Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(NCLT) 5379

NATIONAL COMPANY LAW TRIBUNAL
UMESH KUMAR SHUKLA, MEMBER (TECHNICAL), KISHORE VEMULAPALLI, MEMBER (JUDICIAL)
Bank of Maharashtra – Appellant
Versus
Mr. Sridhar Cherukuri & Anr. – Respondent
CP (IB)/1/95/AMR/2023

Advocates:
For the Appellants/Petitioners: Ms. Aishwarya Ch.
For the Respondents: Mr. Bikki Raveendra Babu

The court affirmed the validity of the Personal Guarantor's liability and demand notice, holding that the Petition under the IBC was timely and properly invoked.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 95 and 60(5) - Personal Guarantee - Petition for Personal Insolvency Resolution Process against Personal Guarantor admitted based on failure to honor loan obligations of Corporate Debtor - Demand Notice issued pursuant to guarantee was validly served, establishing cause for action. (Paras 4, 10, 30, 36)

(B) Guarantee Agreements - Personal Guarantor's liability under Guarantee Deeds for loans to Corporate Debtor reaffirmed, with proper invocation and acknowledgment of notice critical to enforceability. (Paras 33, 34)

(C) Limitation - The Petition was filed within the admissible period, addressing applicable statute limitations effectively. (Paras 31, 32)

Facts of the case:
The Bank of Maharashtra filed a Petition against the Personal Guarantor seeking to initiate the Personal Insolvency Resolution Process due to defaults by the Corporate Debtor, Transstroy (India) Limited, on a loan amount exceeding Rs. 253 crores. The Personal Guarantor contended improper service of demand notices. (Paras 1, 4)

Findings of Court:
The Petition was admitted as the service of notice was established, fulfilling requirements under the IBC. The previous acts concerning demands were upheld as valid by the court. (Paras 36, 42)

Issues: Whether the service of Demand Notice upon the Personal Guarantor was sufficient to establish jurisdiction under the IBC and if the Petition was within the limitation period. (Paras 31, 34)

Ratio Decidendi: The Court held that acknowledgment by the Personal Guarantor of notices related to the guarantee obligations favored the creditor's position, rendering the Petition valid. (Paras 36)

Result: Petition admitted, initiating the Personal Insolvency Resolution Process.

ORDER

PER: BENCH

The Company Petition bearing No. CP (IB)/1/95/AMR/2023 (hereinafter referred to as the “CP 1/2023” or “Petition”) has been is filed, vide Diary No. 1452, on 19.12.2022 (e-filed on 20.12.2022) by the Bank of Maharashtra (hereinafter referred to as the “Creditor”) through its Deputy Zonal Manager & AGM, Zonal Office Mr. Abhishek Dubey (who is having authorisation letter dated 07.12.2022) under section 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC” or “Code”) read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 (hereinafter referred to as the “Personal Guarantors Rules”) seeking to initiate Personal Insolvency Resolution Process (hereinafter referred to as the “PIRP”) against Mr. Sridhar Cherukuri (hereinafter referred to as the “Personal Guarantor”), who is the Personal Guarantor of the loan accounts of M/s. Transstroy (India) Limited (hereinafter referred to as the “Corporate Debtor” or “Principal Borrower”) and who has extended the Personal Guarantee to the Creditor.

2. The Corporate Debtor is a Company incorporated under the Companies Act, 1956 having its registered office at 5-91-25, 4^th line, Lakshmipuram, Guntur-522007, which is situated in the state of Andhra Pradesh. Further, the Corporate Debtor has been admitted into Corporate Insolvency Resolution Process vide this Adjudicating Authority order dated 27.09.2024 in Company Petition bearing No. CP(IBC)/35/7/2022. Therefore, the present Petition lies under the jurisdiction of this Adjudicating Authority as per provisions of section 60(1) and 60(2) of the IBC.

FACTS OF THE CASE:

3. The facts of the case, as stated in the Petition filed by the Creditor, are summarized below:

(i) The Creditor vide sanction letter dated 23.09.2013 bearing reference no. AV2/ADV/TRANSSTROY/2013-14 (annexed at page 15 of the Petition) had sanctioned a working capital facility consisting of cash credit limit of Rs.40 crores along with bank guarantee limit of Rs.40 crores and letter of credit of Rs.40 Crores.

(ii) The total amount payable is Rs.253,06,99,297.79, including a principal amount of default payable of Rs.19,61,48,926.00 along with a total interest amount of Rs.233,45,50,371.79 calculated until 23.08.2022.

(iii) The Corporate Debtor had failed to honour its obligations towards the Creditor. Accordingly, the loan account of the Corporate Debtor was declared as ‘non-performing assets’ (hereinafter referred to as the “NPA” as on 27.03.2015.

(iv) The Personal Guarantor executed a Guarantee Deed on 14.03.2014 (copy annexed at page 25 of the Petition) to secure the financial assistance granted by the Creditor to the Corporate Debtor, vide which the Personal Guarantor undertook to pay to the Creditor upon demand forthwith, without demur or protest all the amounts payable by the Corporate Debtor. The Personal Guarantor also undertook to indemnify and keep the Creditor indemnified against all losses, costs, claims, damages, whatsoever, which the Creditor may suffer, pay, or incur by reason of or in connection with any such default on the part of the Corporate Debtor.

(v) The Guarantee Deed also provides that a certificate in writing signed by an official of the Creditor shall be conclusive evidence against the Personal Guarantor for the amount due to the Financial Creditor. The Guarantee Deed executed by the Personal Guarantor is irrevocable, independent, coextensive and continuing guarantee.

(vi) The Personal Guarantor had failed to pay the outstanding amount and the Creditor, while invoking the provisions of the IBC vide Form B Demand Notice dated 15.06.2022 through Speed Post (receipt annexed along with the Form C Petition), issued a notice to the Personal Guarantor, requesting to honour the terms of Guarantee Deed.

4. The Personal Guarantor vide Diary No.3049 dated 26.04.2023, filed the Counter contending as under:

(i) I