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2026 (1) TMI 329
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.... Creditor of M/s Dream Procon Private Limited (Corporate Debtor), despite the existence of a valid and enforceable corporate guarantee extended by M/s Dream Procon Private Limited for a loan advanced to Indirapuram Habitat Center Private Limited (IHCPL). 2. The Appellant contends that its claim arises from the corporate guarantee, and hence constitutes a "financial debt" under Section 5(8)(i) of the Code. The rejection of its claim, without adequate reasoning and without appreciating the legally binding guarantee agreement, has necessitated the filing of the present appeal Brief Facts 3. Brief facts of the case are given below: (i) The Appellant is engaged in the business of providing financial services. The Appellant is the Financial Creditor of the Corporate Debtor. The Appellant is a wholly owned subsidiary of SMC Global Securities limited and is registered with the Reserve Bank of India as a non-deposit taking systematically important non-banking finance company. (ii) On 20.05.2015, the Appellant granted a loan of Rs. 5,00,00,000/- to the Corporate Debtor, M/s Dream Procon Pvt. Ltd., for the construction of a real estate project titled "Victory Ace" l....
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....n), which was accepted and is not in dispute in the present appeal. (xi) On 20.10.2020, the Appellant filed a fresh claim in Form C with the Respondent (RP of Dream Procon Pvt. Ltd.) for Rs. 14,59,89,580/-, arising from the corporate guarantee executed by the Corporate Debtor in favour of the Appellant to secure the loan advanced to IHCPL. (xii) On 13.11.2020, the Respondent rejected the Appellant's claim, citing that the debt was not disbursed to the Corporate Debtor and hence did not qualify as "financial debt" under Section 5(8) of the IBC. (xiii) The Appellant responded to this rejection through an email dated 01.12.2020, asserting that the guarantee obligations of the Corporate Debtor are co-extensive with those of the principal borrower under Section 128 of the Indian Contract Act, 1872. (xiv) Despite repeated follow-up emails, the Respondent did not reverse the decision, prompting the Appellant to file IA No. 767 of 2021 on 27.01.2021 before the Adjudicating Authority, seeking directions to admit its claim for Rs. 14.59 crores as a financial debt. (xv) By Order dated 05.12.2023, the Ld. Adjudicating Authority dismissed IA No. 767 ....
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....vestments Ltd. v. SREI Infrastructure Finance Ltd., [(2025) 1 SCC 456]', particularly at para 26, and 'Laxmi Pat Surana v. Union of India, [(2021) 8 SCC 481]', at paras 31 and 32. In both these cases, Hon'ble Apex Court has clearly held that the absence of disbursement to the guarantor does not preclude a financial creditor from initiating proceedings against the corporate guarantor under the Code. Hence, the Appellant qualifies as a financial creditor. 7. Ld. Counsel for the Appellant draws attention to the Report of the Insolvency Law Committee dated 20.02.2020, wherein it has been emphasized that the right to pursue simultaneous remedies against both the principal borrower and the guarantor is fundamental to the nature of a contract of guarantee. The Committee also recommended that creditors must be permitted to file claims in the CIRP of both the principal borrower and the guarantor. Counsel accordingly submits that the Appellant cannot be denied the right to submit its claim in the CIRP of the Corporate Debtor merely because a claim has also been filed in the CIRP of Indirapuram Habitat Centre Pvt. Ltd. (IHCPL). 8. Further, it is submitted by Ld. Counsel that the Committ....
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....or understanding intended to secure payment or performance of any obligation. The MLA constitutes such an arrangement and Clause 28 therein satisfies the statutory test of financial debt. 14. He submitted that the absence of a separate document titled "deed of guarantee" does not dilute the Corporate Debtor's liability. Judicial precedents consistently emphasize that courts must consider the totality of the agreement, the conduct of the parties, and surrounding circumstances to determine whether a guarantee exists. In the present case, all such elements point to a clear understanding that the Corporate Debtor was a guarantor. 15. Counsel for the Appellant submits that the nature of the transaction must be assessed holistically. The MLA was executed to facilitate a loan to IHCPL, and the Corporate Debtor's agreement to act as guarantor is expressly recorded therein. The execution of the MLA and Clause 28 unequivocally establish the Corporate Debtor's liability. The argument regarding the absence of a separate deed is merely hyper-technical and undermines the substance of the transaction. 16. Ld. Counsel submitted that the Term Sheet, when read together with Clause 28 of the....
