Idbi Bank Limited vs Arm Infra & Utilities Pvt Ltd

(Arising against the impugned order dated 16.06.2023 passed by the Hon'ble National Company Law Tribunal, Mumbai Bench in CP (IB) No. 144/MB/2023)

IN THE MATTER OF:

IDBI Bank Ltd.

Registered Office at:

IDBI Tower, WTC Complex, Cuffe Parade, Mumbai-400005.

Branch Office:

7th Floor, NMG, IDBI Tower, ...Appellant WTC Complex, Cuffe Parade, Mumbai-400005.

Through its Authorised Signatory, Mr. O.T. Tolani, General Manager E-mail: ot.tolani@idbi.co.in

Versus

ARM Infra & Utilities Pvt. Ltd.

18th Floor, A Wing, Marathon Futurex, N.M. Joshi Marg, Lower Parel, Mumbai-400013. ...Respondent

E-mail: rohan.kabra@esselgroup.in secretarial@esselgroup.in

Present: For Appellant: Mr. Sudhir Makkar, Sr. Advocate, Mr. Sidhartha Barua, Mr. Praful Jindal, Mr. Akash Mohan, Ms. Aadhya, Advocates. For Respondents: Mr. Krishnendu Datta, Sr. Advocate, Ms. Smriti Churiwal, Mr. Jaiveer Kant, Advocates.

Cont'd..../ -2-

J U D G M EN T (3rd July, 2025)

INDEVAR PANDEY, MEMBER (T)

The present appeal arises out of the judgment and final order dated

16.06.2023 passed by the National Company Law Tribunal, (Adjudicating

Authority) Mumbai Bench in CP (IB) No. 144/MB/2023, whereby the Section

7 petition under Insolvency and Bankruptcy Code, 2016 ('Code') filed by the

IDBI Bank Ltd./(Appellant), against ARM Infra & Utilities Pvt. Ltd. the

Corporate Guarantor/(Respondent), was dismissed. The Appellant had

sought initiation of Corporate Insolvency Resolution Process (CIRP) under the

Code, on account of a default of Rs.193.82 crore by the Principal Borrower

Siti Networks Ltd., whose liabilities were secured by unconditional and

irrevocable corporate guarantees executed by the Respondent.

2. The Adjudicating Authority vide the impugned judgement held that the

date of default fell within the "prohibited period" (i.e., between 25.03.2020

and 25.03.2021) under Section 10A of the Code, and therefore rejected the

petition as non-maintainable. Aggrieved by the said dismissal, the Appellant

has preferred the instant appeal under Section 61 of the code, challenging the

erroneous interpretation of the default date and the applicability of Section

10A to the facts of the case.

Company Appeal (AT) (Ins.) No. 1046 of 2023 -3-

Brief Facts of the Case

3. The brief facts of the case are given below:

i. On 24.11.2008, IDBI Bank Ltd. (Appellant) sanctioned a Cash Credit

facility of Rs.25 crore in favour of Wire and Wireless (India) Ltd., which

was later renamed as Siti Networks Ltd., (the Principal Borrower. The

purpose of the facility was to meet working capital requirements,

secured by a first pari-passu charge on movable and immovable assets,

and a corporate guarantee from Zee Entertainment Enterprises Ltd.

ii. Subsequently, on 09.12.2009, two separate facilities were extended--

(a) a renewed Working Capital Facility (Rs.50 crore limit, including

CC/STL and LC components), and (b) a Rupee Term Loan (RTL) of Rs.75

crore--for capital expenditure and working capital augmentation.

Security was provided by Zee Entertainment Enterprises Ltd., with

Board Resolutions supporting the transactions. The working capital

facility was further renewed and enhanced, including a CMS limit of

Rs.2 crore, under an overall credit exposure of Rs.62 crore on

09.03.2011.

iii. On 29.05.2012, the Appellant sanctioned enhanced credit facilities of

Rs.150 crore (Rs.50 crore Fund-Based and Rs.100 crore Non-Fund-

Based), along with a Letter of Exchange Risk (LER) limit of Rs.5 crore

and continued CMS limits of Rs.2 crore. A fresh Board Resolution was

passed by the Principal Borrower confirming acceptance of terms.

iv. The facility structure was further renewed and raised by the appellant

on 26.12.2014 on 26.12.2014. the Respondent, ARM Infra & Utilities

Company Appeal (AT) (Ins.) No. 1046 of 2023 -4-

Pvt. Ltd., executed a Corporate Guarantee dated 31.12.2014 in favour

of the Appellant, covering the entire facility obligations of the Principal

Borrower. This was supported by resolutions from the Respondent's

Board of Directors.

v. On 11.02.2016, the Appellant further renewed the sanction facilities

including enhanced term loans and working capital exposure. In

relation thereto, the Respondent executed another Corporate

Guarantee dated 29.02.2016, reinforcing its undertaking to repay the

dues of the Principal Borrower in case of default. These facilities were

further revised and continued on 19.07.2017 and 19.12.2018.

vi. On 31.12.2018, a joint Revival Letter was executed by both the Principal

Borrower and the Respondent, reaffirming their liability under the

respective financial arrangements, thereby extending limitation under

the corporate guarantee.

vii. The account of the Principal Borrower was declared as Non-Performing

Asset (NPA) on 31.01.2020 by the Appellant due to non-payment of

interest and principal dues. As per records, the default amount was

Rs.193,82,66,336.74 as on that date. Appellant continuously engaged

with principal borrower to make the account regular, however the

efforts of the bank did not succeed.

viii. Due to the continuing default, the Appellant issued a Recall Notice

dated 18.02.2021 to the Principal Borrower, demanding immediate

repayment of the entire outstanding amount of Rs.193.82 crore.

