Superfine Profile And Extrusions ... vs Central Bank Of India Limited & Anr

[Arising out of Order dated 03.01.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-IV in CP (IB) 692/MB/2023]

IN THE MATTER OF:

Siddharth Satish Katariya (Ex-Director) ....Appellant Superfine Profile and Extrusions Pvt. Ltd. Vs.

Central Bank of India & Anr. ...Respondents For Appellant: Mr. Krishnendu Datta, Sr. Advocate with Mr. Lalit Katariya, Mr. Akhil Sachar, Ms. Sunanda Tulsyan, Advocates.

For Respondents: Mr. Abhijeet Sinha, Sr. Advocate with Mr. Kunal Tandon, Mr. Rahul Nagar, Ms. Niti Jain, Ms. Bhavna Vijay, Advocates and Mr. D. K. Dhoke, officer for CBI for R-1.

JUDGMENT

(14th August, 2024)

Ashok Bhushan, J.

1. This Appeal by Suspended Director of the Corporate Debtor has been

filed challenging the order dated 03.01.2024 passed by the Adjudicating

Authority (National Company Law Tribunal), Mumbai Bench-IV admitting

Section 7 application filed by the Central Bank of India.

2. Brief facts of the case necessary to be noticed for deciding this Appeal

are:-

2

2.1. Central Bank of India issued a sanction letter dated 27.11.2013

wherein certain credit facilities were sanctioned to the Corporate Debtor

which included Cash Credit, Term Loan Non-Fund Based Limits. On

22.08.2015, a Corporate Guarantee deed was executed by the Corporate

Debtor- Superfine Profile and Extrusions Pvt. Ltd. to indemnify the Central

Bank of India Consortium for an amount not exceeding Rs.73.61 Crore.

Another Corporate Guarantee Deed was executed on 18.11.2016 by the

Corporate Debtor in favour of Central Bank of India, Indian Bank and

Oriental Bank of Commerce (Now Punjab National Bank). On 26.12.2019,

letter of sanction was issued by the Central Bank of India to Superfine

Metals Pvt. Ltd., the Principal Borrower for Ad hoc Limit of Rs.3.70 Crores.

Another sanction letter dated 09.09.2020 was issued for FITL Scheme for a

sum of Rs.3,16,90,762/-, in sanction letter dated 26.12.2019 and

09.09.2020, Bank of Maharashtra was also added in Consortium but no

disbursement took place by the Bank of Maharashtra). On 06.11.2020, new

Corporate Guarantee was executed for the Central Bank of India, Indian

Bank, Oriental Bank of Commerce (now PNB) and Bank of Maharashtra. On

06.11.2020, Working Capital Consortium Agreement was also executed

between the Corporate Debtor and the Consortium Bank. Account of

Superfine Metal was classified as Non-Performing Asset (NPA) on

29.11.2020. On 29.06.2022, Notice under Section 13(2) of the SARFAESI

Act was issued upon the Appellant by the Central Bank of India. On

06.03.2023, a demand notice was issued by the Central Bank of India to the

Corporate Debtor calling upon the Corporate Debtor to pay the defaulted

amount. After issuance of notice dated 06.03.2023, an application under

Company Appeal (AT) (Insolvency) No. 78 of 2024 3 Section 7 was filed by the Central Bank of India claiming total debt and

default of Rs.94,71,23,119/- as on 06.03.2023. Part-IV contains the details

of nature of facilities i.e. Cash Credit, Term Loan, FITL and Cash Credit

Adhoc. A reply to Section 7 application was filed by the Corporate Debtor.

Letter was also sent by the Corporate Debtor submitting the restructuring

proposal on 10.10.2023. Adjudicating Authority vide impugned order

admitted Section 7 application holding that the guarantee was invoked by

notice dated 06.03.2023. Corporate Guarantee Deeds dated 22.08.2015 and

18.11.2016 were invoked by notice dated 06.03.2023. Application is filed

within time after invocation of guarantee on 06.03.2023. Application is not

barred by Section 10 A. Aggrieved by the order admitting Section 7

application, this Appeal has been filed.

