Guarantee liability requires actual fund disbursement to principal borrower for financial creditor status under insolvency proceedings

The NCLAT upheld the NCLT's decision excluding the appellant from the Committee of Creditors. The tribunal found that the appellant's Rs.195 crores claim as a financial creditor was invalid since no funds were actually disbursed to the principal borrower under the facility agreement. The court held that liability under a guarantee deed only arises when the principal borrower defaults, and without disbursement, no debt becomes due from the corporate debtor. The appellant failed to provide required financial statements evidencing actual drawdown of committed amounts. However, the tribunal granted liberty to both parties to file fresh applications after completion of the transaction audit report to determine if the appellant qualifies as a related party or financial creditor based on audit findings.

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Issues Involved:

1. Whether the Appellant qualifies as a 'related party' and its exclusion from the Committee of Creditors (CoC) was justified.
2. Whether the Appellant's claim as a financial creditor was valid, considering the disbursement of funds.
3. Whether the Appellant can be considered a secured creditor.
4. The necessity of a forensic audit to investigate the transactions related to the Appellant's claim.

Detailed Analysis:

1. Related Party Status:

The Adjudicating Authority found the Appellant to be a 'related party' due to its connections with the Corporate Debtor, such as being a guarantor and having financial dealings. However, the Appellate Tribunal noted that the Adjudicating Authority did not specify under which clause of Section 5(24) of the Insolvency and Bankruptcy Code (IBC) the Appellant was considered a related party. The Tribunal decided to proceed on the premise that the Appellant is not a 'related party' but allowed for the possibility of revisiting this issue after the transaction audit report is received.

2. Validity of Financial Creditor Claim:

The Appellant claimed to be a financial creditor based on a Loan Agreement and a Deed of Guarantee-cum-Indemnity. However, the Tribunal found that the actual disbursement to the Corporate Debtor was only Rs.19,43,13,000/-, not the Rs.195 crores claimed. The Tribunal emphasized that a financial debt requires a liability or obligation that is due, which was not the case here as the full loan amount was not disbursed. The Tribunal upheld the Adjudicating Authority's decision to exclude the Appellant from the CoC, as the claim was unsustainable based on the evidence presented.

3. Secured Creditor Status:

The Appellant argued that it should be considered a secured creditor, citing clauses in the Loan Agreement regarding hypothecation of receivables. The Tribunal noted that this issue was not addressed by the Adjudicating Authority and granted the Appellant liberty to file a fresh application to seek recognition as a secured creditor. The Tribunal referenced the Supreme Court case of Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd., which dealt with secured creditor status, but found that the facts of the present case required further examination.

4. Forensic Audit:

The Tribunal supported the Adjudicating Authority's decision to conduct a forensic audit to investigate the transactions related to the Appellant's claim. The audit is expected to provide clarity on the nature of the transactions and whether they were preferential, undervalued, extortionate, or fraudulent. The Tribunal allowed for the possibility of revisiting the Appellant's status as a financial creditor or secured creditor based on the findings of the audit.

Conclusion:

The Tribunal upheld the Adjudicating Authority's order to exclude the Appellant from the CoC and conduct a forensic audit. It provided the Appellant with the opportunity to file fresh applications regarding its status as a related party or secured creditor based on the audit's findings. The Tribunal's decision emphasized the importance of substantiating claims with evidence of actual disbursement and the necessity of adhering to statutory definitions and requirements under the IBC.

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