ix. The Appellant served formal Demand Notice on 05.03.2021, upon the

Respondent (Corporate Guarantor) invoking the corporate guarantees

Company Appeal (AT) (Ins.) No. 1046 of 2023 -5-

dated 31.12.2014 and 29.02.2016, calling upon the Respondent to pay

the defaulted sum of Rs. 60.87 crore towards Working capital facility

(fund based) and Rs.16.98 Crore towards Rupee Term Loan (RTL). There

was no response or payment from the Respondent.

x. the Appellant issued a Second Notice to the respondent invoking the

corporate guarantee on 09.12.2022, in view of further default by the

principal borrower and asking the respondent to deposit Rs. 166.78

crores within seven days from the receipt of the notice. This amount

related to working capital and Term-loan. Despite ample opportunity,

the Respondent failed to comply.

xi. The Appellant filed a Section 7 Petition under Code on 11.01.2023,

before the Adjudicating Authority seeking initiation of Corporate

Insolvency Resolution Process (CIRP) against the Respondent as a

Corporate Guarantor. The Appellant filed an Additional Affidavit in

support of its petition on 28.02.2023, further affirming the

enforceability of the corporate guarantees and continuing nature of

default.

xii. The Adjudicating Authority vide its order dated 16.06.2023 dismissed

the Section 7 Petition, holding that the date of default fell within the

barred period under Section 10A of IBC.

xiii. Aggrieved by the said dismissal, the Appellant has filed the present

appeal under Section 61 of the IBC, assailing the findings in the

impugned order dated 16.06.2023 and seeking admission of the Section

7 petition against the Respondent.

Company Appeal (AT) (Ins.) No. 1046 of 2023 -6-

Submissions of the Appellant

4. The Learned Counsel appearing for the Appellant submits that the

impugned order dated 16.06.2023 passed by the Hon'ble National Company

Law Tribunal, Mumbai Bench in CP (IB) No. 144/2023, is liable to be set aside

as the Adjudicating Authority failed to appreciate that the present application

under Section 7 of the IBC was not premised on the guarantee invocation

dated 05.03.2021, which admittedly fell within the scope of the Section 10A

exclusion period, but rather on a fresh and independent invocation dated

09.12.2022, which occurred well after the expiry of the 10A bar. It is

submitted that the said invocation was based on continuing contractual

obligations under two corporate guarantees executed by the Respondent--

Corporate Guarantee I dated 31.12.2014 and Corporate Guarantee II dated

29.02.2016; each of which were explicitly continuing, irrevocable,

unconditional, and on-demand in nature. The invocation dated 09.12.2022,

along with the computation dated 08.12.2022, formed the foundational basis

of the debt and default as reflected in Entry 2 and Entry 8 of Part IV of the

Form-1 application filed before the Hon'ble Tribunal.

5. The Appellant's counsel submits that the financial facilities were

granted to the Principal Borrower, Siti Networks Ltd., under a Rupee Term

Loan sanctioned on 26.12.2014 amounting to Rs.125 Crores, and further

working capital facilities were sanctioned on 29.02.2016. These facilities were

duly secured by the aforementioned corporate guarantees executed by the

Respondent. It is pertinent to note that the Respondent's obligations under

these guarantees were co-extensive with those of the Principal Borrower, and

expressly permitted multiple and successive invocations until full and final

Company Appeal (AT) (Ins.) No. 1046 of 2023 -7-

repayment of all dues. In particular, Clause 15 of Guarantee I and Clause 7

of Guarantee II unambiguously provide that the guarantor shall be liable to

pay the outstanding amounts "on demand" and that the guarantee shall not

be exhausted by partial payments or earlier demands. These clauses, coupled

with Clause 18 of CG-I describing the guarantee as a "continuing guarantee,"

render the Appellant's right to issue a fresh demand both lawful and

enforceable.

6. Ld. Counsel further submitted that the first invocation of the corporate

guarantees was made on 05.03.2021, for Rs. 60.87 Crore towards Working

Capital Facility and Rs. 16.98 Crores towards Rupee Term Loan (RTL) facility

shortly after the issuance of the Recall Notice dated 18.02.2021. However, this

invocation was made during the Section 10A exclusion period, which lasted

from 25.03.2020 to 25.03.2021. Though the invocation was valid, any default

arising therefrom could not form the basis of a Section 7 application, in view

of the statutory bar.

7. The Ld. Counsel submits that subsequent to this invocation, and

despite partial payments made by the Principal Borrower (including Rs.24

Lakhs on 29.05.2021 and Rs.6.14 Crores on 12.04.2022), the Respondent

continued to remain in default, leading to a fresh and independent invocation

on 09.12.2022.

8. The learned counsel for the Appellant emphasizes that the second

invocation dated 09.12.2022 was issued pursuant to the continuing

contractual liability of the Respondent to maintain a Debt Service Reserve

Account (DSRA) of Rs.166.78 Crores, as computed on 08.12.2022. This

demand, made under the terms of the loan documents and guarantees, was

Company Appeal (AT) (Ins.) No. 1046 of 2023 -8-

clear and unconditional, and called upon the Respondent to deposit the said

amount within seven days. This invocation, being distinct in its nature, time

frame, and substance, gave rise to a new cause of action, post the expiry of

the Section 10A bar, and therefore cannot be dismissed merely because of the

existence of a prior invocation.

9. The Appellant further relies upon the decision of this Hon'ble Tribunal

in 'NuFuture Digital (India) Ltd. v. Axis Trustee Services Ltd., Co.' [Company

Appeal (AT) (Ins.) No. 444/2023], wherein at para 20 it was held that even if

the original invocation fell within the 10A bar period, a fresh invocation post

10A with subsisting default is legally permissible. Similarly, in 'SIDBI v.

