Corporate guarantees constitute financial debt under IBC Section 5(8); challenges on timing, non-disclosure, verification, and stamping rejected; tribunals' perverse findings warrant Supreme Court interference.

JUDGMENT :

ALOK ARADHE, J.

1. This appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (Code) has been preferred by SBI Consortium comprising State Bank of India, Bank of India, UCO Bank, Syndicate Bank, Oriental Bank of Commerce and Indian Overseas Bank. The appeal arises from the order dated 14.10.2022 passed by the National Company Law Appellate Tribunal (NCLAT), whereby the order dated 02.03.2021 passed by National Company Law Tribunal (NCLT) was affirmed and the appeal was dismissed.

2. This appeal raises important question regarding validity and enforceability of corporate guarantees within the framework of the Code. The challenge mounted by respondents to the validity of the said corporate guarantees has been made on several grounds, namely, the timing and circumstances of the execution of guarantee, the alleged absence of proper disclosure in financial statements, the manner of their verification, the corporate insolvency resolution process and to their alleged insufficiency of stamping. These objections call for careful scrutiny to determine whether such grounds can legitimately defeat the recognition of a “financial debt” and status of a “financial creditor” under the Code.

FACTUAL BACKGROUND

3. The material facts giving rise to filing of this appeal, are as follows:

On 19.03.2010, a Facility Agreement was executed between Respondent No. 1, Doha Bank and Reliance Infratel Limited (RITL), namely Corporate Debtor (CD), whereby a foreign currency loan of USD 250 million was extended. Thereafter, on 04.03.2011, a Security Trustee Agreement was executed between the Consortium Lenders and Axis Trustee Services Ltd., appointing it as Security Trustee in respect of loan to Reliance Communications Ltd., (RCOM) and Reliance Telecom Ltd., (RTL).

4. The appellants, as members of a consortium of Banks, extended the rupee loan facilities of Rs.6,015 crores to Reliance Communications Limited (RCOM) and Rs.735 crores to Reliance Telecom Limited (RTL). On 20.02.2015, a deed of hypothecation was executed by the CD, in the favour of Security Trustee to secure the consortium lending pursuant to which a charge was created and duly registered.

5. On 26.08.2016, the accounts of RCOM, RTL and CD were classified as Non-Performing Assets (NPA) indicating default in repayment obligations. Subsequently, on 05.09.2016 and 04.12.2016, Reinstatement Agreements were executed between Doha Bank and the CD, restructuring the repayment obligations and extending repayment schedule ultimately up to 05.06.2017.

6. On 03.03.2017, the CD executed Corporate guarantees in favour of consortium lenders to secure loans extended to its group entities, namely RCOM & RTL. On 22.12.2017, the account of RITL was declared as NPA with retrospective effect from 26.08.2016.

INSOLVENCY PROCEEDINGS

7. On 15.05.2018, NCLT Mumbai initiated Corporate Insolvency Resolution Process (CIRP) against the CD. An Interim Resolution Professional (IRP) wa