TaxTMI 
TaxTMI 
2022 (5) TMI 18
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....ct, the impugned order in CP(IB)/82/CHE/2021 was passed by the `Adjudicating Authority', `National Company Law Tribunal', Division Bench - I, Chennai, on 04.02.2022 and the period of 30 days, as enshrined under Section 61(2) of the I & B Code, 2016 to prefer an `Appeal' came to an end on 06.03.2022. However, the Hon'ble Supreme Court on 10.01.2022 in M.A.No.21 of 2022 in M.A.No.665 of 2021 in Suo Motu Writ Petition (C) No.3 of 2022 had excluded the period between 15.03.2020 and 28.02.2022 for the purpose of calculating limitation. Hence, the period from 04.02.2022 till 28.02.2022 would stand excluded and the 1st day would run from 01.03.2022. 2. Viewed in the above backdrop, this `Tribunal' holds that the `instant Comp. App (AT) (CH) (INS) No.102 of 2022 filed by the Applicant/Appellant is filed by the Applicant/Appellant in time and accordingly, the IA No. 237 of 2022 stands disposed of. No costs. Company Appeal (AT) (CH) (INS) No. 102 of 2022: PREFACE: The 'Appellant'/'Promoter' and Former Managing Director of the Corporate Debtor (Kaveri Gas Power Pvt. Ltd.) has filed the Instant Company Appeal (AT) (CH) (INS) No.102 of 2022 being dissatisfied with the Order dated 04....
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....rom 24.03.2020) this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP) and in relation to a Section 7 Application defence or set off or counter claim put forth by the Corporate Debtor cannot be considered as a dispute in relation to the Financial debt and default in relation to it. Thus, it is clear that there is a default on the part of the Corporate Debtor for a sum exceeding Rs.l Crore. 10. Further, in relation to the aspect of Corporate Guarantee it is apt to refer to the decision of the Hon'ble Supreme Court in the matter of Laxmi Pat Surana -Vs- Union Bank of India & Anr. in Civil Appeal No. 2734 of 2020 wherein it was held that the liability of the `Corporate Guarantor' is `coextensive' with that of the `Principal Borrower' and that acknowledgment given by the `Principal Borrower' also binds the `Corporate Guarantor'; 27. In law, the status of the guarantor, who is a corporate person, metamorphoses into corporate debtor, the moment principal borrower (regardless of not being a corporate person) commits default in payment of debt which had become due and payable. Thus, action under ....
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....antor (corporate debtor). Section 18 of the Limitation Act, however, posits that a fresh period of limitation shall be computed from the time when the party against whom the right is claimed acknowledges its liability. The financial creditor has not only the right to recover the outstanding dues by filing a suit, but also has a right to initiate resolution process against the corporate person (being a corporate debtor) whose liability is coextensive with that of the principal borrower and more so when it activates from the written acknowledgment of liability and failure of both to discharge that liability. 42. Suffice it to conclude that there is no substance even in the second ground urged by the appellant regarding the maintainability of the application filed by the respondent financial creditor under Section 7 of the Code on the ground of being barred by limitation. Instead, we affirm the view taken by the NCLT and which commended to the NCLAT - that a fresh period of limitation is required to be computed from the date of acknowledgment of debt by the principal borrower from time to time and in particular the (corporate) guarantor/corporate debtor vide last communicatio....
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....o 'CIRP', the `Consortium of Banks', represented by the State Bank of India, Stressed Assets Management Branch, Chennai, had executed an `Assignment Agreement' dated 30.12.2020 wherein, all their rights and liabilities pursuant to the 'Working Capital Consortium Agreements' and the 'Guarantee Agreements' were purportedly assigned to the 1st Respondent/ASREC (India) Ltd. 5. It is represented on behalf of the 'Appellant' that the Rs. 1st Respondent'/ 'Financial Creditor'/'Applicant' had issued a 'Notice' dated 12.03.2021 (`Letter of Invocation'/`Demand Notice'), calling upon the 'Corporate Debtor' to settle a sum of Rs. 150,39,59,607.73, purportedly arising out of the 'Guarantee Agreement' and that a mere perusal of Recital and Clause 20 of the 'Guarantee Agreement' would make it evident that the 'Corporate Debtor' had extended its 'Corporate Guarantee' only to a maximum extent of Rs. 50.48 Crores. 6. The Learned Counsel for the 'Appellant' adverts to the Clauses No. 3, 20 and 21 of the 'Guarantee Agreement' which expressly requires the 'Lender'/'Security Trustee', to issue a `Certificate' or `Claim' in writing stating that an amount was `due and payable' under the 'Guarantee A....