Sambandh Finserve Pvt. Ltd., Co.' [Company Appeal (AT) (Ins.) No. 784/2023],

at paras 28-29, it was held that continuing obligations under a guarantee

allow multiple invocations, and default arising after the 10A period can

sustain a Section 7 petition. The Appellant also relies on 'Manmohan Singh

Jain v. State Bank of India', [2021 SCC OnLine NCLAT 5983], where at para

47 this Tribunal held that even if the date of default is not explicitly stated in

Form-1, the application is not defective if sufficient documentary evidence is

placed on record establishing default.

10. The Appellant's counsel further distinguishes the ruling in 'IDBI Bank

Ltd. v. Zee Entertainment Enterprises Ltd., Co.' [Company Appeal (AT) (Ins.)

No. 939/2023], where the only invocation was dated 05.03.2021 and there

was no subsequent demand or invocation. In contrast, the present application

is squarely based on the 09.12.2022 invocation, which is a distinct and new

default supported by contractual documents, and clearly falls outside the

Company Appeal (AT) (Ins.) No. 1046 of 2023 -9-

Section 10A shield. Moreover, the Respondent has not placed any material to

rebut this fresh invocation or the computation dated 08.12.2022.

11. Lastly, the Appellant submits that the law as laid down by the Hon'ble

Supreme Court in 'Dena Bank v. C. Shivakumar Reddy' [(2021) 10 SCC 330],

para 144, and 'Kotak Mahindra Bank Ltd. v. Anuj Kumar',

[MANU/DE/4116/2015 (Del HC)], supports the proposition that each default

gives rise to a fresh cause of action, and where guarantees are continuing,

repeated demands can be raised lawfully. In the present case, the Appellant's

second invocation stands on firm legal footing, and the denial of admission

solely on the basis of the earlier invocation is an error apparent on the face of

the record.

12. Therefore, in light of the facts, contractual terms, repeated defaults, and

settled jurisprudence, the Appellant humbly prays that the present appeal be

allowed, the impugned order dated 16.06.2023 be set aside, and the

application under Section 7 of the IBC against the Respondent be admitted to

initiate CIRP.

Submissions of the Respondent

13. The Learned counsel appearing for the Respondent submits that the

impugned order passed by the Hon'ble NCLT on 16.06.2023 does not suffer

from any infirmity and deserves to be upheld. It is submitted that the

application under Section 7 filed by the Appellant is wholly barred by the

express mandate of Section 10A of the IBC, as the only valid invocation of the

corporate guarantees executed by the Respondent was made on 05.03.2021,

which squarely falls within the statutory bar period of 25.03.2020 to

25.03.2021. The invocation notices served on that date demanded Rs.16.98

Company Appeal (AT) (Ins.) No. 1046 of 2023 -10-

Crores and Rs.60.87 Crores under the RTL and WCF respectively. These were

full and final invocations, and no reservation was made in the said letters

regarding future or repeated invocation.

14. The Respondent further submits that the so-called second invocation

dated 09.12.2022 was not an invocation of the guarantee in law or in

substance. The said letter was not issued under any express provision of the

corporate guarantees and merely directed the Respondent to maintain a DSRA

amount of Rs.166.78 Crores. However, there is no clause under either CG-I

or CG-II which imposes such a DSRA obligation on the Respondent. Moreover,

once the facilities were recalled on 18.02.2021 and the guarantees were

invoked on 05.03.2021, the entire outstanding amount under the loan stood

accelerated and became due. Thereafter, the concept of maintaining a DSRA--

meant to be a reserve for servicing future instalments--ceased to have any

contractual or practical relevance.

15. It is also submitted that the invocation made on 05.03.2021 was the

only valid invocation pleaded by the Appellant before the Hon'ble NCLT. In

Part IV of Form-1, the Appellant mentioned the date of default as 29.12.2019,

i.e., the NPA date, and further referred only to the 05.03.2021 letters as the

basis of default. The invocation dated 09.12.2022 was never pleaded as the

foundation of default in the original application. It is settled law that an

applicant cannot improve its case at the appellate stage. In this regard,

reliance is placed on the judgment of the Hon'ble Supreme Court in 'Bachhaj

Nahar v. Nilima Mandal' [(2008) 17 SCC 491], paras 12-13, and 'Arikala

Narasa Reddy v. Venkata Ram Reddy' [(2014) 5 SCC 312], para 15.

Company Appeal (AT) (Ins.) No. 1046 of 2023 -11-

16. The Respondent strongly relies on IDBI Bank Ltd. v. Zee Entertainment

Enterprises Ltd., (supra), where this Hon'ble Tribunal, on identical facts, held

that invocation dated 05.03.2021 being within the Section 10A bar period,

could not sustain a Section 7 application. There, as here, the invocation was

under the same facilities, against the same borrower, and involved identical

language. This authoritative ruling covers the present case squarely.

17. The Respondent also submits that the invocation of a guarantee is a

one-time cause of action unless expressly permitted otherwise. There is no

contractual provision permitting second invocation once full liability has been

demanded. In this respect, the Respondent places reliance on 'Syndicate Bank

v. Channaveerappa Beleri' [(2006) 11 SCC 506], paras 9-13, wherein the

Hon'ble Supreme Court held that the right to sue a guarantor accrues only

upon invocation, and not on the date of borrower's NPA.

