TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 1073
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..../Financial Creditor/Applicant) passed by the 'Adjudicating Authority' (National Company Law Tribunal, Court No. 1, Mumbai Bench, Mumbai). 2. The 'Adjudicating Authority' (National Company Law Tribunal, Court No. 1, Mumbai Bench, Mumbai) while passing the 'impugned order' dated 10.05.2021 in CP(IB)-3000/MB/2019 (Filed by the 1st Respondent/Financial Creditor/Applicant under Section 7 of the I & B Code, 2016 at paragraphs-59 to 65 had observed the following: 59. " The aforesaid judgment correctly hold that the suit for recovery based upon cause of action it is within limitation cannot be in any manner in fact separate an independent remedy of winding up proceedings. In law when time begins to run, it can only be extended in the manner provided the limitation act. for eg. An acknowledgment of liability u/s 18 of Limitation Act, 1963 would extend limitation period but a suit of recovery which is independent proceedings district from the remedy of windings up, in no manner in fact the limitation within which winding up proceedings is to be filed, by somehow keeping the debt alive for the purpose of winding up. 60. Therefore, the Hon'ble Supreme Court has held that limitation can on....
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....discharged from all the obligations by operation of Law, in terms of the Indian Contract Act, 1872 and further that the 'Application' filed under Section 7 of the I & B Code by the 1st Respondent/'Financial Creditor' was hopelessly time barred. 4. According to the Learned Senior Counsel for the 'Appellant' the 1st Respondent/Bank had shown two dates of 'Default' i.e., 27.07.2014 for the 'Principal Borrower' (GNIC) and 08.12.2014 i.e., date of invocation of 'Guarantee', as the date of 'Default' of the 'Corporate Debtor'. 5. It is represented on behalf of the 'Appellant' that the 1st Respondent/'Financial Creditor' had issued the Sanction Letter, 24.06.2009, 24.02.2010, 28.12.2012, to the 'Great Indian Nautanki Company Pvt. Ltd. ('Principal Borrower') to sanction Loan and other credit facilities from time to time. The sanction and the credit facility were secured by a first charge valued at more than Rs. 500 Crores, Company of Assets of the 'Principal Borrower' including a property at Plot admeasuring 5.66 Acres situated at Sector -29, Gurugram, Haryana, also known as 'Kingdom of Dreams'. 6. It is a version of the 'Appellant' that in terms of the aforesaid 'Sanction Letters', the ....
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....ring September, 2017 had initiated 'proceedings' against the 'Principal Borrower' and the 'Appellant' under SARFAESI Act, 2002 and under RDBFI Act, 1993. Before the 'Debt Recovery Tribunal', the 'Appellant'/'Corporate Guarantor' in its 'Notes of Written Submissions' had denied their liability under the 'Corporate Guarantee' submitted during November, 2018. In fact, the 1st Respondent/'Financial Creditor' took over the possession of the 'Auditorium' site (Kingdom of Dreams) being 5.66 Acres of Land valued more Rs. 500 Crores as a measure under Section 13(4) of the SARFAESI Act, 2002, as per 'Possession Notice' dated 02.07.2018. 11. The Learned Senior Counsel for the 'Appellant' adverts to the fact that the 1st Respondent/Bank had issued the Insolvency Resolution Notice dated 03.03.2017 to the 'Principal Borrower' and also issued the Insolvency Resolution Notice dated 07.03.2017 to the 'Corporate Guarantor' for Applicant. Besides this, the 1st Respondent/Bank issued Notice dated 25.08.2017 to the 'Principal Borrower' (Responded by the 'Principal Borrower through Letter dated 04.09.2017) and further Notice dated 25.08.2017. But, the Petition/Application under 7 of the I & B Code 2016....
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....021. 15. The Learned Senior Counsel for the 'Appellant' takes a stand that 1st Respondent/Bank had not shown the 'debt' of 'default' in Part-V in Form I being the mandatory requirement and further that, there cannot be two dates of 'default'. Moreover, it is the mandatory requirement to furnish the date of 'default' at serial No. 8 of Part-V of Form-1 to count the period of Limitation and the 1st Respondent/Bank was granted time by the 'Adjudicating Authority' to remove the defects. But such 'defects' were not removed as per Section 7(5)(b) of I & B Code. 16. The Learned Senior Counsel for the 'Appellant' contends that there is no 'debt' due or payable by the 'Corporate Debtor' to the 1st Respondent/Bank and refers to clause 3 of the 'Guarantee Agreement' runs to the effect "In the event of default on the part of the borrower in payment/respondent of any of the monies referred to above or in the event of any default on the part of the borrower to comply with or perform any of the terms conditions and covenants contained in the agreement, the guarantor shall, upon demand, forthwith pay to the bank without demur all the amounts payable by the borrower under the agreement" and em....
