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Issues: (i) whether the corporate debtor, as co-borrower and signatory to the loan documents, incurred a financial debt and was liable for repayment under the facility; (ii) whether the section 7 application was barred by limitation or hit by section 10A; (iii) whether insufficiency of stamp duty in the facility agreement defeated the section 7 proceeding; and (iv) whether the reliance on MSME revival framework and SARFAESI steps displaced the insolvency petition.
Issue (i): whether the corporate debtor, as co-borrower and signatory to the loan documents, incurred a financial debt and was liable for repayment under the facility.
Analysis: The facility documents, sanction letters, board resolutions, undertaking-cum-declaration, demand promissory note, mortgage-related papers and supplementary facility documents all showed the corporate debtor as a co-borrower. The contractual terms recorded joint and several liability, and the corporate debtor also undertook to indemnify the lender and acknowledged the outstanding dues by correspondence and part-payments. On these materials, the debt was not confined to the primary borrower, and the lender's claim satisfied the statutory concept of financial debt and financial creditor.
Conclusion: The issue was decided against the appellant and in favour of the respondent.
Issue (ii): whether the section 7 application was barred by limitation or hit by section 10A.
Analysis: The date of default pleaded was 15.03.2020, which was outside the section 10A exclusion window. In addition, part-payment made in 2021 and later written acknowledgment of the outstanding liability extended limitation by a fresh period under the law of acknowledgment. The petition was therefore within time.
Conclusion: The issue was decided against the appellant and in favour of the respondent.
Issue (iii): whether insufficiency of stamp duty in the facility agreement defeated the section 7 proceeding.
Analysis: Non-stamping or insufficient stamping was treated as a curable defect affecting admissibility, not the existence of the underlying obligation. The defect did not render the instrument void and could not nullify the insolvency claim founded on the admitted borrowing arrangements and repayment default.
Conclusion: The issue was decided against the appellant and in favour of the respondent.
Issue (iv): whether the reliance on MSME revival framework and SARFAESI steps displaced the insolvency petition.
Analysis: The steps taken under the SARFAESI framework were treated as independent from the insolvency remedy. The lender's willingness to regularise the account and the borrower's failure to pay the balance did not prevent initiation of proceedings under the Insolvency and Bankruptcy Code.
Conclusion: The issue was decided against the appellant and in favour of the respondent.
Final Conclusion: The corporate debtor was held liable as a co-borrower, the debt and default were found proved, the petition was held to be within limitation, and the insolvency admission was sustained.
Ratio Decidendi: A co-borrower who signs loan and security documents undertaking joint and several liability can be proceeded against under section 7 of the Insolvency and Bankruptcy Code when the debt is due and defaulted, and part-payment or acknowledgment extends limitation.
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