TaxTMI 
TaxTMI 
2022 (2) TMI 966
X X X X Extracts X X X X
X X X X Extracts X X X X
.... referred to as 'The Code') and observed as follows: "10. In the present matter, CD has signed deeds of guarantee in favour of FC for the CD facilities sanctioned to the two principal borrowers. In terms of the aforementioned provisions of the Code, FC is clearly a financial creditor to the CD having legally recoverable financial debt. 11. At this stage, we reproduce below the provisions of Section 7(5) of the Code: "where the Adjudicating Authority is satisfied that-- (a) a default has occurred and the application under sub-section (2) is complete, and there are no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or (b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application:" 12. If it is established that default has occurred and no disciplinary proceeding is pending against the IRP and application is complete, the Adjudicating Authority (AA) has no option but to admit the application; if any of the condi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch it is held as follows: "It was held that "'financial creditor' is a person who has direct engagement in the functioning of the corporate debtor; who is involved right from the beginning while assessing the viability of the corporate debtor; who would engage in restructuring of the loan as well as in reorganisation of the corporate debtor's business when there is financial stress...... Role of a person having only security interest over the assets of the corporate debtor could easily be contrasted with the role of a financial creditor because the former shall have only the interest of realising the value of its security while the latter would,......would also....be interested in rejuvenation, revival and growth of the corporate debtor.......it is clear that if...... a person having only security interest over the assets of the corporate debtor is also included as a financial creditor.......the growth and revival of the corporate debtor may be the casualty. ......Indisputably, the debts in question are in the form of third-party security said to have been given by the corporate debtor JIL so as to secure the loans/advances/facilities obtained by JAL from the respondent-le....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 1872 without taking into consideration the scope of IBC is not justified. Learned Counsel for the Appellant relied on Order 23 Rule 1 (4) of the CPC in support of his submission that when the Plaintiff withdraws any suit, the Plaintiff shall be precluded from instituting any fresh suit in respect of the same subject matter and that the Impugned Order is sub silentio on this aspect. 3. Submissions of Respondents: Learned Counsel for the Respondent submitted that 'Service' made was by way of an email which is the registered Email of the Company on the Company Master Data. An email was also sent to the Email ID of the Appellant herein who is also a Director of the Company. It is submitted that the Registry served notice vide an email dated 23.09.2020 on [email protected] and on [email protected] which ID is reflected in the MCA record. A WhatsApp message was also served to Mr. Rajnish Gupta who is the Appellant herein. The Respondent served a copy of the Section 7 Application informing the Appellant of the pending litigation vide an email dated 08.10.2020 and hence it cannot be said that the 'Appellant' was not served in accordance ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le, in the light of the view of the fact that the material on record shows that an email was also sent to Mr. Rajnish Gupta together with the Copy of the Petition by WhatsApp and it is the same Mr. Rajnish Gupta who is the 'Appellant' herein. Further, a perusal of the Company Master Data shows that the Respondent had served on the registered Email ID appearing on the Company Master Data and hence, we are of the considered view that the service by Email on the registered Email ID and also on the Email ID of the Appellant herein is held sufficient in the eyes of law. Hence, this Tribunal does not find any illegality in the observations of the Ld. Adjudicating Authority in setting the 'Appellant' Ex-parte on account of non-appearance on 09.10.2020, 05.11.2020 and on 26.11.2020 on which date it was set Ex-parte. 7. Adverting to the contention of the Learned Counsel for the Appellant that the amount claimed to be 'due and payable' cannot partake the character of a 'Financial Creditor' within the meaning of Section 5(8) of the Code, as the ratio of 'Anuj Jain' (supra) is squarely applicable to the facts of this case. In the afore-noted decision in 'Anuj Jain (Supra)', Jaypee Infrat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rower" solely or from the Borrower jointly with any other or others in partnership or otherwise whether as principal or surety, or otherwise and whether such liabilities have matured or not and whether they are absolute or contingent including all liabilities in respect of advances, letters of credit, Bank Guarantees, Cheques. Hundies, Bills, Notes, Drafts and other