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2025 Supreme(Online)(NCLT) 8193
NATIONAL COMPANY LAW TRIBUNAL
SMT. BIDISHA BANERJEE, CMDE SIDDHARTH MISHRA, JJ
Indian Bank – Appellant
Versus
Mr. Biswanath Agarwal – Respondent
Company Petition (IB) No. 107 of 2024
For the Financial Creditor: Mr. Santosh Kumar Ray, Ms. Ashmita Lohia, Ms. Utkarshika, Ms. Varsha Khowala
Guarantor liability is co-extensive with the principal debtor under the Indian Contract Act; insolvency proceedings initiated due to defaults in loan repayments.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 95, 99, 100, and 128 of the Indian Contract Act, 1872 - The Corporate Debtor defaulted in loan repayments, leading to application for insolvency resolution against the Personal Guarantor. The resolution professional was appointed to assess the eligibility of the application for insolvency resolution as per IBC provisions. (Paras 2, 5, 12, 13)
(B) Liability of the Guarantor - The guarantor's liability is co-extensive with that of the principal debtor according to Section 128 of the Indian Contract Act. (Paras 4, 5)
Facts of the case:
The financial creditor sanctioned multiple credit facilities to the corporate debtor, who defaulted on repayments, triggering insolvency proceedings against the personal guarantor. The application was deemed complete after the guarantor's non-responsiveness.
Findings of Court:
The court admitted the application, implemented a moratorium on debts, and directed the resolution process in compliance with IBC provisions.
Issues: Key questions centered on the admissibility of the application for insolvency resolution and the guarantor’s acknowledgment of debts.
Ratio Decidendi: The court reaffirmed the principle of continuing guarantor liability and the necessity for adherence to procedural requirements under the IBC, affirming the resolution professional's role in the insolvency process.
Result: The application was admitted under Section 100.
| Table of Content |
|---|
| 1. description of the credit facilities and defaults (Para 2 , 3 , 4 , 5 , 6) |
| 2. personal guarantor's failure to appear and respond (Para 7) |
| 3. process and recommendations for insolvency admission (Para 9 , 10 , 11 , 14) |
| 4. court's agreement on resolution professional's recommendations (Para 13) |
| 5. final admission of the application (Para 17 , 18 , 19 , 20) |
ORDER
In Company Petition (IB) No. 107 of 2024 Per: Siddharth Mishra, Member (Technical)
1. The Court Convened in a hybrid mode.
2. The Corporate Debtor along with its Guarantor had approached the Financial Creditor in the year 1987 to avail certain credit facility and after due consideration the Creditor sanctioned the said facilities by way of Working Capital, Cash Credit, Term Loan etc. To secure the loan facility, several security documents were executed by the Principal Borrower/Corporate Debtor and its guarantors.
3. The said credit facilities were enhanced, modified and renewed from time to time as the request of the corporate Debtor and its Guarantor. Further the said credit facility was also secured by Personal Guarantee of Mr. Biswanath Agarwal (Personal Guarantor herein) (See page no.217 of the petition for the Deed of Guarantee)
4. In spite of providing the various existing credit facilities by the Creditor, the Corporate Debtor failed to operate the account and began to default in repaying Principal and interest amount as well. Thus, the account had become irregular, and the Creditor was constrained to declare the account of the Corporate Debtor as Non-Performing Assets (NPA) on 31.12.2016 as per the guidelines of Reserve Bank of India. Thus, there is a default on the part of the Corporate Debtor and its guarantors in repaying the credit facilities sanctioned to it by the Creditor. The date of default is 31.12.2016
5. Further, it is pertinent to be mentioned that the liability of the guarantors is co-extensive in terms of Section 128 of the Indian Contract Act, 1872 with that of the Principal Borrower/ Corporate Debtor, the outstanding sums due and payable by the debtors to the creditor is sum of Rs. 78,23,58,123.88P. It is to be noted that the last Deed of Guarantee was executed as on 10.12.2015 for a reason as it In Company Petition (IB) No. 107 of 2024 itself acts as "Individual Contract" executed between the Financial Creditor and Guarantor.
6. Thereafter, following the guideline laid down by the Insolvency and Bankruptcy Code, 2016 , the Financial Creditor had issued demand notice to the Principal Borrower and the Guarantor on 27.11.2018 calling upon the guarantors to repay the outstanding dues.
7. SUBMISSIONS
a. It is submitted herein that despite getting several opportunities, the Personal Guarantor has failed to file the reply affidavit and has failed to appear before the Hon'ble bench, which clearly indicates his unwillingness and portraits the unlawful tactics to delay the proceeding.
b. It is submitted that the matter was earlier reserved for orders on two occasions, i.e., on 28.11.2024 and 02.01.2025, however, on both occasions, the matter came to be released owing to a change in the composition of the Bench.
c. As such, this Hon'ble tribunal has reserved the matter for orders on 02.12.2025, considering that the respondent herein has not entered appearance till date, despite various opportunities.
d. It is submitted herein that the relevant portion of the Deed which significantly shows the liability of the Guarantor for all sums that may be due or payable by the principal borrower at any point of time is shown below:-
"2. I/We declare that my/our liability under this guarantee shall be limited and restricted to the aggregate sum of Rs.2800.00 Lakhs (Rupees Twenty Nine Crore Eighty Five Lakhs only) with interest at the rate aforesaid but subject to such limit shall nevertheless be a Continuing guarantee to the Bank as hereinafter specified for all sums whatsoever which may at any In Company Petition (IB) No. 107 of 2024 time be or become payable by
