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TMI Blog2025 (1) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... he liability of the personal guarantor gets triggered on the invocation of guarantee. In the present factual matrix, in terms of the PGA, the Appellant as personal guarantor was mandatorily obliged to honour its guarantee keeping in view that PGA provided for an unconditional, irrevocable and continuing guarantee to the COR Security Trustee/COR Lenders in respect of the COR Secured Obligations and credit facilities secured by the principal borrower - It is clear from the reading of the terms of the PGA at Clause 26 that if the Borrower failed to perform its obligations under the COR Finance Documents, it was incumbent on the Personal Guarantor to forthwith pay on demand to the COR Security Trustee/COR Lenders the whole of such outstanding sum. Hence there is no merit in the plea taken by the Appellant that since no request was made by them as guarantor for release of loan in favour of the borrower, the personal guarantee could not have been invoked. The invocation of the personal guarantee and signing of the invocation in the capacity of COR Lenders Agent by Respondent No. 1 Bank has been questioned by the Appellant. It is dissuaded from agreeing with the Appellant since the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kothari, Ms. Henna George , Advocates For the Respondent : Mr. Prateek Kumar, Ms. Raveena Rai, Mr. Siddhant Grover, Advocates for R-1. Mr. Karan Valecha , Advocate for R - 2 JUDGMENT ( Hybrid Mode ) Per : Barun Mitra, Member ( Technical ) Present is a set of two similar appeals filed by Shri Amit Dineshchandra Patel vide Company Appeal No. 1826 of 2024 and Shri Rahul Arunprasad Patel vide Company Appeal No. 1827 of 2024. The appeal filed by Amit Dineshchandra Patel is against the impugned order dated 17.05.2024 in CP/IB/76/NCLT/AHM/2021 while the appeal filed by Rahul Arunprasad Patel is against the impugned order dated 17.05.2024 in CP/IB/77/AHM/2021. In both these appeals the above two Appellants have assailed the impugned order admitting the Section 95(1) application filed by the Respondent No.1-State Bank of India allowing initiation of insolvency resolution process of the Appellants-Personal Guarantors. Since, the facts and the grounds on which both the appeals have been premised are common, it would suffice to confine ourselves to the pleadings made in Company Appeal No. 1826 of 2024 to decide both these appeals at hand. 2. The facts in both these appeals being largely ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned order while admitting the Section 95 application. It was contended that the personal guarantee given by the Appellant-Personal guarantor was in favour of the SBI Trustee Cap ( SBI Cap in short) as the Security Trustee. This guarantee was not given in favour of any individual lender. Hence the Respondent No.1 Bank could not have invoked the personal guarantee in their individual capacity. Neither the PGA nor the CORLA empowered any of the individual lenders to invoke the personal guarantee on their own. When the COR lenders had collectively appointed SBI Cap as the Security Trustee, the Respondent No.1 Bank in their individual capacity could not have initiated personal insolvency proceedings against the Personal guarantor. There was no request which flowed from the guarantor for release of loan in favour of the borrower and the guarantor is also not party to the CORLA. Moreover, the PGA is not a tripartite agreement between the Borrower, Lender and the Guarantor and hence the Section 95 application was not maintainable. Submission was pressed that the Adjudicating Authority while passing the impugned order had missed these vital nuances of the PGA and CORLA. Yet another content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always have been filed by the Respondent No.1 Bank. 5. We have duly considered the arguments advanced by both the parties and perused the records carefully. 6. The short issue before us for our determination is whether the Respondent No.1 Bank was entitled to invoke the personal guarantee in the facts of the present case and whether the Section 95 application was filed on behalf of Respondent No.1 Bank by a person having valid authority to do so. 7. On the issue whether Respondent No.1 Bank was entitled to invoke the personal guarantee, it is the case of the Appellant that the determining factors are the PGA which stipulated that the personal guarantor shall execute the guarantee in favour of the SBI Cap-Security Trustee for the benefit of all COR Lenders read with Schedule-1 of the CORLA which specified the Banks which collectively formed the part of COR Lenders. It was further stressed that all the Banks viz SBI, Bank of Baroda and IDBI are collectively referred to as COR Lenders in the CORLA and the same agreement also refers to the individual banks as COR Lender . Since the clauses of the CORLA clearly makes a distinction between COR Lenders and COR Lender , the two terms cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower. It was also pointed out that the clauses contained in CORLA under the heading Manner of Demand authorised the SBI to invoke the guarantee, as in terms of these clauses, the COR Lenders were also authorized to claim the demand under the guarantee and the Demand Notice issued on the personal guarantor was therefore pretty much in conformity with the manner prescribed in the PGA. 9. To analyse the tenability of the rival submissions, it may be useful to weigh their contentions in the light of the relevant clauses of the CORLA and PGA. From the material on record, at the outset, we would like to observe that it is an indisputable fact that both the CORLA and the PGA were signed on the same date and the terms and conditions are integral and relatable to each other. The CORLA was signed amongst Shirpur Power Private Limited (As Borrower) and the Banks set forth in Part-A of Schedule I (as COR Lenders); the State Bank of India (as COR Lenders' Agent) and SBICAP Trustee Company Limited (as COR Security Trustee) as maybe seen at page 312 of Appeal Paper Book ( APB in short). Coming to the signatories of the PGA, we find that it was signed between the Appellant, Amit Dinesh Patel