TaxTMI 
TaxTMI 
2026 (1) TMI 54
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....on filed by the Central Bank of India admitting the Corporate Debtor/Corporate Guarantor into the rigours of Corporate Insolvency Resolution Process ("CIRP" in short). Aggrieved by the impugned order, the present appeal has been preferred by the Appellant- suspended Director of the Corporate Debtor. 2. The relevant facts which are required to be noticed for deciding the present matter before us are as follows: • The Central Bank of India and other banks as a consortium had extended credit facilities to M/s Superfine Metal Pvt. Ltd. ("SMPL" in short) as the Principal Borrower. The said loan was inter alia secured by M/s Superfine Extrusions Pvt. Ltd. ("SEPL" in short) as one of the Corporate Debtor/Corporate Guarantor. • A sanction letter dated 27.11.2013 was issued by Central Bank of India wherein certain credit facilities were sanctioned to the Principal Borrower. • On 22.08.2015, a Corporate Guarantee deed was executed by the Corporate Debtor-SEPL guaranteeing payment to the Central Bank of India Consortium for a principal sum not exceeding Rs. 73.61 Cr. • Another Corporate Guarantee Deed was executed on 18.11.2016 by the Cor....
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....d not have been relied upon by the Adjudicating Authority since these Guarantee Deeds were insufficiently stamped documents. Being insufficiently stamped, it was contended that these documents were inadmissible in evidence and should have been impounded in terms of Sections 33 and 34 of the Maharashtra Stamp Act. As the Guarantee Deeds were not stamped appropriately, the said deeds did not constitute a contract and therefore not enforceable in law under the Indian Contract Act. In support of their contention, reliance has been placed on the judgment passed by the Hon'ble Supreme Court of India in M/s N.N. Global Mercantile Pvt. Ltd. Vs M/s Indo Unique Flame Ltd. & Ors. in Civil Appeal Nos. 3802-2803 of 2020; Avinash Kumar Chauhan Vs Vijay Krishna Mishra MANU/SC/8502/2008 and Hindustan Steel Ltd. Vs Dilip Construction Company MANU/SC/0474/1969 in which judgments the Hon'ble Supreme Court held that unstamped documents cannot be acted upon unless the defects are cured. It was asserted that these defects were not rectified prior to invocation of these aforementioned guarantee deeds and hence the guarantee was unenforceable. 4. Submission was pressed that subsequent to the execution ....
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....ing the above contention of the Appellant, it was asserted that non-invocation of the guarantee dated 06.11.2020 was not material since the Corporate Debtor still remained bound by the guarantees which were executed on 22.08.2015 and 18.11.2016. Hence, the Section 7 petition was pretty much maintainable basis the invocation of guarantee of 22.08.2015 and 30.11.2016 and no error was committed by the Adjudicating Authority in admitting the Section 7 application filed by the Respondent Bank. 7. It was emphatically asserted that all that the Adjudicating Authority is required to look into in a Section 7 application is the issue of debt and default. Since the Appellant has not disputed the liability arising out of the discharge of the guarantee obligations in respect of the debt of the Principal Borrower qua the Respondent Bank nor denied the incidence of default, the admission of the Section 7 application by the Adjudicating Authority was in consonance with the statutory provisions of the IBC and in conformity with the judicial precedents of the Hon'ble Supreme Court. 8. We have duly considered the arguments advanced by the Learned Counsel for the parties and perused the records ....
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....of Guarantee made on this 22nd day of August 2015 by SUPERFINE EXTRUSION PVT LTD, a company incorporated under the Companies Act 1956 and having its registered office at 'Pratibha', 1267 Dalmandai, Ahmednagar hereinafter referred to as the Guarantors which expression shall unless repugnant to context or meaning thereof be deemed to include its successor and assigns in favour of Central Bank of India Consortium represented by Central Bank of India as Lead Bank as defined in the working capital consortium agreement dated 22nd August 2015 (hereinafter referred to as Lead Bank which expression shall unless repugnant to the context or meaning thereof be deemed to include the Central Bank of India and other consortium member banks constituting the Central Bank of India Consortium from time to time or each of them or any one or more of them and their respective successor and assigns) whereas in terms of the working capital consortium Agreement dated 22nd August 2015 and Joint Deed of Hypothecation dated 22nd August 2015 executed by SUPERFINE METALS PVT LTD, a company within the meaning of the Companies Atc 1956 and having its registered office at 'Pratibha', 1267 Dalmandai....
