Winzcraft International ... vs Idbi Bank Limited & Anr

[Appeal Filed under Section 61 of the I & B Code, 2016, arising out of impugned order dated 10th May, 2021 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Court No. 1, Mumbai Bench, Mumbai) in CP(IB)- 3000/MB/2019]

IN THE MATTER OF:

Mr. Sabbas Winifred Joseph Suspended Director of Wizcraft International Entertainment Private Limited, Satyadev Plaza, 5th Floor, Fun Republic Lane Off New Link Road, Andheri (W) Mumbai- 400 053 Maharashtra .. Appellant

Versus

1. IDBI Bank Limited IDBI Tower, WTC Complex, Cuffe Parade, Mumbai- 400 005 Maharashtra

2. Mr. Praveen Bansal AAA Insolvency Professional LLP E-10A, Kailash Colony, Greater Kailash-1 New Delhi - 110 048

Also at: I-347, Block- J Sarita Vihar New Delhi- 110 044 .. Respondents

Present:

For Appellant : Mr. Ravi Shankar Prasad, Senior Advocate with Mr. Deepak Shukla, Mr. Alok Singh, Mr. Ashutosh Shukla, Mr. Anurag Singh and Mr. Gaurav Bhardwaj, Advocates

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 1 of 63 For Respondent No. 1 : Mr. Ritin Rai, Senior Advocate with Mr. Siddhartha Barua, Mr. Praful Jindal and Ms. Aditi Rao, Advocates

JUDGMENT

(Virtual Mode)

M. VENUGOPAL, Member (J)

Preface:

The 'Appellant' /suspended Director of the 'Corporate Debtor' has

preferred the instant Comp. App (AT)(Ins) 411 of 2021 being dissatisfied

with the order dated 10.05.2021 in CP(IB)-3000/MB/2019 (Filed by the

1st Respondent/Financial Creditor/Applicant) passed by the

'Adjudicating Authority' (National Company Law Tribunal, Court No. 1,

Mumbai Bench, Mumbai).

2. The 'Adjudicating Authority' (National Company Law Tribunal,

Court No. 1, Mumbai Bench, Mumbai) while passing the 'impugned order'

dated 10.05.2021 in CP(IB)-3000/MB/2019 (Filed by the 1st

Respondent/Financial Creditor/Applicant under Section 7 of the I & B

Code, 2016 at paragraphs-59 to 65 had observed the following:

59. " The aforesaid judgment correctly hold that the suit for recovery based upon cause of action it is within limitation cannot be in any manner in fact separate an independent remedy of winding up proceedings. In law when time begins to run, it can only be extended in the manner provided the limitation act. for eg. An acknowledgment of liability u/s 18 of Limitation Act, 1963 would extend limitation period but a suit of recovery which is independent proceedings district from the remedy of windings up, in no manner in fact the

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 2 of 63 limitation within which winding up proceedings is to be filed, by somehow keeping the debt alive for the purpose of winding up.

60. Therefore, the Hon'ble Supreme Court has held that limitation can only be extended in the manner provided u/s 18 of Limitation Act, 1963.

61. Hon'ble Supreme Court in Jignesh Shah and BK Education Services Private Limited reported in 2018 SCC OnLine SC 1921 has also held that Article 137 of Limitation Act, 1963 shall be applicable to the application filed u/s 7 and 9 of IBC.

62. The Bench is of the considered opinion that the letter of the Corporate Debtor dated 27.09.2017 has amounts to acknowledgment of the liability and thus extends the limitation periods u/s. 18 of Limitation Act, 1963 and thus all the ingredients of Section 7 of IBC are satisfied and the liability of Corporate Debtor being a Corporate Guarantor is establish in view of the admission of liability by the Corporate Debtor vide its Letter 27.09.2017 and the Petition is within 3 years is filed and hence the Petition is admitted.

63. The Application IA 613 of 2020 in CP 3000 of 2019 is disposed off in view of the fact that no additional documents can be sought to be filed at the final stage.

64. Considering the above facts, we come to conclusion that the nature of debt is a "Financial Debt" as defined under Section 5(8) of the Code. It has also been established that there is a "Default" as defined under Section 3(12) of the Code on the part of the Debtor. The two essential qualifications, i.e., existence of 'debt' and 'default', for admission of a Petition under Section 7 of the I & B Code, have been met in this case. Besides, the Company Petition is well within the period of limitation.

