2025 (1) TMI 1772 - AT - IBC

Corporate guarantor and co borrower liability under Insolvency Code and SARFAESI invoked despite membership challenge; appeal dismissed

Corporate guarantor and co borrower status was central: the corporate guarantor had been held jointly liable where financial facilities defaulted and a ... Corporate guarantor and co-borrower - admission u/s 7 of the Insolvency and Bankruptcy Code, 2016 - Non-Performing Asset (NPA) - notice u/s 13(2) of the SARFAESI Act, 2002 as invocation of guarantee - membership requirement of cooperative bank - Suppression and fabrication of documents - admissibility of additional documents in Section 7 proceedings - HELD THAT:- We have already noted facts of the case and background of financial facilities while recording pleadings of the parties, hence, we shall not repeat the same for the purpose of brevity. Suffice to note that certain financial facilities in terms of Term Loan as well as working capital facilities were granted to UTWC by SVC Corporative Bank. It is noted that the Corporate Debtor gave its corporate guarantee as well as became co-borrower of the said financial facilities. The Principal Borrower i.e., UTWC could not repay the loan and service interest liability, therefore, an application was filed under Section 7 of the Code for a default amount of Rs. 35,90,56,629/- as on 30.04.2021, which was admitted by the Adjudicating Authority after passing the Impugned Order dated 20.04.2022. The Corporate Debtor did not receive any amount from original Financial Creditor i.e., SVC Bank or assignee of the loan i.e., Respondent No. 1 herein and therefore, the Corporate Debtor cannot be held liable for any debt. - We note that the principal borrower along with other parties including the Corporate Debtor had filed Writ Petition under Article 32 challenging the validity of Section 2 of SARFAESI Act, 2002 vide W.P (C), before the Hon’ble Supreme Court of India. In the Writ Petition, they have referred clearly that the petitioner no. 3 Shri Balaji Entertainment Private Ltd., was a co-borrower. Thus, it does not lie in the mouth of the Appellant to take any contrary position than what has already been admitted by him before the Hon’ble Supreme Court of India. Therefore, on this point, we do not find any error in the Impugned Order and we do find any merit in the contention of the Appellant. The Status of the Corporate Debtor as member of the SVC Bank - It is the case of the Appellant that neither principal borrower UTWC nor the Corporate Debtor was a member of the SVC bank which is mandatory requirement in terms of The Multi-State Co-operative Societies Act, 2002. Thus, it is clear that the Corporate Debtor was member of the SVC Bank and therefore we do not find any merit in the pleadings of the Appellant account or error in the Impugned Order. Invocation of the Corporate Guarantee. - The Appellant pleaded that no invocation of guarantee was done by the Financial Creditor and therefore, the Corporate Debtor is not liable to make such payments. ‘In this connection, we note that Financial Creditor had filed its petition under Section 13 (2) of the SARFAESI Act, 2002 under which the Corporate Debtor both in capacity of co-borrower/ as well as Corporate Guarantor was called upon to make the payment due to default of principal borrower. It is very clear that the SVC Bank has called upon all concerned parties including the Corporate Debtor to make the payment of Rs. 29,89,96,940/- along with interest from 01.12.2019 as indicated in the table therein till the date of actual payments within 60 days of receipt of the said notice. We find merit in the pleadings of the Appellant that he had invoked corporate guarantee and asked Corporate Debtor to make payment. We find suitable reasoning has been given by the Adjudicating Authority in the Impugned Order. In view of detailed examination of various issues brought out in the present appeal, we do not find any merit in the Appeal. Appeal devoid of any merit stand rejected. Issues: (i) Whether the Adjudicating Authority erred in admitting the Section 7 petition against Shri Balaji Entertainment Pvt. Ltd. by treating it as co-borrower and corporate guarantor; (ii) Whether the Corporate Debtor was a member of SVC Co-operative Bank as required under the Multi-State Co-operative Societies Act, 2002; (iii) Whether there was valid invocation of the corporate guarantee and adequate evidence of liability; (iv) Whether additional documents (bank ledger, assignment deed, notices) were admissible and could be relied upon for admission.Issue (i): Whether the Adjudicating Authority erred in admitting the Section 7 petition by treating the Corporate Debtor as co-borrower and corporate guarantor.Analysis: The Tribunal examined sanction letters, acknowledgements and related loan documentation (including sanction letters dated 18.06.2011 and 19.07.2018 and acknowledgments signed by directors) which identified Shri Balaji Entertainment Pvt. Ltd. as co-borrower and corporate guarantor. The Tribunal also noted admissions made in separate proceedings (Writ Petition) that recorded the entity's status. On the documentary record, the acts of signing and the terms of sanction letters consistently recorded the Corporate Debtor's obligations.Conclusion: The Tribunal upheld the Adjudicating Authority's finding that the Corporate Debtor acted as co-borrower and corporate guarantor; conclusion in favour of Respondent.Issue (ii): Whether the Corporate Debtor was a member of SVC Co-operative Bank as required for bank facilities.Analysis: The Tribunal considered ledger extracts showing dividend entries for 100 shares, and board minutes dated 24.07.2018 recording membership. The account statements and corporate minutes were accepted as evidence of membership.Conclusion: The Tribunal held that the Corporate Debtor was a member of SVC Co-operative Bank; conclusion in favour of Respondent.Issue (iii): Whether there was valid invocation of the corporate guarantee and sufficient evidence of liability to justify admission under Section 7.Analysis: The Tribunal relied on the notice under Section 13(2) of the SARFAESI Act dated 09.12.2019 calling upon co-borrowers and guarantors to pay and on ledger/statement of accounts showing classification as NPA and outstanding dues. The Tribunal found that the invocation/notice and account records supported the claim of outstanding liability.Conclusion: The Tribunal found that invocation and evidence of liability were established to sustain admission; conclusion in favour of Respondent.Issue (iv): Whether additional documents (ledger, assignment deed, writ petition) were admissible and could be considered in deciding admission.Analysis: The Tribunal recorded that application under Rule 11 to place additional documents on record was allowed; it treated ledger accounts as bank records and the writ petition as part of judicial record, permitting their consideration for determining admission under Section 7.Conclusion: The Tribunal held the additional documents admissible and rightly considered by the Adjudicating Authority; conclusion in favour of Respondent.Final Conclusion: The Appellate Tribunal found no merit in the challenges to the Adjudicating Authority's admission of the Section 7 petition, concluding that documentary evidence collectively supported the Corporate Debtor's status as co-borrower and corporate guarantor, membership of the co-operative bank, invocation of guarantee and admissibility of additional documents; the appeal is therefore rejected and the admission under Section 7 is sustained.