Second IBC application against corporate debtor for same debt dismissed after guarantor's CIRP discharge

SC dismissed appeal regarding second IBC application against corporate debtor for same debt. Financial creditor had granted Rs.100 crores loan to corporate debtor, secured by corporate guarantee from holding company ACIL. After default, creditor invoked guarantee and filed Section 7 application against ACIL. CIRP completed with resolution plan providing creditor Rs.38.87 crores against Rs.241.27 crores claim. SC held liability of guarantor and principal debtor is co-extensive under Contract Act. CIRP discharge of guarantor doesn't extinguish corporate debtor's remaining liability. Subrogation under Section 140 limited to amount actually recovered from guarantor. NCLAT decision upheld.

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Issues Involved:
1. Whether the application under Section 7 of IBC is barred by limitationRs.
2. Whether the second application under Section 7 of IBC is maintainable against the Corporate Debtor after CIRP has already taken place against the Corporate GuarantorRs.

Detailed Analysis:

1. Whether the application under Section 7 of IBC is barred by limitationRs.
The appellant did not seriously press the issue of the bar of limitation in this appeal. The NCLAT rendered findings in favor of the respondents, confirming that the application under Section 7 of IBC was not barred by limitation. There is no dispute that the 1st respondent financial creditor had granted a loan of Rs.100 crores to the 2nd respondent corporate debtor, secured by a corporate guarantee furnished by ACIL. The 2nd respondent committed a default, leading to the invocation of the guarantee and subsequent CIRP against ACIL. The resolution plan was approved, and the financial creditor accepted a sum of Rs.38.87 crores from the resolution applicant.

2. Whether the second application under Section 7 of IBC is maintainable against the Corporate Debtor after CIRP has already taken place against the Corporate GuarantorRs.
The NCLAT held that the second application under Section 7 of IBC was maintainable against the Corporate Debtor. The liability of the surety and the principal debtor is co-extensive, allowing the creditor to proceed against both or any of them. The creditor can recover the balance amount from the principal borrower even if a part of the debt is recovered from the surety. The approval of the resolution plan of the corporate guarantor (ACIL) does not discharge the principal borrower (2nd respondent) from its liability to repay the loan amount to the extent it is not recovered from the corporate guarantor.

Liability of Guarantor / Surety:
The liability of the surety is co-extensive with that of the principal debtor unless otherwise provided by the contract. Sections 133 to 139 of the Contract Act deal with the discharge of surety. The creditor can proceed against the guarantor without exhausting remedies against the principal borrower. The financial creditor's recovery of part of the amount from the surety does not extinguish the remaining debt payable by the principal borrower.

Simultaneous Proceedings Under the IBC Against the Corporate Debtor and Guarantor:
Section 60 of the IBC allows for separate or simultaneous insolvency proceedings against the corporate debtor and guarantor. Sub-section (2) of Section 60 contemplates separate or simultaneous insolvency proceedings against the corporate debtor and guarantor. The IBC permits separate or simultaneous proceedings to be initiated under Section 7 by a financial creditor against the corporate debtor and the corporate guarantor.

Whether the Assets of the Corporate Debtor Were Part of CIRP in Respect of ACIL - Corporate Guarantor:
The assets of the 2nd respondent-corporate debtor were not part of the CIRP in respect of ACIL. The information memorandum published in accordance with Section 29 of the IBC indicates the business of ACIL and the 2nd respondent-corporate debtor. However, the assets of the subsidiary company cannot be part of the resolution plan of the holding company. Section 36(4)(d) of the IBC mandates that the assets of an Indian subsidiary of the corporate debtor shall not be included in the liquidation estate assets.

Subrogation Under Section 140 of the Contract Act:
Section 140 of the Contract Act provides that the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor. The surety's right of subrogation is confined to the debt he cleared. The appellant paid Rs.38.87 crores on behalf of ACIL, the corporate guarantor, and the subrogation right is limited to that amount. The financial creditor's right to recover the balance debt from the corporate debtor remains unaffected.

Conclusion:
1. Liability of the Corporate Debtor: Payment of Rs.38.87 crores to the financial creditor under the resolution plan of the corporate guarantor-ACIL does not extinguish the liability of the 2nd respondent principal borrower/corporate debtor to pay the entire amount payable under the loan transaction after deducting the amount paid on behalf of the corporate guarantor.
2. Assets of Subsidiary: A holding company is not the owner of the assets of its subsidiary. Therefore, the assets of the subsidiaries cannot be included in the resolution plan of the holding company.
3. Simultaneous Applications: The financial creditor can file separate applications under Section 7 of the IBC against the corporate debtor and the corporate guarantor, and these applications can be filed simultaneously.

The appeal is dismissed with no order as to costs.

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