3. In the Appeal, it was submitted that the Appellant has already

submitted a re-structuring proposal which is under consideration. Counsel

for the Bank has also submitted that it has no objection in considering the

proposal for restructuring. On 19.01.2024, this Tribunal passed following

order:-

"19.01.2024: Learned counsel for the Appellant submits that the restructuring proposal submitted by the Appellant on 08.11.2023 which was responded by the Central Bank of India, the lead bank on 18.11.2023 informing that the restructuring proposal can be considered only after completion of Forensic Audit and fresh valuation of the primary and collateral securities of all group companies. It is submitted that the fresh valuation was completed on 26.12.2023 and Forensic Audit has been completed only

Company Appeal (AT) (Insolvency) No. 78 of 2024 4

on 17.01.2024. It is submitted that the Bank is now to consider and take decision on restricting proposal dated 08.11.2023.

Learned counsel for the Respondent submits that the Bank has no objection in considering the proposal, however, the formation of CoC not to be interdicted.

Let the Bank takes a decision on the restricting proposal submitted by the Appellant within two weeks from today.

Let the CoC be constituted but no further action shall be taken by the CoC till the next date.

List this Appeal on 09.02.2024. It shall be open for the Respondent to file an affidavit before the date fixed."

4. In the Appeal, there has been further orders to await the outcome of

re-structuring proposal. A detailed order was passed on 09.04.2024 listing

the appeal on 13.05.2024 providing that all necessary reports for the Bank

may be called for regarding the re-structuring proposal. Interim order was

extended. On 22.05.2024, again following order was passed by this

Tribunal:-

"22.05.2024: Learned Counsel for the appellant referring to Additional Affidavit submits that bank had issued a letter dated 10.5.2024 indicating that no Binding Letter from Investor has yet been received. Ld. Counsel for the appellant submits that Investor has already noticed the said letter and within a short period of a week or a ten days the binding offer will be given by the Investor to the Bank and thereafter it will be finalised and further steps shall be taken for restructuring.

Company Appeal (AT) (Insolvency) No. 78 of 2024 5

Learned counsel for the bank Mr. Tondon submit that several opportunities have been granted to the appellant till date nothing concrete has come out. He submits that the Investor has not giving the binding letter and there are several shortcomings in the proposal which are submitted.

In view of the facts brought on the Additional Affidavit we are of the view that a last opportunity be given to the appellant to finalise restructuring, if any, before the next date.

List this appeal on 03.07.2024. Interim order to continue.

We make it clear that in event the if restructuring is not completed; parties shall address the submission on the next date."

5. Ultimately, on 16.07.2024, it was informed on behalf of the Bank that

the lead bank is not in favour of re-structuring of group. Re-structuring

proposal could not be finalised despite several opportunities, hence, counsel

for the Appellant addressed the submissions on merits.

6. Counsel for the Appellant has filed Additional-Affidavit bringing

relevant documents on the record. Counsel for the Central Bank of India has

filed compilation of documents on behalf of the Respondent.

7. We have heard Shri Krishnendu Datta, Learned Senior Counsel for

the Appellant and Shri Abhijeet Sinha, Learned Senior Counsel for the

Respondent.

8. Shri Krishnendu Datta, Learned Senior Counsel for the Appellant

submits that the guarantee which has been invoked by invocation notice

Company Appeal (AT) (Insolvency) No. 78 of 2024 6

dated 06.03.2023 relates to Guarantees which were executed by Corporate

Guarantor on 22.08.2015 and 18.11.2016. It is submitted that after the

sanction letters and the guarantee executed on 22.08.2015 and 18.11.2016

there has been further sanction of the loan by Financial Creditor. Counsel

for the Appellant refers to sanction letter dated 26.12.2019 of Ad Hoc Limit

and sanction letter dated 09.09.2020. With regard to FITL, it is submitted

that subsequent guarantee was executed by corporate guarantor on

06.11.2020 which guarantee having not been invoked, Section 7 application

filed by the Central Bank of India was not maintainable. It is submitted that

in view of the subsequent sanction letters and guarantee dated 06.11.2020,

earlier guarantees extended by the Corporate Debtor had come to an end

and without invocation of the guarantee dated 06.11.2020, no proceeding

could have been initiated. It is submitted that by subsequent sanction

letters dated 26.12.2019 and 09.09.2020 and the guarantee dated

06.11.2020, contract between the parties have been novated. It is submitted

that in view of the novation of the contract between the parties by virtue of

Section 62 of the Contract Act, the original contract need not be performed.

