Tribunal upholds insolvency application based on breach of guarantee within limitation period

The Tribunal held that the application under Section 7 of the Insolvency & Bankruptcy Code was not barred by limitation as the breach of guarantee date constituted the cause of action, falling within the limitation period. The Corporate Debtor's liability was established through a tripartite agreement and a Deed of Guarantee, obligating repayment in case of default by farmers. The Tribunal upheld the initiation of Corporate Insolvency Resolution Process, dismissing the appeal for lack of merit.

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Issues Involved:
1. Whether the application filed under Section 7 was debarred by the law of limitation.
2. The liability of the 'Corporate Debtor' based on the tripartite agreement and Deed of continuing Guarantee.

Summary:

Issue 1: Limitation
The Appellant argued that the application under Section 7 of the Insolvency & Bankruptcy Code, 2016, was barred by limitation. The 'Corporate Debtor' had provided a Deed of Guarantee dated 03.10.2013, which was a continuing guarantee. The Financial Creditor issued a legal notice on 07.04.2021, invoking the guarantee, and the default was noted on 15.04.2021. The application under Section 7 was filed on 24.04.2021. The Tribunal held that the breach of guarantee date becomes the cause of action, and the application was within the limitation period as per the Limitation Act, 1963. Hence, the argument that the application was barred by limitation did not succeed.

Issue 2: Liability of the Corporate Debtor
The Corporate Debtor had entered into a tripartite agreement and a Deed of Guarantee with the Financial Creditor and NIIPL on 03.10.2013. The agreement stipulated that the Corporate Debtor would repay the loan amounts on behalf of the farmers in case of default. The Deed of Guarantee was unconditional and irrevocable, and it was a continuing guarantee. The Tribunal examined the clauses of the agreement and the Deed of Guarantee, concluding that the Corporate Debtor was liable to make payments on demand in case of default by the farmers. The Financial Creditor had sent monthly MIS reports to the Corporate Debtor, listing the outstanding debts. Due to non-payment of Rs. 5,41,34,813/-, the default date was treated as 15.04.2021. The Tribunal found that the Adjudicating Authority correctly treated the outstanding money as a financial debt and approved the initiation of CIRP against the Corporate Debtor.

Other Considerations:
The Appellant's reference to the Vidarbha Industries Power Limited case was deemed not directly relevant. The Tribunal also reviewed the cited judgments and upheld the validity of the continuing guarantee invoked by the Financial Creditor.

Conclusion:
The appeal was dismissed, and the impugned order was upheld. The Tribunal found no error in the challenged order, and the appeal was deemed devoid of merit.

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