Court emphasized that inaccuracies in default dates and procedural errors can invalidate insolvency proceedings.

ORDER

(Hybrid Mode)

05.08.2024:

These two Appeals are listed together for orders, because they engage consideration of the common question of law. Though the facts involved are marginally different, for the purposes of brevity, a common Judgment is being rendered in these two Company Appeals.

The Appellant in the Company Appeal CA (AT) (CH) (Ins) No.226/2024 puts a challenge to the Impugned Order of 18.04.2024, as it has been rendered in CP(IB) No.119/2021, as a consequence to which the application under Section 95 of I & B Code, 2016, stood admitted as against the Appellant, the personal guarantor.

In the connected Company Appeal being CA (AT) (CH) (Ins)No.227/2024 too, the respective Appellant puts a challenge to the Impugned Order dated 18.04.2024, as it was passed in CP(IB) No.118/2021, whereby the Appellant, the personal guarantor has been admitted to the proceedings under Section 95 of the Insolvency and Bankruptcy Code of 2016.

The facts of the case are the following: -

The original borrower of the loan, was Splendid Metal Private Limited (SMPL) which later on was renamed as Thalaivar Steels Limited. It went into CIRP on 04.09.2019 on admission of Section 7 application by NCLT, Hyderabad Bench in CP(IB)666/7/HDB/2018. The borrower had obtained some funding from Respondent No.1 and other members of the consortium, from time to time. Consequently the Respondent No.1, who claims himself to the Financial Creditor, being a member of the consortium of the Financial Creditors, invoked the Guarantee executed by the personal guarantors / Appellants by making a demand vide Form B Demand Notice dated 24.12.2020 under Rule 7(1) of I & B (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules 2019. As the personal guarantors failed to pay the demand amount, Respondent 1 initiated proceedings under Section 95 of the I & B Code on 19.04.2021 before NCLT, Hyderabad. Based on such NCLT vide its order dated 09.07.2021 ordered interim moratorium and asked IRP to submit report under Section 99 of the Code. The Applicants also filed IAs challenging the maintainability of the respective Company Petition. After hearing both sides and considering the report of IRP NCLT, Hyderabad passed orders under Section 100 of the I &B Code admitting the petition for initiating personal insolvency against the Appellants.

It is the case of the Appellants that as per the demand notice dated

24.12.2020, the date of default is 01.09.2012 and therefore, the proceedings under Section 95 , has to be barred by limitation. It has been argued to the contrary by the Respondent contending thereof that owing to the fact that though the credit was sanctioned to the tune of Rs.136 crores vide sanction letter dated 02.01.2008, at the request of Corporate Debtor and the guarantors the same had been renewed/enhanced from time to time on various dates, the last being on 17.08.2012 under consortium arrangements and these were secured by the Appellants herein by way of guarantee, that because of failure of Corporate Debtor to repay in time, the irregular portion in the loan accounts were restructured under Master Restructure Agreement for which the Appellants herein executed a Deed of Guarantee on 29.03.2013, that on 22.05.2013 a Supplementary Agreement for Reschedulement of term loan and agreements for interest term loan & working Capital term loan were executed by the Corporate Debtor with the consortium and the Agreement of Guarantee was executed by the Appellants executed, that on 13.02.2015 Supplemental Master Restructuring Agreement was executed with the Corporate Debtor with the Appellants executing Personal Guarantee Agreement, that the Appellants subsequently executed revival letters dated 26.02.2016 and 16.12.2017 and that it is clear from the above that the Appellants had undertaken to pay the amount in case of Default by Corporate Debtor on receipt of a Demand Notice in terms of Guarantee Agreements