TaxTMI 
TaxTMI 
2025 (11) TMI 608
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....nt Bank for initiating insolvency resolution of the Appellant-Personal Guarantor. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant-Shri Subhash Aggarwal. 2. The relevant facts of the case which are necessary to be noticed for deciding the matter before us are as outlined below: • The Appellant-Subhash Aggarwal had joined the Corporate Debtor-M/s J.V. Strips Ltd. as an Executive Director on 01.09.2008. • During his tenure in the Corporate Debtor company, the Appellant had signed a personal guarantee on 25.08.2009 in favour of State Bank of India-Respondent No.1 for a credit facility of Rs. 41.25 Cr. extended to the Corporate Debtor. The Appellant had stood as a guarantor to the tune of Rs. 3.84 Cr. only. • The credit facility was further renewed and enhanced by the Respondent Bank on 07.06.2010 for Rs. 47.75 Cr.; on 23.10.2010 for Rs. 57.50 Cr.; and on 12.10.2011 for Rs. 51 Cr. • The Appellant purportedly resigned from the Directorship of the Corporate Debtor on 13.02.2012. The resignation letter is claimed to have been uploaded on the website of the Registrar of Companies. However, the res....
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....d a notice under Section 13(2) of the SARFAESI Act, 2002 on 15.03.2019. The Appellant responded to the said notice on 02.05.2019 denying the execution of any of the loan documents having already resigned from the Corporate Debtor company. The Respondent Bank also filed an OA before the Debt Recovery Tribunal which led to issue of summons to the Appellant. • The Appellant filed a police complaint on 09.06.2019 against the Corporate Debtor and the Respondent Bank for commission of forgery and fabrication in collusion with each other in the letters of renewal/extension of credit facilities and personal guarantee. • The Respondent Bank addressed a communication to the Appellant on 16.07.2019 seeking a notarized asset and liability statement to which the Appellant responded on 24.07.2019 stating that having resigned from the Corporate Debtor company and not having signed any loan documents, he was not in a position to provide any such accounts statement. • On 29.07.2019, the Respondent Bank issued a Loan Recall cum Demand Notice ("LRDN" in short) inter alia to the Appellant seeking discharge of liabilities to the tune of Rs. 68.86 Cr. The Appellant....
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....ppellant-Personal Guarantor. • Aggrieved by the impugned order, the present appeal has been filed by the Appellant. 3. Making his submissions, Shri Abhijeet Sinha, Ld. Senior Advocate for Appellant submitted that the Appellant had only signed the Guarantee Deed dated 25.08.2009 for an amount of Rs. 3.84 Cr. only and was never a signatory of any facility renewal/enhancement thereafter. Emphatically asserting that the liability of the Appellant was only restricted to the Guarantee Deed of 25.08.2009, it was contended that the non-invocation of the Guarantee Deed of 2009 vitiated the entire insolvency resolution process qua the Appellant. As the Guarantee Deed of 25.08.2009 had not been invoked by the Respondent Bank, no liability stood fastened on the Appellant. It was also denied that the Guarantee Deed of 25.08.2009 was a continuing guarantee. It was contended that Clause 8 of the 2009 Guarantee Deed limited the continuance of the guarantee to the amount mentioned in Clause 1 of the guarantee and did not cover the subsequent facilities extended by the Respondent Bank. Hence the impugned order which held the 2009 Guarantee Deed to be irrevocable and continuing is not....
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....r without invocation of the Guarantee Deed of 2009, there was no due that could be claimed against the guarantor. Therefore, since the Deed of Guarantee of 2009 to which the Appellant was a signatory had not been invoked, no default in terms of Section 3(12) of IBC can be said to have occurred. 6. It was further pointed out that the present Section 95 petition was time- barred and not maintainable. Reliance was also placed on the judgment of the Hon'ble Supreme Court in Babulal Vardharji Gurjar Vs Veer Gurjar Aluminium Industries Pvt. Ltd. (2020) 15 SCC 1 in which it has been held that the IBC does not intend to give a new lease of life to time-barred debts. The Deed of Guarantee of 2009 not having been invoked, the period of limitation of three years in terms of Article 137 of the Limitation Act stood surpassed. Further, since the default had occurred on 25.07.2018 which was the date of NPA and the Section 95 application was filed on 26.05.2022, the application was beyond three years and hence time-barred. Attention was adverted to the decision of this Tribunal in Jagdish Prasad Sarda Vs Allahabad Bank in CA(AT)(Ins) No. 183 of 2020 wherein it has been held that the period of l....
