TaxTMI 
TaxTMI 
2026 (7) TMI 17
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....cation and manufacturing of structural metal products, tanks, reservoirs, steam generators and henceforth. 3. The Corporate Debtor was in dearth of finances and to meet up its operational needs, it applied to Respondent No.1, the Financial Creditor in 2019, for sanction of term loan and working capital facility totalling Rs. 39.60 crore, which was sanctioned vide the letter of sanction dated 13.05.2019. It is an admitted case of the Appellant, as per the stand taken by him in the counter filed before the Ld. Adjudicating Authority that the name of the Appellant did figure in the aforesaid letter of sanction of loan to the Corporate Debtor. It can be witnessed from the said sanction letter dated 13.05.2019 that, the Appellant had been a signatory to it, as per the description of the signatories to the said letter and that the Appellant had described himself as Guarantor. The relevant portion of the letter of sanction is extracted below: - Note: The extracted part herein below has been received from the e-mail of the Ld. Counsel for the Appellant. "I / We accept all the terms and conditions which have been read and understood by me/us. Accepted (-sd-) Furnace Fabric....
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....ursed thereafter, in favour of the Corporate Debtor, it has been done on an assurance by the Appellant as a Personal Guarantor as portrayed in the sanction letter of 13.05.2019 and that, the same has been admitted as per the contents of the counter filed by the Appellant before the Ld. NCLT and even as per the pleading raised before the Ld. NCLT. That being the case, the Appellant cannot resile away and take a contrary stand that, he was not a valid executant of the personal guarantee deed, on the basis of which the proceedings under Section 95 of the I & B Code, 2016 have been initiated in the instant case. 7. The admitted facts of the case are that the Corporate Debtor, under the strength of the sanction letter dated 13.05.2019, was extended with a term loan and a working capital facility in the year 2019, amounting to a total sum of Rs. 39,60,00,000/- vide the sanction letter dated 13.05.2019, which stood secured by the personal guarantors, which were described as Mr. Riaz Basheeruddin, Mr. Abdul Basheeruddin and Mr. Badri Bholenath Prasad (i.e., the Appellant herein). A loan agreement document was also executed on 13.05.2019, followed by a corresponding execution of a deed o....
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....(a) and (b) is necessary because the Appellant had never endeavoured, at any stage of the proceedings, to address upon the terms and conditions of the guarantors under the loan agreement document, as it has been referred to under clause 8(b) of the loan agreement dealing with the guarantees. 8. More importantly, the impugned order makes reference to yet another significant document for the purposes of consideration of the liabilities of the personal guarantors, which is the letter of guarantee executed yet again on 13.05.2019. If it is taken into consideration, as appended by the Appellant along with the memorandum of appeal, an undertaking has been recorded therein under clause 16 (i) to (xii) and clause 17 detailing the liability of the guarantors and the Appellant admittedly is the signatory to the same, which is a fact not denied and which stands confirmed on account of the signature of the Appellant appearing therein, describing him as to be Guarantor No.1. The relevant extract of endorsement of the letter of guarantee is given hereunder: - 9. When the Corporate Debtor committed a default in remittance of the loan liability in terms of the loan agreement, the account of ....
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....ing the impugned order. However, in the entire pleading raised by the Appellant before the Ld. Tribunal, the fact of extension of loan, the fact of the loan amount having been defaulted and the fact of execution of the letter of guarantee and the loan agreement is an admitted fact and therefore, the Appellant cannot now shy away from the liabilities arising out of those documents. Further, as regards the contention that the proceeding would stand vitiated in the absence of there being a prior report by the RP as per Section 99 of the I & B Code, 2016, it is important to point out at this juncture itself, that this is not the limb of argument either pleaded, raised or argued by the Appellant before the Ld. Tribunal and that it is being raised for the first time before this Appellate Tribunal. How far could it be appreciated at this stage would be yet another question to be considered, for the reason being that the question as raised qua the effect of the RP's report under Section 99 of the I & B Code, 2016, is a mixed question of fact and law and therefore, it ought to have been agitated by the Appellant at the first available opportunity at the stage when the proceedings were being....