18. In conclusion, the Respondent humbly submits that the present appeal

is wholly devoid of merit, and that the Appellant, having invoked the

guarantee within the Section 10A bar period, cannot resuscitate its cause of

action through an unrelated demand letter issued 20 months later. The

invocation of 09.12.2022 cannot be construed as a fresh default under the

guarantees. Therefore, the impugned order does not warrant any interference

and the appeal may be dismissed with costs.

Analysis and Findings

19. We have gone through the records of the case and heard the Learned

Counsels in detail.

Company Appeal (AT) (Ins.) No. 1046 of 2023 -12-

20. There are three basic issues to be decided in the present case.

(i) Whether the second invocation dated 09.12.2022 reflects a fresh default with fresh cause of action beyond Section 10A exemption period?

(ii) Whether multiple invocations to continuing guarantees is permissible?

21. In the present case the loan account of principal borrower (Siti

Networks Ltd.) was classified as Non-performing Asset (NPA) by the appellant

on 29.12.2019. The amount outstanding on that date was Rs. 193.82 Crores.

This date is significant as it is prior to commencement of Section 10 A period

which begun on 25.03.2020. Prior to the classification as loan as NPA, the

principal borrower consistently acknowledged the liability through various

communications including a revival letter dated 31.12.2018 and further

emails during February and March 2020 which affirmed the continuity of debt

obligation and reflected a liability that pre-dated the Section 10A period.

22. The Respondent had executed two guarantees, the first on 31.12.2014

and the second on 29.02.2016. The first invocation of these guarantees by

IDBI Bank occurred on 05.03.2021 during the prohibited period under the

Section 10A. The Adjudicating Authority treated this as the only date of

default and held that the Section 7 petition was not maintainable.

23. The Adjudicating Authority in para 4.6 of the impugned order has given

the following findings:

4.6 This Bench finds that the Financial Creditor has contended

that the default is established by multiple documents including

(a) emails dated 31.12.2018, 16.01.2019, 02.02.2019,

04.02.2019, 28.02.2020, 02.03.2020 (all before the Covid

Company Appeal (AT) (Ins.) No. 1046 of 2023 -13-

Period); and (b) 18.02.2021, 05.03.2021 and 09.12.2022. On

perusal of email dated 31.12.2018, this Bench finds that the

said email pertains to intimation to the principal borrower

regarding devolvement of a bank guarantee on 28.02.2018 with

request to principal borrower to regularize CC account. The

email dated 16.01.2019 for also requires the principal borrower

to regularize the account. The email dated 02.02.2019 informs

the avoiding possession in account as on 02.02.2019 with

request to principal borrower to regularize CC account. The

email dated 04.02.2019 is response from the Corporate Debtor

assuring the Financial Creditor that the principal borrower's

internal accruals and cash flow is enough to take care all the

future debts service obligation requirement and sought removal

of lien from the cash credit account. Further, email dated

28.02.2020, a copy of which is marked to Mr. Chetan Sharma

of the Corporate Debtor, is a communication from the principal

borrower seeking suitable restructuring to help the principal

borrower to overcome the liquidate issue and requested not to

take any legal action against the principal borrower. The email

dated 02.03.2020 is an email response from the Financial

Creditor to the email dated 28.02.2020 seeking clarity on the

restructuring request and informing the avoiding position as on

02.03.2020. The said email communicated that Financial

Creditor will be forced to initiate action against the borrower and

guarantor company. Communication dated 18.02.2021 and

05.03.2021 is a notice of recall of facilities and notice of

invocation of guarantee respectively. This Bench does not find

Company Appeal (AT) (Ins.) No. 1046 of 2023 -14-

any demand having been made upon the Corporate Debtor

asking it to pay the amount outstanding against the principal

borrower in these communications except notice dated

05.03.2021."

(Emphasis supplied)

24. In paragraph 4.11 of the impugned order the Adjudicating Authority

gave the following findings:

"4.11. In the present case, it is undisputed facts that the first

demand notice was addressed to the Corporate Debtor on

05.03.2021 to pay an amount of Rs. 60,67,89,718/-, being

outstanding in working facility capital account and another

amount of Rs.16,98,45,076.61/- upon receipt of the notice.

accordingly, the default qua Corporate Debtor took place on the

date when the demand notice dated 05.03.2021 was served

upon it. The Financial Creditor has not claimed that the service

of the demand notice was complete on after 24.03.2021.

Accordingly, this Bench is of the considered view that the

Corporate Debtor committed the default in in discharge of its

obligation under guarantee agreement dated 31.12.2014 and

29.02.2016 during the period specified in Section 10A of the

Code. As per the provisions of Section 10A of the Code, no

application for initiation of corporate insolvency resolution

process can be filed in respect of a default that has occurred on

or after 25th March, 2020 till 24th September, 2020. By a

notification dated 24th September 2020 the applicability of

Section 10A was extended for a further period of three months

till 25th December, 2020. Thereafter, by a notification dated

Company Appeal (AT) (Ins.) No. 1046 of 2023 -15-

22nd December, 2022 the applicability of section 10A was

further extended by a period of three months till 25th March,

2021. Thus, Section 10A bars absolutely and forever, the filing

of any application under Sections 7, 9 and 10 of the Code, for

defaults committed on or after 25th March, 2020 upto 25th

March, 2021."

25. It is seen from the findings in the paragraph 4.6 and 4.11 that the

Adjudicating Authority did not find any demand having been made on the

Corporate Debtor asking it to pay the outstanding amount against the

Principal Borrower except for notice dated 05.03.2021. The Tribunal mentions

the email dated 09.12.2022 but does not examine it or discuss it and relies

totally on notice dated 05.03.2021. Whereas it is seen from the records that

the letter dated 09.12.2022 is the second demand placed upon the Corporate

Debtor based on the continuing default by the Principal Borrower.

