The resignation of a personal guarantor from a corporate directorship does not discharge their liability under a continuing guarantee agreement unless formally released by the creditor.

ORDER

Per: Bidisha Banerjee, Member (Judicial)

1. The Court congregated through a hybrid mode.

2. We have heard the Ld. Sr. Counsel/ Ld. Counsels for both the sides at length.

Facts in a nutshell:

3. Company Petition (IB) No. 327/KB/2024 has been preferred by the Financial Creditor Union Bank of India under Section 95 (1) of the Insolvency and Bankruptcy Process, 2016, for brevity “I&B Code”/ “Code” seeking initiation of Insolvency Resolution Process in respect of Mr. Narendra Kansal Personal Guarantor of M/s. K.K. Gifts Private Limited.

4. The total amount claimed to be in default is Rs.8,17,92,001/- as on 31.08.2024.

5. The date on which debt fell due is 31.10.2015 and the date on which default occurred is indicated 30.01.2016.

Submissions advanced by the Financial Creditor:

6. Ld. Sr. Counsel Mr. Jishnu Chowdhury appearing on behalf of the Financial Creditor Union Bank of India would submit that the Corporate Debtor K.K. Gifts Private Limited approached the Financial Creditor for credit facilities and upon such request the applicant bank on 17.03.2014 sanctioned a fresh working capital cash credit limit of Rs. 4 crore including takeover of limit of Rs.2.85 crore from the SBI, Bhawanipore Branch.

7. It is submitted that in consideration of financial facilities the corporate Debtor execute a guaranteed agreement on 28.03.2014, wherein Rajendra Khandelwal, Ravi Khandelwal and Narendra Kansal had stood as the Personal Guarantor guaranteeing due repayment of the financial facilities availed by the Corporate Debtor.

8. Further, it is submitted that a loan recall notice was issued on 05.02.2016 by the applicant bank to the Corporate Debtor as well as the Personal Guarantors demanding the repayment of loan as well as invoking the Personal Guarantee. Further a notice under Section 13(2) of SARFAESI Act was issued by the applicant bank to the Corporate Debtor on 06.02.2016.

9. Ld. Sr. Counsel would indicate that on 06.09.2019 this adjudicating Authority admitted the Corporate Debtor into CIRP upon a company Petition bearing No. 139/KB/2019 preferred by the applicant bank under Section 7 of the Code, the Resolution Plan was approved by this Adjudicating Authority on 28.06.2021.

10. It is further submitted that as the total debt was not satisfied under the Resolution Plan, a demand notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 to Mr. Narendra Kansal, respondent herein.

11. It is asserted that as the Corporate Debtor failed to repay the debt, the Personal Guarantor was liable to pay an amount of Rs.8,17,92,001/-.

Report furnished by the Resolution Professional:

12. Vide Order dated 14.10.2024, Ms. Rashmi Chhawchharia was appointed as the Resolution Professional in exercise of the power conferred under Section 97 of the Code. On 21.11.2024, Ms. Chhawchharia, the appointed Resolution Professional has filed the report under Section 99 of the Code by way of an application being I.A. (IB) No. 2307/KB/2024. In the said report Ms. Chhawchharia has concluded and recommend as under:

RP’s remarks on Law of Limitation:

1) In cases of guarantees, the limitation period typically starts from the date of invocation of the guarantee.

2) Invocation of Personal Guarantee was on 05.02.2016. The limitation would ordinarily expire three years from this date, i.e., on 05.02.2019.

3) Bank has submitted the OTS Proposal Dates, the latest one being 01.06.2019 by the CD.

4) PG's Reply dated 03.09.2021 to Demand Notice sent on 11.08.2021. As per