TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 1010
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....or 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. Declaration cum Undertaking dated 18.11.2011 executed by the Corporate Debtor for....
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....gned 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. 'Tempo Appliances Pvt. Ltd.', Company Appeal (AT) (Ins.) No.1005/2020 in support of his argument that mere obliga....
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....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 the Air India resulted in depriving the Appellants - workmen herein of their legal rights." 5. Submissions of the Learned Counsel appea....
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....ase 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 Counsel placed reliance on the Judgement of the Hon'ble Supreme Court in 'Margaret Lalita Samuel' Vs. 'Indo Commercial Bank Ltd.' (1979) 2 SCC 396, in support of his....
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....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 been admitted and has been invoked by the Assignor Bank. The aforenoted Clause 3 of the Deed of Guarantee specifies that an acknowledgement in writing by the Principal Borrower is to be treated as an acknowledgement in wr....
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....ent 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) revoking the guarantee, the guarantee stands and the legal representatives of the deceased are liable to repay the loan. 18. Now let us examine Section 62 of the Act which reads as follows: "62. Effect of novation, rescission and alteration of contract.-....
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....ot 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 finding of the NCLAT that there was nothing on record to suggest that the 'Corporate Debtor' acknowledged the debt within three years and agreed to pay debt is not sustainable in law, in view of the Statement of Accounts/Balance sheets/Financial Statements for the years 2016-2017 and 2017-2018 and the offer of One Time Settlement refer....
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....as 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 limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act. In Gaurav Hargovindbhai Dave (supra) cited by Mr. Shivshankar, this Court had no occasion to consider any proposal for one time settlement. Be that as it may, the Balance Sheets and Financial Statements of the Corporate Debtor for 2016-2017, as observed above, constitute acknowledge....
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....ances 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., any indulgence without discharging our liability." The guarantee is seen to be a continuing guarantee and the undertaking by the defendant is to pay any amount that may be due by the company at the foot of the general balance of its account or any other account whatever. In the case of such a continuing guarantee, so long as the account is a live account in the sense that it is not settled and there is no refusa....