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....d Ors. Reported in 2019 (19) SCC 529 (Civil Appeal dismissed on the ground Limitation)/2020 (2) SCC 677 (Review came to be dismissed on the ground of Limitation) for giving the benefit under Section 18 of the Limitation Act, 1963. 22. The Learned Senior Counsel for the 'Appellant' refers to the decision of Hon'ble Supreme Court in Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (India) Limited and Anr. reported in (2019) 10 SCC 572, at spl. Page 574 wherein at paragraph 7 it is held that, 'It is not for Court to interpret commercially or otherwise articles of the Limitation Act when it is clear that a particular Article gets attracted. It is well settled that there is no equity about Limitation. Judgments has stated that often time periods provided by the Limitation Act can be arbitrary in nature'. 23. The Learned Senior Counsel for the 'Appellant' makes a forceful plea that the Letter dated 27.09.2017 relied on by the 1st Respondent/Bank, wherein the 'Appellant' had requested the 1st Respondent/Bank not to initiate any action under the I & B Code, 2016 as the matter was directly addressed 'Principal Borrower' with the 1st Respondent/Bank, but nowhere in the aforesaid ....
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....efault' was not mentioned in Form 1, Part V. 28. It is projected on the side of the 'Appellant' that even without admitting that the Letter dated 27.09.2017 can be considered as an 'Acknowledgment', still the Application filed under Section 7 of the I & B Code, 2016 is barred by Limitation, because the Application was filed on 01.08.2019 under the three year's period had expired on 29.07.2017. 29. The Learned Senior Counsel for the 'Appellant' refers to Section 135 of the Indian Contract Act, 1872 which enjoins as 'Discharge of Surety when creditor compounds with, gives time to, or agrees and to sue principal debtor. A contract between the Creditor and the principal debtor, by which the creditor makes a composition with, or promises to given time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract." 30. The Learned Senior Counsel for the 'Appellant' contends that in the instant case, the 1st Respondent/Bank had agreed with the 'Principal Borrower'/GINCPL to recover the sum of at 5% with effect fro 09.05.2014 and at 7.5& w.e.f 14.12.2015 and had already recovered a sum of Rs. 14,00,50,000/- between the year 2014-2019 and the ....
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....enior Counsel for the 'Appellant' cites the Judgment of the Hon'ble Supreme Court dated 21.01.2021 in (Civil Appeal No. 4221/2020) between M/s Reliance Asset Reconstruction Company Ltd. V. M/s Hotel Poonja International Pvt. Ltd. whereby and whereunder at paragraph 38 it is observed as follows: 38. ...."In Transmission Corporation of Andhra Pradesh Ltd. Vs. Equipment Conductors and Cable Ltd. (2019) 12 SCC 697 this Court followed its earlier judgment in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. (2018) 1 SCC 353 and observed as under: "In a recent judgment of this Court in Mobilox Innovations Private Limited v. Kirusa Software Private Limited (2018) 1 SCC 353, this Court has categorically laid down that IBC is not intended to be substitute to a recovery forum. It is also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked...." 34. The Learned Senior Counsel for the 'Appellant' relies on the decision of the Hon'ble Supreme Court in Babulal Vardhraj Ji Gujjar V. Veer Gujjar Aluminium Industries Pvt. Ltd. reported in (2020) 15 SCC 1 wherein it is held that the 'Limitation' of three years as provided by Art. 137 of the ....
