Corporate guarantees and stamping defects do not defeat insolvency when later documents preserve securities and debt and default are established.

Later finance documents that expressly preserved existing securities were treated as not extinguishing earlier corporate guarantees, so novation was rejected and invocation of the earlier guarantees was accepted for maintaining the Section 7 insolvency application. The objection that the earlier guarantee deeds were insufficiently stamped was treated as a curable defect, and technical stamping issues were held not to defeat insolvency proceedings where debt and default were otherwise established. On those grounds, the appeal failed and admission of the Section 7 application was upheld.

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Issues: (i) Whether the earlier corporate guarantees of 22.08.2015 and 18.11.2016 stood extinguished by the later arrangements of 06.11.2020 so as to require invocation of the later guarantee alone for maintainability of the Section 7 application; (ii) Whether the Section 7 application could fail on the ground that the earlier guarantee deeds were insufficiently stamped and therefore unenforceable.

Issue (i): Whether the earlier corporate guarantees of 22.08.2015 and 18.11.2016 stood extinguished by the later arrangements of 06.11.2020 so as to require invocation of the later guarantee alone for maintainability of the Section 7 application.

Analysis: The later sanction letters and the working capital consortium arrangement preserved the existing securities, and the later corporate guarantee was found not to have displaced the earlier guarantees. The later facilities were held to be covered by the continuing security framework already created under the earlier guarantees. The notice of invocation dated 06.03.2023 was therefore treated as a valid invocation of the binding earlier guarantees. The plea of novation was rejected because the later documents did not show an intention to wipe out the earlier contractual obligations.

Conclusion: The earlier guarantees continued to bind the corporate debtor, and invocation of the later guarantee was not a precondition for maintaining the Section 7 application.

Issue (ii): Whether the Section 7 application could fail on the ground that the earlier guarantee deeds were insufficiently stamped and therefore unenforceable.

Analysis: The Court treated insufficient stamping as a curable defect. It noted the existence of stamp duty exemption certificates, the absence of any timely objection, and the undertaking to pay any deficit if raised. The Court held that technical objections of this nature could not defeat insolvency proceedings where debt and default were otherwise established. The defect, even if assumed, had not been cured by the appellant or the corporate guarantor, and no basis was found to ignore the guarantee deeds in the insolvency proceedings.

Conclusion: The objection based on insufficient stamping was rejected and did not render the Section 7 application non-maintainable.

Final Conclusion: The appeal failed on both the asserted grounds, and the admission of the Section 7 application was upheld because the debt and default stood established and no legal infirmity in the invocation of the guarantees was shown.

Ratio Decidendi: Where later finance documents expressly preserve existing securities, earlier corporate guarantees are not extinguished by novation; and an insufficiently stamped guarantee is a curable defect that does not defeat a Section 7 insolvency application when debt and default are undisputed.

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