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 3 of 63

65. As a consequence, keeping the aforesaid facts in mind, it is found that the Petitioner has not received the outstanding Debt from the Corporate Debtor and that the formalities as prescribed under the Code have been completed by the Petitioner, we are of the conscientious view that this petition deserves 'Admission' "

and admitted the Petition, declared 'moratorium' and appointed

Mr. Vinit Gangwal as an 'Interim Resolution Professional' to conduct

Insolvency Resolution Process.

APPELLANT'S CONTENTIONS

3. Challenging the legality of the 'impugned order' dated 10.05.2021

in CP(IB)-3000/MB/2019 passed by the 'Adjudicating Authority'

(National Company Law Tribunal, Court No.1, Mumbai Bench, Mumbai),

the Learned Senior Counsel for the 'Appellant' submits that the

'Appellant'/'Corporate Debtor' is not the 'Principal Borrower' but who

issued a 'Guarantee' which stood discharged from all the obligations by

operation of Law, in terms of the Indian Contract Act, 1872 and further

that the 'Application' filed under Section 7 of the I & B Code by the 1st

Respondent/'Financial Creditor' was hopelessly time barred.

4. According to the Learned Senior Counsel for the 'Appellant' the 1st

Respondent/Bank had shown two dates of 'Default' i.e., 27.07.2014 for

the 'Principal Borrower' (GNIC) and 08.12.2014 i.e., date of invocation of

'Guarantee', as the date of 'Default' of the 'Corporate Debtor'.

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 4 of 63

5. It is represented on behalf of the 'Appellant' that the 1st

Respondent/'Financial Creditor' had issued the Sanction Letter,

24.06.2009, 24.02.2010, 28.12.2012, to the 'Great Indian Nautanki

Company Pvt. Ltd. ('Principal Borrower') to sanction Loan and other

credit facilities from time to time. The sanction and the credit facility were

secured by a first charge valued at more than Rs. 500 Crores, Company

of Assets of the 'Principal Borrower' including a property at Plot

admeasuring 5.66 Acres situated at Sector -29, Gurugram, Haryana, also

known as 'Kingdom of Dreams'.

6. It is a version of the 'Appellant' that in terms of the aforesaid

'Sanction Letters', the 'Appellant' had executed the 'Guarantee

Agreement' dated 26.06.2009, 25.02.2009 and 14.01.2013 considering

the fact that the Property mortgaged with the 'Financial Creditor', valued

more than INR 500 Crores. As a matter of fact, in terms of the Sanction

Letter dated 28.12.2012, which supersedes the previous Sanction Letters

having for Amended Facility of Rs. 43.42 Crores, Personal Guarantees

were obtained from three persons and the 'Corporate Guarantee' was

obtained from two Corporate entity including 'Corporate Debtor'.

7. The Learned Senior Counsel for the 'Appellant' points out that the

security offered by the 'Principal Borrower' was auctioned with an 'NOC'

dated 02.07.2019 from the 1st Respondent/Bank, for an amount of Rs.

61,18,49,269.83, far in excess of the dues claimed without any credit

therefore being documented, which if accounted for exceed the purported

dues claimed. As such, under and in terms of the 'Law' and 'Deed' the

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 5 of 63 'Corporate Debtor' stood discharged and no 'debt' is due and payable by

the 'Appellant'.

8. Advancing the argument, the Learned Senior Counsel for the

Appellant submits that the 'Accounts' of the of the 'Principal Borrower'

was classified as 'Non Performing Asset' by the 1st Respondent on

29.07.2014 and that the 1st Respondent/'Financial Creditor'/Bank had

recalled the 'Financial Assistance' given to the 'Principal Borrower' and

demanded a sum of Rs. 39,43,32,818.08 through Letter dated

14.11.2014. Apart from this, the 1st Respondent/Bank through Letter

08.12.2014 had invoked the 'Corporate Guarantee' of the 'Appellant' and

other 'Corporate' and 'Personal Guarantees' for the entire outstanding

sum due from each of the 'Corporate' and 'Personal Guarantor', contrary

to provisions of Indian Contract Act, 1872.

9. On behalf of the 'Appellant', it is brought to the notice of this

'Tribunal' that the 1st Respondent/'Financial Creditor'/Applicant without

the consent of the 'Appellant/'Corporate Guarantor' had granted further

time to the 'Principal Borrower' which is evident from the e-mail dated

11.12.2015 and agreed on the maximum of adjustment of 5% of Daily

Sales Collection of the 'Principal Borrower' which was enhanced to 7.5%

of the Daily Sales Collection of the 'Principal Borrower', effective from

14.12.2015.