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....time barred and it cannot reap the benefit of extension of Limitation Period, as enjoined under Section 18 of the Limitation Act, 1963. 40. The Learned Counsel for the Appellant refers to the judgement of the Hon'ble Supreme Court dated 26.03.2021 in Laxmipat Surana V. Union of India and Others (vide Civil Appeal No.2734 of 2020) wherein it is observed that a right or cause of action would ensure to the financial creditor to proceed against the principal borrower, as well as to proceed against the guarantor in equal measures in case they commit default in repayment of the amount of debt acting jointly and severally. Moreover, if and when the principal borrower fails to discharge its obligation in respect of the amount of debt, the obligation of the guarantor is co-extensive and co-terminus with that of the principal borrower to defray the debt, as predicated in Section 128 of the Contract Act, 1872. Furthermore the liability and obligation of the guarantor to pay the outstanding due would get triggered co-extensively. 41. The Learned Counsel for the Appellant refers to the Judgement 30.09.2021 of the Hon'ble Supreme Court in Rajendra Narottamdas Sheth and others Vs Chandra Prakas....
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....tances, it cannot lie in the mouth of the Appellant that the date of default gets extended on account of acknowledgment made in the OTS proposal emanating from the Corporate Debtor. There cannot be two defaults in respect of the same debt, one for the purpose of claim filed before the Debts Recovery Tribunal and the other for purposes of 'I&B Code' based on OTS proposal, more so when in application filed before the Adjudicating Authority in prescribed format date of default has unambiguously been reflected as 10th June, 2014. The application having been filed before the Adjudicating Authority beyond three years of occurrence of default is hopelessly time barred and it is not permissible for Appellant to take recourse to Section 18 of the Limitation Act for triggering Corporate Insolvency Resolution Process under Section 7 of the 'I&B Code' against the Corporate Debtor. 1ST RESPONDENT/BANK'S SUBMISSIONS 45. According to the Learned Senior Counsel for the 1st Respondent/Bank, the 1st Respondent/Bank had extended multiple loans and credit facilities through sanction letters dated 24.06.2009, 24.02.2010 and 28.12.2012, to the Principal Borrower/Great Indian Nautanki Company Pvt Ltd. ....
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....5(8)(a) and that the 'financial debt' owed by the 'Corporate Debtor' falls under Section 5(8)(i). 52. The Learned Counsel for the 1st Respondent/Bank comes out with a plea that 'financial debt' owed by each individual is, therefore, not the same (although it may arise out of or be connected to the same loan) and hence, the dates of default (or commencement of limitation) will be different. 53. The Learned Counsel for the 1st Respondent/Bank draws the attention of this 'Tribunal' to the fact that Section 3(12) of the Code r/w Section 3(11) contemplates the ingredients for 'Default' (i) non-payment of debt; (ii) which becomes due and payable and (iii) that is not paid by the 'Debtor or Corporate Debtor.' Therefore, an argument is advanced on behalf of the 1st Respondent/Bank that the 'Debt' of the 'Corporate Debtor' is distinct from that of the 'Principal Borrower' and that the 'default' occurs only when that 'debt' is due and payable and is not paid. 54. The Learned Senior Counsel for the 1st Respondent/Bank puts forward a plea that in the case of Guarantor, the debt is the liability arising from the guarantee which becomes 'due and payable' when a 'Demand' is made under the 'Gua....
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....first principles as to the nature and incidents of suretyship. The liability of a principal debtor and the liability of a surety which is co-extensive with that of the former are really separate liabilities, although arising out of the same transaction. Notwithstanding the fact that they may stem from the same transaction, the two liabilities are distinct. The liability of the surety does not also, in all cases, arise simultaneously." 18. It will be noticed that the guarantor alone could have been sued, without even suing the principal debtor, so long as the creditor satisfies the court that the principal debtor is in default." 58. The Learned Senior Counsel for the 1st Respondent/Bank relies on the decision of the Hon'ble Supreme Court in Industrial Finance Corporation of India Ltd V. Cannanore Spinning and Weaving Mills and others reported in (2002) 5 SCC 54 at Spl Page 73 and 74, wherein the Hon'ble Supreme Court at paragraph 33 had observed the following:- 33"Adverting to the contract of guarantee be it noted that though it is not a contract regarding a primary transaction : but it is an independent transaction containing independent and reciprocal obligations. It is on pr....