9. Counsel for the Respondent refuting the submissions of the Counsel

for the Appellant submits that earlier sanction letter and guarantee deed

dated 22.08.2015 and 18.11.2016 still binds the Corporate Debtor by

subsequent sanction letters dated 26.12.2019 and 09.09.2020, the existing

securities were continued. Existing securities including the aforesaid

guarantees dated 22.08.2015 and 18.11.2016 being continuing, Bank has

rightly invoked the guarantees dated 22.08.2015 and 18.11.2016. It is

Company Appeal (AT) (Insolvency) No. 78 of 2024 7

submitted that non-invocation of guarantee dated 06.11.2020 is

inconsequential. It is submitted that the disbursements were made to the

Corporate Debtor consequent to the sanction letter dated 27.11.2013 and

thereafter disbursement having been made by the Financial Creditor for

which repayments having not been made by the Principal Borrower, the

Corporate Guarantee has been invoked by the Bank, there is no question of

any novation of contract between the parties. Corporate Debtor is still bound

by the guarantees executed on 22.08.2015 and 18.11.2016. The sanction

letters which were issued by the Bank on 26.12.2019 and 09.09.2020

clearly contemplated that existing securities continues. It is submitted that

Section 7 application was fully maintainable and has been rightly admitted

by the Adjudicating Authority. It is submitted that in spite of ample

opportunities granted by this Tribunal, re-structuring could not be finalised,

hence, the debt and default continues.

10. We have considered the submissions of the Counsel for the parties

and perused the record.

11. Before we proceed to consider the respective submissions of the

Counsel for the parties, we may first notice the Notice of Invocation dated

06.03.2023. The notice dated 06.03.2023 has been brought on record by the

Appellant along with Additional-Affidavit. It is useful to extract the Notice

dated 06.03.2023, which is as follows:-

"To, March 06, 2023

Superfine Profile and Extrusions Private Ltd

Company Appeal (AT) (Insolvency) No. 78 of 2024 8

1267 Pratibha Dalmandai Ahemednagar-414001

Subject: Legal Notice for invocation of corporate guarantee and calling upon you to repay the outstanding loan amount of Rs.94,71,23,119.18/- (Rupees Ninety Four Crore Seventy One Lakhs Twenty Three Thousand One Hundred and Nineteen and Eighteen Paisa).

Reference:

1. Recall Notice sent to Superfine Metal Pvt Ltd dtd 02-01-2023

2. Corporate Guarantee deed dated August 22, 2015

3. Corporate Guarantee deed dated November 18, 2016

4. Sanction Letter dated 27-11-2013, 26-12-2019, 09-09-2020 & 19-01-2021

5. Review the Proposal dated January 19, 2021 6 Notice under section 13(2) SARFAESI Act, 2002

7. POA of Mr Abhay Kulkarni

Sir,

Aware as you are, we the undersigned, and the superfine group shares a Banking relationship for the last couple of years. The Superfine Metal Pvt ltd. approached the Central Bank of India (Lender) with a request for the advancement of a loan facility for an amount of Rs. 66,21,05,008/ (Rupees Sixty Six Crore Twenty One Lakhs Five Thousand and Eight Only) ("Hereinafter referred to as the said Loan').

The bank has sanctioned the credit facilities wide sanctioned letter dated 27-11-2013, 26-12- 2019, 09-09-2020, 19-01-2021. Loan was disbursed from time to time to Superfine Metal Pvt Ltd wherein your company has given corporate guarantee.

We have to inform you that the principal borrower ie. Superfine Metals Pvt Ltd has committed defaults in payment of their liabilities and consequently their account has been classified as a non-performing asset. A copy of the notice dated 29.06.2022 under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Recall Notice dated 02.01.2023 sent by us to the Principle borrower is enclosed.

