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2026 (4) TMI 71
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....dia, State Bank of Hyderabad, Union Bank of India and the Indian Overseas Bank, who were individually referred, as to be the lenders are said to have extended financial assistance to M/s. Ennore Coke Limited (the Corporate Debtor), a public limited company, which stood incorporated thus with its legal status in accordance with the provisions of the Companies Act of 1956. As per the request made by the principal borrower/Corporate Debtor, the lenders are shown to have agreed for a disbursement of a sum of Rs. 36.45 Crores, with a return payable thereafter together with interest, cost, charges, expenses and all other amounts that would be falling due to be paid to the lenders. 3. The condition for disbursement of the loan was governed under conditions as expressed by the Financial Creditors, was that, the guarantor who was also the promoter of the Corporate Debtor would be bound to furnish the guarantee, thereby guaranteeing the due repayment of loan advances, by the borrower of the said amount as extended by way of financial assistance to the Corporate Debtor by the consortium of Financial Creditors, if the principal borrower (i.e., the Corporate Debtor) defaulted the re-payment ....
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....ection 95 of the I & B Code, 2016, stood initiated by the Financial Creditor, by filing the same before the Ld. Adjudicating Authority, contending thereof that, since there is an acknowledgement of debt due to be paid under the terms of the Guarantee Deed dated 10.02.2012, the proceedings of Insolvency Resolution Process (IRP) deserve to be initiated, as against the Appellant for the alleged apparent default. For the aforesaid purpose, the State Bank of India, through its Stressed Assets Management Branch, had submitted Form C, as contemplated under Rule 7 (2), of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, (hereinafter to be called as the Rules of 2019). 8. The Respondent is said to have issued a demand notice, in Form B, under Rule 7 (1) to Personal Guarantor demanding an amount due of Rs. 88,34,95,187.40/- as on 16.04.2018, which was determined to be along with interest and other charges as payable on it, with effect from 16.04.2018, till the date of the payment or realization. The Respondent No. 1, as per the contents of its Part IV of Form B dated 20.01.2020....
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....o the Corporate Debtor. If the terms of deed of guarantee dated 10.02.2012, to be read along with the aforesaid supporting documents, are considered that itself would fortify the fact that the Personal Guarantor of the Corporate Debtor, had candidly undertaken the factum of liability to be honored, in an event where the Corporate Debtor was determined as to be a defaulter, which happened so, in the instant case, as soon as the account was declared as an NPA on 28.10.2015. 11. The Corporate Debtor defaulted in timely remittance of its financial liabilities, and didn't maintain the books of accounts, and even had failed to comply with the terms and conditions of the sanction letter and due to Non- Performance of his undertaken liabilities under the contract of extension of financial assistance, the account was appropriately classified as to be an NPA. Consequentially the notices under Section 13 (2) of the SARFAESI Act, was also issued as against the principal borrower on 10.11.2016, as well as against the Guarantor, demanding a sum of Rs. 58,91,31,035.00/- plus interest payable on it as the amount due to be paid. It is because of that it necessitates the initiation of the pro....
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....or of the Corporate Debtor who had availed the loans from Respondent No. 1 / Petitioner bank, and in lieu thereof it had executed a common loan facility security document that is a joint hypothecation deed of 10.02.2012, and the Appellant had also contended, that he in the capacity of being the Chief Executive Officer of the Corporate Debtor, had entered into a Guarantee Agreement too as a Personal Guarantor in favor of the consortium, for a term loan of Rs. 50 Crores and Rs. 35 Crores pertaining to the letter of credits as, it was got issued. It was ultimately deduced by the Ld. Tribunal that despite having executed the Guarantee Agreement, he resigned from post of president & CEO, but he continued in the said capacity as whole time Director till 31.07.2013 and thereafter, continued as a Non-Executive Director till 31.03.2015. And it's the case of the Appellant that after cessation of his office with the Corporate Debtor, the default had chanced thereafter only in repaying the loan account after declaration of the same as NPA on 28.10.2015. 16. The Appellant contested the proceedings and primarily raised their objection from the viewpoint that the entire proceedings would be ba....