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....documents after his resignation, the Appellant nevertheless continued to remain liable to the credit limits granted under the sanction letter dated 12.10.2011 which preceded the resignation. Even this much of admission is sufficient for admission of the Appellant in the insolvency resolution process under IBC. In support of their contention reliance has been placed on the judgment of the Hon'ble Supreme Court in Sitaram Gupta Vs Punjab National Bank (2008) 5 SCC 711 and in H.R. Basavaraj Vs Canara Bank (2010) 12 SCC 458 in which it was held that when a party enters into a guarantee with a bank which is in the nature of continuing guarantee, the guarantee was to continue and remain in operation for all subsequent transactions. The plea taken by the Appellant of novation of contract following the execution of the Supplemental Deed of Guarantee of 2014 was opposed as misconceived. 10. It was also pressed that all the requirements as set out under Section 95 of the IBC read with Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019 had been complied with by the Resp....
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....he same loan transactions which stem from the Guarantee Deed of 2009 onwards having been already admitted, the Appellant standing on the same footing as the other three guarantors, cannot be seen to claim any differential treatment. 13. We have duly considered the arguments advanced by the Learned Counsel for the parties and perused the records carefully. 14. It is the case of the Appellant that he had only signed the Guarantee Deed dated 25.08.2009 for an amount of Rs. 3.84 Cr. which Guarantee Deed had not been invoked by the Respondent bank. The Section 95 petition on the other hand had been filed by the Respondent Bank on the basis of renewal/enhancement of the credit facility for which a Supplementary Agreement of Loan and a Deed of Guarantee was entered into on 28.01.2014. These documents had not been signed by the Appellant but were forged and fabricated documents submitted by other directors of the Corporate Debtor in collusion with the Respondent Bank. Thus, this Supplementary Agreement could not be made the basis for making a demand on the Appellant who was not party to the Supplementary Agreement. Submission was therefore pressed that the Appellant cannot be held li....
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....the deal. In the present case, it was contended that since the alteration made in the subsequent guarantees were substantially material as it enhanced the guaranteed amount without the consent of the Appellant, the Appellant stood discharged under the Guarantee Deed of 25.08.2009 and Section 95 petition could not have been initiated basis the Guarantee Deed of 25.08.2009. 16. Per contra, it is the contention of the Respondent Bank that the it is an admitted fact that the Guarantee Deed of 2009 was signed and executed by the Appellant. Even if the Appellant's contention that he was not liable for facilities sanctioned after 2012 post his resignation, the liability of the Appellant as a guarantor would undeniably continue to the extent of the amount guaranteed under the Guarantee Deed of 2009. Hence, the liability of the Appellant in respect of the Guarantee Deed of 2009 which was clearly before the resignation of the Appellant was to continue unhindered. It was further contended that the terms of this Guarantee Deed clearly spell out that the Guarantee Deed would remain unaffected by any subsequent variations and that on demand being made, the guarantor was liable to honour the s....
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....demnified the Bank against all losses of the said principal sum, interest or other monies due and all costs charges and expenses whensoever which the Bank may incur by reason of any default on the part of the Borrower. ..... 8. The guarantee herein contained is a continuing one and amounts advanced by the Bank to the Borrower in respect of or under aforesaid credit facilities as also for all interest costs and other monies which may from time to time become due and remain unpaid to the Bank thereunder and shall not be determined or in any way be affected by any account or accounts opened or to be opened by the Bank becoming nil or coming into credit at any time or from time to time or by reason of the said account or accounts being closed and fresh account or accounts being opened in respect of fresh facilities being granted within the overall limit Sanctioned to the Borrower. ..... 11. The guarantee shall be irrevocable and enforceable against the Guarantors notwithstanding any dispute between the Bank and the Borrower. 12. The Guarantors affirm confirm and declare that any balance confirmation and/or acknowledgment of debt and/or admis....
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....asis supplied) 18. That that the Deed of Guarantee of 2009 was a "continuing" guarantee which was "irrevocable" in nature is evident from a plain reading of Clauses 8 and 11 of the Guarantee Deed. Further when we look at Clause 14 it is amply clear that the terms of the Guarantee Deed of 2009 provided scope for subsequent variations. Thus, when the clauses of Guarantee Deed of 2009 by itself provided that it was to remain unaffected by subsequent variations, the guarantor was liable to honour the variations also on demand being made. Hence the future variations remained binding on the Appellant. 19. We are therefore not inclined to agree with the skewed and selective reading of the clauses by the Appellant that that Clause 8 of the 2009 Guarantee Deed limited the continuance of the guarantee only to the amount mentioned in Clause 1 of the guarantee and that it did not cover the subsequent facilities extended by the Respondent Bank and therefore the Guarantee Deed of 25.08.2009 was not in the nature of a continuing guarantee. 20. Reliance has been placed by the Respondent bank on the judgements of the Hon'ble Supreme Court in Sitaram judgment and Basavraj judgment supra to ....
