NCLAT (23.04.2019) Edelweiss Asset Reconstruction Company Limited vs. Orissa Manganese and Minerals Limited & Ors..[CA (AT) (Insolvency) No. 437 of 2018] Question before the bench was whether a creditor can file a claim in the CIRP of Corporate Guarantor, without invoking guarantee, in other words when the claim has not matured.
NCLAT held; “In this background, the claim having not matured in absence of alleged default on the part of the ‘Principal Borrower’ and for non-invocation of the Bank Guarantee, the Appellant- ‘Edelweiss Asset Reconstruction Limited’ claim cannot be accepted.”
Excerpts of the Order;
# 10. In this appeal, the Appellant- ‘Edelweiss Asset Reconstruction Company Limited’ has raised claim against non-inclusion/ rejection of its proof of claim as ‘Financial Creditor’ and thereby, including it as a member of the ‘Committee of Creditors’ of the ‘Corporate Debtor’.
# 15. Further, the case of the Appellant- ‘Edelweiss Asset Reconstruction Limited’ is that the proof of claim under Form C was filed for a sum of Rs.648,89,62,395/- along with supporting documents on 6th January, 2018 which was received by the ‘Resolution Professional’. However, the ‘Resolution Professional’ vide email dated 8th January, 2018 enquired about the invocation of the Corporate Guarantee of ‘Orissa Manganese Minerals Limited’- (‘Corporate Debtor’) by the Appellant, placing reliance upon the order passed by the Adjudicating Authority in the case of “Axis Bank vs. Edu Smart Services Limited’.
# 16. The grievance of the Appellant is that the claim of the Appellant was not taken into consideration by the ‘Resolution Professional’ because of non-invocation of the Corporate Guarantee, and was neither invited or made a member of the ‘Committee of Creditors’ despite it being a ‘Financial Creditor’ of the ‘Corporate Debtor’ on the basis of its claim against the Corporate Guarantee given by the ‘Corporate Debtor’.
# 19. In terms of Section 5(8)(h), any counter-indemnity obligation in respect of a guarantee also comes within the meaning of ‘financial debt’, therefore, the Appellant- ‘Edelweiss Asset Reconstruction Limited’ on the basis of such guarantee can technically claim to be a ‘Financial Creditor’ within the meaning of Section 5(7).
# 24. It is true that the ‘Corporate Debtor’ had taken guarantee but the said guarantee was not invoked in favour of the Appellant- ‘Edelweiss Asset Reconstruction Limited’. However, the said guarantee was not invoked by the Appellant- ‘Edelweiss Asset Reconstruction Limited’ as on the date of admission or filing of the claim.
# 25. On declaration of ‘Moratorium’, it was not open to the Appellant- ‘Edelweiss Asset Reconstruction Limited’ to invoke the guarantee (Corporate Guarantee).
# 26. It is also not the case of the Appellant- ‘Edelweiss Asset Reconstruction Limited’ that it has not received the amount from the ‘Principal Borrower’ on default and, therefore, it was liable to invoke the Bank Guarantee which it invokes. In this background, the claim having not matured in absence of alleged default on the part of the ‘Principal Borrower’ and for non-invocation of the Bank Guarantee, the Appellant- ‘Edelweiss Asset Reconstruction Limited’ claim cannot be accepted the debt payable by the ‘Corporate Debtor’ as on the date of the admission (initiation of Corporate Insolvency Resolution Process’).
# 28. However, we make it clear 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 Limited’ 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.
Disclaimer: The sole purpose of this blog is to create awareness on the subject and must not be used as a guide for taking or recommending any action or decision. A reader must do his own research and seek professional advice if he intends to take any action or decision in the matters covered in this blog.
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Author’s comments; NCLAT earlier on 14.08.2018, in the matter of Export Import Bank of India and Ors. Vs. RP JEKPL Pvt. Ltd. and Ors. [CA No. 304 of 2017, 16 of 2018 and 302 of 2017] had ruled as under;
# 53 …………. Any person who has the right to claim payment, as defined under Section 3(6), is supposed to file the claim whether matured or unmatured. The question as to whether there is a default or not is not to be seen.
# 54. Therefore, stand taken by the respondents that the claim has not been matured cannot be ground to reject the claim.
# 56. Therefore, we hold that maturity of claim or default of claim or invocation of guarantee for claiming the amount has no nexus with filing of claim pursuant to public announcement made under Section 13(1)(b) r/w Section 15(1)(c) or for collating the claim under Section 18(1)(b) or for updating claim under Section 25(2)(e).
The Doctrine of “Binding Precedent”.
i). Constitution Bench of Hon’ble SCI in Union of India vs. Raghubir Singh [(1989) 2 SCC 754], observed as under:
"The doctrine of binding precedent has the merit of promoting certainty and consistency in judicial decisions, and enables an organic development of the law, besides providing assurance to the individual as to the consequence of transactions forming part of his daily affairs. And, therefore, the need for a clear and consistent enunciation of legal principle in the decisions of a court."
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