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....so an offer in the shape of a proposal given by the Corporate Debtor, acceptance of the repayment of dues, which was falling to be the subject matter of consideration in the process of One-Time Settlement proposal and in response thereto on 06.02.2017 the Financial Creditor had rejected the proposal. This proposal of restructuring of the loan and its consequential rejection on 06.02.2017 would provide continuity to the limitation as it has been attempted to be determined otherwise by the Appellant, construing the same from the date when the account was declared as an NPA, i.e., with effect from 28.10.2015. 20. We are of the view that, the acknowledgement made by the Corporate Debtor and its communication of the proposal of settlement made on 07.12.2016 will also provide a continuity, to debt, and not even that, when the Corporate Debtor despite the rejection of the offer by the orders of the Financial Creditor vide its letter dated 06.02.2017, had still persisted upon to resort to yet another process by submitting yet another proposal on 23.02.2017, wherein, the Corporate Debtor itself had requested the Financial Creditor for restructuring the debt once again, by making a refere....
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.... as referred to in the letter of 15.03.2017 and thus the intention of "without prejudice" used therein the letter of 15.03.2017 would be read as an exception to the admission of liability as it is being derived from the previous communications as referred to herein above. 22. The Ld. Counsel for the Appellant further submitted that the observations that has been made in the letter of 15.03.2017, seeking Bank's advice on any alternative mechanism for dispute resolution and requesting the NOC to be granted so as to enable the operation of the plant, that too will have to be read in exception owing to the language used in the letter of 15.03.2017, using the word "without prejudice", and the letter of 15.03.2017 itself cannot provide a continuity for exemption of limitation for the purposes of extension of benefit in the light of the provisions contained under Section 18 of the Limitation Act. For the reason being that, it has been interpreted by the Ld. Counsel for the Appellant that if the letter of 15.03.2017 is taken in its entirety, it only intends to seek permission to run the plant on a conversion basis, and request was to the bank for the approval of the proposal for mak....
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.... (b) the word "signed" means signed either personally or by an agent duly authorised in this behalf, and (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right." 24. If the said communication of 15.03.2017, is read with the preceding communications between the parties and particularly, when the communication of 15.03.2017 find reference to the last rejection, as made by the Corporate Debtor on 06.02.2017, and later proposal made on 23.02.2017 and thereafter has proceeded to make an observation with regards to the implication of the letter dated 07.12.2016 and while referring to the discussion of 15.03.2017 it was decided to make the payment of Rs. 0.50 Crore on sanction of the NOC that in itself will amount to be an admission of a liability and it was providing a continuity to the liability as it had arisen from the date of declaration of the account as to be a Non-Performing Asset. 25. The Ld. Tribunal, while referring to the letter of 15.03.2017, which has been tried to be read otherwise by the Appellant, arguing in the context that as if the said letter will not be providing a conti....
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....28.10.2015, that is, the date of declaration of the account of Corporate Debtor as NPA. Because most of the contents of the letter of 15.03.2017 was an admission of liability by the Corporate Debtor, which in turn would be an admission of liability by the Personal Guarantor also, in the light of the provisions contained under Section 128 of the Indian Contract Act, 1872 as it has been dealt with by the Hon'ble Apex Court in matter of Laxmi Pat Surana v. Union Bank of India & Anr. as reported in 2021 (8) SCC 481, and the relevant observations has been made therein. Observing thereof that, the moment the Principal Borrower commits default in paying the acknowledged debt, and further he acknowledges the debt due by the Principal Borrower and not the Guarantor, that would not absolve the Guarantor of its liability. The relevant paragraph 44 of the said judgment is extracted hereunder: - "44. In the present case, NCLT as well as NCLAT have adverted to the acknowledgments by the principal borrower as well as the corporate guarantor-corporate debtor after declaration of NPA from time to time and lastly on 8-12- 2018. The fact that acknowledgment within the limitation period was o....
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....on of limitation, we can ultimately conclude in the following manner: - I. All the communications that were made by the Corporate Debtor independently, making any effort for settlement of the amount by elongating the period that, would equally bind the Personal Guarantor in the light of the provisions contained under Section 128 of the Indian Contract Act. Hence, even if the Personal Guarantor is not a signatory of any expression of settlement given in the aforesaid communications made by the Corporate Debtor, that would equally bind him in the light of Section 128 of the Indian Contract Act. Thus, for all practical purposes the limitation has to be determined with effect from 15.03.2017, thus the determination, which has been made on the aspect of limitation by the impugned order doesn't suffer from any apparent error. 31. On the aspect of limitation, it was the case of the Financial Creditor that the persistent and admitted communications, between the Corporate Debtor, as well as the Personal Guarantor, each of the communications thereafter would be giving birth to a fresh reckoning of the limitation to the payability of the loan liability on the Personal Guaranto....
