Approval Of Resolution Does Not Absolve Guarantor; NCLT Mumbai Reiterates

Background Facts

Sejal Glass Limited (“Principal Borrower”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) vide an order dated 13.02.2019. Anchor Leasing Private Limited (“Financial Creditor”) was admitted into the Committee of Creditors (“CoC”) of the Principal Borrower and received an amount of Rs. 33.33 lakhs from the Principal Borrower pursuant to the approval the resolution plan by the Tribunal. The Financial Creditor had disbursed a loan of Rs. 10 crores to the Principal Borrower at an interest of 12% p.a. vide a Loan Agreement dated 11.08.2009. On the same date, a Deed of Guarantee and a Pledge Agreement was executed between Sejal Realty and Infrastructure Limited (“Corporate Debtor”), the Financial Creditor and the Principal Borrower vide which the Corporate Debtor guaranteed the loan amount of Rs. 10 crores and had also provided security for the same.

It was submitted by the Financial Creditor that the Principal Borrower failed to repay the loan amount of Rs. 15 crores on 30.06.2010. The Financial Creditor invoked the guarantee dated 11.08.2009 on 13.05.2021. It was submitted that the Principal Borrower admitted the outstanding amount in its balance sheet upto FY-2019.

On the contrary, the Corporate Debtor contended that the Financial Creditor already settled its claim by accepting the payments under the resolution plan. Thus neither does the debt survived nor the guarantee. Further, an amount of Rs. 19.12 crores had been repaid to the Financial Creditor against the loan of Rs. 10 crores which had discharged the Corporate Debtor of any obligations arising out of the Deed of Guarantee.

Findings of the Tribunal

It was observed by the Tribunal that during the CIRP process against the Principal Borrower, the Corporate Debtor voluntarily agreed to forego their right of subrogation against the successful resolution applicant which clearly showed that the liability of the Corporate Debtor as guarantor did not come to an end with the approval of the resolution plan . Further, there is no specific mention in the resolution plan that the liability of the guarantors of the Principal Borrower would come to an end with the approval of the plan. It was further reiterated that merely with the approval of the resolution plan against the Principal Borrower, the liability of the guarantor does not ipso facto come to an end. Reliance was placed on the Supreme Court judgment of Lalit Kumar Jain v. Union of India (Transferred Case (Civil) No. 245/ 2020).

It was however observed that the Financial Creditor advanced a loan of Rs. 15 crores to the Principal Borrower whereas the Loan agreement dated 11.08.2009 did not have any condition which stated that a loan amount of more than Rs. 10 crores could’ve been advanced to the Principal Borrower. Further, the Deed of Guarantee showed that the liability of the Guarantor was limited to the extent of Rs. 10 crores plus interest. It was held that the additional amount of Rs. 5 crores disbursed on 25.09.2009 constituted variance in terms and conditions of the Loan Agreement dated 11.08.2009. Thus as per Section 133 of the Indian Contract Act, 1872, the liability of the Corporate Debtor/Guarantor got extinguished.

With the aforesaid observations, the Tribunal dismissed the petition.

Case:Anchor Leasing Private Limited vs Sejal Realty and Infrastructure Limited

Case No. C.P. No. 889/(IB)-MB-V/2021

Counsels for the ApplicantsAdv. Pulkit Sharma a/w Adv. Vibha Joshi i/b Abhishek Adke

Counsel for the Respondent Adv. Shyam Kapadia, Adv. Rishir Daulat, Adv. Siddharth Nunes, Adv. Raj Adhia i/b. TRD Associates

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