Corporate debtor liability as co-borrower and guarantor sustained; Section 7 insolvency petition remained maintainable despite document objections.
Documentary records showed the corporate debtor was expressly treated as both co-borrower and corporate guarantor for the financial facilities, so liability for the financial debt was established and the Section 7 application was maintainable. The objections that it was neither co-borrower nor guarantor were rejected because the sanction letters, acknowledgments, transaction documents and the debtor's own prior stand supported dual liability. The Tribunal also rejected challenges based on alleged non-membership in the co-operative bank, want of invocation, and claimed document manipulation, finding the ledger material, SARFAESI notice and additional records sufficient. The insolvency admission was therefore sustained.
Issues: (i) Whether the corporate debtor was liable as a co-borrower and corporate guarantor for the financial facilities granted to the principal borrower, and whether the Section 7 application was maintainable on that basis; (ii) Whether the objections regarding membership in the co-operative bank, invocation of guarantee, and alleged defects or manipulation in the documents vitiated the admission of the insolvency petition.
Issue (i): Whether the corporate debtor was liable as a co-borrower and corporate guarantor for the financial facilities granted to the principal borrower, and whether the Section 7 application was maintainable on that basis.
Analysis: The sanction letters and connected documents showed that the financial facilities were extended to the principal borrower with the corporate debtor expressly described as a co-borrower and corporate guarantor. The acknowledgments and subsequent transaction documents were signed in those capacities, and the materials relied upon by the respondent showed that the corporate debtor had accepted the dual role. The Tribunal also relied on the corporate debtor's own prior stand before the Supreme Court describing itself as a co-borrower. On that record, the existence of a financial debt and the corporate debtor's liability were established for the purpose of Section 7.
Conclusion: The objection to maintainability on the ground that the corporate debtor was neither a co-borrower nor a corporate guarantor was rejected.
Issue (ii): Whether the objections regarding membership in the co-operative bank, invocation of guarantee, and alleged defects or manipulation in the documents vitiated the admission of the insolvency petition.
Analysis: The ledger records and board material showed that the corporate debtor was a member of the co-operative bank, and the plea that membership was absent was not accepted. The notice issued under Section 13(2) of the SARFAESI Act was treated as sufficient invocation against the corporate debtor in its capacity as co-borrower and guarantor. The allegations of forged or manipulated records were found unsupported by concrete evidence, and the additional documents were duly taken on record. The Tribunal therefore found no infirmity in the evidentiary basis of the Section 7 petition.
Conclusion: The objections based on non-membership, want of invocation, and alleged document defects were rejected.
Final Conclusion: The appeal failed on merits and the admission of the insolvency application was sustained.
Ratio Decidendi: Where documentary records conclusively show that a corporate debtor acted as both co-borrower and corporate guarantor, and the creditor has invoked the liability through the statutory demand process, the insolvency petition under Section 7 of the Code is maintainable notwithstanding objections to membership, assignment, or alleged irregularities in supporting documents.