Section 7 petition against corporate guarantor upheld despite forgery claims and authorization challenges

NCLAT Principal Bench dismissed an appeal challenging admission of a Section 7 petition under IBC against a corporate guarantor. The appellant contested the petition's maintainability, alleging forged guarantee deeds and improper authorization. NCLAT held that the petition was filed by a duly authorized person with valid power of attorney backed by board resolution. Applying the doctrine of indoor management, the tribunal found the financial creditor protected against internal irregularities and not required to scrutinize company's internal procedures. The court rejected forgery allegations, noting no judicial cognizance of fabrication. NCLAT clarified that Section 127 of Indian Contract Act permits past consideration for guarantee agreements, and corporate guarantor's liability arises simultaneously with principal borrower's default. The admission into CIRP was upheld as legally sound.

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Issues Involved:

1. Maintainability of Section 7 application filed by a person based on Power of Attorney without supporting Board Resolution.
2. Validity of Deeds of Guarantee alleged to be forged and fabricated.
3. Requirement of obtaining Deed of Guarantee before disbursement of loan u/s 127 of The Indian Contract Act, 1872.
4. Alleged forgery of Deeds of Mortgage.
5. Admissibility of Section 7 petition against the Corporate Guarantor.

Summary:

1. Maintainability of Section 7 application:
The Appellant contended that the Section 7 application filed by Mr. Rahul Dodeja on behalf of Respondent No. 1 was not maintainable as it was based on a Power of Attorney without a supporting Board Resolution. The Tribunal referred to Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, and the judgment in Sameer Bansal vs Canara Bank & Ors, concluding that the Power of Attorney pursuant to a Board Resolution was sufficient authorization. Thus, the Section 7 application was held to be maintainable.

2. Validity of Deeds of Guarantee:
The Appellant argued that the Deeds of Guarantee were forged and fabricated, lacking proper Board Resolution authorization. The Tribunal noted the Board Resolution dated 26.03.2019 authorizing the execution of the Deeds of Guarantee and applied the Doctrine of Indoor Management, which protects third parties dealing with the company from internal procedural irregularities. The Tribunal found no conclusive evidence of forgery and held that the Deeds of Guarantee were valid.

3. Requirement of obtaining Deed of Guarantee before disbursement of loan:
The Appellant claimed that the Deed of Guarantee should have been obtained before the loan disbursement u/s 127 of The Indian Contract Act, 1872. The Tribunal referred to judicial precedents and concluded that past consideration is sufficient for a contract of guarantee to be valid. Therefore, the timing of the Deed of Guarantee did not invalidate it.

4. Alleged forgery of Deeds of Mortgage:
The Appellant alleged that the Deeds of Mortgage were forged and unauthorized. The Tribunal noted that the charges created by the Deeds of Mortgage were registered with MCA and not disputed by the Corporate Debtor. The Tribunal held that the liability of the Corporate Debtor could not be negated even if there were irregularities in the execution of the mortgage deeds.

5. Admissibility of Section 7 petition against the Corporate Guarantor:
The Tribunal referred to the judgment in Laxmi Pat Surana vs UOI, which established that the liability of a Corporate Guarantor is coextensive with that of the principal borrower. The Tribunal found that the Corporate Guarantor was liable upon the principal borrower's default and upheld the Adjudicating Authority's decision to admit the Corporate Debtor into CIRP.

Conclusion:
The Tribunal dismissed the appeal, affirming the Adjudicating Authority's order to admit the Corporate Debtor into CIRP, finding no merit in the Appellant's contentions.

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