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....hich, the liability under the Guarantee arose, thus being a `Contract' to the contrary, being an exception to Section 128 of the Indian Contract Act, 1872. According to the Appellant, the liability of the `Corporate Guarantor' in the instant case, starts only upon issue of `Notice of Demand' and that the `Notice of Demand' was issued by the 1st Respondent (Assignee of the Original Creditor) on 12.03.2021. 13. The Learned Counsel for the `Appellant' to lend support to the contention that the Date of `Demand Notice' is the applicable Date of `Default' for a `Corporate Guarantor' refers to the Judgment of this Tribunal dated 23.04.2019 in Edelweiss Asset Reconstruction Company V Orissa Manganese and Minerals Ltd & Ors (vide Comp App (AT) 437 OF 2018, wherein the proposition laid down in paragraph 16 to 27 is stated as under: "A contract of guarantee matures into a binding obligation only upon its invocation. Contract of Guarantee is an autonomous contract and the admission of the principal debtor to CIRP does not mean that the debt stands proved as against the Guarantor in a Section 7 proceeding against the Corporate Guarantor automatically. The guarantee has to be invoked....
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....d in accordance with its terms in the manner known to law. Therefore, it is the clear cut stand of the `Appellant' that there was `no Debt' and that there was `no Default' for the purposes of Section 7 of the I & B Code, 2016. Hence, `no cause' had arisen for the acknowledgement of `Debt'. Also, it is contended that no presumption of `indebtedness' or `default' thereof be drawn based on these facts. 20. The Learned counsel for the Appellant submits that the `Corporate Guarantee Agreement' is an `Autonomous Contract' and irrespective of the proof of the `Principal Debt' in the `Corporate Insolvency and Resolution Process' of the `Principal Debtor' as against it, that the `Debt' to the extent carried by the `Corporate Debtor' has to be proved separately by the `Applicant'/`Creditor' in an application filed under Section 7 of the Code and further that the `Statute' prescribed no exception. 21. The Learned Counsel for the Appellant contends that the aggregates sum of `Principal' claimed in the purported `Letter of Intent' is itself called into question much like the `Invoice' itself being disputed. 22. The Learned Counsel for the Appellant points out that the decision in Sabba....
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.... (INS) No.412 of 2020. EVALUATION: 27. Before the `Adjudicating Authority' (NCLT, Chennai Bench, in Form-I, filed under Section 7 of the I & B, Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, by the 1st Respondent/Applicant/Financial Creditor under Part IV `Particulars of Debt', it was mentioned that the total outstanding `Debt of Corporate Debtor' was Rs. 50.48 Crores towards `Working Capital Assistance' including interest, expenses and costs, as per the Agreement dated 19.07.2018. In respect of the amount claimed to be in Default and date on which the Default occurred, it was mentioned under Part-IV of Form-I that total outstanding Debt of the Corporate Debtor arose from Rs. 50.48 Crores, as per the `Working Capital Assistance Agreement' dated 19.07.2018 along with interest, at Rs. 52,25,74,088 as on 31.12.2020. 28. Furthermore in Form-I Part-IV Column No.3, it was also mentioned that the total outstanding Debt of the Principal Borrower/Debtor M/s. Cauvery Power Generation Power Limited stood at Rs. 1,50,39,59,607.73 and that the entire debt was `Due for Payment' originally when the `Account' was declared ....
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.....07.2018, executed by Kaveri Gas Power Limited (Guarantor) to and in favour of SBICAP TRUSTEE Company Limited shows that the Cauvery Power Generation Chennai Private Limited was sanctioned by the State Bank of India (Lender) `Working Capital Assistance' not exceeding Rs. 50.48 Crores on the terms and conditions set out in the `Working Capital Consortium Agreement' dated 31.10.2013 and First Amendment to `Working Capital Consortium Agreement' dated 19.07.2018. 34. It must be borne in mind that Clause 6 to 8 of the `Guarantee Agreement' dated 19.07.2018, executed by the Kaveri Gas Power Limited (Guarantor) run as under : "6. The Lender/Security Trustee shall have full liberty, without notice to the Guarantor and without in any way affecting this guarantee, to exercise at any time and in any manner any power or powers reserved to the Lender/Security Trustee under the Working Capital Agreement to enforce or forbear to enforce payment of the Loans or any part thereof or interest or other monies due to the Lender/Security Trustee from the Borrower or any of the remedies or securities available to the Lender/Security Trustee, to enter into any composition or compound with or t....
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....f the `Guarantor' was the `Principal Debtor' to the `Lender/Security Trustee'. 36. As a matter of fact, the aforesaid `Guarantee Agreement' dated 19.07.2018 `Clause 13' points out that the 'Guarantor' hereby declares and agrees that they have not perceived and shall not without the prior consent in writing of the `Lender/Security Trustee' receive any Security or Commission from the Borrower for giving this `Guarantee' so long as monies remain `due and payable' by the `Borrower' to the `Lender/Security Trustee' under the `Working Capital Agreement'. 37. In reality, Clause 20 of the `Guarantee Agreement' dated 19.07.2018 categorically provides that the liability of the `Guarantor' shall not exceed the sum of Rs. 50.48 Crores plus all interest, additional and penal interest, further interest, premium on pre-payment, costs, charges and other monies payable by the Borrower to the `Lender/Security Trustee' under the `Working Capital Agreement'. Moreover, the `Clause 20 of the Guarantee Agreement', says that `A Certificate' or `Claim' in writing by the `Lender/Security Trustee' stating the amount at any particular time due and payable under this `Guarantee' shall be `conclusive evid....