10. The Learned Senior Counsel for the 'Appellant' points out that the

1st Respondent/'Financial Creditor', during September, 2017 had

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 6 of 63 initiated 'proceedings' against the 'Principal Borrower' and the 'Appellant'

under SARFAESI Act, 2002 and under RDBFI Act, 1993. Before the 'Debt

Recovery Tribunal', the 'Appellant'/'Corporate Guarantor' in its 'Notes of

Written Submissions' had denied their liability under the 'Corporate

Guarantee' submitted during November, 2018. In fact, the 1st

Respondent/'Financial Creditor' took over the possession of the

'Auditorium' site (Kingdom of Dreams) being 5.66 Acres of Land valued

more Rs. 500 Crores as a measure under Section 13(4) of the SARFAESI

Act, 2002, as per 'Possession Notice' dated 02.07.2018.

11. The Learned Senior Counsel for the 'Appellant' adverts to the fact

that the 1st Respondent/Bank had issued the Insolvency Resolution

Notice dated 03.03.2017 to the 'Principal Borrower' and also issued the

Insolvency Resolution Notice dated 07.03.2017 to the 'Corporate

Guarantor' for Applicant. Besides this, the 1st Respondent/Bank issued

Notice dated 25.08.2017 to the 'Principal Borrower' (Responded by the

'Principal Borrower through Letter dated 04.09.2017) and further Notice

dated 25.08.2017. But, the Petition/Application under 7 of the I & B

Code 2016, was filed only against the 'Appellant' and in fact, no such

Application was filed by the 1st Respondent/Bank against the 'Principal

Borrower'.

12. The Learned Senior Counsel for the 'Appellant' proceeds to point

out that the 1st Respondent/Bank had issued 'No Objection' Letter dated

02.07.2019 to Haryana Sahari Vikas Pradhikaran (HSVP) formerly

known as 'HUDA' in consultation with the 'Principal Borrower' and

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 7 of 63 'HSVP', where the 1st Respondent/Bank had expressly conveyed its 'No

Objection' for carrying out the bidding process against the 'First Charge

property Auditorium site (i.e., Kingdom of Dreams being 5.6 Acres of

Land valued more than Rs. 500 Crores) provided that the condition to be

incorporated in the request for proposal that the selected bidder/new

Operator shall discharge liability of 'Principal Borrower' towards the 1st

Respondent/Bank amounting to Rs. 61,18,49,269.83 as on 30.06.2019

and also the interest and charges thereon till the date of payment,

upfront upon award of the project by 'HSVP'.

13. The Learned Senior Counsel of the 'Appellant' contends that the 1st

Respondent/Bank had filed the Application under Section 7 of the I & B

Code 2016, seeking to initiate the 'Corporate Insolvency Resolution

Process' against the 'Appellant' because of the 'Default' dated 29.07.2014

as averred in the Application for the whole outstanding sum of Loan to

'Principal Borrower'. But the 'Corporate Guarantee' was given by the

'Appellant's' Company on the strength of the fact that the assets of the

'Principal Borrower' was mortgaged and at all time where more than

sufficient to meet any arising 'default' by the 'Principal Borrower' to the

Bank.

14. The Learned Senior Counsel for the 'Appellant' comes with a plea

that the 'Adjudicating Authority' had failed to appreciate that the 1st

Respondent/Bank had neither sought any 'Condonation of Delay' nor

had made any averments that the period of limitation for filing the

Petition was extended on account of any 'acknowledgement of debt' or

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 8 of 63 otherwise. Also that, the objection of the 'Appellant' being novation of the

contract, resulting into 'no default' on account of the 'Corporate

Guarantor' and 'Limitation' was not considered by the 'Adjudicating

Authority' at the time of 'Admission of the Petition' and erroneously

admitted the 'Petition' and initiated the 'CIRP' against the 'Appellant'

through dated 10.05.2021.

15. The Learned Senior Counsel for the 'Appellant' takes a stand that

1st Respondent/Bank had not shown the 'debt' of 'default' in Part-V in

Form I being the mandatory requirement and further that, there cannot

be two dates of 'default'. Moreover, it is the mandatory requirement to

furnish the date of 'default' at serial No. 8 of Part-V of Form-1 to count

the period of Limitation and the 1st Respondent/Bank was granted time

by the 'Adjudicating Authority' to remove the defects. But such 'defects'

were not removed as per Section 7(5)(b) of I & B Code.

