Corporate guarantee liability as financial debt leads to admission of insolvency proceedings and commencement of CIRP.

A corporate guarantor's liability under a guarantee for a disbursed credit facility is treated as financial debt under the Insolvency and Bankruptcy Code, 2016. Where the record shows default, supporting loan and guarantee documents, proof of service, and no disciplinary issue against the proposed resolution professional, the section 7 application is complete and the Adjudicating Authority may admit it. On the stated facts, the application was admitted, CIRP was commenced against the corporate debtor, the Interim Resolution Professional was appointed, and the section 14 moratorium followed.

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Issues: Whether the liability of a corporate guarantor under a guarantee agreement constitutes financial debt and whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was complete, the default established, and CIRP liable to be admitted.

Analysis: The guarantor had executed guarantee deeds in respect of the credit facilities advanced to the principal borrowers, and section 5(8)(i) of the Insolvency and Bankruptcy Code, 2016 expressly includes liability arising from a guarantee within financial debt. The record also contained default reports, loan documents, and proof of service, while no disciplinary proceedings were shown against the proposed resolution professional. On that basis, the Adjudicating Authority found the applicant to be a financial creditor, held that default had occurred, and concluded that the application satisfied the requirements of section 7(5) of the Insolvency and Bankruptcy Code, 2016.

Conclusion: The application was admitted, CIRP was initiated against the corporate debtor, and the proposed Interim Resolution Professional was appointed. The moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 also followed.

Final Conclusion: The petition succeeded and insolvency proceedings were commenced against the respondent company with consequential moratorium and appointment of the Interim Resolution Professional.

Ratio Decidendi: Liability undertaken as a corporate guarantor for a disbursed credit facility constitutes financial debt, and where default and procedural completeness are established under section 7(5), the application must be admitted and CIRP commenced.

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