TaxTMI 
TaxTMI 
2022 (10) TMI 1013
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.... against Jotindra Steel and Tubes Limited (for short hereinafter referred to as the 'respondent/corporate debtor'). The petition is signed by Mr.Lalit Rankawat, who has been authorized by Board Resolution dated 20.03.2020 (Annexure 1) and the affidavit verifying the contents of the application is on page 18-19 of the petition. 2. The corporate debtor, namely, Jotindra Steel and Tubes Limited, is a company incorporated on 16.03.1970 under the Companies Act, 1956, having CIN L27104HR1970PLC005240 and its registered office is at 14/3, Mathura Road, Faridabad, Haryana. Therefore, the matter falls within the territorial jurisdiction of this Adjudicating Authority. Copy of master data of the corporate debtor is at Annexure 2 of the petition. 3. The brief facts, as stated in the petition, are that the petition is being filed against M/s Jotindra Steel and Tubes Limited, who is a corporate guarantor to its associate company M/s Mauria Udyog Limited (for short hereinafter referred to as 'borrower'), who had obtained credit facilities from the applicant to the tune of Rs.17,50,000/- (Rupees Seventeen Crores Fifty Lacs only) through Loan Account No.4329TL0100000035, by way of Sanction Lette....
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....by the respondent/corporate debtor that it never stood as Corporate Guarantor to the loan facility granted to the borrower by the financial creditor and no contract of guarantee was ever executed by the respondent. Further, it is stated that a 'letter of comfort' in issue is a document signed by an individual, is undated and is not supported by an authentication of the Board of Directors and no resolution was ever passed by the Board of Directors in support of the said letter of comfort, or to provide any guarantee which conforms Contract of Guarantee under the Contract Act. 6. It is also stated that the petitioner/financial creditor has filed the present petition alleging itself as a 'financial creditor', however, it does not fall under the definition of the financial creditor as the document in issue i.e. the letter of comfort provided by an individual person, can never conform a 'financial debt' for the respondent/corporate debtor, as is defined under the Code. Further, it is stated that sanction letter to advance loan to the borrower, expressly points out two different documents, which are/were required to be executed included: i.) The corporate guarantee of Strawberry Star ....
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....her stated in the reply that the sanction letter dated 22.08.2017 specifically mentions (at internal page 4 of the sanction letter) that 'confirmation from the guarantor that the issuance of the guarantee complies with the provisions of Section 185 and other application provisions of the Companies Act, 2013 (applicable in case of the corporate guarantee)'. However, in case of the respondent/corporate debtor no such confirmation was ever sought by the petitioner/financial creditor and can never be provided keeping in view the bar to provide corporate guarantee by respondent/corporate debtor against the loan borrowed by the borrower. According to the respondent, Section 185 of the Companies Act bars providing loans and guarantees by a company to any director or to 'any other person where the director is interested'. Reliance has been placed on the explanation (d) and (e), mentioned in Section 185, which provides that 'to any other person in whom director is interested' means any body corporate at a general meeting of which not less than twenty five percent of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; and/or....
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....ed contract obligation. In support of this argument, learned counsel for the petitioner has placed reliance on Lucent Technologies Versus ICICI Bank; 2009 SCC OnLine Del 3213, wherein Hon'ble Delhi High Court after placing reliance upon decision of Australian Courts reported at Banque Brussels Lompart S.A. (BBL) versus Australian National Industries reported at (1989) 21 NSW LR 502, held as under:- "xxxx xxxx xxxx xxxx the whole thrust of the law today is to attempt to give proper effect to commercial transactions. It is for this reason that uncertainty, a concept so much loved by lawyers, has fallen into disfavour as a tool for striking down commercial bargains. If these statements are appropriately promissory in character, courts should enforce them when they are uttered in the course of business, and there is no clear indication that they are not intended to be legally enforceable." xxxx xxxx xxxx xxxx So far as the letter of comfort is concerned, the Court laid down the following principles which give valuable guidance on the subject. The Learned Chief Justice of Australia held that:- "1. In determining whether a letter of comfort gives rise to contractual obligat....
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....s undated, was issued by an individual and there is support of the resolution of the Board of Director(s) to that effect, which is violative of Section 179(3)(f) and Section 185 of the Companies Act, 2013. Copies of number of resolutions passed by the Board of Directors, have been placed on record through IA No.474/2022 but there is no such resolution passed by the Board of Directors of the respondent corporate debtor for authorizing the person signing this letter of comfort as to be a guarantor on behalf of Jotindra Steel and Tubes Limited, for availing credit facilities by the borrower. The said letter also does not bear stamp/seal of the respondent-company/corporate debtor. 17. Lastly, it is argued by learned counsel for the respondent/corporate debtor that the alleged letter of comfort cannot be read in evidence because it is not properly stamped under the Indian Stamp Act. More so, as per the sanction letter dated 22.08.2017 (Annexure 5), it is mentioned at page 36 that two different documents were required to be executed i.e. corporate guarantee of Strawberry Star India Pvt. Ltd. and letter of comfort from the respondent/corporate debtor. Therefore, according to learned coun....
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....ties i.e. i) 'surety' ii) 'principal debtor' and iii) 'creditor'. In the case in hand, the said letter of comfort cannot be termed as letter of contract of guarantee because it is neither signed by the creditor nor by the borrower and to the contrary, the sanction letter dated 22.08.2017 is signed by all the three i.e. creditor, borrower and guarantor. More so, there is no evidence placed on record to show that the said letter of comfort was signed in pursuance of any resolution passed by the Board of Directors of the respondent/corporate debtor. Thus, it can be safely said that the said letter of comfort, if any, issued, is not in conformity with the provisions of Section 179(3)(f) and Section 185 of the Companies Act, 2013. Even if at the time of issuing no dues certificate in favour of Jotindra Steel and Tubes Ltd., respondent/corporate debtor, for its own loan account by the bank/financial creditor, if there is any reference of such liability created by the present undated letter of comfort then it is of no consequence as document itself is not valid. No doubt, there can be two guarantors for a single loan facility or cash credit facility, but this fact should have been fairly ....