16. The Learned Senior Counsel for the 'Appellant' contends that there

is no 'debt' due or payable by the 'Corporate Debtor' to the 1st

Respondent/Bank and refers to clause 3 of the 'Guarantee Agreement'

runs to the effect

"In the event of default on the part of the borrower in payment/respondent of any of the monies referred to above or in the event of any default on the part of the borrower to comply with or perform any of the terms conditions and covenants contained in the agreement, the guarantor shall, upon demand, forthwith pay to the bank without demur all the amounts payable by the borrower under the agreement"

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 9 of 63

and emphatically projects an argument that the invocation of

Guarantee dated 08.0.2014 cannot be the 'Date Of Default'. Added

further, even if the 'Guarantee' is invoked, in terms of the 'Agreement',

the 'Corporate Debtor' is liable to pay the 'Debt' on the failure of 'payment'

by the 'Principal Borrower'.

17. The other contention raised on behalf of the 'Appellant' is that the

'Invocation' of Guarantee' pre-supposes that the 'Borrower' as well as the

'Corporate Guarantor' had defaulted to pay the 'Debt'- to take legal

recourse and recovery of 'Debt' from the 'Guarantor' the 'Guarantee' is

invoked.

18. In effect, the submission on behalf of the Leaned Senior Counsel

for the 'Appellant' is that 'Invocation Of Guarantee' cannot shift the date

of 'Default' and that the 'Date of Default' by the 'Principal Borrower' and

the non-payment of the same by the 'Corporate Guarantor' despite the

demand made, only exhibits that 'Default' persists. In fact, for the said

reason, only one date of default i.e., 29.07.2014 was mentioned by the 1st

Respondent/Bank.

19. The Learned Senior Counsel for the 'Appellant' contends that the

'Adjudicating Authority has no jurisdiction to determine or treat any date

as 'Date of Default' particularly 08.12.2014, viz., the date of 'Invocation

of Guarantee' as relied on by the 1st Respondent/Bank. Therefore, it is

stand of the 'Appellant' that the Application projected by the 1st

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 10 of 63 Respondent/Bank (under Section 7 of the I & B Code, 2016) is barred by

Limitation and the 'debt' is not payable in the eye of law or on facts.

20. The Learned Senior Counsel for the 'Appellant' refers to the

decision of the Hon'ble Supreme Court in B.K. Financial Services v.

Parag Gupta reported in 2019 (11) SCC 633 and contends that Art. 137

of the Limitation Act, 1963 shall be applicable for an Application filed

under Sections 7, 9 or 10 of the I & B Code 2016, since the 'Account' of

the Original Borrower/Corporate Debtor was classified and declared as

'NPA' on 29.07.2014. As such, the 'default' commenced on 29.07.2014

and three year's period of Limitation was available for applying under

Section 7 of I&B Code, 2016. In short, the 1st Respondent/Bank cannot

agitate its claim after the dated 29.07.2017.

21. The Learned Senior Counsel for the 'Appellant' relies on the

decision of the Hon'ble Supreme Court in Shanti Conductors Pvt. V.

Assam State Electricity Board and Ors. Reported in 2019 (19) SCC 529

(Civil Appeal dismissed on the ground Limitation)/2020 (2) SCC 677

(Review came to be dismissed on the ground of Limitation) for giving the

benefit under Section 18 of the Limitation Act, 1963.

22. The Learned Senior Counsel for the 'Appellant' refers to the

decision of Hon'ble Supreme Court in Gaurav Hargovindbhai Dave Vs.

Asset Reconstruction Company (India) Limited and Anr. reported in

(2019) 10 SCC 572, at spl. Page 574 wherein at paragraph 7 it is held

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 11 of 63 that, 'It is not for Court to interpret commercially or otherwise articles of

the Limitation Act when it is clear that a particular Article gets attracted.

It is well settled that there is no equity about Limitation. Judgments has

stated that often time periods provided by the Limitation Act can be

arbitrary in nature'.

23. The Learned Senior Counsel for the 'Appellant' makes a forceful

plea that the Letter dated 27.09.2017 relied on by the 1st

Respondent/Bank, wherein the 'Appellant' had requested the 1st

Respondent/Bank not to initiate any action under the I & B Code, 2016

as the matter was directly addressed 'Principal Borrower' with the 1st

Respondent/Bank, but nowhere in the aforesaid Letter, the 'Appellant'

ever acknowledged any 'debt'.

24. The Learned Senior Counsel for the 'Appellant' points out that the

'Appellant/'Corporate Debtor' denied its claim in the 'Debt Recovery

Proceedings' and in any event, there was delay in filing the 'Application'

under Section 7 of I & B Code, 2016 and it was not accompanied by an

'Application for Condonation of Delay', as per Section 5 of the Limitation

Act, 1963.

25. The Learned Senior Counsel for the 'Appellant' refers to the

decision of the Hon'ble Supreme Court in Vasudev R. Bhojwani V.