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....05.12.2023 passed in I.A. No. 767 of 2021 in CP(IB) No. 1771/ND/2018, rightly upheld the said rejection, holding that the Appellant is not a financial creditor of the Corporate Debtor. The said order is legally sustainable and does not warrant any interference. 22. Ld. Counsel for the Respondent submits that the primary issue involved in the appeal is whether the Respondent correctly rejected the Appellant's claim of Rs. 14,59,89,580/- as a financial creditor of the Corporate Debtor. In this regard, counsel submits the following: a) That no corporate guarantee was ever executed by the Corporate Debtor in favour of the Appellant. Despite repeated assertions, the Appellant has failed to place on record any duly executed deed of guarantee by the Corporate Debtor. The foundation of the Appellant's claim thus collapses. b) That Clause 28 of the Master Loan Agreement, relied upon by the Appellant, does not constitute a binding guarantee deed. Moreover, there exists no Board Resolution of the Corporate Debtor authorizing any of its promoters to execute a corporate guarantee in favour of the Appellant. c) That the sanction letter issued by the Appellant to Ind....
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....e earlier claimed deed, does not fulfil the statutory requirement for an enforceable guarantee. Under Sections 3(31) and 3(33) of the IBC, counsel submits that security interest must be based on actual executed documents and not on vague references or intentions. 27. Ld. Counsel places reliance on the judgments of this Appellate Tribunal in 'Unity Small Finance Bank Ltd. v. Sripatham Venkatasubramanian Ramkumar & Ors., Comp. App. (AT) (Ins.) No. 601 of 2024 (Paras 20, 24)'; and 'M/s. Star Maxx Properties v. Arunava Sikdar & Anr., Comp. App. (AT)(Ins.) No. 338 of 2024 (Paras 5, 31, 32)' to assert that only formally executed documents can constitute a valid security interest. 28. Ld. Counsel for the Respondent submits that the Appellant has not produced any evidence to show that the alleged guarantee was ever invoked before the commencement of CIRP. Clause 28 of the MLA contemplates a first demand guarantee, yet no such demand has been raised upon the Corporate Debtor. 29. Ld. Counsel further submitted that in law, an uninvoked guarantee cannot constitute financial debt. The Counsel relies on the following judgements of Hon'ble Supreme Court and this Appellate Tribunal in th....
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....olution Plan for the Corporate Debtor has already been approved by the Committee of Creditors with a vote share of 90.66% during the 11th CoC meeting held on 07.05.2021. Entertaining the Appellant's claim at this belated stage would disrupt the settled commercial wisdom of the CoC, and jeopardize the approved resolution plan, contrary to established jurisprudence. 36. In light of the above submissions, counsel for the Respondent prays that this Tribunal may dismiss the present appeal with exemplary costs, as it is devoid of merit, factually misleading, legally untenable, and constitutes an abuse of the process of law. Analysis and Findings 37. We have heard the Ld. Counsels for both the parties in great detail. We have gone through the records of the case including the written submissions of both the parties. 38. Based on the submissions of both the parties we frame the following 3 issues for adjudication: I. Whether a valid and enforceable corporate guarantee has been executed by the Corporate Debtor, and if so, has it been invoked; II. Whether the Appellant's claim, is barred by limitation under the Code; and III. Whether the Appellant's cla....
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....l borrower is not a corporate person. Similarly, the Appellant cites State Bank of India v. Athena Energy Ventures Pvt. Ltd., Company Appeal (AT)(Insolvency) No. 633 of 2020, and also relies upon Hon'ble SC's Judgement in BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd., (2025) 1 SCC 456 to reinforce the legal proposition that a valid guarantee constitutes a financial debt under Section 5(8)(i) of the Code. 42. The Respondent, however, disputes the very existence of a legally valid corporate guarantee. It is submitted that while the Appellant initially referred to a "Deed of Guarantee dated 22.04.2016" in its Form C claim, no such deed was ever produced before the Adjudicating Authority or this Tribunal. The Respondent points out that the Appellant has now entirely abandoned that position and instead relies solely on Clause 28 of the MLA. It is contended that such a clause, appearing within a tripartite loan agreement, does not constitute a formal guarantee and lacks the characteristics of an enforceable security instrument. Crucially, the Respondent highlights that there is no Board Resolution or any other corporate authorization by the Corporate Debtor permitt....
