Corporate guarantor liability survives borrower insolvency, with moratorium and subrogation rights not barring creditor action.

A corporate guarantee cannot be rejected merely for insufficient stamping where execution is admitted and the debt and default are otherwise established. The Tribunal held that insolvency moratorium against the principal borrower does not bar a creditor from proceeding against corporate guarantors, and sections 140 and 141 of the Indian Contract Act do not prevent such action because subrogation arises only after payment. A possible resolution plan or liquidation recovery from the borrower also does not suspend the creditor's claim against the guarantors. The petitions were admitted, moratorium was declared against each corporate debtor, and an Interim Resolution Professional was appointed for CIRP.

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Issues: (i) whether the deed of guarantee was insufficiently stamped and therefore could not be acted upon for admission of the petition; (ii) whether moratorium in the insolvency proceedings against the principal borrower barred proceedings against the corporate guarantors and whether sections 140 and 141 of the Indian Contract Act, 1872 applied to prevent such proceedings; (iii) whether a future resolution plan or liquidation distribution of the principal borrower would affect the creditor's claim against the guarantors; (iv) whether the proceedings against the guarantors were liable to be stayed.

Issue (i): whether the deed of guarantee was insufficiently stamped and therefore could not be acted upon for admission of the petition.

Analysis: The guarantee was executed in support of the working capital facilities granted to the principal borrower and was part of the same commercial transaction. The guarantors did not deny execution of the deed. The Tribunal held that an admitted document need not be proved, and that the objection of insufficient stamping was a technical defence that did not defeat the admitted debt and default. It further held that the guarantee deed was not a standalone instrument creating an independent monetary obligation in the manner suggested by the corporate debtors.

Conclusion: The objection based on insufficient stamping was rejected and the deed of guarantee was treated as admissible for the present proceedings.

Issue (ii): whether moratorium in the insolvency proceedings against the principal borrower barred proceedings against the corporate guarantors and whether sections 140 and 141 of the Indian Contract Act, 1872 applied to prevent such proceedings.

Analysis: The Tribunal held that the moratorium under the Insolvency and Bankruptcy Code operates in relation to the corporate debtor's estate and does not extend to a separate proceeding against guarantors. It further held that section 140 gives the surety a right to step into the creditor's shoes after payment, but does not bar the creditor from proceeding against the surety in the first instance. The guarantee deed itself preserved the creditor's rights notwithstanding those provisions.

Conclusion: The pendency of insolvency proceedings and moratorium against the principal borrower did not bar the present petitions against the guarantors, and sections 140 and 141 did not defeat the creditor's action.

Issue (iii): whether a future resolution plan or liquidation distribution of the principal borrower would affect the creditor's claim against the guarantors.

Analysis: The Tribunal held that the creditor's right against the guarantors remains co-extensive with the liability of the principal borrower and is not suspended until the resolution or liquidation process reaches its end. The Code does not provide that the guarantor is discharged merely because the borrower is under CIRP or liquidation, and the creditor is not required to wait for uncertain recovery from the borrower's estate before proceeding against the guarantors.

Conclusion: The possibility of a resolution plan or partial recovery in liquidation did not prevent or postpone proceedings against the guarantors.

Issue (iv): whether the proceedings against the guarantors were liable to be stayed.

Analysis: Since no statutory bar was found under the Insolvency and Bankruptcy Code or the Indian Contract Act, 1872, and the debt and default were established, there was no sufficient cause to stay the proceedings. The Tribunal found the creditors entitled to proceed with admission and consequential insolvency reliefs.

Conclusion: The request to stay the proceedings was rejected.

Final Conclusion: The petitions were admitted, moratorium was declared against each corporate debtor, and an Interim Resolution Professional was appointed for the initiation of corporate insolvency resolution process.

Ratio Decidendi: A creditor may proceed under section 7 of the Insolvency and Bankruptcy Code, 2016 against a corporate guarantor on proof of debt and default notwithstanding CIRP or moratorium against the principal borrower, because the guarantor's liability is co-extensive and the surety's subrogation rights under the Contract Act arise only after payment and do not bar creditor action.

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