NCLT Mumbai: Corporate Guarantor's Date Of Default Is Independent Of Principal Borrower's Date Of Default
Sachika Vij
3 Feb 2024 8:00 AM GMT
The National Company Law Tribunal ('NCLT') Mumbai, comprising Justice Mr. Kishore Vemulapalli (Judicial Member) and Ms. Anu Jagmohan Singh (Technical Member) held that the date of default by the Principal Borrower is not relevant to determine the date of default by the Corporate Guarantor. Background Facts: On 29.07.2023, the Central Bank of India (Financial Creditor) filed a...
The National Company Law Tribunal ('NCLT') Mumbai, comprising Justice Mr. Kishore Vemulapalli (Judicial Member) and Ms. Anu Jagmohan Singh (Technical Member) held that the date of default by the Principal Borrower is not relevant to determine the date of default by the Corporate Guarantor.
Background Facts:
On 29.07.2023, the Central Bank of India (Financial Creditor) filed a Corporate Insolvency Resolution Process ('CIRP') application against Superfine Profile and Extrusions Private Limited (Corporate Debtor) under Section 7 of Insolvency and Bankruptcy Code, 2016 ('IBC').
The application has been filed on the non-payment of the amount in the Secured Loan of Rs. 66.21 crores under a Corporate Guarantee Agreement dated 22.08.2015 and 18.11.2016 for the total debt of Rs. 73.61 crores. The Date of Default was 06.03.2023.
The Financial Creditor argued that the said amount was extended to the Corporate Debtor for a consideration in the time value of money and hence is a Financial Debt within the meaning of Section 5(8) of the IBC.
NCLT Verdict:
The NCLT Mumbai allowed the application and held that the date of default by the Principal Borrower is not relevant to determining the date of default by the Corporate Guarantor.
It observed that there is a settled position of law that a claim is not barred by Section 10A in case of a corporate guarantee payable on demand since the date of default by the principal borrower is not relevant to determine the date of default by the Corporate Guarantor. Thus, the demand notice presently was issued on 06.03.2023 by the financial creditor on the failure to pay the amount under the guarantee and the same is outside the Section 10A period.
The Tribunal noted the issuance of the corporate guarantee not only in the favour of consortium but also in the favour of each of the members of consortium including the financial creditor. Further, no dispute exists to the debt owed to the Corporate Debtor by the Financial Creditor and default of more than Rs.1 crore as required under Section 4 of IBC.
In conclusion, NCLT admitted the CIRP application against the Corporate Debtor directing the IRP to initiate the process.
Case Title: Central Bank of India vs Superfine Profile and Extrusions Pvt. Ltd.
Case No.: CP (IB) 692/MB/2023
Counsel for Financial Creditor: Mr. Rahul Sarda i/b Adv. Aiqan Z. Memon, Advocate.
Counsel for Corporate Debtor: Mr. Rohit Gupta a/w Ms. Prashansha Aggarwal, Ms. Mahtab Katariya and Ms. Monali Solanki i/b Katariya & Associates.