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....al creditor. That however, needs to be exercised within three years when the right to sue/apply accrues, as per Article 137 of the Limitation Act. This is the effect of Section 18 of the Limitation Act. In that, a fresh period of limitation is required to be computed from the time when the acknowledgment was so signed by the principal borrower or the corporate guarantor (corporate debtor), as the case may be, provided the acknowledgment is before expiration of the prescribed period of limitation. Thus, the conclusion reached [Union Bank of India v. Surana Metals Ltd., 2019 SCC OnLine NCLT 9859] by NCLT and affirmed [Laxmi Pat Surana v. Union Bank of India, 2020 SCC OnLine NCLAT 217] by NCLAT on the basis of the asservation in the application under Section 7 IBC, read with the relevant undisputed correspondence, is a possible view." 33. In the light of the observation made by the Hon'ble Apex Court and the ratio propounded therein para 48 Laxmi Pat Surana (Supra), the judgments of the Hon'ble Supreme Court of India and the letters of 07.12.2016, 23.02.2017 and 15.03.2017 of the Corporate Debtor, which are to be treated as an acknowledgement of debt for the purposes of determining....
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.... "12. Both these factors, acknowledgment of debt in the balance-sheet as well as in the one-time settlement proposal, have been considered by the National Company Law Appellate Tribunal while dismissing the appeal. The relevant portion of the National Company Law Appellate Tribunal findings, after considering balance-sheet entries and one-time settlement letter are as follows [ See page 635 of 251 Comp Cas.] : "The company's balance-sheet is prepared in the statutory format as per Schedule III to the Companies Act, 2013, which does not provide for giving the specific name of every secured or unsecured creditor. It is further observed that the corporate debtor has not denied that there are no outstanding dues to the UCO Bank. A perusal of extract of register of charges submitted with the Registrar of Companies, at serial No. 3, shows that a charge of rupees one hundred and seventy-five crores created by the corporate debtor has not been satisfied and remains outstanding... In the instant case, we also find that the corporate debtor issued a letter dated June 7, 2016 (annexure A page 11 of their reply affidavit of respondent No. 1) wherein it ha....
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....is a matter of interpretation which is capable of variation according to usage in the profession. It seems to me that, no issue of public policy being involved, it would be wrong to say that the words were given a meaning in 1889 which is immutable ever after, bearing in mind that the precise question with which we are concerned in this case did not arise in Walker v. Wilsher [(1889) 23 QBD 335 (CA)] and the court did not deal with it. I think that the wide body of practice which undoubtedly exists must be treated as indicating that the meaning to be given to the words is altered if the offer contains the reservation relating to the use of the offer in relation to costs." "34. Yet again in Rush & Tompkins Ltd. v. Greater London Council [(1988) 1 All ER 549 : 1989 AC 1280 : (1988) 2 WLR 533 (CA)] it was held: (All ER pp. 551g- 552b) "The rule which gives the protection of privilege to 'without prejudice' correspondence 'depends partly on public policy, namely the need to facilitate compromise, and partly on implied agreement' as Parker, L.J. stated in South Shropshire DC v. Amos [(1987) 1 All ER 340 : (1986) 1 WLR 1271 (CA)] (All ER at p. 343, WLR at p. 1277). The ....
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....s 'without prejudice' which also indicate that the order of the Collector was not final and irrevocable. The term 'without prejudice' has been defined in Black's Law Dictionary as follows: 'Where an offer or admission is made "without prejudice", or a motion is denied or a bill in equity dismissed "without prejudice", it is meant as a declaration that no rights or privileges of the party concerned are to be considered as thereby waived or lost, except insofar as may be expressly conceded or decided. See, also, Dismissal without prejudice.' Similarly, in Wharton's Law Lexicon the author while interpreting the term 'without prejudice' observed as follows: 'The words import an understanding that if the negotiation fails, nothing that has passed shall be taken advantage of thereafter; so, if a defendant offers, "without prejudice", to pay half the claim, the plaintiff must not only rely on the offer as an admission of his having a right to some payment. The rule is that nothing written or said "without prejudice" can be considered at the trial without the consent of both parties - not even by a judge in determining whether or not there is goo....