a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ean the guarantees to be issued or, as the case maybe, confirmed by COR lenders on behalf of the Borrower or caused to be issued or confirmed by any bank on its behalf under the Non-Fund based facility, as mentioned in Schedule 1-Part B of this Agreement issued or to be issued as sub- limit to the respective loan granted or to be granted by the COR Lenders to the Borrower. Personal guarantors shall collectively mean (a) Shri Amit Dineshchandra Patel and (b) Shri Rahul Arunprasad Patel 2.2 NATURE OF RIGHTS AND OBLIGATIONS OF COR LENDERS The obligations of each COR Lender hereunder are several. No COR Lender shall be responsible for the obligations of any other COR Lender. Any COR Lender may separately enforce any of its rights arising out of any of the COR Finance Documents The rights of each COR Lender under the COR Finance Documents are separate and independent. Any COR Lender may separately enforce any of its rights arising out of any of the COR Finance Documents, except as otherwise stated in the COR Finance Documents. We also take note that the CORLA at Clause 7.2 provides for Consequences of Default which at Clause 7.2 (iii) further clarifies that the COR Lenders on the occurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R Facility or fails to perform its obligations under the COR Finance Documents, the Guarantor shall forthwith on demand pay to the COR Security Trustee/COR Lenders the whole of such Outstanding Sum and shall indemnify and keep indemnified the COR Security Trustee/COR Lenders against all losses, costs, charges and expenses whatsoever which COR Security Trustee/COR Lenders may incur by reason of any default on the part of the Borrower. 26 Manner of Demand 29.1 Any demand made by the COR Security trustee/COR lenders upon the Guarantor during the subsistence of this Guarantee in accordance with its terms, pursuant to a Demand Certificate (herein below defined), shall be conclusive evidence that: (a) the Guarantor s liability hereunder has accrued; and (b) the extent of the Guarantor s liability is the amount shown in such Demand Certificate. 29.2 The Demand Certificate shall be conclusive evidence against the Guarantor of the amount for the time being due to the COR Security Trustee/COR Lenders from the Borrower/Guarantor in any action or proceeding brought on this Guarantee against the Guarantor during the subsistence of this Guarantee and in accordance with the terms of this Guarante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emanded by the Applicant and as such in over view entire amount demanded is unserviced as on the date of order. v. In our view the application is not hit by Limitation. 15. Coming to our analysis, in the present factual matrix, in terms of the PGA, the Appellant as personal guarantor was mandatorily obliged to honour its guarantee keeping in view that PGA provided for an unconditional, irrevocable and continuing guarantee to the COR Security Trustee/COR Lenders in respect of the COR Secured Obligations and credit facilities secured by the principal borrower. Recital F of the PGA makes it clear that the Personal Guarantor at the request of the Borrower and in consideration of the COR Lenders having agreed to grant the COR Facility to the Borrower, had agreed to execute this Guarantee in favour of the COR Security Trustee, acting for the benefit of the COR Lenders, for guaranteeing the outstanding sum. It is clear from the reading of the terms of the PGA at Clause 26 that if the Borrower failed to perform its obligations under the COR Finance Documents, it was incumbent on the Personal Guarantor to forthwith pay on demand to the COR Security Trustee/COR Lenders the whole of such outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 1 Bank has been questioned by the Appellant. We are dissuaded from agreeing with the Appellant since the Respondent No. 1 Bank had signed the CORLA wherein it had been clearly designated as COR Lenders' Agent. Moreover, though the lenders had appointed SBI Cap as their Security Trustee, in the Security Trustee Agreement dated 21.09.2015, Clause 8.12 stated that any duty or the obligation of the Security Trustee may be performed by the COR Lenders and any such performance shall not be construed as a revocation of the trusts or agency created thereby. 19. This now brings us to the argument canvassed by the Appellant that in Rakshit Dhirajlal Joshi vs IDBI Bank Ltd 2022 SCC Online NCLAT 4524 it had been held by this Tribunal that if the Security Trustee Agreement had laid down that the lenders shall act collectively, then an individual bank without obtaining formal consent of the other lenders cannot substitute itself in place of the Security trustee. The reliance placed by the Appellant on the decision of this Tribunal in Rakshit Dhirajlal judgment is not applicable in the present case since in this case there is no dispute inter se between the members of the consortium whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving been filed by an Assistant General Manager of State Bank of India above the level of SMGS-IV was repelled. The relevant excerpts of the said judgment is as reproduced below: 23. This brings us to the second question on whether the Section 95 application has been validly filed. It is an admitted fact that the Authority Letter authorising the AGM to file the Section 95 application was signed by the Deputy General Manager. It was clarified by the Ld. Counsel for the Respondent No.1 Bank during the oral submissions that the AGM of the Respondent No1 Bank being SMGS-V was statutorily competent to sign any petition by virtue of The Gazette of India Notification dated 02.05.1987 which notified that in pursuance of Regulations 76(1) of the State Bank of India General Regulations, 1955 framed under Section 50 of the State Bank of India Act, 1955 the Executive Committee of the Central Board of the State Bank of India authorized all Officers in the Grade of SMGS-IV and above to exercise Signing Power in respect of documents connected with the current or authorized business of the Bank. Since the Gazette of India Notification lies in the public domain and is subsisting, we are not impres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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