TaxTMI 
TaxTMI 
2022 (9) TMI 1010
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...., 'Mr. Dilip Ramchandra Mohite'/the Guarantor preferred this Appeal. 2. Facts in brief, are that vide letter dated 28.10.2011, an amount of Rs.45Crores/- was sanctioned to Telsar Construction Private Limited/the Principal Borrower by Abhyudaya Cooperative Bank Ltd./the Assignor Bank towards working capital Term Loan. As per the terms of the Agreement, the Borrowers were required to repay the Term Loan and 60 monthly instalments of Rs.58,82,070/- starting from 15.06.2012. Mr. Dilip Ramchandra Mohite and Mr. Anand Shaktikumar Sancheti were the Personal Guarantor to the Assignor Bank. The 'Corporate Debtor'/DM Cooperative Private Limited gave a Corporate Guarantee to secure the payment obligations of the Borrower. It is averred that the following security Agreements were executed in favour of the Assignor Bank: "a. Deed of simple mortgage executed between Mr. Dilip Ramchandra Mohite, Telsar Construction Pv.t Ltd. and the Assignor Bank on 09.11.2011; b. Declaration cum Undertaking cum Indemnity dated 09.11.2011 executed by Mr. Dilip Ramchandra Mohite; c. Memorandum of Entry of Deposit of Title Deeds/Original Documents dated 18.11.2011; d. Declarat....
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....signee from the Assignor, as per the Agreement. Clause 2.3.2- The Financial assets are assigned by the Assignor to the Assignee on "as is where is", "as is what is" and "without recourse" basis." It is submitted that any reference to the Appellant is missing and therefore they are not bound by the terms and conditions of the Settlement. * It is argued that at the stage of 2018 Settlement, in law, a novation without reference to the Guarantor Company has taken place in the Contractual Agreement between the Guarantor Company and the Respondent/Assignor Bank. The legal effect of this novation in a contract of Guarantee in which novation was made without any reference to the Guarantor Company is 'discharge' of the Guarantor, subsequent to which, no Insolvency Petition against the Guarantor can be said to be maintainable. * The Assignee Company with full knowledge of the sequence of events, accepted the assignment of the Post-Settlement Loan on an as is where is basis on 18.03.2019 and therefore at this stage, cannot maintain its claim against the Appellant herein. * Learned Counsel placed reliance on the Judgement of this Tribunal in 'Amrit Kumar Agrawal' Vs. 'Temp....
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....d 80 which are detailed as hereunder: "70. The doctrine of "piercing the corporate veil" stands as an exception to the principal that a company is a legal entity separate and distinct from its shareholders with its own legal rights and obligations. It seeks to disregard the separate personality of the company and attribute the acts of the company to those who are allegedly in direct control of its operation. The starting point of this doctrine was discussed in the celebrated case of Salmon v. A Salmon & Co. Ltd., [1897] AC 22. Lord Halsbury LC (paragraphs 31 - 33), negating the applicability of this doctrine to the facts of the case, stated that: "...a company must be treated like any other independent person with its rights and liabilities legally appropriate to itself. _.. whatever may have been the ideas or schemes of those who brought it into existence." 80. The present facts would not be a fit case to pierce the veil, which as enumerated above, must be exercised sparingly by the Courts. Further, for piercing the veil of incorporation, mere ownership and control is not a sufficient ground. It should be established that the control and impropriety by t....
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....onal Guarantor. In 2018, when the OTS Settlement was entered into, the original Lender preferred two Applications before the Learned DRT, Mumbai to seek release of various properties of the Principal Borrowers and the 'Corporate Debtor'. The 'Corporate Debtor' who is arrayed as the third defendant in the DRT Proceedings was fully aware of the Terms of the OTS. * The liability of the Guarantor and the Principal Borrower is coextensive and therefore to contend that Admission on the Principal Borrower would not be treated as Admission on the part of the 'Corporate Debtor' is incorrect and contrary to Clauses 3, 5, 6, 9 & 10 of the Agreement. If Limitation qua the Principal Borrower is extended then Limitations qua the Guarantor is also extended automatically. Learned Counsel placed reliance on the Judgement of the Hon'ble Supreme Court in 'R. Lilavathi' Vs. 'Bank of Baroda & Ors.', ILR/987 Karnataka 964. * Under Clause 9 of the Guarantee Agreement, the Guarantee has been expressly made a continuing Guarantee and therefore as long as debt remains 'due and payable' by the Principal Borrower, the period of Limitation for enforcement of the Guarantee also remains alive. Learned Coun....
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....ayments and covenants. Clause 9: Guarantee shall remain in force till all the amounts are paid in full. (Continuing Guarantee). Clause 10: Guarantors' consent to the Creditor making any variance, change or modification that the Financial Creditor may think fit in terms of the Bank's contract with the Borrower and the Guarantors shall not be discharged if any arrangement is inconsistent with the Guarantor's rights and sureties. Further, the Guarantors waive all rights available to Sureties under Section 133, 134, 135, 139 and 141 of the Indian Contract Act." (Emphasis Supplied) 8. At this juncture we find it relevant to examine the coextensive liability of the Director and the Principal Borrower as provided for under Section 128 of the Indian Contract Act, 1872, which reads as follows: "128. Surety's liability - The liability of the surety is co- extensive with that of the principal debtor, unless it is otherwise provided by the contract." 9. It is also relevant to mention that since 2013, when the proceedings before DRT and SARFAESI Act, 2002, were initiated against the 'Corporate Debtor' and the Principal Borrower, the Guarantee has always....