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.... may bustle about, pay off the debt, take over the benefit of the securities and sell them. No creditor could carry on the business of lending if he could become liable to a mortgagee and to a surety or to either of them for a decline in value of mortgaged property, unless the creditor was personally responsible for the decline. Applying the rule as specified by Pollock CB in Watts v. Shuttleworth (1860) 5 H&N 235 at 247-248, 157 ER 1171 at 1176, it appears to their Lordships that in the present case the creditor did not act injurious to the surety, did not act inconsistent with the rights of the surety and the creditor did not omit any act which his duty enjoined him to do. The creditor was not under a duty to exercise his power of sale over the mortgaged securities at any particular time or at all." 59. The Learned Senior Counsel for the 1st Respondent/Bank seeks in aid of the decision of Hon'ble Supreme Court in the matter of 'Syndicate Bank V. Channaveerappa Beleri & Ors reported in (2006) 11 SCC 506 at Spl Page 517 wherein at paragraph 9 is it observed as under:- "9. A guarantor's liability depends upon the terms of his contract. A 'continuing guarantee' is diff....
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....de to the well-known principle that a guarantee is not put an end to by reason of the debt becoming unenforceable against the principal by reason of matters happening subsequently, and that a surety is liable though the claim against the principal is barred by the statute of limitation or by reason of the bankruptcy of the principal. No doubt, there is the provision in Section 45(4) of the Presidency Towns Insolvency Act expressly enacting that the fact the principal debtor has become an insolvent did not affect the liability of the surety. But this provision in the statute does not deterect from the principle that we have stated above. The liability of the guarantor arising as it doe from an independent contract, even in cases where the guarantor is a privy to the contract between the principal debtor and the creditor, stands on a different footing, and unless we are able to say that by necessary implication that liability is also affected by some conduct of the principal debtor or any agreement between the principal debtor and the creditor, attracting the provisions of Section 133, 134, or 135 of the Contract Act, the principle laid down in Subramania V Narayanaswami , will not e....
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...., if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years. 143. Moreover, a judgment and/or decree for money in favour of the Financial Creditor, passed by the DRT, or any other Tribunal or Court, or the issuance of a Certificate of Recovery in favour of the Financial Creditor, would give rise to a fresh cause of action for the Financial Creditor, to initiate proceedings under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the Certificate of Recovery, if the dues of the Corporate Debtor to the Financial Debtor, under the judgment and/or decree and/or in terms of the Certificate of Recovery, or any part thereof remained unpaid." 62. The Learned Senior Counsel for the 1st Respondent/Bank relies on the decision of the Hon'ble Supreme Court in Rajendra Narotamdas Sheth V. Chander Prakash Jain and another 2021 SCC Online 843 wherein at paragraph 21 to 24 it is observed as un....
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....erty or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed. 23.It is no more res integra that Section 18 of the Limitation Act is applicable to applications filed under Section 7 of the Code. In case the application under Section 7 is filed beyond the period of three years from the date of default and the financial creditor furnishes the required information relating to the acknowledgement of debt, in writing by the corporate debtor, before the Adjudicating Authority, with such acknowledgement having taken place within the initial period of three years from the date of default, a fresh period of limitation commences and the application can be entertained, if filed within this extended period. 24. There is no dispute that the date of default in this case is 30.09.2014, as mentioned by the financial creditor in its application under Section 7. A copy of the debit balance confirmation letter dated 07.04....
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....uarantor' in any manner. 66. It is pointed out by the Learned Senior Counsel for the 1st Respondent/Bank that as per Clause 7 of the 'Guarantee', the 1st Respondent/Bank is empowered to forbear or enforce the payment of loan or any interest thereof and the same shall not release the 'Guarantor' and further that the 'Guarantor' had waived all suretyship rights which the 'Guarantor' might otherwise entitle to enforce. 67. Beside the above, it is pointed out on the side of the 1st Respondent/bank that the NOC provides a pre-condition that the Tender Document must require that 'Selected Bidder' to discharge the liability of the 'Principal Borrower'. Further that the 1st Respondent/Bank continues to hold the security interest over the 'Project Land' as evidenced by the Possession Notice and that the 'Tender' was cancelled, as recorded by an order of the Hon'ble High Court of Punjab & Haryana. 68. The Learned Senior Counsel for the 1st Respondent/Bank, therefore prays for dismissing the instant 'Appeal' since it lacks merits. APPRAISAL 69. The 1st Respondent/Financial Creditor/Applicant in Company Petition No. CP(IB)- 3000/MB/2019 under 'Part IV Particulars of Debt' had mentioned th....