Abhuydaya Cooperative Bank Ltd. & Anr. Reported in 2019(9) SCC 158

wherein it is observed as under:

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 12 of 63

3. " Having heard the Ld. Counsel for the both parties, we are of the view that this is a case covered by our recent judgment in B.K. Educational Services Pvt. Ltd. V. Parag Gupta & Associates, para 42 of which reads as follows:-

42. It is thus, clear that since the Limitation Act is applicable to applications filed under Section 7 and 9 of the Code from the inception of the code, Article 137 of the Limitation Act gets attracted 'the right to sue', therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such applications".

26. The Learned Senior Counsel for the 'Appellant' points out the

decision of the Hon'ble Supreme Court in "Sagar Sharma & Anr. V.

Phoenix ARC Pvt. Ltd. & Anr., in Civil Appeal No. 7673/2019 dated

30.09.2019 wherein at para 3 it is held as under:

3. "Article 141 of the Constitution of India mandates that our judgments are followed in letter and spirit. The date of coming into force of the IBC Code does not and cannot form a trigger point of limitation for applications filed under the Code". Equally, since "applications' are petitions which are filed under the Code, it is Article 137 of Limitation Act which will apply to such applications".

27. The Learned Senior Counsel for the 'Appellant' submits that the

Application under Section 7 of the I & B Code, 2016 was filed in July,

2019 with defects and the defects were not removed, although specific

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 13 of 63 time was granted by the 'Adjudicating Authority' and 'date of default' was

not mentioned in Form 1, Part V.

28. It is projected on the side of the 'Appellant' that even without

admitting that the Letter dated 27.09.2017 can be considered as an

'Acknowledgment', still the Application filed under Section 7 of the I & B

Code, 2016 is barred by Limitation, because the Application was filed on

01.08.2019 under the three year's period had expired on 29.07.2017.

29. The Learned Senior Counsel for the 'Appellant' refers to Section

135 of the Indian Contract Act, 1872 which enjoins as 'Discharge of

Surety when creditor compounds with, gives time to, or agrees and to sue

principal debtor. A contract between the Creditor and the principal

debtor, by which the creditor makes a composition with, or promises to

given time to, or not to sue, the principal debtor, discharges the surety,

unless the surety assents to such contract."

30. The Learned Senior Counsel for the 'Appellant' contends that in the

instant case, the 1st Respondent/Bank had agreed with the 'Principal

Borrower'/GINCPL to recover the sum of at 5% with effect fro 09.05.2014

and at 7.5& w.e.f 14.12.2015 and had already recovered a sum of Rs.

14,00,50,000/- between the year 2014-2019 and the 1st

Respondent/Bank had given 'NOC' HSVP(HUDA) to recover the total

amount by way of 'Bidding' on the condition that the 'Bidder' will pay the

affront sum of the entire liability of the 'Principal Borrower'/GINCPL.

Therefore, the 'Corporate Guarantee' given by the 'Appellant/'Corporate

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 14 of 63 Guarantor' stood discharged as per Section 135 of the Indian Contract

Act, 1872.

31. The Learned Senior Counsel for Appellant points out Section 139

of the Indian Contract Act, 1872 which runs as under:

Discharge of surety by creditor's act or omission impairing surety's eventual remedy.--If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.

Illustrations

(a) Xxx xxxxx xxxx

(b) C lends money to B on the security of a joint and several promissory note made in C's favour by B, and by A as surety for B, together with a bill of sale of B's furniture, which gives power to C to sell the furniture, and apply the proceeds in discharge of the note. Subsequently, C sells the furniture, but, owing to his misconduct and wilful negligence, only a small price is realized. A is discharged from liability on the note.

(c) A puts M as apprentice to B, and gives a guarantee to B for M's fidelity.

B promises on his part that he will at least once a month, see M make up the cash. B omits to see this done as promised, and M embezzles. A is not liable to B on his guarantee. (c) A puts M as apprentice to B, and gives a guarantee to B for M's fidelity. B promises on his part that he will at least once a month, see M make up the cash. B omits to see this done as promised, and M embezzles. A is not liable to B on his guarantee."

32. The Learned Senior Counsel for the 'Appellant' puts forward a plea

that the full remedy of 'surety' was taken over by the 'Principal Borrower'

(GINC) which reached the 'Settlement/Agreement with the 1st

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 15 of 63 Respondent/Bank and more than Rs. 14 Crores was received. In fact, the

acts of the 1st Respondent/Bank is not consistent with the 'Right of

Surety'. As such, the 'Surety' ('Corporate Guarantee) given by the

'Appellant/Corporate Guarantor stood discharged and hence, the 'Debt'

is not payable by the 'Appellant/Corporate Debtor'.