negotiable instruments drawn, accepted endorsed or guaranteed by the Borrower and in respect of interest at the rate agreed upon with monthly/quarterly/half yearly/annual rests, commission and bank charges and in respect of all costs, charges and expenses with the Bank may incur in paying any rent, rates, taxes, duties, calls, instalments, legal and other professional charges or other outgoings whether for the insurance, repair, maintenance, management, realisation or otherwise in respect of any property movable or immovable or any chattles or actionable claims or scrip securities or title deeds pledged, mortgaged or assigned or ...with the Bank as security for the due payment and discharge of the Borrower liability to the Bank. ...... The Guarantor hereby consents to the Bank making any variance that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....liability of the guarantor under Section 128 of the Indian Contract Act, 1872. The legislature has succinctly stated that the liability of the guarantor is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. This Court has decided on this question, time and again, in line with the intent of the legislature. In Ram Kishun and Ors. v. State of U.P. and Ors., (2012) 11 SCC 511, this Court has held that "in view of the provisions of Section 128 of the Contract Act, the liability of the guarantor/surety is co-extensive with that of the debtor." The only exception to the nature of the liability of the guarantor is provided in the Section itself, which is only if it stated explicitly to be otherwise in the Contract. 14. In the case of Ram Kishun (supra), this Court has also stated that it is the prerogative of the Creditor alone whether he would move against the principal debtor first or the surety, to realize the loan amount. This Court observed: "10.....Therefore, the creditor has a right to obtain a decree against the surety and the principal debtor. The surety has no right to restrain execution of the decr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 make the recovery and pursue its remedy against the 'Principal Debtor' at his instance. FINANCIAL DEBT AND DEFAULT UNDER IBC. 83. It is to be pointed out that a 'Financial Debt' includes Debt owed to the Creditor by both the 'Principal' and the 'Guarantor'. Failure by the 'Guarantor' to pay the 'Financial Creditor' when the 'Principal Debt' amount is demanded will amount to a 'Default' as per Section 3(12) of the Code. A Financial Creditor who has a 'Guarantee' on the debt due can initiate proceedings under Section 7 of the I&B Code, 2016 against the 'Guarantor' for failure to repay the amount borrowed by the 'Principal Borrower'. .......... 111. No absolvement 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 S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re to the lender (financial creditor) to proceed against the principal borrow, as well as the guarantor in equal measure in case they commit default in repayment of the amount of debt acting jointly and severally. It would still be a case of default committed by the guarantor itself, if and when the principal borrower fails to discharge his obligation in respect of amount of debt. For, the obligation of the guarantor is coextensive and coterminous with that of the principal borrower to defray the debit, as predicated in Section 128 of the Contract Act. As a consequence of such default, the status of the guarantor metamorphoses into a debtor or a corporate debtor if it happens to be a corporate person, within the meaning of Section 3(8) of the Code. For, as aforesaid, expression "default" has also been defined in Section 3(12) of the Code. For, as aforesaid, express "default" has also been defined in Section 3(12) of the Code to mean nonpayment 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." (Emphasis Supplied) CIRP INITIATION 113. A 'Fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uarantor who is now essaying the rule of the Principal Debtor, as seen from the terms of the Agreement and hence is liable to pay the outstanding amount 'due and payable'. 12. Dealing with the contention of the Learned Counsel for the Appellant that as the CIRP proceedings against the 'Principal Borrowers' in CP(IB) No. 1386 (PB)/2019 was withdrawn under Section 12A of the Code (vide Order dated 22.10.2019), the Respondent/Lender is precluded from instituting any fresh suit in respect of the same subject matter and doing so would be in contravention of Order 23 Rule 1(4) of the Civil Procedure Code. It is a well settled preposition in Law that the creditor is not bound to exhaust his/its remedy against the 'Principal Borrower' before invoking the 'Guarantor' or suing the 'Guarantor' for payment of outstanding sum(s), (unless otherwise agreed to in the Guarantee Deed). A 'suit' can be maintained against the 'Guarantor' for payment of outstanding sums in connection with the Loan extended to the 'Borrower' even if the 'Borrower' itself has not been sued by the Lender. This Tribunal is of the considered opinion that the 'Lender' has an independent access to the 'Guarantor' issued by....