2026 Supreme(Online)(NCLT) 2051

NATIONAL COMPANY LAW TRIBUNAL
Nilesh Sharma, Member (Judicial), Charanjeet Singh Gulati, Member (Technical)
Sumer Buildcorp Private Limited – Appellant
Versus
Omkara Asset Reconstruction Pvt Ltd – Respondent
IA/2212/2023 | C.P.(IB)/136/MB/2022

A default under a corporate guarantee that initially occurred during the Section 10A period is not a bar to a Section 7 petition if the liability, including accrued interest, continues and creates an independent default after the 10A suspension period.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 7, 10A, 60(5) - Suspension of initiation of CIRP - Defaults during 10A period - Continuing default. Section 10A permanently bars filing of CIRP applications for defaults arising between 25.03.2020 and 24.03.2021, but does not bar filing for defaults occurring after this period; a default occurring after 24.03.2021 constitutes a distinct and independent default, giving rise to a fresh cause of action under Section 7. (Paras 20, 23)

(B) Insolvency and Bankruptcy Code, 2016 - Section 7 - Guarantor’s default - Liability under corporate guarantee - Co-terminus liability. The liability of a corporate guarantor under a continuing guarantee, which has been invoked, does not extinguish after the 10A period; non-payment of additional interest and principal obligations that accrue and remain unpaid after 24.03.2021 constitutes a fresh, actionable default. (Paras 24, 25, 26)

(C) Practice and Procedure - Maintainability - Application to dismiss petition under Section 60(5). An application to dismiss a main petition under Section 7 on grounds of Section 10A is liable to be dismissed if there is evidence of a default occurring independently after the 10A suspension period. (Para 29)

Facts of the case:
The applicant/Corporate Debtor sought dismissal of a Section 7 petition filed by the Financial Creditor, arguing the default (non-payment within 15 days of invoking corporate guarantees on 10.02.2021 and 16.02.2021) occurred on 25.02.2021 and 03.03.2021, squarely within the Section 10A period. The Financial Creditor argued that the default was continuing, the principal borrower was classified as NPA on 01.07.2019, and importantly, that additional interest under the loan agreement continued to accrue beyond 24.03.2021, creating a fresh, independent default above the threshold limit.

Findings of Court:
The Tribunal held that while the initial default on the principal amount fell within the 10A period, the liability was not extinguished. The loan agreement provided for additional interest on overdue amounts, and the Corporate Debtor failed to pay such interest accruing from 25.03.2021 onwards. This post-10A default, calculated up to the date of filing the petition, constituted a distinct and independent default exceeding the Rs. 1 crore threshold. The main petition was, therefore, maintainable.

Issues: The main issue was whether a default arising from a demand under a corporate guarantee, made during the Section 10A period, bars a subsequent Section 7 petition when the liability (including additional interest) continues and accrues after the 10A period.

Ratio Decidendi: The court reasoned that a default occurring after 24.03.2021 is a fresh cause of action, not barred by Section 10A. The continuing liability under the guarantee, particularly the obligation to pay additional interest post-24.03.2021, creates an independent default sufficient to maintain a Section 7 petition, relying on the NCLAT judgments in Small Industries Development Bank of India v. Sambandh Finserve Pvt. Ltd. and Bikram Bahadur v. Union Bank of India.

Result: IA(I.B.C)/2212/MB/2023 is hereby dismissed and disposed of.