Second section 7 insolvency application against corporate guarantor held not maintainable after CIRP admission against principal borrower.

A second section 7 application under the Insolvency and Bankruptcy Code against a corporate guarantor for the same debt and default was held not maintainable after CIRP had already been admitted against the principal borrower. The Tribunal applied the co-extensive nature of surety liability but treated the prior admission against one corporate debtor as determinative against a proceeding on the same claim. The objection that the corporate debtor was a financial service provider or NBFC, and therefore outside the definition of corporate person, was rejected because no proper registration or authorisation establishing that status was produced on record.

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Issues: (i) whether a financial creditor could maintain a second application under section 7 of the Insolvency and Bankruptcy Code, 2016 against a corporate guarantor after initiation and admission of CIRP against the principal borrower for the same debt and default; (ii) whether the corporate debtor could avoid proceedings on the ground that it was a financial service provider or NBFC and therefore outside the definition of corporate person.

Issue (i): whether a financial creditor could maintain a second application under section 7 of the Insolvency and Bankruptcy Code, 2016 against a corporate guarantor after initiation and admission of CIRP against the principal borrower for the same debt and default.

Analysis: The liability of the surety is co-extensive with that of the principal debtor, but the Tribunal applied the principle that once an application for the same claim and default has been admitted against one corporate debtor, a second application by the same financial creditor for the same set of claims cannot be admitted against the other corporate debtor. The earlier admission of CIRP against the principal borrower was treated as determinative against a further section 7 proceeding on the same debt against the guarantor.

Conclusion: The issue was decided against the applicant and in favour of the respondent; the second section 7 petition was held not maintainable.

Issue (ii): whether the corporate debtor could avoid proceedings on the ground that it was a financial service provider or NBFC and therefore outside the definition of corporate person.

Analysis: The Tribunal noted that the corporate debtor relied on its objects clause and RBI correspondence, but no registration or authorization establishing it as an NBFC or financial service provider was produced. On the materials placed, the claimed exclusion from the definition of corporate person was not established.

Conclusion: The issue was decided against the corporate debtor; the NBFC objection was rejected.

Final Conclusion: The application under section 7 failed in view of the prior admission of CIRP against the principal borrower, and the respondent's alternative objection based on NBFC status was not proved on the record.

Ratio Decidendi: A financial creditor cannot maintain a second section 7 application for the same debt and default against a guarantor after CIRP has already been admitted against the principal borrower, and exclusion as a financial service provider must be affirmatively established by proper authorization or registration.

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