Claims Based On Uninvoked Guarantee Cannot Be Admitted By Resolution Professional: NCLAT

Brief Facts:

The CIRP against the Corporate Debtor commenced by order dated 10.10.2019. Publication in the newspaper inviting claims from creditors was issued on 16.10.2019. Last date of submission was 26.10.2019.

The CD has executed a corporate guarantee in favor of the Respondent on November 11, 2014 by which financial assistance provided by the Respondent in favor of the farmers was secured.

On 18.09.2020, the Respondent- Sustainable Agro-Commercial Financial Ltd. invoked the guarantee dated 13.11.2014 and asked the corporate debtor to make the payment. On 24.09.2020, the Corporate Debtor informed the Respondent of initiation of CIRP against the corporate debtor and asked the Respondent to file its claim before the Resolution Professional.

In the CIRP of the Corporate Debtor, the CoC approved the Resolution Plan on 13.09.2021. Commercial Financial Ltd. submitted a claim in Form C dated 13.10.2021 to the Resolution Professional claiming an amount of Rs.1,14,57,536/- for non-payment of agreed repayment of loan by the corporate debtor in pursuance of the corporate guarantee dated 13.11.2014.

The claim of Commercial Financial Ltd. having not been admitted, an IA was filed by the Commercial Financial Ltd. being IA No.886 of 2022 dated 04.05.2022 seeking direction to accept the claim of the Commercial Financial Ltd. and for adding the claim in the Resolution Plan.

The IA filed by the Respondent was opposed by the Resolution Professional by filing the reply to which rejoinder was also filed by the Respondent. Adjudicating Authority after hearing the parties by order dated 17.02.2023 allowed the IA No.886 of 2022. Aggrieved by the order passed by the Adjudicating Authority in IA No.886 of 2022, this Appeal has been filed by erstwhile Resolution Professional.

Contentions:

The appellant submitted that the Respondent having invoked the guarantee only on 18.09.2020 i.e. subsequent to initiation of CIRP on 10.10.2019, the claim filed by the Respondent could not have been entertained in the CIRP.

It was also argued that the provision of Section 14 of the IBC prohibited the Respondent to enforce its security by invoking the guarantee. Invocation itself being in breach of Section 14 of the IBC, claim could not have been accepted by the IRP.

It was further submitted that no claim was submitted by the Respondent before approval of the Resolution Plan by the CoC. Letter dated 23.10.2020 which was sent by the Respondent cannot be treated to be any claim. Claim was submitted by Respondent only on 13.10.2021 that too in incorrect form.

Per contra, the respondent submitted that no sooner the breaches were committed by the principal borrowers in the year 2017, the liability of corporate debtor based on the guarantee arose and there was no need for invocation of guarantee to make the corporate debtor liable.

It was also argued that the language of Section 14 of the IBC does not say that Respondent cannot invoke a guarantee. Invocation of guarantee does not tantamount to institution of legal proceeding. If the Respondent would have filed the proceeding for invoking guarantee then Section 14 will come into play.

Observations:

The tribunal at the outset observed that the purpose and object of Moratorium is to save the corporate debtor from any future liability which may arise after initiation of CIRP against the Corporate Debtor and to protect its assets for purposes of resolution.

It noted that in IDBI Trusteeship Services Limited vs. Mr. Abhinav Mukherji & Anr.(2022) the NCLAT held that “this Tribunal is of the earnest view that the Appellants cannot Claim the amounts in the CIRP of the 'Corporate Debtor' who is a 'Corporate Guarantor' on the basis of the Deed of Guarantee which was never invoked as on the date of filing of the Claims.”

In the above judgment, the NCLAT further observed that when the 'Corporate Debtor' is a 'Guarantor' and when the 'Corporate Guarantee' has never been invoked prior to the commencement of the CIRP, as on the date of filing of the Claims, the 'Right to Payment' has not accrued.

In Edelweiss Asset Reconstruction Company Ltd. vs. Orissa Manganese and Minerals Ltd. 2019, the NCLAT observed that the rejection of the claim for the purpose of collating the claim and making it part of the “resolution plan” will not affect the right of the appellant “Edelweiss Asset Reconstruction Ltd.” to invoke the bank guarantee against the “corporate debtor” in case the “principal borrower” failed to pay the debt amount, the “Moratorium” period having come to an end,

The above judgment of the NCLAT was not approved by the Supreme Court in Ghanshyam Mishra and Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Limited (2021).

It noted that the view taken by the NCLT in SBI v. Orissa Manganese & Minerals Ltd. (2018) that the guarantee could not have been invoked after initiation of the CIRP was upheld by the Hon'ble Supreme Court in Ghanshyam Minsra (Supra) after noticing the submission of Counsel for EARC relying on the judgment of this Tribunal in Export Import Bank of India v. JEKPL (P) Ltd. Resolution Professional (2018).

The tribunal also noted that “this Tribunal in “IDBI Trusteeship Services Limited” (supra) after noticing all the judgments of this Tribunal as well as the judgment of the Hon'ble Supreme Court in “Ghanshyam Mishra and Sons Pvt. Ltd.” (supra) has taken the view that on the basis of uninvoked guarantee prior to initiation of the CIRP, no claim can be admitted.”

It also said that when the Respondent having invoked the guarantee on 18.09.2020 i.e. subsequent to initiation of the CIRP, on the basis of said invocation no claim could have been accepted in the CIRP.

The tribunal concluded that “the Respondent could not have invoked the guarantee given by the corporate debtor on 18.09.2020. The said invocation cannot be base for any claim to be admitted in the CIRP it having not matured.”

Case Title: Ankur Kumar Versus Sustainable Agro-Commercial Financial Ltd.

Case Number: Company Appeal (AT) (Insolvency) No. 484 of 2023

Date of Judgment: 06/02/2025

For Appellant: Mr. Shubhangda Singh and Mr. Anshuj Dhingra, Advocates

For Respondent: Mr. Murtaza Najmi, Mr. Vinod Sharma, Ms. Aqsa Tajuddin & Mr. Vinod Sharma, Advocates

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