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....fit and protection of the individual in his private capacity which may be dispensed with without infringing any public right or public principle. In Halsbury's Laws of England, Vol. 8, 3rd Edn., it has been stated in Para 248 at p. 143 as under: "248. 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. Statutory conditions may, however, be imposed in such terms that they cannot be waived by agreement, and, in certain circumstances, the legislature has expressly provided that any such agreement shall be void." 9. In Brijendra Nath Bhargava v. Harsh Wardhan it has been observed at p. 461 in para 10 that if a party had given up the advantage he could take of a position of law, it was not open to him to change and say that he could avail of that ground. The same principle has been followed in Bank of India v. O.P. Swarnakar. 10. Keeping this principle in mind, we now look at the clause in....
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.... future transactions. The Appellant cannot be seen to reason out that he was not bound by the transactions emanating out of the Guarantee Deed of 2009 as this deed was of a continuing nature and would remain operational even for subsequent transactions. All guarantees after the Guarantee Deed of 2009 were supplemental in nature and would not change the legal status of the Appellant as a Personal Guarantor nor would it extinguish his liability as a guarantor. The plea of novation of contract taken by the Appellant is misconceived as novation of contract can take effect only with the consent of all the parties. No such consent or mutual agreement has been placed on record by the Appellant. The Basavraj judgment supra has held in no uncertain terms that it was not open to a party to revoke a guarantee when the party 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. The plea taken by the Appellant that the Sitaram judgment and Basavraj judgment supra are not applicable since those judgments were prior in time to the promulgation of IBC and because they did not involve any enh....
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....uted the signing and execution of renewal and enhancement of facility documents dated 07.06.2010, 23.10.2010 and 12.012.2011 which were all subsequent to the Guarantee Deed of 2009 but prior to his resignation. Thus, even if for arguments sake, we are to agree that the Appellant did not sign or execute any documents after his resignation, the Appellant will nevertheless continue to remain liable to the credit limits granted under the sanction letter dated 12.10.2011. Even this admission is sufficient for admission of the Appellant in the insolvency resolution process under IBC. The liability of the Appellant can willy nilly be fixed with reference to the Deed of Guarantee signed on 25.08.2009. The liability for discharge of the surety prior to resignation remains unaffected and default thereof forms sufficient basis for admission of Section 95 petition. We also notice that even when the account of the Corporate Debtor was classified as NPA on 25.07.2018, the Appellant had admittedly only sought copies of documents of renewal/extension of credit facilities after 13.02.2012 but did not seek documents before the date of resignation. This means that the Appellant did not dispute any of....
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....uments to be clearly in continuation of documents executed under the 2009 Guarantee Deed. The Guarantee Deed of 2009 being the principal guarantee, on which foundational document, the Supplementary Agreement rested, non-mention of the Guarantee Deed of 2009 did not render the Form-B and Form-C defective. The Demand Notice issued by the Respondent Bank as well as the Section 95 petition both referred to the Supplemental Deed of Guarantee which was based on the continuing Deed of Guarantee of 2009. 29. The grant of loan facilities to the Corporate Debtor by the Respondent Bank and in consideration thereof, the execution of the Deed of Guarantee of 2009 by the Appellant is a factum not in dispute. No material has been placed on record to substantiate discharge of the Appellant in respect of the above guarantee obligation tendered by the Appellant. We also cannot be unmindful of the fact that the Respondent Bank in their objections filed before the Adjudicating Authority on the initial report of the RP filed under Section 99 of IBC had clarified that the Respondent Bank had not been in a position to produce the Guarantee Deed of 2009 as the same was not readily traceable because thi....
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....-barred since the Appellant stood discharged from the Deed of Guarantee of 2009 cannot be accepted. The Deed of Guarantee of 2009 was a continuing guarantee and no proof or substantiation of revocation of the same has been placed on record. We are also not amenable to subscribe to the view taken by the Appellant that the debt was time-barred for it was filed beyond the three years period since declaration of NPA. It is well settled law that the date of default cannot be strictly interpreted to be the date of NPA. The date of default in terms of Section 3(12) of the IBC means non-payment of a debt which has become due and payable whether in whole or any part and is not paid by the Corporate Debtor or the guarantor. The expression used is 'default' and not the date of notifying the loan account of the corporate person as NPA. In the present case, the date on which the debt fell due was shown as 29.07.2019 in Form-B and the date of default shown as 05.08.2019. The Section 95 application having been filed on 26.05.2022 fell very much within the three-year period. 32. Yet another contention has been made that the RP is not permitted to submit multiple reports and yet the RP was allow....