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....e debtor shall not be entitled to dispute the validity of such debt. (4) For the purposes of examining an application, the resolution professional may seek such further information or explanation in connection with the application as may be required from the debtor or the creditor or any other person who, in the opinion of the resolution professional, may provide such information. (5) The person from whom information or explanation is sought under sub-section (4) shall furnish such information or explanation within seven days of receipt of the request. (6) The resolution professional shall examine the application and ascertain that- (a) the application satisfies the requirements set out in section 94 or 95; (b) the applicant has provided information and given explanation sought by the resolution professional under sub-section (4). (7) After examination of the application under sub-section (6), he may recommend acceptance or rejection of the application in his report. (8) Where the resolution professional finds that the debtor is eligible for a fresh start under Chapter II, the resolution professional shall submit a repo....
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....meet the object of Section 99 of the I & B Code, 2016, which intends to establish the liability of the personal guarantor through the report of the RP before Ld. NCLT proceeds to decide on admission of Section 95 application by passing the necessary orders under section 100 of the Code and therefore, absence of the report of RP to be submitted under Section 99 of the Code will not vitiate the proceedings under consideration. 17. The aforesaid distinction as regards to the non-applicability of the ratio as propounded in the judgment of Central Bank of India (supra) has been made, for the reason being that, the necessity of the report under Section 99 of the I & B Code, 2016, is only for the purposes of facilitating the Adjudicating Authority to come to a conclusion about the existence of debt and default, and about the liability of the personal guarantor. We are of the view that, the said principle may not be directly made applicable in the instant case, particularly, when the facts that have come on record, as well as the evidence itself were sufficient enough to establish the existence of debt and default, which in itself was sufficient to attract Section 95 of the I & B Code, ....
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....presented to the RP or collected by him under the powers conferred upon him to call for records and evidence. 20. The aforesaid basic elements of debt and default stood satisfied, when the account was initially declared as to be an NPA on 16.12.2022, the fact of which was not denied by the Appellant. Declaration of the account as an NPA itself is sufficient proof of existence of debt and default, justifying the act of initiation of proceedings under Section 95 of the I & B Code, 2016. Secondly, when the Appellant himself according to the documents already referred to herein, admits his status to be that of a guarantor and when the very factum of existence of debt and status of Appellant being a guarantor, stands established due to the factors that were taken into consideration, including the records when the account was declared as to be an NPA, the Appellant cannot now be permitted to contend that he is not liable to discharge the guarantee in the absence of the report of RP. The admission of the Appellant regarding his status of a guarantor in itself as evident from the loan sanction letter and from the letter of guarantee is sufficient to initiate proceedings under Section 95....
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....estioned the propriety of these documents which he had admittedly signed, exhibiting his status as a personal guarantor. Admitting of the signatures is admission of the document itself and liabilities flowing from it. Now contending that signing of those documents was under duress appears to be an articulated realization, which cannot be accepted now, as the said contention should have been made by the Appellant within a reasonable time frame from the dates of execution of the said documents and he should not have waited till the account was declared as to be an NPA, resulting into initiation of various proceedings including the proceedings under Section 95 of the I & B Code, 2016. Having not done so and having not questioned the document, the Appellant cannot be permitted now to contend that he signed the said documents under duress. 23. The proceedings under Section 95 of the I & B Code, 2016, stood instituted as back as on 18.04.2023, in which the Appellant was noticed. The Appellant contends that, on account of the fact that there were other proceedings which were already filed by the Appellant and were pending consideration and the outcome of which would have an impact on h....
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....entation of the loan transactions outlining the terms and conditions of the credit facilities, in which the Appellant admits his status as to be that of a personal guarantor. Signing of the loan sanction letter and the letter of guarantee demonstrates an explicit consent of guarantee to the loan by the Appellant, the personal guarantor, obligating him to the terms and conditions of the loan and the terms and conditions of the guarantors, which has been expressed in the letter of guarantee. 25. For the aforesaid reasons, since the default is established and the status of the Appellant being the guarantor is too established, invocation of Section 95 of the I & B Code, 2016, doesn't suffer from any apparent error, which could call for any interference by this Appellate Tribunal. Hence, the company appeal lacks merit and the same is accordingly 'dismissed'. All interlocutory applications, if any, would stand 'closed'. ============= Document 1 TATA documents and Ti such line same may ba canceled whoif any prior nadon." This sanction shall stand rovoked and cascaded without any notice if there are roatesisi changos is the Bcerower's financial performance, Any maise al ....