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.... The aspect of irrevocability of the bank guarantee, by the person, by way of personal guarantee was considered by the Hon'ble Apex Court in the matters of Sita Ram Gupta v Punjab National Bank and Others as reported in 2008, Volume 5, SCC, Page 711, whereas in Para 7, 8 and 10 of the judgment, which are extracted hereunder: - "7. We have carefully examined the submissions made on behalf of the parties and also the relevant clauses in the agreement of guarantee. In our view, the High Court was perfectly justified in holding that the appellant was liable to pay the decretal amount to the Bank in view of the clause, as mentioned herein earlier, in the agreement of guarantee itself. The agreement of guarantee clearly provides that the guarantee shall be a continuing guarantee and shall not be considered as cancelled or in any way affected by the fact that at any time, the said accounts may show no liability against the borrower or may even show a credit in his favour but shall continue to be a guarantee and remain in operation in respect of all subsequent transactions. This was an agreement entered into by the appellant with the Bank, which is binding on him. Therefore, the q....
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....oan was advanced to Defendants 1 to 4 and 6, he was not liable to pay the decretal amount as a guarantor to the Bank as his guarantee had already stood revoked. In this view of the matter, we are not in a position to accept the submissions of the learned counsel for the appellant and we hold that in view of the nature of guarantee entered into by the appellant with the Bank, the statutory provision under Section 130 of the Act shall not come to his help. The findings arrived at by the High Court while deciding the first appeal were that the amount shown due in the accounts of the Bank against the appellant and the defendants was neither cleared by the defendants nor by the appellant. Therefore, even if a letter was written to the Bank by the appellant on 31-7-1980 withdrawing the guarantee given by him, it was contrary to the clause in the agreement of guarantee, as noted herein earlier. Therefore, it was not open to the appellant to revoke the guarantee as the appellant had agreed to treat the guarantee as a continuing one and was bound by the terms and conditions of the said guarantee. For this reason, it is difficult to accept the submissions of the learned counsel for the appel....
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....e, unless it is procedurally made as part of record, enabling an opportunity to avail one opportunity to rebut its contents. 42. The second question, which has been pressed upon by the Ld. Counsel for the Appellant, with regards to the aspect of limitation, we are of the considered view that the answer exists as it has been extended by the Ld. Tribunal in the impugned order of determining it from the date of the correspondence dated 15.03.2017 that was lastly made, acknowledging the liability and payability of amount and that has been rightly interpreted by the Ld. Tribunal by observing that, the contents of the document, i.e., letter 15.03.2017, is to be read in its entirety, particularly when the Corporate Debtor, who was attempting to restructure the loan it will amount to be an admission of liability and any communication thus made in furtherance to it would be read as a communication on behalf of the Corporate Debtor also. In that eventuality, the aspect of limitation as decided by the Ld. Tribunal, does not suffer from any apparent error calling for any interference? 43. A very peculiar argument has been was raised by the Appellant at this stage, and for first time, tha....
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....er Section 23 of the Evidence Act. An exception has been attempted to be carved out by the Learned Counsel for the Personal Guarantor on the ground that, when a proposal by the Corporate Debtor for restructuring of the loan has been sent on 07.12.2016 to the Financial Creditor, which has been argued to be an acknowledgement of the liability by the Corporate Debtor and also the proposal of the Corporate Debtor for the repayment of the said dues through an OTS proposal. It was submitted by the Appellant that the letter of 15.03.2017 or a restructuring proposal of 07.12.2016 was an exclusive communication, which was made by the Corporate Debtor addressed to the Financial Creditor, which does not acknowledges the liability on part of the Corporate Debtor. Hence, it cannot be said that the observations which have been made in those two communications of 07.12.2016 and 15.03.2017 would be amounted to be the acknowledgement of debt for the purposes of attracting Section 18 of the Limitation Act. 46. And based upon the aforesaid fact, the Appellant contended that the period of limitation is required to be calculated from 07.12.2016, because of which the limitation would be expiring on 0....