The Tribunal affirmed the validity of a Corporate Guarantee despite internal contract breaches, applying the Indoor Management Doctrine to protect the interests of third parties in agreement enforcement.

ORDER

1. The present Interlocutory Application has been filed by Phoenix ARC Private Limited (Financial Creditor and a member of the Committee of Creditors), acting in its capacity as Trustee of Phoenix Trust FY 23-7 (hereinafter referred to as the “Applicant”) as per the provisions of Section 60 (5) of the Insolvency and Bankruptcy Code , 2016 hereinafter referred to as the (“Code”), against Mr. Pradeep Kabra (hereinafter referred to as “R.1”/ “Interim Resolution Professional (“IRP”) of M/s. Precision Realty Developers Private Limited (hereinafter referred to as “Corporate Debtor”) and IndusInd Bank (hereinafter referred to as “R.2”) while seeking the following reliefs: -

“a) That the Respondent No. 1 be directed not to admit the claims of Respondent No. 2;

b) That the Respondent No. 1 be directed to reject the partially admitted claims of the Respondent No. 2;

c) Pending the hearing of the present application, the Respondent No. 2 should not be allowed to participate in the CoC meetings;”

Facts of the case & Averments made by the Applicant, in brief

2. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (“CIRP”) vide Tribunal Order dated 20.10.2023. As per the procedure laid down in the Code, the 1^st CoC (Committee of Creditors) Meeting was held on 24.11.2023 by R.1/IRP, wherein the list of CoC Members was discussed and the Applicant was admitted in CoC with voting right of 76.6%. The 2^nd CoC Meeting was held on 05.12.2023.

3. The R.2 filed it claim of Rs.1,17,95,71,468.05 with R.1/IRP before the last day for filing claims which was 08.11.2023, asserted that the Corporate Debtor had executed a Corporate Guarantee in favour of R.2 in the year 2021. R.1/IRP partially admitted the claims of R.2 to the tune of Rs. 40,50,00,000 which came to the knowledge of the Applicant during the 1st CoC Meeting.

4. A Facility Agreement dated 14.03.2017 was executed between Kaa Vee Retail Infra Private Limited (“Kaa Vee”) & L&T Finance Limited (“L&T”) in order to facilitate Kaa Vee’s purchase of assets. As per Clause 6.2 (ii)(a) & (d) of the Facility Agreement, it was agreed that Kaa Vee shall not contract or provide any guarantees in favour of any other person without the approval of L&T Finance Limited. Clause 6.2 (ii)(a) & (d) of the Facility Agreement is reproduced below: -

“6.2 During the subsistence of this Agreement and till the Facility and all amounts payable in terms hereof are duly paid by the Borrower, the Borrower shall not, without the approval of the Lender, or as otherwise permitted hereunder:

ii)(a) contract, incur or agree to any indebtedness of any manner whatsoever or create any security interest in favour of any other person.

(d) provide any loan/financial assistance, including by way of guarantees, indemnities, or other assurances of a similar nature. This provision shall not apply to any plan loan and advances made to employees or contract/suppliers in the ordinary course of business.”

It is submitted that in terms of the clauses of the Facility Agreement, the Corporate Debtor was not supposed to avail any credit facility/extend guarantee to any credit facility availed by 3^rd parties to create security interest in favour of any other person. Further, through Assignment Deed dated 29.06.2022, L&T had assigned all its rights, title, interest, debt in favour of the Applicant.

5. NCLT Mumbai Bench approved the Scheme of Merger by absorption, vide order dated 08.05.2019 in C.P.(CAA) No.2930/230- 232/MB/2018 between the Transferor Company i.e., Kaa Vee Retail Infra Private Limited and the Transferee Company i.e. Corporate Debtor, wherein all debts, liabilities, c