Since the borrower has committed defaults. in terms of the guarantee deed dated August 22, 2015 and November 18, 2016, Superfine Profile and Extrusions Pvt Ltd have become liable to pay to us the outstanding amount of loan/credit facilities aggregating balance O/s as of 06.03.2023 Rs. 94,71,23,119.18/- (Rupees Ninety Four Crore Seventy One

Company Appeal (AT) (Insolvency) No. 78 of 2024 9

Lakhs Twenty Three Thousand One Hundred and Nineteen and Eighteen Paisa) exclusive of other charges, and we hereby invoke the corporate guarantee and call upon you to pay the said amount within 10 days from the date of this notice, failing which we have been instructed to initiate the legal proceeding including but not limited to appropriate legal actions under the provisions of Insolvency & Bankruptcy Code, 2016.

The cost of the notice being INR 25,000/- are a lien on you.

Please note. Hence, the notice.

Yours sincerely.

(ABHAY KULKARNI) MANAGER Ahmednagar"

12. Now we come to the application under Section 7 filed by the Central

Bank of India. Part-IV of the application filed by the Central Bank which

contains a detail of amount claimed which included all facilities, are as

follows:-

"PART IV

PARTICULARS OF FINANCIAL DEBT

1 TOTAL AMOUNT OF Total amount of debt granted to superfine DEBT GRANTED Metals Pvt Ltd for which corporate debtor has DATE(S) OF provided corporate guarantee dated August DISBURSEMENT 22, 2015 and November 18, 2016. Rs.66,21, 05,008/- (Rupees Sixty-Six Crore Twenty-One Lakh Five Thousand and Eight Only).

Nature of A/C No. Amount Facility Disbursed (Rs.) Cash 3056432616 54,27,45,208.00 Credit Term 3305046620 50,67,01,98.00 Loan FITL 3852802470 3,16,90,762.00 Cash 3793059834 3,69,98,840.00 Credit Adhoc

Company Appeal (AT) (Insolvency) No. 78 of 2024 10

Total 66,21,05,008/-

The schedule of disbursement of the aforesaid facilities is hereto annexed and marked as Annexure "D";

2 AMUNT CLAIMED Total Amount of debt in default from the TO BE IN DEFAULT Corporate Debtor is Rs.94,71,23,119.18/- AND THE DATE ON (Rupees Ninty Four Crore Seventy One Lakh WHICH THE Twenty Three Thousand One Hundred and DEFAULT Nineteen and Eighteen Paisa Only) The break- OCCURRED up of the said defaulted amount is as under-

(ATTACH THE WORKINGS FOR Nature A/C No. Amount COMPUTATION OF of Disbursed (Rs.) AMOUNT AND Facility DAYS OF DEFAULT Cash 3056432616 77,85,36,496.00 IN TABULAR FORM) Credit Term 3305046620 6,68,45,124.18 Loan FITL 3852802470 4,15,05,088.00 Cash 3793059834 6,02,36,411.00 Credit Adhoc Total 94,71,23,119.18/-

Hereto annexed is the copy of breakup of the defaulted amount for each facility as on 6.03.2023 annexed as Annexure "E"

13. Above Part-IV refers to breakup of the defaulted amount for each

facility as on 06.03.2023 as Annexure-E. Annexure E although has not

annexed in the Appeal but in the compilation of documents filed on behalf of

the Bank. The said Annexure E is at Pages 47 to 52 which we shall notice

hereinafter.

14. The guarantees which were executed by the Corporate Debtor dated

22.08.2015 and 18.11.2016 have been brought on the record by the

Appellant. Clause 1 of the Guarantee Deed dated 22.08.2015 provide that if

Company Appeal (AT) (Insolvency) No. 78 of 2024 11

any time default shall be made by the borrower in payment, the guarantors

shall forthwith on demand pay to the Central Bank of India amount not

exceeding Rs. 73.61 Crores. Para 1 of the Guarantee Deed is as follows:-

"1. If any time default shall be made by the borrower in payment of the principal sum (not exceeding Rs 73.61 Crores) together with interest, costs, charges, expenses and/or other money for the time being due to the Central Bank of India consortium in respect of or under the above mentioned credit facilities or any of them the guarantors shall forthwith on demand pay to the Central Bank of India consortium the whole of such principal sum (not exceeding Rs 73.61 Crores) together with interest, costs, charges, expenses and or any other money as may be then due to the Central Bank of India consortium in respect of the above mentioned credit facilities and shall indemnify and keep indemnified the Central Bank of India consortium against all losses of the said principal sum, interest or other money due and all cost, charges and expenses whatsoever which the Central Bank of India consortium may incur by reason of any default on the part of the borrower."