26. It is important to note that the Section 7 application filed on 11.01.2023

was not based solely on 05.03.2021 invocation. The first invocation of

05.03.2021 was only made for funds based working capital facilities for an

amount of Rs. 60.87 Crores under Working Capital Facility and Rs. 16.98

Crores towards Rupee Term Loan (RTL). A second invocation was made on

09.12.2022, after a detailed computation as on 08.12.2022, which reaffirmed

the continuing default and the failure of Corporate Guarantor to discharge its

obligations. These were placed on record before the Adjudicating Authority.

27. To obtain the correct picture we have a look at the relevant portions of

Form-1 are extracted below:

Company Appeal (AT) (Ins.) No. 1046 of 2023 -16-

"Part (iv)- Particulars of financial debt Amount claimed to be in The total amount of default under default and the date on the Working Capital Facility of Rs which the default 150 crore and term loan of Rs. 125 occurred (attach the crore is Rs. 168,45,83,258/- workings for computation (Rupees One Hundred Sixty Eight of amount and days of Crore Forty Five Lakh Eighty Three default in tabular form) Thousand Two Hundred and Fifty Eight Only) as on 08 December 2022 together with the applicable interest, penal interest, premia, charges etc. thereon at the contractual rates upon the footing of compound interest until payment/realization to the satisfaction of Financial Creditor.

The Borrower defaulted in payment of its obligations under the Working Capital Facility on 30 September 2019 and under the 125 Cr. Term Loan Facility on 30 September 2019 and the account of the Corporate Debtor was classified as a Non-

Performing Asset on 29 December 2019 in accordance with the existing guidelines of Reserve Bank of India.

A tabular computation of amount in default and days of default is annexed herewith as "Annexure AE".

Part -V -Particulars of Financial Debt (Documents,

Records and Evidence of default)

8. List of other documents attached to this application in

order to prove the existence of financial debt, the amount and

date of default

(C). On 05 March 2021, the Financial Creditor invoked the

guarantee provided by the Corporate debtor under deed of

guarantee dated 29 February 2016 and called upon the

Corporate debtor to pay Rs 60,87,89,718.00 together with

Company Appeal (AT) (Ins.) No. 1046 of 2023 -17-

further interest from 18 February 2021. The Financial

Creditor has not received any response to the invocation

letter dated 05 March 2021. A copy of the demand notice

dated 5 March 2021 is annexed hereto and marked as

Annexure-O.

(D). By way of separate letter dated 5 March 2021, the

Financial Creditor invoked the guarantee provided by the

Corporate debtor under deed of guarantee dated 31

December 2014 and called upon the Corporate debtor to pay

Rs 16,98,45,076.61 together with further interest from 18

February 2021. The Financial Creditor has not received any

response to the invocation letter dated 05 March 2021. A

copy of the demand notice dated 5 March 2021 is annexed

hereto and marked as "Annexure-P".

(G). The Financial Creditor issued notice dated 21 November

2022 to the Borrower calling upon the Borrower to maintain

the DSRA balance. A copy of the notice dated 21 November

2022 is annexed and marked as "Annexure R".

(H). Subsequent to the failure on the part of the Borrower to

maintain the DSRA balance, Financial Creditor issued notice

dated 09 December 2022 to the Corporate Debtor

demanding Corporate Debtor to maintain the DSRA balance.

A copy of the notice dated 09 December 2022 is annexed

hereto and marked as "Annexure-S".

28. It can be seen from the Part (iv) of Form-1 that the appellant has

calculated the amount in default by Principal Borrower from 29.12.2019

which was the date of NPA in accordance with the existing guidelines of

Company Appeal (AT) (Ins.) No. 1046 of 2023 -18-

Reserve Bank of India. In Part(V) of the Form-1 the appellant has given the

sequence of events with regard to existence of Financial Debt, the amount and

date of default. It can be seen from description in Para (C) and (D) that the

first invocation was made on 05.03.2021 for Rs. 60.87 Crores towards

Working Capital Facility (fund based) and by a separate letter of the same date

for Rs. 16.98 Crores as rupee term loan.

29. From Para (G) and (H) of Part (V) we see that on 09.12.2022 a separate

notice was issued to Corporate Debtor. This notice is also invocation of the

Corporate Guarantee for Rs.166.78 Crores. This invocation was for both fund

based and non-fund based Working Capital Facility, Rupee Term Loan and

other dues.

30. We also have a look at the relevant Clauses 6 & 7 of the letter dated

09.12.2022 which is extracted below:

"6. In view of the defaults committed by Borrower towards

maintenance of DSRA, we in terms of aforementioned clauses of

guarantee agreement, call upon you to immediately to maintain

a balance of Rs. 166,78,34,329/- (Rupees One Hundred Sixty

Six Crore Seventy Eight Lakh Thirty Four Thousand Three

Hundred Twenty Nine Only) as on November 14, 2022 in DSRA

within seven days from the date of receipt of this letter.

7. In case of your failure to comply as aforesaid, IDBI Bank shall

be constrained to take such steps as may be necessary for

enforcing its rights at your own risk, as to the costs and

consequences thereof."

31. This is similar to the language of notice dated 05.03.2021, the relevant

para 6 is extracted below:

Company Appeal (AT) (Ins.) No. 1046 of 2023 -19-

"6. In the premises, we hereby call upon you and demand from

you to pay forthwith to IDBI Bank at IDBI Tower, 8th floor, "D"

Wing, WTC Complex, Cuffe Parade, Mumbai 400 005 sums

aggregating Rs.60,87,89,718/- (Rupees Sixty crore, eighty

seven lakh, eighty nine thousand seven hundred and eighteen

only), as per details given in Annexure II of this letter, together

with further interest thereon with effect from 18.02.2021 at the

given contractual rates, upon the footing of compound interest

until payment/realisation. In case, you fail to make the

payments as aforesaid, IDBI Bank, shall be constrained to take

such steps against you as may be necessary for enforcing the

guarantees and realising the dues at your own risk as to the

costs and consequences thereof."