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....the aggregate amount of default under the Facility Agreement as on 01.06.2019 was mentioned as Rs. 60,39,87,991.41 and which includes the defaulted amounts of principal, interest and penal interest and charges. 72. In the Application filed by the 1st Respondent/Financial Creditor/Applicant under Part V 'Particulars of the Financial Debt Documents, Records and Evidence of Default at Serial No.8, it was mentioned that the following documents were attached to the Application to prove the existence of Financial Debt etc. and they are as under:- "1) Notice dated 14, 2014 sent by the IDBI Bank to the Borrower recalling the Financial Facility and for the payment of outstanding dues under the Facility Agreements in view of the default committed by the Borrower under the Facility Agreement. 2) Notice dated December 8, 2014 sent by IDBI Bank Ltd to the Corporate Debtor invoking the Guarantees furnished by the Corporate Debtor to IDBI Bank demanding that the Corporate Debtor pay forthwith the Guaranteed Sums. 3) Notice dated November 29, 2014 under Section 13(2) of the SARFAESI Act, by the Financial Creditor to the Managing Director of Borrower and Mortgager and the Corporate Debtor be....
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....the 1st Respondent/Financial Creditor/Bank initiated proceedings under SARFAESI Act, 2002, in which the 1st Respondent/Financial Creditor/Bank can recover entire alleged outstanding due. In fact, the 1st Respondent/Financial Creditor/Bank should exhaust remedies available for recovery of its alleged dues before proceeding with an 'Insolvency Application'. Indeed, without completion of proceedings under SARFEASI Act, 2002, it does not lie for the 1st Respondent/Financial Creditor/Bank to file the Section 7 Application under IBC. 76. Also, a plea is taken before the 'Adjudicating Authority' that the 'invocation of guarantee' is premature and that the liability of the 'Corporate Debtor' arises only in case there is default on the part of the Borrower to pay the amounts, payable by the Borrower. The liability of Borrower is to be adjudicated by the 'Adjudicating Authority' as to what amount is payable by the 'Borrower' and pending adjudication of amount payable by the Borrower, the invocation of Guarantee by the 1st Respondent/Financial Creditor/Bank is a premature one. 77. In this connection, it is pertinent for this 'Tribunal' to make a significant mention that at paragraph 22 of t....
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....or Guarantee'. Section 128 of the Act pertains to 'Surety's liability'. Section 129 of the Act refers to 'Continuing Guarantee'. Section 135 of the Act is concerned with 'Discharge of Surety when Creditor compounds with, gives time to, or agrees not to sue, principal debtor'. Section 140 of the Act provides for the 'Rights of Surety on Payment or Performance'. Section 146 of the Indian Contract Act, 1872 deals with 'Co-Sureties' liable to contribute equally. SUING SURETY 81. It is to be pointed out that a 'Creditor' can sue the 'surety' directly without suing the 'Principal Debtor'. In reality, 'surety' provides 'Guarantee' only when requested by the 'Principal Debtor' in a 'Contract Of Guarantee'. In Law, in a 'Contract of Guarantee' there is an existing liability for 'Debt' and 'Surety' guarantees the performance of such liability. SURETY'S RIGHT 82. A 'Surety' is eligible to proceed against the 'Principal Debtor' on payment of 'Debt', in case 'Principal Debtor' fails to pay the same. A 'Creditor' can sue their surety directly without proceeding against the Principal Debtor. As per Law, the 'surety' does not have the right to dictate terms to the creditor as to how he should ....
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....o 'the company for which Wizcraft International Entertainment Pvt Ltd (WIEPL) (hereafter referred as 'The Guarantor") have provided guarantee vide Guarantee Agreement dated June 26, 2009, February 25, 2010 and January 14, 2013. 2.Despite our repeated follow-up for said payment, you have failed, neglected and not taken any step to clear the overdue as referred in above mentioned letter dated 07.03.2017. 3.In the premises, we hereby give you final Notice to arrange for clearance of overdue on immediate basis, failing which, IDBI Bank shall be constrained to take such steps against the Company, including initiating action under Insolvency and Bankruptcy Code for recovering the dues at your own risk as to the costs and consequences thereof. 4. Please note that this Notice is issued without prejudice to all the other rights and remedies available to IDBI Bank against you/guarantors/pleadings, if any, under the applicable laws and under the respective contracts entered into by the respective parties in favour of IDBI Bank, in law or in contract or both, in respect of the Financial Assistance." CORPORATE DEBTOR'S REPLY 88. On 27.09.2017 the 'Corporate Debtor' issued a Repl....