15. Subsequent Guarantee Deed dated 18.11.2016 has given a guarantee

for sum not exceeding of Rs.92.47 Crores. Corporate Guarantee dated

18.11.2016 is as follows:-

"CORPORATE/DEED OF GUARANTEE

Company Appeal (AT) (Insolvency) No. 78 of 2024 12

This Deed of Guarantee made on this 18th day of November 2016 by SUPERFINE PROFILE AND EXTRUSION PVT LTD, a company incorporated under the Companies Act 1956 and having its registered office at 'Pratibha", 1267 Dalmandai, Ahmednagar hereinafter referred to as the Guarantors which expression shall unless repugnant to context or meaning thereof be deemed to include its successor and assigns in favour of Central Bank of India Consortium represented by Central Bank of India as Lead Bank as defined in the working capital consortium agreement dated 18th November 2016 (hereinafter referred to us Lead Bank which expression shall unless repugnant to the context or meaning thereof be deemed to include the Central Bank of India and other consortium member banks constituting the Central Bank of India Consortium from time to time or each of them or any one or more of them and their respective successor and assigns) whereas in terms of the working capital consortium Agreement dated 18th November 2016 and Joint Deed of Hypothecation dated 18th November 2016 executed by SUPERFINE METALS PVT LTD, a company within the meaning of the Companies Act 1956 and having its registered office at 'Pratibha', 1267 Dalmandai, Ahmednagar (Hereinafter referred to as the Borrower which expression shall unless repugnant to the context or meaning thereof be deemed to include its successors and permitted assigns) with the Lead Bank of the other part on the 18th November 2016 executed between the Borrower and the Lead Bank (hereinafter the said working capital consortium agreement, Joint Deed of Hypothecation and Supplement Agreement collectively referred to as the said Agreement of Loan) the Lead Bank/Central Bank of India consortium has agreed to grant to the borrower all or some or any of the credit facilities either in Indian or foreign currencies by way of over drafts, cash credits, term loans, pre-shipment

Company Appeal (AT) (Insolvency) No. 78 of 2024 13

credits, opening of letters of credit, issuing of guarantees including deferred payment guarantees and indemnities negotiations and discounting of demand and /or Usance bills and cheques inland as well as foreign and such other facilities as may be agreed upon from time to time between the bank and the borrower (hereinafter called the above mention facilities) for sums not exceeding in the aggregate the sum of Rs. 92.47 crores (hereinafter for the sake of brevity referred to as the principle sum) on the terms and conditions specified and contained therein."

16. The submission made by the Appellant of novation of the contract and

non-invocation of the subsequent guarantee dated 06.11.2020 is based on

sanction letters dated 26.12.2019 and 09.09.2020 which according to the

Appellant is sanction of further amount which amount has been claimed as

a debt under Part IV and there being no invocation of guarantee dated

06.11.2020, application under Section 7 is not maintainable. 26.12.2019 is

a sanction issued by the Central Bank of India to Principal Borrower with

regard to Ad-hoc Limit of Rs.3.70 Crores for a period of 90 days. Letter dated

26.12.2019 contains following:-

"BR/AHMPOO/2019-20/1 Date: 26/12/2019

SUPERFINE METALS PVT. LTD., 1267, PRATIBHA, DALMANDAI, AHMEDNAGAR-414001

Reg: Adhoc Limit Sanction- Superfine Metal Pvt. Ltd.

