme of I&B Code clearly indicate that both the Principal Borrower and the Guarantor become liable to pay the amount when the default is committed. When default is committed by the Principal Borrower the amount becomes due not only against the Principal Borrower but also against the Corporate Guarantor, which is the scheme of the I&B Code. When we read with as is delineated by Section 3(11) of the Code, debt becomes due both on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid credit facilities as also for all costs and other monies which may from time to time become due and remain unpaid to the Bank thereunder.... 12. The Guarantors affirm confirm and declare that any balance confirmation and/or acknowledgment of debt and/or admission of liability given or promise or part payment made by the Borrower or the authorised agent of the Borrower to the Bank shall be deemed to have been made and/or given by or on behalf of the Guarantors themselves and shall be binding upon each of them. 13. The Guarantors shall forthwith on demand made by the Bank deposit with the Bank such sum or security or further sum or security as the Bank may from time to time specify as security for the due fulfillment of their obligations under this Guarantee.... 20. The Guarantors agree that amount due under or in respect of the aforesaid credit facilities and hereby guaranteed shall be payable to the Bank on the Bank serving the Guarantors with a notice requiring payment of the amount ..." ( Emphasis supplied ) 16. The liability of the guarantor has to be read from the Deed of Guarantee. Further, the terms of the Deed of Guarantee are extremely material as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the copy of this notice to personal guarantor who are liable to pay the aforesaid outstanding amount. This notice is without prejudice to the Bank's right to initiate such other actions or legal proceedings as it deems necessary under any other applicable provisions of Law. This notice is in supersession of our earlier notices sent to you vide our letter no. SAMB/GRJ/2018-19/2002 dated 16.02.2019 which stands withdrawn. Copy forwarded to : Jayantibhai Pragjibhai Patel, C/O Jayantilal Bhorania, Gopal Society, Mahendranagar Road, , Morbi, Gujarat-363642 Babubhai Khimjibhai Patel, C/O Patel Timber Company, 7 Lati Plot, Morbi, Gujarat-363641 Bhagwanbhai Talsibhai Bhoraniya Gopal Society, Mahendranagar Road, Morbi, Gujarat-363642 Mavjibhai Nagarbhai Patel, Gopal Co-operative housing society, Mahendranagar road, Morbi- Gujarat- 363642 Jayantibhai Nagarbhai Patel, Gopal Co-operative housing society, Mahendranagar road, Morbi-Gujarat-363642. Jasuben Odhavjibhai Bhoraniya, Legal heir of Late Odhavji 'Talsibhai Bhoroniya, Gopal Co-operative housing society, Mahendranagar road, Morbi- Gujarat-363642. Narayanbhai N Patel, Gopal Co-operative housing society, Mahendranagar ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown as 04.08.2021 being 60 days from 04.06.2021. The Section 13(2) Notice was also attached with the Rule 7(1) Notice. 20. Since the guarantee deed specifically mentioned that the guarantee was in the nature of an on-demand guarantee, the default was to arise on the part of the Guarantor only when the Demand Notice was issued as contemplated in the Deed of Guarantee. Thus, the period of limitation of the Personal Guarantor was to commence once the demand was made on the Guarantor by the Respondent No.1 Bank. Hence, the Notice dated 04.06.2021 issued by the Respondent No.1 Bank to the Personal Guarantor has to be treated to be Notice on Demand as contemplated in the Deed of Guarantee. The Rule 7(1) Notice dated 28.06.2021 had therefore rightly recorded that the debt was due on 04.06.2021 being the date of Demand Notice under Section 13(2) of the SARFAESI Act and that the date of default occurred on 04.08.2021 on the expiry of 60 days from 04.06.2021. 21. Further, when we look at the Form-C of Section 95 application filed by Respondent No. 1 Bank, we find that the date of default in respect of the Personal Guarantor has been explained in Part-II at column No. 4 as follows: "On ..... X X X X Extracts X X X X X X X X Extracts X X X X
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