32. It is clear from the language of both the letters that both involved

invocation of corporate guarantee by the financial creditor. The first

invocation made in March 2021 was limited in scope. It was based only on a

part of the total liability- specifically, the fund-based Working Capital Facility

and the Rupee Term Loan. In particular, IDBI Bank demanded a sum of

Rs.16.98 crore under the RTL and Rs.60.87 crore under the fund-based

working capital. This demand was issued shortly after the bank recalled the

facilities on 18.02.2021. It did not include several other components of the

sanctioned credit facilities such as the non-fund-based exposures (including

letters of credit and bank guarantees), treasury transactions, or DSRA (Debt

Service Reserve Account) obligations, which were also covered under the

credit agreements. The Principal Borrower accepted this liability but

expressed its inability to make payment of the outstanding amount.

Company Appeal (AT) (Ins.) No. 1046 of 2023 -20-

Consequently, the Appellant invoked the Corporate Guarantee covering these

items vide the letter dated 09.12.2022.

33. The default date mentioned by the appellant in Part (iv) of Section 7

Petition relates to the Principal Borrower and the same is stated as

29.12.2019 which is the NPA date of Principal Borrowers account. However,

in Part (v) of the Section 7 Petition which has the particulars of Financial Debt

documents, records and evidence of default, has details of notices dated

05.03.2021 and 09.12.2022. It is the settled position that in case the date of

default is not specifically mentioned in the Section 7 Petition but the same

can be ascertained from documents in Part (v) the same would be admissible.

34. The relevant findings in this regard relates to this Tribunal Judgment

in Manmohan Singh Jain v. State Bank of India (supra) wherein it was held

that:

"47) This 'Tribunal' deal with the issues as raised by the

Learned Counsel for the Appellant, the facts of the present case

and law applicable to it. In the present Appeal, though the first

date of NPA is with respect to Axis Bank i.e. 10.02.2017.

However, the RBI circulars/Directives provides filing of

independent application by the Financial Creditor i.e. the SBI

before the Adjudicating Authority (NCLT) under Section 7 of the

IBC. Accordingly, the Applicant the 1st Respondent herein filed

application under Section 7 of the IBC for initiating the CIRP

against the Corporate Debtor independently taking into the date

of NPA/default and the amount of debt and default. There is no

dispute with regard to the existence of debt and default

committed by the Corporate Debtor. However, there is only an

Company Appeal (AT) (Ins.) No. 1046 of 2023 -21-

objection raised with respect to omission to mention the date of

default in Part IV of Form 1 filed before the Adjudicating

Authority. It is evident from the records that the date of NPA of

the SBI is 27.11.2018 and the application filed by the Financial

Creditor on 19.12.2019 even if the 90 days period prior to NPA

is taken into consideration for the purpose of deciding default

as per the Judgment of the Hon'ble Supreme Court in Re Laxmi

Pat Surana, the application is within the period of limitation.

Further, this 'Tribunal' hold that omission to mention date of

default in Col. 2 Part IV in Form 1 is not fatal to the application.

As we are of the view that as per Col. 8 of Part V in Form 1

regarding particulars of Financial Debt documents, records and

evidence of default to be attached, the Financial Creditor has

shown sufficient documentary evidence to establish the date of

NPA i.e. 27.11.2018 and the Adjudicating Authority has taken

note of the same and admitted the application. This 'Tribunal'

do not find any illegality in admitting the application."

35. The second invocation referred to continuing unpaid dues under the

guarantees and demanded immediate payment of Rs.166.78 crore from the

Corporate Guarantor. The invocation was not merely a request to maintain a

DSRA (Debt Service Reserve Account), as claimed by the Respondent. Rather,

it was a formal invocation of liability based on the original guarantees and the

underlying loan documents. The Appellant annexed both the computation

and invocation to its Form-1 filed before the NCLT, and also submitted an

additional affidavit explaining that the application was based on this second

Company Appeal (AT) (Ins.) No. 1046 of 2023 -22-

invocation, which occurred after the Section 10A exclusion period. The

documents were properly placed on record and pleaded.

36. The second invocation made on 09.12.2022 was based on a

comprehensive and updated computation of the borrower's total dues as of

08.12.2022. The total liability computed by IDBI Bank at that time stood at

Rs.166.78 crore. This amount included not only the unpaid dues under the

RTL and working capital facilities but also several additional heads of liability,

making the second invocation materially different from the first. A breakup of

the total dues as per the 8 December 2022 computation is as follows:

 Rupee Term Loan outstanding (principal and interest): Rs.16.98 crore

 Fund-Based Working Capital Facility dues: Rs.60.87 crore

 Non-Fund-Based exposure devolved: Rs.44.34 crore

 DSRA (Debt Service Reserve Account) shortfall: Rs.39.90 crore

 Treasury and other unadjusted items: Rs.4.69 crore

 Total: Rs.166.78 crore

37. The DSRA obligation, in particular, arose under the financial covenants

of the sanction letter, requiring the borrower to maintain a dedicated reserve

for timely servicing of debt. Its breach gave rise to a specific contractual event

of default, which is separate from the borrower's failure to repay the principal

or interest. The inclusion of devolved non-fund-based facilities and treasury

exposures also reflects defaults under other components of the credit package

that were not part of the earlier invocation.