Ref: 1) Regional Office Letter no.RO/NAGAR/CREDIT/2019- 20/464

2) Zonal Office Letter No. ZO: CR: 2019-20:161 dated 26/12/2019

Company Appeal (AT) (Insolvency) No. 78 of 2024 14

------------------------------------------------------------------------------------------ We are pleased to inform you that your ad-hoc limit proposal has been approved by ZLCC, Pune vide their Agenda Item No. ZO/ZLCC/2019-20/31 DATED 26/12/2019 as under

subject to compliance of terms and conditions as stipulated in this letter:

✓ Committee has approved adhoc limit of Rs.3.70 crore for a period of 90 days, subject to compliance of terms & conditions as stipulated under:

1. Interest rate- 1 yr MCLR + 3.00% p.a. + additional interest 2.00% p.a. (i.e. ROI for Adhoc Limit- 1 yr MCLR + 5.00% p.a)

2. Security-As applicable for existing FBWC limits.

3. Margin-25% on paid stock & 25% on boo<-debts upto 90 days

4. Processing charges:- Concession of 50 % in processing charges on pro rata basis or till adjustment of ad-hoc, whichever is later.

5. Validity:- 90 days. Ad-hoc is to be adjusted on or before the expiry of 90 days from the date of availment

6. The Ad-hoc limit shall be secured by way of our exclusive charge over the additional current assets created out of the said Ad-hoc limit."

17. It is relevant to notice that sanction dated 26.12.2019 was Ad-hoc

Limit where Clause 2 clearly mentions 'security- As applicable for existing

FBWC limits'.

18. The next sanction letter on which reliance is placed is sanction letter

dated 09.09.2020 by which amount of Rs.3,16,90,762/- has been

sanctioned under FITL Scheme. Sanction letter dated 09.09.2020 provides

as follows:-

"SANCTION ADVISE TO THE BORROWER

Company Appeal (AT) (Insolvency) No. 78 of 2024 15

AHMEDNAGAR BRANCH OFFICE NEAR LAXMIBAI KARANJA, AHMEDNAGAR, 414001.

BR/AHMPOO/2020-21/FITL/01 Date: 09.09.2020

TO:

M/S SUPERFINE METALS PVT. LTD.

PRATIBHA 1267 DALMANDAI AHMEDNAGAR-414001 MAHARASHTRA

Dear Sir,

REG: SANCTION OF FITL

With reference to your application for FITL SCHEME, We have examined your application based on the application submitted by you and We are pleased to inform you sanction of FITL SCHEME on terms and conditions mentioned in this sanction letter.

1. Name of the Borrower M/S SUPERFINE METALS PVT.

LTD.

2. Address PRATIBHA 1267 DALMANDAI AHMEDNAGAR-414001 MAHARASHTRA

3. Purpose of Loan Deferment of interest in working capital facility.

4. Loan Amount Rs. 3,16,90,762.00

5.Facility type Term Loan

6.Rate of Interest 10.30% pa. Rate of interest as being applied on the existing FBWC limit of the borrower.

7. Repayment term 6 Instalment of Ra. 52,81,794 + Interest. Commencing from 1st October 2020.

FITL shall be repayable fully not later than 31.03.2021

8.Documentation Agreement for FITL

Company Appeal (AT) (Insolvency) No. 78 of 2024 16

OTHER TERMS AND CONDITIONS-

1. Any unpaid arrears of interest/Instalments/Charges pertaining to 01/03/2020, will be repaid before disbursement.

2. The instalments in the term loan falling due during the period from 01/*/* to 31/08/2020 in respect of Term Loan will be repaid by you as per the * repayment schedule by extending the tenor of the loan as allowed in the Regulation Package.

3. All necessary agreements on account of the above deferment of interest / allowing moratorium to be executed before disbursement of FITL.

4. All existing securities in the captioned facilities will continue to be the security for the existing facilities with the revised repayment schedule. Further the said securities will also cover the fresh FITL facility opened to park the interest on the captioned working capital facilities.

(underlined by us)"

19. In the above sanction letter, clause 4 clearly mentions that all existing

securities in the captioned facilities will continue to be the security for the

existing facilities with the revised repayment schedule. It was further

mentioned that the said securities will also cover the fresh FITL facility

opened to part the interest on the captioned working capital facilities. Thus,

the sanction letter dated 09.09.2020 was fully covered by existing securities

which included the guarantees dated 22.08.2015 and 18.11.2016.

