The sanction letter clearly mentioned that all existing ...

Existing securities, including guarantees, remain valid for revised loan repayment and fresh credit facilities. No novation of contract.

Case Laws     Insolvency and Bankruptcy

August 17, 2024

The sanction letter clearly mentioned that all existing securities, including the guarantees dated 22.08.2015 and 18.11.2016, would continue to cover the existing facilities with the revised repayment schedule and the fresh FITL facility. The Section 7 Application pertained to Cash Credit, Term Loan, FITL, and Cash Credit Adhoc facilities, for which the guarantees dated 22.08.2015 and 18.11.2016 were applicable. The Consortium Agreement executed on 06.11.2020 did not affect the existing securities, and there was no novation of the contract. The disbursements made pursuant to the 2013 sanction and the guarantees issued by the corporate guarantor on 22.08.2015 and 18.11.2016 continued to bind the corporate guarantor. The subsequent Adhoc Limit and FITL sanctioned on 26.12.2019 and 09.09.2020 were also covered by the existing securities. The bank's invocation of the guarantee on 06.03.2023 was valid, obliging the corporate guarantor to clear the dues. The Appellant did not contest the debt or default but sought to avoid liability on the grounds of novation, which was rejected. The Adjudicating Authority's order admitting the Section 7 Application was upheld, and the appeal was dismissed.

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