Corporate Debtor not Liable as Guarantor, Application Dismissed under Section 7.

The Tribunal dismissed the application under Section 7, ruling that the Corporate Debtor was not liable as a guarantor under the "Unattested Pledge Agreement." It was determined that the agreement solely pertained to the pledge of shares and did not create any guarantee obligation for the Corporate Debtor. As a result, the Corporate Debtor was not considered a debtor under the Insolvency & Bankruptcy Code, and the petition was rejected with no costs awarded.

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Issues Involved:
1. Whether the Corporate Debtor is liable as a guarantor under the "Unattested Pledge Agreement."
2. Whether the application under Section 7 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against the Corporate Debtor is maintainable.

Detailed Analysis:

Issue 1: Liability of the Corporate Debtor as a Guarantor

The Financial Creditor asserted that the "Unattested Pledge Agreement" dated 27th February 2015, should be interpreted as a "Pledge Cum Guarantee Agreement." The Financial Creditor based this claim on clauses 5.1(g) and 6.2(b) of the agreement, which they argued implied joint and several liability of the Pledgors, including the Corporate Debtor, for the Borrower’s dues.

The Corporate Debtor countered this by arguing that the agreement was solely for the pledge of shares and did not constitute a guarantee. They emphasized that the title of the document was "Unattested Pledge Agreement," and there was no explicit mention of a guarantee by the Corporate Debtor. The Corporate Debtor also referred to the Loan Agreement and the Board Resolutions, which clearly indicated that the only personal guarantee was provided by Mr. Manoj Kumar Agarwal, not the Corporate Debtor.

The Tribunal found that the agreement was indeed an "Unattested Pledge Agreement" and not a "Pledge Cum Guarantee Agreement." The Tribunal noted that the agreement’s title and the clauses within it did not explicitly or implicitly create a guarantee by the Corporate Debtor. The Tribunal emphasized the importance of the context and the parties' intentions, as reflected in the Loan Agreement and the Board Resolutions, which did not include the Corporate Debtor as a guarantor.

Issue 2: Maintainability of the Application under Section 7

The Financial Creditor sought to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor under Section 7 of the Insolvency & Bankruptcy Code, 2016, claiming that the Corporate Debtor was liable for the Borrower’s dues due to the alleged guarantee.

The Corporate Debtor argued that there was no debt owed by them to the Financial Creditor, as they were merely a pledger of shares and not a guarantor. They highlighted that the shares pledged had already been invoked and were being sold by the Financial Creditor, and thus, no further liability could be attributed to them.

The Tribunal agreed with the Corporate Debtor, concluding that the "Unattested Pledge Agreement" did not create any guarantee obligation for the Corporate Debtor. Consequently, the Corporate Debtor could not be considered a "Corporate Debtor" under the Insolvency & Bankruptcy Code, as there was no financial debt owed to the Financial Creditor. The Tribunal emphasized that initiating CIRP against the Corporate Debtor, who had not availed any financial benefit and had not signed any guarantee document, would be unjust and harsh.

Conclusion:

The Tribunal dismissed the application under Section 7, stating that the Financial Creditor failed to establish any liability of the Corporate Debtor for the outstanding dues. The Tribunal found that the Corporate Debtor was merely a pledger of shares and not a guarantor, and therefore, no debt was due and payable by the Corporate Debtor to the Financial Creditor. The petition was dismissed with no order as to costs.

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