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....n the case on hand, the guarantee deeds specifically state that the guarantors agree to pay and satisfy the Bank on demand and interest will be payable by the guarantors only from the date of demand. In a case where the guarantee is payable on demand, as held in Bradford [(1918) 2 KB 833 : 88 LJKB 85 : 119 LT 727 (CA)] and Hartland [(1863) 1 H & C 667 : 7 LT 792], the limitation begins to run when the demand is made and the guarantor commits breach by not complying with the demand. 12. We will examine the meaning of the words `on demand'. As notice above, the High Court was of the view that the words 'on demand' in law have a special meaning and when an agreement states that an amount is payable on demand, it implies that it is always payable, that is payable forthwith and a demand is not a condition precedent for the amount to become payable. The meaning attached to the expression `on demand' as `always payable' or `payable forthwith without demand' is not one of universal application. The said meaning applies only in certain circumstances. The said meaning is normally applied to promissory notes or bills of exchange payable on demand. We may refer to Articles 21 and 22 i....
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....nt of a sum which is legally due and recoverable from the principal debtor. If the debt had already become time-barred against the principal debtor, the question of creditor demanding payment thereafter, for the first time, against the guarantor would not arise. When the demand is made against the guarantor, if the claim is a live claim (that is, a claim which is not barred) against the principal debtor, limitation in respect of the guarantor will run from the date of such demand and refusal/non-compliance. Where guarantor becomes liable in pursuance of a demand validly made in time, the creditor can sue the guarantor within three years, even if the claim against the principal debtor gets subsequently time-barred. To clarify the above, the following illustration may be useful: Let us say that a creditor makes some advances to a borrower between 10-4-1991 and 1-6-1991 and the repayment thereof is guaranteed by the guarantor undertaking to pay on demand by the creditor, under a continuing guarantee dated 1-4-1991. Let us further say a demand is made by the creditor against the guarantor for payment on 1-3-1993. Though the limitation against the principal debtor may expire on....
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....this provision in the Statute does not detract from the principle that we have stated above. The liability of the guarantor arising as it does from an independent contract, even in cases where the guarantors 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 other 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 extend to a case where a temporarily the liability of the principal debtor has been suspended and as therefore, become unenforceable. A reference to Section 7 of the Act indicates that it is only a suspension and a liability is not affected at all. Section 7 of the Act specifically provides in computing the period of limitation for the enforcement of any right, privilege, obligation or liability referred to in Clause (b) of Section 4 the period during which it or the remedy for the enforcement thereof was suspended, shall be excluded. It is t....
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....rate 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." 45. In the decision of the Hon'ble Supreme Court in Syndicate Bank V Channaveerappa Beleri & Ors reported in (2006) 11 SCC 506 at Spl Page 517 wherein at paragraph 9 it is observed as under:- "9. A guarantor's liability depends upon the terms of his contract. A `continuing guarantee' is different from an ordinary guarantee. There is also a difference between a guarantee which stipulates that the guarantor is liable to pay only on a demand by the creditor, and a guarantee which does not contain such a condition. Further, depending on the terms of guarantee, the liability of a guarantor may be limited to a particular sum, instead of the liability being to the same extent as that of the principal debtor. The liability to pay ....
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....Time Settlement' had recognised itself as the `Debtor' in respect of the outstanding sum to be paid to the Rs. 1st Respondent/Applicant/Financial Creditor', in the latter's position as `Assignor'. 52. The other vital fact to be kept in mind is that the `Guarantee' has a `Live Force' and that the `Appellant's obligation' is not wiped out in discharging its liability. It is to be remembered that under the I & B Code, 2016, the `Quantum of Liability' is not a relevant factor to be taken into account and has no nexus in respect of the `Initiation' of `Corporate Insolvency Resolution Process', in as much as the `Default' of a `Debt' is equivalent to Rs. 1 Crore and above. 53. An `Adjudicating Authority' is not to determine a `money claim' or `suit'. The I & B Code, 2016, requires an `Adjudicating Authority' only, to find out and record satisfaction in a summary adjudication, in regard to the occurrence of `Default', as per ingredients of Section 4, before admitting a `Petition'. 54. In the teeth of I & B Code, 2016, the aspect of extent of liability can be dealt with and arrived at a final solution by a `Resolution Professional' based on the claims projected by the parties, of ....