38. We find that the second invocation dated 09.12.2022 was valid,

independent, and enforceable. The Adjudicating Authority failed to take

Company Appeal (AT) (Ins.) No. 1046 of 2023 -23-

cognizance of letter dated 09.12.2022 and did not examine its relevance to

the CIRP proceedings. Accordingly, we find that the second invocation

constitutes a distinct cause of action, and the Section 7 application filed by

IDBI Bank on 11 January 2023 based on this default is legally maintainable.

39. The second issue to be decided in this case is whether multiple

invocations of corporate guarantee is permissible in such cases. We take a

look at the relevant clauses of the second guarantee dated 29.02.2016:

"6. In order to give effect to the Guarantee herein contained the

Bank shall, upon invoking of the Guarantee, be entitled to act as if

the Guarantors were principal debtors to the Bank for all payments

guaranteed by them as aforesaid to the Bank.

7. The Guarantee herein contained is a continuing one for all

amounts advanced by the Bank to the Borrower in respect of or

under the Facilities as also for all interest, costs and all other

monies which may from time to time become due and remain

unpaid to the Bank under the Facilities Agreement and shall not be

determined or in any way be affected by any account or accounts

opened or to be opened by the Bank becoming nil or coming into

credits at any time or from time to time or by reason of the said

account or accounts being closed and fresh account or accounts

being opened in respect of fresh facilities being granted within the

overall limit sanctioned to the Borrower.

10. The guarantee shall be irrevocable and enforceable

against the Guarantors notwithstanding any dispute between the

Bank and The Borrower.

Company Appeal (AT) (Ins.) No. 1046 of 2023 -24-

11. The guarantors shall forthwith on demand made by the

Bank deposit with the Bank such sum or security or further sum or

security as the Bank may from time to time specify as securities for

the due fulfillment of their obligations under this guarantee and any

security deposited with the Bank any be sold by the Bank after

giving to the Guarantors 7 days' notice of sale and the said sum or

the proceeds of sale of the securities may be appropriated by the

Bank in or towards satisfaction of the said obligation and any

liability arising out of non-fulfillment thereof by the Guarantors."

(emphasis supplied)

(Identical clauses are there in the first guarantee dated 31.12.2014).

40. A demand for payment under a corporate guarantee need not be limited

to a one-time or all-inclusive invocation, unless the guarantee contract itself

provides such a restriction. Here, the guarantees are described in express

terms as "continuing," "irrevocable," and "on demand." Clause 18 of

Guarantee-I and Clause 7 of Guarantee-II provide that the liability of the

guarantor continues until full repayment of all dues, and that the obligation

shall not be discharged by partial payments or earlier demands.

41. In law, a "continuing guarantee" under Section 129 of the Indian

Contract Act, 1872, remains in force until revoked or until the obligation is

satisfied in full. The creditor can make successive demands under such a

guarantee until full payment is received. This principle is well supported by

judicial precedents. In Dena Bank v. C. Shivakumar Reddy (2021) 10 SCC

330, the Hon'ble Supreme Court held that repeated defaults and

Company Appeal (AT) (Ins.) No. 1046 of 2023 -25-

acknowledgments under a continuing obligation can constitute fresh causes

of action.

42. In Kotak Mahindra Bank Ltd. v. Anuj Kumar (supra) the Delhi High

Court also explained that where a financial obligation is still unpaid, and

where the contract is still in force- especially in the case of continuing

guarantees or loan agreements- the creditor does not have to act only at the

time of the first default. The creditor can act later, based on a new or repeated

failure to pay. Each time the borrower or guarantor fails to meet their

responsibility under the contract, the creditor gets a new right to sue.

43. The Respondent has not produced any evidence to show that the

guarantee was discharged or that the debt was fully paid. The defense that

the invocation was a mere administrative request is inconsistent with the

express language of the demand letter and the computation annexed to the

application.

44. Now applying these principles to the present case, this Tribunal finds

that the factual situation clearly supports the Appellant's argument. The

guarantees issued by the Respondent were described in clear terms as

continuing, irrevocable, and on-demand. This means that they were not

meant to be used only once. As long as the borrower's dues remained unpaid,

IDBI Bank was legally allowed to make a fresh demand at any time. The first

invocation made in March 2021 was only with respect to part of the dues--

specifically, the Rupee Term Loan and the fund-based working capital. That

invocation did not include other unpaid components of the borrower's

liabilities such as the non-fund-based exposures, unpaid treasury dues, and

Company Appeal (AT) (Ins.) No. 1046 of 2023 -26-

the shortfall in the Debt Service Reserve Account (DSRA), which were part of

the same credit facility.

45. Over time, as the Principal Borrower failed to make full repayment and

as the unpaid amount increased, the Bank issued a second invocation notice

in December 2022. This second invocation was not a repetition of the earlier

one. It was based on a new and comprehensive computation dated

08.12.2022, showing a total outstanding of Rs.166.78 crore. This amount

included new components of default- specifically, Rs.44.34 crore towards

devolved non-fund-based limits, Rs.39.90 crore towards DSRA shortfall, and

other treasury dues. These amounts had not been demanded earlier, and

therefore the failure to pay them gave rise to a fresh default.

46. The argument raised by the Respondent that the first invocation

exhausted the right of the Appellant to proceed again is not supported either

by contract or law. The guarantees do not provide for single enforcement, and

the conduct of parties indicates a subsisting liability. We are satisfied that the

guarantees in question are continuing guarantees, and the Appellant was

legally entitled to issue a second invocation on 9 December 2022.

