Under A Security Trustee Agreement, An Individual Lender Cannot Invoke Personal Guarantee Without Taking Consent Of Other Co-Lenders: NCLT Delhi

The National Company Law Tribunal ("NCLT") New Delhi (Special Bench), comprising of Shri Dharminder Singh (Judicial Member) and Shri Avinash Kumar Srivastava (Technical Member), while adjudicating an application filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 ("IBC") in IDBI Bank Ltd. v Manoj Gaur (Personal Guarantor of Corporate Debtor Jaypee Infratech Ltd)., has held that invocation of personal guarantee can be done by a Security Trustee only after obtaining consent of all co-lenders under the concerned Security Trustee Agreement. When there are multiple beneficiaries, the Trustee is bound to execute the Trust for the benefit of all beneficiaries in accordance with Trust Deed and after taking permission from the co-lenders. The order was passed on 05.05.2022. Background Facts Jaypee Infratech Ltd. ("Corporate Debtor") had availed four loans from IDBI Bank Ltd. ("Financial Creditor") aggregating to Rs. 4650,00,00,000/- and had executed a Common Loan Agreement and Facility Agreement on 30.04.2015 and a First Amendment Agreement (to Common Loan Agreement) dated 22.05.2015. Thereafter, an amount of Rs. 900,00,00,000/- was down sold by the Financial Creditor to India Infrastructure Finance Company due to which the principal amount of loan granted to the Corporate Debtor came down to Rs. 3750,00,00,000/-. A Security Trustee Agreement dated 30.04.2015 was executed between the Financial Creditor and the Corporate Debtor. IDBI Trusteeship Service Ltd. was appointed to act as a Trustee on behalf of the Financial Creditor and the other lenders; and also to hold the security to be created pursuant to Financing Documents. Mr. Manoj Gaur had executed a Deed of Guarantee dated 25.05.2015 in respect of the aforementioned loan facilities, wherein in the capacity of a Personal Guarantor he had irrevocably and unconditionally guaranteed repayment of the said loan facilities. The Corporate Debtor defaulted in repayment of dues to the Financial Creditor and consequently, the Corporate Debtor's loan account was declared Non Performing Asset (NPA) on 31.03.2016. The Financial Creditor filed a petition under Section 7 of IBC seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor. The NCLT Allahabad (Adjudicating Authority) had initiated CIRP against the Corporate Debtor vide an order dated 09.08.2017. The Financial Creditor issued a demand notice dated 09.07.2018 to Mr. Manoj Gaur ("Personal Guarantor"), seeking repayment of the amounts in terms of Deed of Personal Guarantee. Thereafter, two demand notices dated 12.11.2021 and 09.12.2021 were issued by the Financial Creditor in Form-B under Rule 7(1) of the Rules of 2019 to the Corporate Debtor but the latter failed to pay the dues within the statutory period of 14 days from the service of the said Notice. Following which, the Financial Creditor (through the Resolution Professional) filed an application under Section 95 of IBC against the Personal Guarantor on 14.01.2022. The Financial Creditor had also filed an application bearing IA No.782/2022 under Section 60(5) of IBC, seeking modification of order passed by the Adjudicating Authority on 08.02.2022, and appointment of Resolution Professional (RP) alongwith direction to RP to submit a report under Section 99 of IBC, 2016. Contentions Of The Personal Guarantor The Personal Guarantor challenged the application on grounds of maintainability, stating that the Financial Creditor has no locus standi to file the Application under Section 95, as it is a stranger to the contract (Deed of Guarantee). It was further argued that the Financial Creditor had concealed the fact that the Security Trustee had already filed a similar application under Section 95 of IBC bearing (IB)-83(PB)/2022 titled IDBI Trusteeship Services Ltd. Vs. Manoj Gaur in which the Adjudicating Authority had already issued notice. Further, the Personal Guarantor apprised the Bench that in the proceedings before NCLT Allahabad under Section 7 of IBC, the financial institutions that extended loans to the Corporate Debtor were: IDBI Bank Limited Union Bank of IndiaIndia Infrastructure Finance Company LimitedLife Insurance Corporate of IndiaState Bank of IndiaCanara BankBank of MaharashtraICICI Bank LimitedIFCI LimitedThe Jammu & Kashmir Bank Limited However, in the demand notice dated 09.07.2018 issued by IDBI Trusteeship Services Ltd., the names of only 4 lenders were included, i.e. IDBI Bank Limited, Union Bank of India, Syndicate Bank of India and Bank of Maharashtra. Further, the version of the Security Trustee Agreement which includes the names of all the Lenders of the Corporate Debtor has not been placed on the record by the Financial Creditor. Instead, the version which contains only the names of from IDBI, State Bank of Hyderabad and India Infrastructure...

Under A Security Trustee Agreement, An Individual Lender Cannot Invoke Personal Guarantee Without Taking Consent Of Other Co-Lenders: NCLT Delhi

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Under A Security Trustee Agreement, An Individual Lender Cannot Invoke Personal Guarantee Without Taking Consent Of Other Co-Lenders: NCLT Delhi

Pallavi Mishra

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