Excerpts of the order;
Petitioner has filed this application under Sec.7 of the Insolvency and Bankruptcy Code, 2016 (from now on referred to I & B Code, 2016) for initiating corporate insolvency process read with Rule 4 (1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 against the respondent/ corporate debtor, Ghotaringa Minerals Ltd. Petitioner has stated that corporate debtor has committed default in making payment of Rs.982,82,01,341.70 as on 13/12/2017
5. The case of the applicant is that the total amount to the principal borrower is as under: -
(i) Fund Based limit sanctioned for Rs.628,36,00,000/-;
(ii) Non Fund Based limit for Rs.165,25,00,000/-.
In order to avail the credit facility, the principal borrower Visa Steel Ltd. executed the following documents along with various guarantors including corporate debtor in favour of the applicant:
f) Deed of Guarantee executed by Ghotaringa Minerals Ltd. dated 19/12/2012 as the guarantor in favour of the applicant, annexed with the application as Exhibit X.
g) Guarantee agreement dated 28/3/2015 by Ghotaringa Minerals Ltd. dated 19/12/2012 in favour of the applicant, annexed with the application as Exhibit HHH.
11. To prove its case the applicant/financial creditor has also annexed with the application deed of hypothecation dated 14/9/2016 between Visa Steel Ltd. as one of the borrower and co-obligor and lender marked as Exhibit MMM. On the strength of above referred deed of guarantee executed by the corporate debtor, it is contended that corporate debtor is liable for the amount claimed because it defaulted the payment.
13. The respondent further contended that Visa Steel Ltd., the principal borrower, was referred to the Corporate Debt Restructuring Empowered Group. On 25/9/2012 the applicant approved the restructuring package and certain additional financial assistance was to be extended to the principal borrower. Pursuant thereto a letter of approval dated 27/9/2012 was issued by CDR EG, in view of which the respondent/corporate debtor provided guarantee to all the lenders of the principal borrower vide guarantee agreement dated 19/12/2012.
14. The respondent further contended that the principal borrower has not yet crystallized and the same should be first adjudicate before the applicant can proceed against the respondent/corporate debtor who is a guarantor and not the borrower. As such, the application filed is premature and should be dismissed.
16. Heard arguments of Ld. Counsel for the applicant/financial creditor as well as Ld. Counsel for the respondent/corporate debtor.
17. The principal borrower has evidently availed credit facility to the tune of Rs.628,36,00,000/- as per Fund Based Limit and Rs.165,25,00,000/- as per Non Fund Based Limit by executing various security documents referred in the petition. The corporate debtor has executed guarantee agreement Exhibit HHH. It is good to read Clause 12 and 27 in the said Deed of Guarantee. It reads as follows: -
“12. The rights of the Lenders against the Guarantor shall remain in full force an effect notwithstanding any arrangement which may be reached between the Lenders and the other Guarantor, if any, or notwithstanding the release of the other or others from liability and notwithstanding that any time hereafter the other Guarantor may cease for any reason whatsoever to be liable to the Lenders, the Lenders shall be at liberty to require the performance by the Guarantor of its obligations hereunder to the same extent in all respects as if the Guarantor had at all times been solely liable to perform the said obligations.
27. The Guarantor agrees and declares that the rights and powers conferred on the Lenders by these presents shall be joint and several and shall be deemed always to be so and they may be exercised by the Lenders accordingly.”
18. The above said clause in the deed of agreement impose a contractual liability on the corporate debtor to pay the dues in the account of principal debtor. The Contention of the corporate debtor that claim raised against the corporate debtor is premature has no legal force.
19. The applicant alleged that the corporate debtor, has committed default in making payment of Rs.982,82,01,341.70 as on 13.12.2017. It has come out inevidence that corporate debtor failed to discharge its liability as a guarantor and thereby committed default. Petitioner has filed this application in the proper format as prescribed in I & B Code and Adjudicating Authority Rules which is complete.
20. The corporate debtor's main challenge in this case is that filing of this petition as against the corporate debtor without exhausting the remedy available to the applicant as against the principal borrower Visa Steel Ltd. a petition of this nature is not maintainable. Ld. Counsel for the corporate debtor submits that corporate debtor provided guarantee to all the lenders of the principal borrower by executing guarantee agreement and therefore corporate debtor is not liable for the amount as claimed by the applicant/financial creditor. Law is settled regarding the liability of a guarantor in a case of this nature. Guarantors liability being co-extensive with that of the principal borrower, there is no legal bar in initiating action against the corporate debtor who is a guarantor.
21. In State Bank of India v. Indexport Registered and others, AIR 1992 SC 1740 the Hon'ble Supreme Court has held that
"the decree holder bank can execute the decree against the guarantor without proceedings against the principal borrower. Guarantor's liability is co-extensive with that of the principal debtor. In that case, this court further observed that "the execution of the money decree is not made dependent on first applying for execution of the mortgage decree. The choice is left entirely with the decree holder. The question arises, where a decree which is framed as a composite decree as a matter of law, must be executed against the mortgage property first or can a money decree, which covers whole or part of the decretal amount covering mortgage decree can be executed earlier. There is nothing in law which provides such a composite decree to be first executed only against the principal borrower. The court further observed that the liability of the surety is co-extensive with the principal debtor, unless it is otherwise provided by the contract”.
The above said proposition is squarely applicable in the case in hand. Bear in mind the above said proposition, it appears to me that the contention of the corporate debtor that without first adjudicating the liability of the principal borrower, initiation of proceedings in this case is not maintainable is found devoid of any merit. The above said factors proves that the attempt of the corporate debtor is only an attempt to evade payment which is found liable to pay to the financial creditor. The corporate debtor has failed to repay the debt outstanding in its name.
24. As held in Innoventive Industries Ltd. v. ICICI Bank [2017] 139 CLA 335 by the Hon'ble NCLAT, this adjudicating authority if satisfied that there is occurrence of default and the application filed is complete the application filed under section 7 of the I & B Code is liable to be admitted. Here, in this case, none of the objections of the corporate debtor is found sustainable under law.
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