47. The Respondent has referred to the decision in IDBI Bank Ltd. v. Zee

Entertainment Enterprises Ltd., Company Appeal (AT) (Insolvency) No. 939 of

2023, to argue that since the first invocation of the corporate guarantee by

IDBI Bank was made on 05.03.2021- during the one-year bar period under

Section 10A of the IBC- the Appellant was permanently barred from initiating

insolvency proceedings, even at a later stage. The Respondent further claimed

that the second invocation made in December 2022 was not a fresh or

separate demand, but merely a continuation of the earlier invocation. On this

Company Appeal (AT) (Ins.) No. 1046 of 2023 -27-

basis, it was submitted that the present application under Section 7 is also

barred.

48. This case has been cited by both the appellant and respondent in

support of their case. The relevant paras 27, 34 & 35 are reproduced below:

"27. In any view of the matter as noted, we have already noticed

the pleadings in Section 7 application which was made by the IDBI

Bank. IDBI bank in his Section 7 application has clearly pleaded

that "on 05.03.2021, financial creditor invoked the guarantee

provided by the corporate debtor and called upon the corporate

debtor to pay Rs.61,97,33,612/-". Further in Part IV Serial No. 2

again following was pleaded "financial creditor invoked the

guarantee on 05.03.2021 and the corporate debtor is in continuous

default in terms of the guarantee agreement dated 03.08.2012".

When the appellant financial creditor has come with the

categorical case that guarantee was invoked only on 05.03.2021,

there cannot be any occasion to treat any other date as date for

invocation of guarantee. The letter dated 05.03.2021 is also

brought on the record as Annexure-31. Letter dated 05.03.2021

has been addressed to the corporate debtor. Para 6 of the notice

provided as follows:

"6. In the premises, we hereby call upon you and

demand from you to pay forthwith to IDBI Bank at IDBI

Tower, 8th floor, "D" Wing, WTC Complex, Cuffe Parade,

Mumbai 400 005 sums aggregating Rs.

61,97,33,612.80/- (Rupees Sixty one crore, ninety

seven lakh, thirty three thousand six hundred & twelve

and paisa eighty only), as per details given in Annexure

Company Appeal (AT) (Ins.) No. 1046 of 2023 -28-

II of this letter, together with further interest thereon

with effect from 18.02.2021 at the given contractual

rates, upon the footing of compound interest until

payment/realisation. In case, you fail to make the

payments as aforesaid, IDBI Bank, shall be constrained

to take such steps against you as may be necessary for

enforcing the guarantees and realising the dues at your

own risk as to the costs and consequences thereof."

34. Much emphasis has been given by the learned counsel for the

appellant that corporate debtor is continuing with the default even

after 10A period which was also even pleaded in Part IV where it

was pleaded that financial creditor invoked the guarantee of

05.03.2021 and the corporate debtor is in continuous default in

terms of the guarantee agreement. As noted above, the application

under Section 7 was filed on the basis of invocation of guarantee

on 05.03.2021, which period fell during the 10A period. A reading

of the application does not indicate that Section 7 application is

founded on any default which is subsequence to the 10A period.

35. In the facts of the present case, we are of the view that

although order impugned of the adjudicating authority needs to be

affirmed, but liberty need to be given to the appellant, if so,

advised to file a Section 7 application for default of corporate

debtor subsequent to 10A period i.e., a default subsequent to

24.03.2021."

49. In Zee Entertainment (supra), the Financial Creditor had made only one

invocation of the guarantee, and that too during the Section 10A prohibition

Company Appeal (AT) (Ins.) No. 1046 of 2023 -29-

period. No second invocation was issued, and no new default was pleaded

after the expiry of the bar period. The Section 7 application in that case was

filed entirely based on the default covered by the single invocation. Therefore,

the Appellate Tribunal held that the application was not maintainable, as it

was based on a default which happened during the period when filing was

legally prohibited.

50. The Tribunal, however, gave liberty to the Financial Creditor IDBI Bank

to file a fresh Section 7 petition if the default continues beyond the prohibition

period of Section 10A.

51. The present case, however, is different from the Zee Entertainment

(supra) in the sense that the IDBI Bank did issue a first invocation on

05.03.2021, but it also issued a second, separate invocation on 09.12.2022.

That second invocation was based on a new and updated computation of the

borrower's total dues as on 08.12.2022. The updated calculation included

liabilities that were not part of the earlier invocation--such as non-fund-based

limits, DSRA shortfalls, and treasury dues. This second invocation was made

after the Section 10A bar period had ended and was based on a broader

default that continued. The application under Section 7 was filed on

11.01.2023 - well after the Section 10A exclusion period--and was based

entirely on this second invocation.

52. This Judgment clearly supports the contention of appellants in the

matter of second invocation of guarantee. It is also important to note that even

in the Zee Entertainment decision, the Appellate Tribunal never stated that a

fresh application based on a later default would be barred. On the contrary,

the Tribunal explained that if a new default arises after the 10A period ends,

Company Appeal (AT) (Ins.) No. 1046 of 2023 -30-

and that default is supported by proper demand and documentation, then an

application under Section 7 would be maintainable. That principle directly

supports IDBI Bank's case in the present appeal.

53. We, therefore, hold that the Corporate Guarantee could be invoked

successively, if the guarantee was a continuing guarantee, loan default

continues post Section 10A period, and the debt obligation were not fully met

by the Principal Borrower. Accordingly, this issue is also decided in

affirmative.

54. Thus, both the issues are decided in favour of Appellants. The appeal

is allowed. The impugned order is set aside and CP (IB) No. 144/MB/2023 is

restored. The parties to approach the Ld. NCLT on 17.07.2025. There is no

order as to costs. Pending I.As if any are closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

SA/Pragya (LRA)

Company Appeal (AT) (Ins.) No. 1046 of 2023