33. The Learned Senior Counsel for the 'Appellant' cites the Judgment

of the Hon'ble Supreme Court dated 21.01.2021 in (Civil Appeal No.

4221/2020) between M/s Reliance Asset Reconstruction Company

Ltd. V. M/s Hotel Poonja International Pvt. Ltd. whereby and

whereunder at paragraph 38 it is observed as follows:

38. ...."In Transmission Corporation of Andhra Pradesh Ltd. Vs. Equipment Conductors and Cable Ltd. (2019) 12 SCC 697 this Court followed its earlier judgment in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. (2018) 1 SCC 353 and observed as under:

"In a recent judgment of this Court in Mobilox Innovations Private Limited v. Kirusa Software Private Limited (2018) 1 SCC 353, this Court has categorically laid down that IBC is not intended to be substitute to a recovery forum. It is also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked...."

34. The Learned Senior Counsel for the 'Appellant' relies on the

decision of the Hon'ble Supreme Court in Babulal Vardhraj Ji Gujjar

V. Veer Gujjar Aluminium Industries Pvt. Ltd. reported in (2020) 15

SCC 1 wherein it is held that the 'Limitation' of three years as provided

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 16 of 63 by Art. 137 of the Limitation Act which commenced from the date of

'Default', was extendable under Section 5 of the Limitation Act.

35. The Learned Senior Counsel for the 'Appellant' contends that in the

instant case, no 'Foundational plea/Application' under Section 5 of the

Limitation Act was filed by the 1st Respondent/Bank before the

'Adjudicating Authority'. That apart, in the absence of any

'Acknowledgment' as per Section 18 of the Limitation Act, 1963, within

three years of 'Default' i.e. 29.07.2017, the 'Application' under Section 7

of the I & B Code, 2016 is barred by 'Limitation' and the same cannot be

entertained.

36. The Learned Senior Counsel for the Appellant submits that 1st

Respondent/Bank by introducing new documents i.e., 'Financial

Statement/Balance Sheet/Audit Report for the year 2016-17 and the

Letter dated 19.11.2017 is endeavouring to set up a new case, at the

'Appellate stage' based on the ground of purported 'Acknowledgment of

Debt'.

37. The Learned Senior Counsel for the 'Appellant' draws the attention

of this 'Tribunal' that before the 'Adjudicating Authority' the final

arguments took place on 03.02.2020 and orders were reserved (after

hearing both sides), and liberty was granted to both sides to file Written

Submissions on 11.02.2020. At that stage, on 13.02.2020, I.A. No. 613

of 2020 was filed by the 1st Respondent/Bank in the main Petition

[CP(IB)/3000(MB) 2019] and that the Letter dated 19.11.2016 was in

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 17 of 63 exclusive possession of the Bank. But, the Bank had not filed the same

in the Main Insolvency Application. Hence, the I.A. 613/2020 filed by the

1st Respondent/Bank to permit it file an 'Additional Document' was

dismissed by the 'Adjudicating Authority', vide its final order dated

10.05.2021.

38. The Learned Senior Counsel for the 'Appellant' submits that now

the 1st Respondent/Bank is not to be allowed to improve its Original

Petition by bringing the additional documents and the Bank cannot

project a new case, after a lapse of rectification period of seven days, as

specified in Section 7(5)(b) of the I & B Code, 2016 for the purpose of

ascertaining the 'Default' or for an extension of the 'Limitation Period'.

39. The 1st Respondent/Bank had filed the 'Financial Statement' for

the period 01.04.2017 to 31.03.2018 which is ratified by the Board of

Directors of the Appellant/Company on 22.08.2018. As such, the case of

the 1st Respondent/Bank is time barred and it cannot reap the benefit of

extension of Limitation Period, as enjoined under Section 18 of the

Limitation Act, 1963.

40. The Learned Counsel for the Appellant refers to the judgement of

the Hon'ble Supreme Court dated 26.03.2021 in Laxmipat Surana V.

Union of India and Others (vide Civil Appeal No.2734 of 2020) wherein it

is observed that a right or cause of action would ensure to the financial

creditor to proceed against the principal borrower, as well as to proceed

against the guarantor in equal measures in case they commit default in

repayment of the amount of debt acting jointly and severally. Moreover,

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 18 of 63 if and when the principal borrower fails to discharge its obligation in

respect of the amount of debt, the obligation of the guarantor is co-

extensive and co-terminus with that of the principal borrower to defray

the debt, as predicated in Section 128 of the Contract Act, 1872.

Furthermore the liability and obligation of the guarantor to pay the

outstanding due would get triggered co-extensively.