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.... or bills of exchange payable on demand. We may refer to Articles 21 and 22 in this behalf. Article 21 provides that for money lent under an agreement that it shall be payable on demand, the period of limitation (3 years) begins to run when the loan is made. On the other hand, the very same words "payable on demand" have a different meaning in Article 22 which provides that for money deposited under an agreement that it shall be payable on demand, the period of limitation (3 years) will begin to run when the demand is made. Thus, the words "payable on demand" have been given different meanings when applied with reference to "money lent" and "money deposited". In the context of Article 21, the meaning and effect of those words is "always payable" or payable from the moment when the loan is made, whereas in the context of Article 22, the meaning is "payable when actually a demand for payment is made". 13. What then is the meaning of the said words used in the guarantee bonds in question? The guarantee bond states that the guarantors agree to pay and satisfy the Bank "on demand". It specifically provides that the liability to pay interest would arise upon the guarantor only from the....
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....he limitation against the principal debtor may expire on 1-6-1994, as the demand was made on 1-3-1993 when the claim was "live" against the principal debtor, the limitation as against the guarantor would be 3 years from 1-3-1993. On the other hand, if the creditor does not make a demand at all against the guarantor till 1-6-1994 when the claims against the principal debtor get time-barred, any demand against the guarantor made thereafter say on 15-9-1994 would not be valid or enforceable." CONTINUOUS GUARANTEE 90. In terms of the 'Guarantee', the 'Guarantee' is a continuous one and as such the right to sue accrues and when the guarantee was invoked and the date when the 'Corporate Debtor' had failed to discharge its obligation as per Guarantee. Although a plea is taken on behalf of the Appellant that the Reply dated 27.09.2017 of the 'Corporate Guarantor' to the 'Demand Notice' dated 25.08.2017 is not an acknowledgement at all and in any event, the same is beyond the three years of classification of account of the Principal Borrower as Non-Performing Assets on 29.07.2014, beyond three years of the Limitation Period, this Tribunal is of the considered view that the 'Reply' dated 2....
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...., under the Agreement. 4.The Guarantor shall also indemnify and keep the Bank indemnified against all cases, damages, costs, claims and expenses whatsoever which the Bank may suffer, pay or incur by reason of or in connection with any such default on the part of the Borrower including legal proceedings taken against the Borrower and/or the Guarantor for recovery of the moneys referred to in Clause 2 above." 94. The other two Guarantee Agreements dated 25.02.2010 and 14.01.2013 executed by the 'Corporate Debtor' proceeds like the 1st Guarantee Agreement dated 26.06.2009. 95. Although, on behalf of the Appellant it is emphatically submitted that the date of invocation of Guarantee by the 1st Respondent/Bank on 08.12.2014 cannot be the date of default, such a plea projected on the side of the Appellant is not a tenable one, because of the fact that the 'Contract of Guarantee' is an independent transaction having separate and reciprocal obligation and that apart the 'Contract of Guarantee' Agreement is made on a Principal-to-Principal basis despite the fact that the issue arises out of the same Transaction, in the considered opinion of this 'Tribunal'. 96. It cannot be forgotten t....
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....rporate Debtor is nothing but a 'tacit acknowledgement' of the liability in question and furthermore, a fervent request was made to the 1st Respondent/Bank not to initiate any action under the I&B Code, 2016 etc. 101. As a matter of fact, in the 'Reply' dated 27.09.2017 of the 'Corporate Debtor' addressed to the 1st Respondent/Bank, the Corporate Debtor had mentioned 'GNIC has failed to pay its dues to IDBI, as a result of which IDBI has invoked the abovementioned Guarantees and called upon Wizcraft to pay IDBI their due of Rs. 48.39 crores'. Therefore, the aforesaid contents of Reply dated 27.09.2017 of the Corporate Debtor is 'an acknowledgement of liability'. Also that a 'Debt' liability of a person can be projected and enforced by a 'Creditor' through initiation of numerous proceedings known to Law. 102. If an 'Acknowledgement' is valid, then, there is no fetter in 'Law' whereby the liability against the particular person/entity can be enforced, in accordance with Law. In Law, an 'Acknowledgement of Liability' merely extends the limitation period and does not create a' new right of action', as per decision of Hon'ble Supreme Court in Tilak Ram V. Nathu reported in AIR 1967 SC....