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....8. Contracting out.-As a general rule, any person can enter into a binding contract to waive the benefits conferred upon him by an Act of Parliament, or, as it is said, can contract himself out of the Act, unless it can be shown that such an agreement is in the circumstances of the particular case contrary to public policy." This principle was reiterated in Lachoo Mal v. Radhey Shyam [(1971) 1 SCC 619] . 16. On the principles of continuing guarantee, the position was cleared by a decision of this Court in Sita Ram Gupta v. Punjab National Bank [(2008) 5 SCC 711] whereby it was held that it was not open to a party to revoke a guarantee when he had agreed to it being a continuing one and thus would be bound by the terms and conditions of the agreement executed at the time of entering into the guarantee. In the present facts and circumstances, we, therefore, do not find any difficulty in affirming the concurrent findings of the High Court and of the trial court on the point that the agreement executed for the purpose of a continuing liability despite the variation of terms of the contract and in the absence of a specific written document by Basavaraj (since deceased)....
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....ndants-1 to 3 as her agents. Therefore when she has specifically empowered defendants-1 to 3 to give consent, any consent given by defendants-1 to 3 would be binding on her. This is also the principle laid down in Dorothy Valentine Burnard v. William Douglas Lysnar. [AIR 1929 PC 273.] Therefore though she might not have been personally a party to the acknowledgment she on account of constituting defendants-1 to 3 as her agents, will be bound in law by the acknowledgment given by defendants-1 to 3. 10. Further the surety bond says that it is a continuing guarantee. If it is a continuing guarantee, the question of limitation urged now by defendant-4 will not crop up at all. This is the view taken by the Supreme Court in Mrs. Margaret Lalita Samuel v. Indo Commercial Bank Ltd. [(1979) 2 SCC 396 : AIR 1979 SC 102.] Therefore, the decree passed by the Court below does not suffer from any illegality." (Emphasis Supplied) 14. We place reliance on the Judgement of the Hon'ble Supreme Court in 'Dena Bank (now Bank of Baroda)' Vs. 'C. Shivkumar Reddy & Anr.', (2021) 10 SCC 330, wherein it is observed in paras 124, 126, 131, 133-136 & 139, as follows: "124. The f....
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....ted 3rd March 2017 proposing a One Time Settlement. This application was also allowed on 6th March 2021. The Adjudicating Authority, took into consideration the new documents and admitted the petition under Section 7 of the IBC. 135. Even assuming that documents were brought on record at a later stage, as argued by Mr. Shivshankar, the Adjudicating Authority was not precluded from considering the same. The documents were brought on record before any final decision was taken in the Petition under Section 7 of IBC. 136. A final judgment and order/decree is binding on the judgment debtor. Once a claim fructifies into a final judgment and order/decree, upon adjudication, and a certificate of Recovery is also issued authorizing the creditor to realize its decretal dues, a fresh right accrues to the creditor to recover the amount of the final judgment and/or order/decree and/or the amount specified in the Recovery Certificate. 139. Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of One Time Settlement of a live claim, made within the period of limit....
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....000 (Rupees Ten Lakhs only) to the Modern Hindustan Food Products Ltd., Poona, We, C.B. Samuel and M.L. Samuel, the undersigned do hereby jointly and severally guarantee to you, the Indo Commercial Bank Limited the repayment of all money, which shall at any time be due to you from the said Modern Hindustan Food Products Ltd., on the general balance of their accounts with you or on any account whatever such balances to include all interest, charges, commission and other expenses which you may charge as bankers and also the due payment at maturity of any promissory note or other negotiable instrument on the security or in respect of which any credit or advance shall be made. And we hereby declare that this guarantee shall be a continuing guarantee to the extent at any one time for Rs 10,00,000 (Rupees Ten Lakhs only) and shall not be considered wholly or partially satisfied by the payment at any one time or at different times of any sums of money due on such general balance of account but shall extend and cover and be a security for every and all further sums at any time due to you thereon. And we further declare that you may grant to the Modern Hindustan-Food Products Ltd.,....
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.... of the Code. Further Clauses 9 & 10 of the Deed of Guarantee specify that the Guarantee is a continuing one. We find it a fit case to consider the Recovery Certificate which has been issued by the Hon'ble DRT, Mumbai on 25.04.2016 and the second OTS dated 12.03.2018 and the part payment which has been made on 28.03.2018 read together with the warrant of attachment dated 20.06.2019 and the date of filing of the Petition dated 17.03.2022 we observe that the Section 7 Petition is not 'barred by Limitation'. 17. Keeping in view the terms of the Guarantee Deed and the ratio of the aforenoted Judgements, we are of the earnest view that 'OTS' is not a 'novation' of the original debt but is only to be construed as 'Terms of Settlement' offered and agreed upon by the Borrower to discharge its liability. The Guarantor is a direct beneficiary of the OTS. Having signed and accepted OTS proposal, the Appellant cannot now turn around and take a stand that the liability is not co-extensive or that the Guarantee was invoked only in 2013. We do not find this argument tenable as we hold that (a) it is a continuing Guarantee and (b) that it is not required for a continuing Guarantee to be invoked....