41. The Learned Counsel for the Appellant refers to the Judgement

30.09.2021 of the Hon'ble Supreme Court in Rajendra Narottamdas

Sheth and others Vs Chandra Prakash Jai and Ors (vide Civil Appeal

NO.422/2020) wherein it is observed that the onus on the Financial

Creditor, at the time of filing an application under Section 7 of the Code

to prima facie demonstrates default (with reference to a debt) which is

not time barred, is not to be diluted.

42. The Learned Counsel for the Appellant refers to the Judgement of

the Hon'ble Supreme Court dated 04.08.2021 in Dena Bank (now Bank

of Baroda) V. C.Shivakumar Reddy and another (vide Civil Appeal

No.1650 of 2020) wherein at paragraph 144 it is observed as under:-

"Needless however to mention that depending on the facts and

circumstances of the case, when there is inordinate delay, the

Adjudicating Authority might at its discretion, decline the request of

an applicant to file additional pleadings and/or documents, and

proceed to pass final a order."

43. The Learned Counsel for the Appellant refers to the Judgement of

this Tribunal dated 17.03.2021 in Comp App (AT)(Ins) No.98/2019

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 19 of 63 between M/s Next Education India Pvt Ltd V. K12 Techno Services Pvt

Ltd wherein at paragraph 26 it is observed as under:-

"As the scope and objective of the Code is not to give a fresh lease

of life to time barred debts, we are of the considered view that the

ratio of the Hon'ble Supreme Court in 'Babulal Vardharji Gurjar'

(Supra) is squarely applicable in the facts of this case. Hence, we

hold that the Application filed under Section 9 is barred by

limitation."

44. The Learned Counsel for the Appellant refers to the Judgement of

this Tribunal dated 17.11.2020 in State Bank of India V. Krishidhna

Seeds Pvt Ltd wherein at paragraph 4 it is observed as under:-

"4. Adverting to the facts of this case, be it seen that in the

application to Adjudicating Authority filed in prescribed format the

date of default is recorded as 10th June, 2014 whereas the

application under Section 7 came to filed on 19th September, 2018

i.e. more than four years after the default occurred. The time, for

purposes of reckoning limitation in terms of Article 137 of the

Limitation Act, would commence from the date of default i.e. 10th

June, 2014 4 Company Appeal (AT) (Insolvency) No. 972 of 2020

which would neither be shifted not extended once a default has

occurred. On the basis of such default the Financial Creditor, in the

instant case, has approached Debts Recovery Tribunal on 20th

October, 2015. In the given circumstances, it cannot lie in the mouth

of the Appellant that the date of default gets extended on account of

acknowledgment made in the OTS proposal emanating from the

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 20 of 63 Corporate Debtor. There cannot be two defaults in respect of the

same debt, one for the purpose of claim filed before the Debts

Recovery Tribunal and the other for purposes of 'I&B Code' based

on OTS proposal, more so when in application filed before the

Adjudicating Authority in prescribed format date of default has

unambiguously been reflected as 10th June, 2014. The application

having been filed before the Adjudicating Authority beyond three

years of occurrence of default is hopelessly time barred and it is not

permissible for Appellant to take recourse to Section 18 of the

Limitation Act for triggering Corporate Insolvency Resolution Process

under Section 7 of the 'I&B Code' against the Corporate Debtor.

1ST RESPONDENT/BANK'S SUBMISSIONS

45. According to the Learned Senior Counsel for the 1st

Respondent/Bank, the 1st Respondent/Bank had extended multiple

loans and credit facilities through sanction letters dated 24.06.2009,

24.02.2010 and 28.12.2012, to the Principal Borrower/Great Indian

Nautanki Company Pvt Ltd.

46. The Learned Senior Counsel for the 1st Respondent/Bank submits

that the 'Corporate Debtor', a 'promoter company' of the Principal

Borrower had executed the 'Corporate Guarantee Agreements' dated

26.06.2009, 25.02.2010 and 14.01.2013 (Corporate Guarantees) to and

in favour of the 1st Respondent/Bank against the loans availed by the

'Principal Borrower'.

47. It is represented on behalf of the 1st Respondent/Bank that the

'Principal Borrower's Account' was declared as 'Non-Performing Asset' on

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 21 of 63 29.07.2014, owing to its 'Default' in respect of the payment dues under

the loans, sanctioned by the Bank. Further, the 1st Respondent/Bank

had recalled the 'loan' extended to the 'Principal Borrower' and demanded

a payment of Rs.39,43,32,818.08 through a 'Recall Letter'. In fact, later,

the 1st Respondent/Bank, on 08.12.2014 had invoked the 'Corporate

Guarantees' executed by the 'Corporate Debtor' seeking payment due by

the 'Principal Borrower'.