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....of the primary contract between the person at whose instance the bank guarantee was given and the beneficiary. Unless fraud or special equity exists, is pleaded and prime facie established by strong evidence as a triable issue, the beneficiary cannot be restrained from encashing the bank guarantee even if dispute between the beneficiary and the person at whose instance the bank guarantee was given by the Bank, had arisen in performance of the contract or execution of the Works undertaken in furtherance thereof. The Bank unconditionally and irrevocably promised to pay, on demand, the amount of liability undertaken in the guarantee without any demur or dispute in terms of the bank guarantee. The object behind is to inculcate respect for free flow of commerce and trade and faith in the commercial banking transactions unhedged by pending disputes between the beneficiary and the contractor. 5........The Court exercising its power cannot interfere with enforcement of bank guarantee/letters of credit except only in cases where fraud or special equity is prime facie made out in the case as triable issue by strong evidence so as to prevent irretrievable injustice to the parties." 109. In t....
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....vement of surety Even if a discharge, a Principal Debtor gets by operation of law in Bankruptcy or in Liquidation proceeds in respect of a Company, the same does not absolve the surety of its liability in the considered of this 'Tribunal'. HON'BLE SUPREME COURT DECISION 112. In the Judgement of Hon'ble Supreme Court dated 26.03.2021 in Laxmipat Surana V. Union of India (vide Civil Appeal No.2734 of 2020) wherein at paragraph 12 and 13 it is observed as under:- 12. "The Finance Creditor has refused the plea regarding maintainability of the application against the Corporate Debtor. According to the Financial Creditor, the liability of the Principal Borrower and of the Guarantor is coextensive or coterminous, as predicated in Section 128 of the Indian Contract Act, 1872. This legal position is well-established by now (see- Bank of Bihar Ltd Vs. Dr Damodar Prasad & Anr). Section 7 of the Code enables the financial creditor to initiate CIRP against the principal borrower if it is a corporate person, including against the corporate person being a guarantor in respect of loans obtained by an entity not being a corporate person. The Financial Creditor besides placing reliance on Secti....
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....in Section 3(12) of the Code to mean non-payment of debt when whose or any part or instalment of the amount of debt has become due or payable and is not paid by the debtor or the corporate debtor, as the case may be." CIRP INITIATION 113. A 'Financial Creditor' is entitled to initiate 'CIRP' against a 'Guarantor' or 'Surety' although the Creditor holds enough security over the assets. A Surety has no right to dictate terms to the 'Creditor' as to how he ought to make a 'recovery' and pursue his remedies against the 'Principal Debtor' at his instance. APPELLATE TRIBUNAL DECISION: 114. In the judgment of this 'Tribunal' in 'Ferro Alloys Corporation Ltd V. Rural Electrification Corporation Ltd. (vide Comp. App. (AT)(Ins) 921/2017, it is held that the 'Insolvency' proceedings against the 'Corporate Debtor' may be undertaken without initiating prior proceedings gains the 'Principal Debtor' under I & B Code. In fact, requiring/asking the 'Financial Creditor'/'Operational Creditor' to postpone in availing its remedy against the 'Corporate Debtor' will undoubtedly defeat the purpose of obtaining 'Guarantee' as that would result in restricting the rights of a 'Creditor'. 115. The 'Fina....
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....apart from that, the 'Guarantor' had waived all the suretyship rights which it might otherwise entitled to enforce. Viewed in that perspective, this 'Tribunal' unhesitatingly comes to a consequent conclusion that the 'Guarantor' had waived all rights as 'Surety' and assumed more liability. CONTENTS OF FORM 1 FOR FILING (SECTION 7 APPLICATION) UNDER IBC. 119. It is to be pointed out that the Hon'ble Supreme Court of India in the decision in Dena Bank (now Bank of Baroda) V. C. Shivakumar Reddy & Another reported in 2021 SCC Online 543 wherein at paragraph at 73 and 91 it is observed as under: "73. Since a Financial Creditor is required to apply under Section 7 of the IBC, in statutory Form 1, the Financial Creditor can only fill in particulars as specified in the various columns of the Form. There is no scope for elaborate pleadings. An application to the Adjudicating Authority (NCLT) under Section 7 of the IBC in the prescribed form, cannot therefore, be compared with the plaint in a suit. Such application cannot be judged by the same standards, as a plaint in a suit, or any other pleadings in a Court of law. 91. On a careful reading of the provisions of the IBC and in particular....