Limitation and debt proof under insolvency proceedings: continuing guarantee, default evidence, and conflict objection did not defeat admission.
In proceedings under Sections 95 and 100 of the Insolvency and Bankruptcy Code, a continuing guarantee invoked by demand is enforceable from the date of demand, so the limitation objection failed where the petition was filed within time after the demand and default dates. The record was also sufficient at the admission stage to show financial debt and default, based on the guarantee and acknowledgment, audited balance sheets showing borrowings, and the admitted claim in liquidation proceedings; differences in amounts were treated as arising from different cut-off dates. An alleged conflict of interest of the resolution professional did not by itself invalidate the admission order, though substitution could be considered. The admission order was left undisturbed.
Issues: (i) whether the petition under Section 95 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation on the ground that the guarantee dated 06.01.2017 had become unenforceable before the filing date; (ii) whether the record disclosed sufficient material to establish financial debt and default for admission under Sections 95 and 100 of the Insolvency and Bankruptcy Code, 2016; (iii) whether the alleged conflict of interest of the resolution professional vitiated the admission order under Section 100 of the Insolvency and Bankruptcy Code, 2016.
Issue (i): whether the petition under Section 95 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation on the ground that the guarantee dated 06.01.2017 had become unenforceable before the filing date.
Analysis: A continuing guarantee invoked by demand becomes enforceable on such demand. The demand under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was issued on 27.02.2019 and default was treated as commencing on 27.04.2019. On that basis, the petition filed on 30.12.2021 was within time.
Conclusion: The limitation objection failed and was rejected.
Issue (ii): whether the record disclosed sufficient material to establish financial debt and default for admission under Sections 95 and 100 of the Insolvency and Bankruptcy Code, 2016.
Analysis: The guarantee and acknowledgment dated 06.01.2017, the audited balance sheets of the corporate debtor showing borrowings, and the admitted claim in liquidation proceedings constituted adequate material to show the existence of financial debt and default at the admission stage. The difference in amounts across documents was treated as explained by different cut-off dates and stages.
Conclusion: Financial debt and default were held to be established for the purpose of admission under Section 100.
Issue (iii): whether the alleged conflict of interest of the resolution professional vitiated the admission order under Section 100 of the Insolvency and Bankruptcy Code, 2016.
Analysis: The alleged conflict, even if assumed, could at the highest justify substitution of the resolution professional. It did not, by itself, warrant setting aside the order admitting the petition under Section 100. The allegation was expressly left open on merits.
Conclusion: The objection did not affect the validity of the admission order.
Final Conclusion: The challenge to admission under Section 95 failed on limitation, on proof of debt and default, and on the alleged role of the resolution professional, and the dismissal of the appeal left the admission order undisturbed.
Ratio Decidendi: In proceedings under Sections 95 and 100 of the Insolvency and Bankruptcy Code, 2016, a continuing guarantee invoked by demand is enforceable from the date of such demand, and an alleged conflict in the resolution professional does not by itself invalidate the admission order.
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