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....in making payment, the Corporate Guarantor-SEPL shall forthwith on demand pay to the Central Bank of India amount not exceeding Rs. 73.61 Cr. It is also clear from the language employed in the above Guarantee Deed that the guarantee could be invoked either by the consortium or any of the members. Thus, no bar was placed on individual constituent member of the consortium to proceed with invocation of the guarantee on a default committed by the Principal Borrower. 13. The subsequent Guarantee Deed dated 18.11.2016 reads as follows: "This Deed of Guarantee made on this 18th day of November 2016 by SUPERFINE EXTRUSION PVT LTD, a company incorporated under the Companies Act 1956 and having its registered office at 'Pratibha", 1267 Dalmandai, Ahmednagar hereinafter referred to as the Guarantors which expression shall unless repugnant to context or meaning thereof be deemed to include its successor and assigns in favour of Central Bank of India Consortium represented by Central Bank of India as Lead Bank as defined in the working capital consortium agreement dated 18th November 2016 (hereinafter referred to us Lead Bank which expression shall unless repugnant to the contex....
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.... then due to the Central Bank of India consortium in respect of the above mentioned credit facilities and shall indemnify and keep indemnified the Central Bank of India consortium against all losses of the said principal sum, interest or other money due and all cost, charges and expenses whatsoever which the Central Bank of India consortium may incur by reason of any default on the part of the borrower. (Emphasis supplied) 14. Clause 1 of the Guarantee Deed dated 18.11.2016 also clearly stipulated that if at any time default is made by the borrower in making payment, the guarantors shall forthwith on demand pay to the Central Bank of India amount not exceeding Rs. 92.47 Cr. Like in the Guarantee Deed of 22.08.2015, the language employed in the present Guarantee Deed also provided that the guarantee could be invoked either by the consortium or any of the members. Thus, no bar was placed on the Respondent No.1 Bank to proceed with invocation of the guarantee on a default committed by the Principal Borrower. 15. Now that we have noticed the Deeds of Guarantee, we now come to the Guarantee Deed of 06.11.2020 which is based on sanction letters dated 26.12.2019 and 09.09.2020. T....
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.... taken, kindly give your comments/ justification for routing operations through current a/c instead of CC a/c. Kindly comply with all the Terms & Conditions and convey your acceptance of the above mentioned Terms & Conditions duplicate copy of this letter for our record. RAVI KANT CHIEF MANAGER" (Emphasis supplied) 17. The other sanction letter dated 09.09.2020 by which an amount of Rs. 3,16,90,762/- has been sanctioned under FITL Scheme provides as follows: BR/AHMPOO/2020-21/FITL/01 Date:09.09.2020 TO: M/S SUPERFINE METALS PVT. LTD. PRATIBHA 1267 DALMANDAI AHMEDNAGAR-414001 MAHARASHTRA Dear Sir, REG: SANCTION OF FITL With reference to your application for FITL SCHEME, We have examined your application based on the application submitted by you and We are pleased to inform you sanction of FITL SCHEME on terms and conditions mentioned in this sanction letter. 1. Name of the Borrower M/S SUPERFINE METALS PVT. LTD. 2. Address PRATIBHA 1267 DALMANDAI AHMEDNAGAR-414001 MAHARASHTRA 3. Purpose of Loan Deferment of interest in working capital facility. 4. Lo....
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..... Ltd. for which corporate debtor has provided corporate guarantee dated August 22, 2015 and November 18, 2016, and Board Resolution dated August 21,2015 Rs. 66,21,05,008/- (Rupees Sixty-Six Crore Twenty-One Lakh Five Thousand and Eight Only). Nature of Facility A/C No. Amount Disbursed (Rs.) Cash Credit 3056432616 54,27,45,208.00 Term Loan 3305046620 5,06,70,198.00 FITL 3852802470 3,16,90,762.00 Cash Credit Adhoc 3793059834 3,69,98,840.00 Total 66,21,05,008/ A copy of the disbursement schedule of the principal borrower is hereto annexed and marked as Annexure D. 2. AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED (ATTACH THE WORKINGS FOR COMPUTATION OF AMOUNT AND DAYS OF DEFAULT IN TABULAR FORM) Total Amount of debt in default from the Corporate Debtor is Rs. 94,71,23,119.18/- (Rupees Ninty Four Crore Seventy One Lakh Twenty Three Thousand One Hundred and Nineteen and Eighteen Paisa Only) The breakup of the said defaulted amount is as under- Nature of Facility A/C No Amount Disbursed (Rs.) Cash Credit 3056432616 77,85,36,496.00 Term Loan 3305046620 6,68,45,....
