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of <h1>Personal guarantor escapes insolvency proceedings as conditional guarantee never became effective due to failed CDR implementation</h1> <h3>CENTRAL BANK OF INDIA Versus DEEPEN ARUN PAREKH</h3> The NCLT Mumbai dismissed a petition for initiating Corporate Insolvency Resolution Process against a personal guarantor. The court held that the ... Time limitation on filing petition - Initiation of Corporate Insolvency Resolution Process against Personal Guarantor - service of demand notice - HELD THAT:- Clause 12 r/w Clause L of the recital of the Deed of Guarantee dt. 10.04.2014 makes it clear that this Guarantee was to come into force only upon implementation of CDR package in full and signed by all the lenders in terms of LOA issued. Ld. Counsel for the Personal Guarantor place on record a letter dt. 23.03.2016 having reference No BY.CDR(DAP)No. 749/2015-16, stating that the Company M/s Parekh Aluminex Limited stands exited from the CDR mechanism as failure. Time limitation - HELD THAT:- It is found that the Financial Creditor invoked the Guarantee on 18.05.2016 by Notice u/s 13(2) of SARFAESI Act, 2002 and the Corporate Debtor came to be admitted into CIRP on 01.02.2019. Since, it is already returned the finding that this Guarantee had not become effective on account of failure in implementation of CDR Package, it is not required to deal with the issue of limitation any further. Petition dismissed. Issues:1. Initiation of Corporate Insolvency Resolution Process against Personal Guarantor.2. Service of Demand Notice and its legal implications.3. Bar of Limitation in filing the Company Petition.4. Validity and enforceability of the Deed of Guarantee.Analysis:Issue 1: Initiation of Corporate Insolvency Resolution Process against Personal GuarantorThe Company Petition was filed by Central Bank of India against the Personal Guarantor of the Corporate Debtor, seeking to initiate Corporate Insolvency Resolution Process. The Guarantor, Mr. Deepen Arun Parekh, was held liable for the repayment of Credit Facilities availed by the Corporate Debtor. The Petitioner contended that despite repeated demands, the Guarantor defaulted in repayment, leading to the classification of the Loan Account as NPA.Issue 2: Service of Demand Notice and its legal implicationsThe Respondent, the Personal Guarantor, opposed the Company Petition on the grounds of improper service of Demand Notice. The Respondent argued that the Demand Notice was served at an incorrect address, which was not the Guarantor's address as per the Deed of Guarantee. The Respondent contended that without proper service of the Demand Notice, the Petition was not maintainable. The Respondent also raised objections regarding the refusal of service at the incorrect address and highlighted discrepancies in the addresses provided by the Petitioner.Issue 3: Bar of Limitation in filing the Company PetitionThe Respondent further argued that the Company Petition was barred by limitation. The Respondent pointed out that the default occurred in 2012-2013, while the Petition was filed in 2022. The Respondent contended that the invocation of the Deed of Guarantee in 2016 was also beyond the limitation period. The Respondent emphasized that the claim was time-barred under the law.Issue 4: Validity and enforceability of the Deed of GuaranteeThe Respondent asserted that the Deed of Guarantee was conditional and could only be enforced upon the full implementation of the Corporate Debt Restructuring (CDR) package. The Respondent argued that since the CDR package was not fully implemented, the Guarantee did not come into effect. The Respondent highlighted specific clauses in the Deed of Guarantee that outlined the conditions for its enforcement and termination. The Respondent contended that the Guarantee was no longer valid and could not be enforced through the present proceedings.Findings and Observations:The Tribunal found that the Guarantee was contingent upon the implementation of the CDR package, which did not occur. As a result, the Guarantee did not become effective. The Tribunal also noted that the invocation of the Guarantee was made after the Corporate Debtor had exited the CDR mechanism due to failure. Consequently, the Tribunal dismissed the Company Petition, ruling that the Guarantee was not enforceable. The Tribunal also disposed of all pending applications in light of the dismissal of the Petition.
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