Letter expressing future guarantee not binding as personal guarantee under Insolvency and Bankruptcy Code

The Tribunal held that the letter dated 03.06.2015 did not constitute a personal guarantee by the erstwhile promoters under Section 29A(h) of the Insolvency and Bankruptcy Code. As the letter only expressed an intention to provide a guarantee in the future and was not an executed guarantee, the promoters were deemed eligible to submit a resolution plan. The Tribunal rejected the Appellant's arguments and dismissed the appeal, upholding the decision to allow the resolution plan from the erstwhile promoters without costs.

---

---

Issues:
The issues involved in the judgment are the eligibility of the erstwhile promoters to submit a resolution plan under Section 29A(h) of the Insolvency and Bankruptcy Code, 2016 and the interpretation of a letter dated 03.06.2015 as a personal guarantee.

Eligibility of Erstwhile Promoters:
The Appellant, an Operational Creditor, filed an application under Section 9 of the Code against the Corporate Debtor for the resolution of a debt. The Adjudicating Authority admitted the application and appointed an IRP, later replaced by an RP. The RP invited Expression of Interest for resolution plans and published lists of Proposed Resolution Applicants. The Appellant objected to the inclusion of erstwhile promoters in the final list, citing ineligibility under Section 29A(h) of the Code. The Adjudicating Authority held that the Corporate Debtor could not claim MSME status retrospectively and rejected the Appellant's application seeking direction against accepting the resolution plan from erstwhile promoters.

Interpretation of Letter dated 03.06.2015:
The Appellant argued that the letter dated 03.06.2015 constituted a personal guarantee by the erstwhile promoters, making them ineligible under Section 29A(h) of the Code. The Respondent contended that the letter only expressed an intention to provide a guarantee in case of default by the Corporate Debtor. The Adjudicating Authority found that the letter did not constitute an executed guarantee and therefore, Section 29A(h) was not applicable. The Respondent's resolution plan was approved, leading to the Appellant's challenge through the present appeal.

Conclusion:
The Tribunal examined the language of the letter dated 03.06.2015 and determined that it did not amount to an executed guarantee but rather an intention to provide a guarantee in the future. As no other document supported the existence of a guarantee, the Tribunal found that Section 29A(h) was not attracted to the case. The Appellant's arguments regarding review of previous orders, res-judicata, and entitlement to statutory benefits were also dismissed. Ultimately, the Tribunal concluded that the appeal lacked merit, upheld the decision to allow the resolution plan of the erstwhile promoters, and dismissed the appeal without costs.

---