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....06.11.2020 is as follows: "WHEREAS AT THE REQUEST OF THE BORROWER- which is the Group Company of the Guarantor and also on the request of the Guarantor, which is the Group Company of the Borrower, THE LENDER agreed in principle to lend and advance to the Borrower the Term Loan (Hypothecation) facility aggregating to Rs. 114.22 Crores (Rs. Rupees One Hundred Fourteen Crores Twenty Two Lacs only), hereinafter referred to as the said Facilities as the context admits, on the terms and conditions mentioned in its respective Sanction Letter dated 24.06.2019, 22.01.2020, 21.09.2019 & 12.08.2020 and also other agreements and security documents entered into between the Borrower and THE LENDER (hereinafter referred to as "the said agreements")" 21. Guarantee Deed of 06.11.2020 was executed by Corporate Guarantor in favour of the Financial Creditor for Term Loan of Rs. 114.22 Cr. Further, the Consortium Agreement which was executed on 06.11.2020 between the parties clearly mentions that it was not to affect existing securities. Thus, the reading of the Guarantee Deed of 06.11.2020 does not indicate that it takes away the existing securities. 22. We may now have a look at the No....
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.... Thousand One Hundred and Nineteen and Eighteen Paisa) exclusive of other charges, and we hereby invoke the corporate guarantee and call upon you to pay the said amount within 10 days from the date of this notice, failing which we have been instructed to initiate the legal proceeding including but not limited to appropriate legal actions under the provisions of Insolvency & Bankruptcy Code, 2016. The cost of the notice being INR 25,000/- are a lien on you. Please note. Hence, the notice. Yours sincerely, (ABHAY KULKARNI) MANAGER Ahmednagar." 23. Now we proceed to answer the question as to whether there was a novation of contract between the parties which necessitated invocation of Guarantee Deed of 06.11.2020 to render the Section 7 application maintainable. We notice that even though sanction letters were issued on 26.12.2019 and 09.09.2020 for Ad- Hoc Limit and FITL by the Respondent Bank in respect of which the Appellant- Corporate Debtor/Corporate Guarantor had given a guarantee on 06.11.2020, the sanction letters had clearly mentioned that the securities which were covered in the guarantees dated 22.08.2015 and 18.11.2016 were to continue....
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....red their property which had been mortgaged to secure the loan sanctioned to the Principal Borrower, they have no ground to raise this plea to contend that the Guarantee Deed suffered from any infirmity. The Corporate Guarantee Deed being exempt from payment of stamp duty under Section 4 of the Maharashtra Stamp Act, the objection of the Appellant that the Guarantee Deeds were insufficiently stamped in terms of the provisions of the Maharashtra Stamp Act is untenable. 27. Before we answer the question about the inadmissibility of the Guarantee Deed on account of insufficient stamping, it may be worthwhile to notice the Stamp Duty Exemption Certificates in possession of the Principal Borrower and the Corporate Guarantor. The Stamp Duty Exemption Certificate of the Principal Borrower which has been produced on record by the Respondent Bank in their Additional Affidavit reads as follows: Date: 10 SEP. 2007 CERTIFICATE M/s Superfine Metal Pvt. Ltd., Plot No. E-29 & E-39 M.I.D.C. Supa, Tal- Parner, District-Ahmednagar situated here for proposed new industries, this unit is certified as New Project as per Government Order No. Mudrank/2007/Pra.Kra. -196(1)/M-1, dated 12/....
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.... was not availed by the Appellant, the validity of the document cannot be ignored, discarded or wished away by them now. 30. We also notice that the Principal Borrower had sworn an affidavit affirming that they have with them a Stamp Duty Exemption Certificate which is applicable for bank loan agreements and that, if necessary, they would pay in case stamp duty was payable by them. This letter is as extracted below: "Superfine Metals Pvt Ltd has received 100% stamp duty exemption certificate No B-22234 from Directorate of Industries. The stamp duty exemption certificate is applicable for bank loan agreements and documentations. We hereby undertake that in case stamp duty is payable on the agreements executed by us, we shall pay the stamp duty immediately along with penalty if any thereon." For Superfine Metals Pvt Ltd Director Date: 06.11.2020 Place: Ahmednagar 31. We are of the view that that insufficiently stamped Deed of Guarantee is a curable defect and the onus to cure the same was on the Principal Borrower or the Corporate Guarantor as it was their obligation to pay the stamp duty. Furthermore, we find that the Principal Borrowe....