20. When we revert to Part-IV of the Section 7 Application, Cash Credit,

Term Loan, FITL and Cash Credit Adhoc are the facilities for which with

regard to amount disbursed default was claimed. Admittedly, for Cash

Company Appeal (AT) (Insolvency) No. 78 of 2024 17

Credit and Term Loan, Guarantees dated 22.08.2015 and 18.11.2016 are

very much covering the said Cash Credit, Term Loan and for sanction of Ad-

hoc Cash Credit and FITL. Sanction letter as extracted above clearly indicate

that the existing securities shall cover.

21. Counsel for the Appellant has much relied on guarantee deed dated

06.11.2020 which was guarantee deed executed with regard to Term Loan

Facility aggregating to Rs.114.22 Crores. It is relevant to notice following

extract of the corporate guarantee dated 06.11.2020:-

"WHEREAS AT THE REQUEST OF THE BORROWER, which is the Group Company of the Guarantor and also on the request of the Guarantor, which is the Group Company of the Borrower, THE LENDER agreed in principle to lend and advance to the Borrower the Term Loan (Hypothecation) facility aggregating to Rs.114.22 Crores (Rs. Rupees One Hundred Fourteen Crores Twenty Two Lacs only), hereinafter referred to as the said Facilities as the context admits, on the terms and conditions mentioned in its respective Sanction Letter dated 24.06.2019, 22.01.2020, 21.09.2019 & 12.08.2020 and also other agreements and security documents entered into between the Borrower and THE LENDER (hereinafter referred to as "the said agreements")"

22. We have referred to Annexure-E which was facilities wise breakup.

When we look into Annexure-E, it is clear that the amount disbursed with

regard to term loan were disbursement to Principal Borrower till 24.02.2014

and amount disbursed under Cash Credit is from 2013 to 2023 whereas in

Company Appeal (AT) (Insolvency) No. 78 of 2024 18

2022, it is only Rs.129.8 and in 2020, it is Rs.1,23,600/-. FITL was

disbursed on 30.09.2020 and Cash Credit Adhoc disbursed on 26.12.2019.

We have already noticed that the disbursement of FITL and Cash Credit

Adhoc was fully covered by Cash Credit Facilities and Cash Credit were all

covered by the earlier bank guarantees. When the Corporate Debtor was

bound by the earlier bank guarantees dated 22.08.2015 and 18.11.2016

which guarantees are still continuing, we cannot accept the submission of

the Appellant that by virtue of guarantee dated 06.11.2020 which was for

Term Loan of Rs.114.22 Crores, earlier guarantee has wiped off and are not

in existence. Guarantee dated 06.11.2020 in no manner take away the

earlier securities including the guarantee which was executed by corporate

guarantor in favour of the Financial Creditor. The Consortium Agreement

which was executed on 06.11.2020 between the parties clearly mentions

that it was not to affect existing securities. We, thus, do not find any

novation of contract between the parties. Disbursement made pursuant to

sanction made in the year 2013 and the guarantees issued by the corporate

guarantor on 22.08.2015 and 18.11.2016 are still continuing and binds the

corporate guarantor to discharge the debt. Subsequent to disbursement,

Adhoc Limit and FITL sanctioned on 26.12.2019 and 09.09.2020 are also

covered by the existing securities as noticed above. We, thus, are of the view

that the invocation of guarantee on 06.03.2023 by the Bank was right

invocation which obliges the corporate guarantor to clear the dues.

23. It is relevant to notice that there is no submission of the Appellant

that no amount is due. Debt and default is not even contested. Appellant

Company Appeal (AT) (Insolvency) No. 78 of 2024 19

sought to get over his liabilities on the ground that contract is novated and

there is no liability of the corporate guarantor as of now, which argument we

have already noted and rejected as above.

24. In view of the above, we do not find any error in the order passed by

the Adjudicating Authority admitting Section 7 application. There is no merit

in the Appeal. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Arun Baroka] Member (Technical)

New Delhi

Anjali

Company Appeal (AT) (Insolvency) No. 78 of 2024