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....ipt of the aforesaid amounts by the Moneywise to its satisfaction." 44. This deed dated 22-04-2016 having aforesaid para 3 has neither been produced before NCLT nor before us. The Appellant has now dropped that contention without explanation. It is well settled that guarantees are not lightly inferred in corporate law; they must be shown by either formal execution or unequivocal documentation, especially in insolvency proceedings where competing claims affect the rights of multiple stakeholders. 45. We now have a look at the Master Loan Agreement. The aforesaid agreement is an agreement between 6 parties Moneywise Financial Services as lender; Indirapuram habitat Centre Pvt. Ltd as Borrower; and 4 Guarantors viz Mr. Pramod Goel; M/s Dream Procon Pvt. Ltd; M/s Victory Infra Projects Pvt. Ltd; and M/s Victory Infratech Pvt. Ltd. We now have a look at the clause 28 of the MLA, which is extracted below: Clause 28 of MLA "Guarantee 28. In consideration of Moneywise granting Loan Facility to the Borrower under this Agreement. the Guarantor, on request of the Borrower, unconditionally guarantees due and timely repayment of all Loan Amount according to its ....
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....h authorization is fatal. In insolvency law, the courts have taken a strict view that a financial creditor must demonstrate the basis of its claim through formal instruments that clearly establish the obligation and its enforceability. Hon'ble Supreme Court in Anuj Jain, Interim Resolution Professional of Jaypee Infratech Ltd. v. Axis Bank Ltd., (2020) 8 SCC 401, emphasized that financial debts under Section 5(8) must be evidenced by legally valid documentation and that any debt not recorded through a demonstrable instrument could not qualify. 47. In this context, it is also relevant to consider the conduct of the Appellant. The Appellant's in NCLT relied on Deed of Guarantee dated 22.04.2016, but could not produce the document before NCLT or before this Appellate Authority. Now before us they have taken the plea of Clause 28 of the MLA, an agreement which has 6 parties including 4 guarantors. The Clause 28 also clearly provides for invocation of the Guarantee, which clearly has not been done by the Appellant. At this stage failure to press its claim under Clause 28 initially, and its belated reliance on it only after being unable to produce the alleged deed of guarantee, casts ....
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....leged guarantee. Issue II: Whether the Appellant's claim is barred by limitation under the Code 50. The Appellant contends that the claim in question arises from an ongoing contractual obligation in the nature of a corporate guarantee and that the limitation for enforcing such a claim must be calculated from the date of default, which in this case is post-2019. The Appellant also asserts that the claim was submitted well in advance of the final approval of the resolution plan by the Adjudicating Authority and, therefore, should not have been dismissed on procedural grounds alone. It is further submitted that mere delay in filing the claim, absent malice or fraud, ought not to bar a creditor from asserting a legitimate financial claim, especially when the underlying transaction is genuine and enforceable. The Appellant seeks to invoke the broad principle laid down by the Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors., (2020) 8 SCC 531, to argue that the procedural timelines in the IBC should not override substantial rights and that the resolution process must be inclusive rather than overly rigid. 51. On the other hand....
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....ndow for admitting claims after the public announcement, provided they are submitted before approval of the resolution plan by the CoC. However, even within this discretionary framework, the claimant must demonstrate diligence, good faith, and absence of prejudice to other stakeholders. None of these factors appear to favour the Appellant in the present case. 54. The Appellant was not a dormant or unaware creditor. It had already submitted a claim for a different transaction in October 2019, acknowledging the existence and schedule of the CIRP. Its failure to file the present claim within the permitted time cannot be attributed to lack of knowledge or external impediments. No explanation-let alone a legally sustainable one- has been offered to justify a delay of 388 days. Even assuming that the Appellant only became aware of its right to enforce the corporate guarantee subsequently, it could have sought directions from the Adjudicating Authority or filed the claim with a proper explanation. It did neither. 55. The IBC is not designed to accommodate open-ended, hydra-headed claims that emerge unpredictably after the CoC has performed its commercial function. In this regard, th....
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....at creditors should be allowed to file claims in both CIRPs without fear of duplicity, and that any recovery made in one proceeding would reduce the corresponding amount claimed in the other. The Appellant further submits that a demand for payment i.e., invocation of the guarantee was not necessary prior to the Insolvency Commencement Date (ICD) because the guarantee was a "first demand guarantee" and the default of IHCPL in repaying the loan was sufficient to trigger liability of the guarantor, Dream Procon. In support of its position, the Appellant relies on the judgments of the Hon'ble Supreme Court in 'Laxmi Pat Surana v. Union of India, (2021) 8 SCC 481' and the NCLAT's decision in 'State Bank of India v. Athena Energy Ventures Pvt. Ltd., Company Appeal (AT)(Insolvency) No. 633 of 2020', both of which confirm that insolvency proceedings can be initiated against corporate guarantors even in the absence of direct disbursal of funds to them, and that a valid guarantee suffices to create financial creditor status. 59. The Respondent on the other hand emphasizes that the Appellant had already submitted the very same claim of Rs. 14.59 crores in the CIRP of IHCPL, the principal b....