Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(NCLAT) 87

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Hon'ble Justice Rakesh Kumar Jain (Member(Judicial)) , Hon'ble Mr. Naresh Salecha (Member (Technical)) , Hon'ble Mr. Indevar Pandey (Member (Technical)) ,
State Bank of India – Appellant
Versus
Gourishankar Poddar & Anr. – Respondent
689/ND/2024 COMPANY APPEAL(AT)(INS)

Mr. Asav Rajan & Ms. Charu Trivedi, Advocates; Mr. Karan Valecha, for R-2; Mr. Deep Roy & Mr. Amay, for R-1; Mr. Navin Pahwa, Sr. Advocate along with Mr. Karan Valecha; Mr. Asav Rajan & Ms. Charu Trivedi, for R-1.

The court affirmed that personal guarantees are irrevocable and remain enforceable despite the approval of a resolution plan, emphasizing that revocation attempts are legally unsustainable.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 61(1) - Personal Guarantee - Appeals against the dismissal of a petition under Section 95 for initiating insolvency proceedings against a personal guarantor - The Adjudicating Authority dismissed the petition on grounds of unenforceability and time-bar - The court found that the guarantees were irrevocable and continuous, and the revocation attempts were legally unsustainable - The approval of a resolution plan does not discharge the liability of personal guarantors. (Paras 2, 8, 9, 10, 12, 26, 28, 42, 48, 82)

(B) Limitation - The limitation period for enforcing a guarantee commences upon the issuance of a demand notice - Acknowledgment of debt by the principal debtor extends the limitation period for actions against the guarantor. (Paras 11, 50, 52)

Facts of the case:
The appeals arise from a common order dismissing a petition to initiate insolvency proceedings against a personal guarantor for a corporate debtor, with the guarantor arguing that the guarantees were revoked and time-barred.

Findings of Court:
The court held that the guarantees were valid and enforceable, and the dismissal of the petition was erroneous.

Issues: The main issues were the validity of the revocation of the guarantee and the applicability of limitation laws.

Ratio Decidendi: The court ruled that the guarantees were irrevocable and that the approval of a resolution plan does not discharge the guarantor's liability.

Result: Appeals allowed.

JUDGMENT

(6th January, 2025)

INDEVAR PANDEY, MEMBER (T)

This order will dispose of two appeals bearing Company Appeal (AT) (Ins.) No. 689 of 2024 titled as State Bank of India Vs. Gourishankar Poddar & Anr. (hereinafter referred to as the first appeal) and Company Appeal (AT) (Ins.) No. 663 of 2024 titled as Vineeta Maheshwari Vs. State Bank of India & Anr. (hereinafter referred to as the second appeal). Both these appeals arise from the common order passed by the National Company Law Tribunal, Ahmedabad Bench (hereinafter to as the “Adjudicating Authority”) on 23.02.2024 in CP (IB) No. 80 (AHM) 2021.

2. The first appeal has been filed under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”), and challenges the order dated 23.02.2024, passed by the Adjudicating Authority in CP (IB) No. 80 (AHM) 2021. The appeal has been filed by the State Bank of India (SBI), the Financial Creditor, (hereinafter referred to as the “Appellant”) against Mr. Gourishankar Poddar (hereinafter referred to as “Respondent No. 1”) and Ms. Vineeta Maheshwari, the Resolution Professional (hereinafter referred to as “Respondent No. 2”). The case pertains to Respondent No. 1’s liability as a personal guarantor for Raj Rayon Industries Limited (hereinafter referred to as “Corporate Debtor”).

The appeal challenges the dismissal of the Appellant’s petition under Section 95 of the Code, which sought to initiate insolvency proceedings against Respondent No. 1. The Adjudicating Authority dismissed the petition on the grounds that the guarantees were either unenforceable or time-barred. The Appellant argues that the Adjudicating Authority failed to appreciate the facts, evidence, and binding legal principles, especially regarding the continuous and irrevocable nature of the personal guarantees.

3. The second appeal has been filed under Section 61(1) of the Code, and challenges the same order dated 23.02.2024 in CP (IB) No. 80 (AHM) 2021. The appeal has been filed by Ms. Vineeta Maheshwari the Resolution Professional (hereinafter referred to as “Appellant”), against State Bank of India, (hereinafter referred to as the “Respondent No.1”) and Mr. Gourishankar Poddar, Personal Guarantor of Corporate Debtor M/s Raj Rayon Industries Limited (hereinafter referred to as “Respondent No. 2”). The case pertains to observations made by Adjudicating Authority against the appellant. The Adjudicating Authority also held that the conduct of Appellant/Resolution Professional needs to be enquired by IBBI. This appeal has a limited scope as the appellant herein has sought quashing of the adverse observations or expunging of adverse observations made against the appellant in para 13 (k) of the impugned order.

4. We would decide both the cases vide this order as the facts of the case for both the appeals are same and both appeals arise from the same impugned order. Matter relating to both the appeals would be examined separately on merits in each case and appropriate orders would be passed disposing both the appeals.

5. The brief facts of the case are as follows:

(i) In 1999, Raj Rayon Industries Limited- the Corporate Debtor, availed financial assistance from the State Bank of India in the form of term loans and working capital loans. These loans were secured through an agreement executed on 06.12.2005. A Working Capital Consortium Agreement was signed between the Corporate Debtor and the SBI, detailing the terms and conditions for these facilities. Additionally, a Joint Deed of Hypothecation was executed to secure the financial facilities.

(ii) The aforesaid financial arrangement underwent several amendments:

26.02.2007: The First Supplemental Working Capital Consortium Agreement and the First Supplemental Joint Deed of Hypothecation were executed.

28.12.2007: The Second Supplemental Agreements were signed, increasing the loan amount.

25.11.2010: The Third Supplemental Agreements were executed, modifying the terms and increasing the facility.

05.07

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