48. The Learned Counsel for the 1st Respondent/Bank brings it to the

notice of this Tribunal that the 'Corporate Debtor' for the first time in his

written submissions and in oral arguments had submitted that the 1st

Respondent/Bank had shown two dates of 'Default' in its Section 7

application, which is a baseless one, since the 'Corporate Debtor' before

the 'Adjudicating Authority' and also in its 'Appeal' had accepted that

29.07.2014, is the date when the 'Principal Borrower' was declared as an

'Non-Performing Asset' and 14.12.2014 viz the invocation of 'Guarantee'

as the date of 'Default' of the 'Corporate Debtor'.

49. It is the submission of the Learned Senior Counsel for the 1st

Respondent/Bank that from Part IV of the Section 7 Application of the

I&B Code, 2016 (Page 240 of the Appeal Paper Book) r/w Annexure 7

(vide the Appeal Paper Book Page 401) it is clear that the date of default

made by the Corporate Debtor is 08.12.2014, the date of invocation of

'Guarantee'.

50. The Learned Senior Counsel for the 1st Respondent/Bank contends

that at the Appellate Stage the new argument is tendered by the

'Corporate Debtor' viz that the 1st Respondent/Bank has provided two

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 22 of 63 different dates of 'Default' and further that the applicable date of default

is the date of 'Non-Performing Asset'.

51. The Learned Counsel for the 1st Respondent/Bank adverts to the

'financial debt' owed by the 'Principal Borrower' falling under Section

5(8)(a) and that the 'financial debt' owed by the 'Corporate Debtor' falls

under Section 5(8)(i).

52. The Learned Counsel for the 1st Respondent/Bank comes out with

a plea that 'financial debt' owed by each individual is, therefore, not the

same (although it may arise out of or be connected to the same loan) and

hence, the dates of default (or commencement of limitation) will be

different.

53. The Learned Counsel for the 1st Respondent/Bank draws the

attention of this 'Tribunal' to the fact that Section 3(12) of the Code r/w

Section 3(11) contemplates the ingredients for 'Default' (i) non-payment

of debt; (ii) which becomes due and payable and (iii) that is not paid by

the 'Debtor or Corporate Debtor.' Therefore, an argument is advanced on

behalf of the 1st Respondent/Bank that the 'Debt' of the 'Corporate

Debtor' is distinct from that of the 'Principal Borrower' and that the

'default' occurs only when that 'debt' is due and payable and is not paid.

54. The Learned Senior Counsel for the 1st Respondent/Bank puts

forward a plea that in the case of Guarantor, the debt is the liability

arising from the guarantee which becomes 'due and payable' when a

'Demand' is made under the 'Guarantee'. Resultantly, the 'date of

default' against the 'Guarantor' for the purpose of calculating the

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 23 of 63 'limitation period', is the date of 'Guarantee invocation', in the present

case, i.e. on 08.12.2014.

55. The Learned Senior Counsel for the 1st Respondent/Bank takes a

plea, that to invoke the 'Guarantee' there will be necessarily a prior

'Default' by the 'Principal Borrower' and hence the Section 7 Application

filed under the Code mentions that the date of 'Default' of the 'Principal

Borrower' is 29.07.2014. In reality, the Section 7 Application filed by the

1st Respondent/Bank clearly identifies the date of 'Default' by the

'Corporate Debtor' as 08.12.2014. Therefore, it is the contention of the

Learned Senior Counsel for the 1st Respondent/Bank that such

identification amounts to two dates of 'Default' qua the 'Corporate Debtor'

is a misleading and an erroneous one.

56. The Learned Senior Counsel for the 1st Respondent/Bank contends

that there is only one date of 'Default' which is the date of the 'Guarantee

Invocation'.

57. The Learned Senior Counsel for the 1st Respondent points out that

the Hon'ble Supreme Court had recognised that the liability of a

'Principal Debtor' and the liability of a 'surety' are 'separate liabilities'

although arising out of the same transaction and that the liability of

surety does not also, in all cases, arise simultaneously. In this

connection, to lend support to his contention, the Learned Senior

Counsel for the 1st Respondent/Bank cites the decision of Hon'ble

Supreme Court in State Bank of India V. Indexport Registered and Ors

reported in 1992 3 SCC 159 at Spl. Page 166 wherein at paragraph 16 to

18 it is observed as under:-

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 24 of 63

16."In Halsbury's Laws of England Forth Edition paragraph 159 at page 87 it has been observed that "it is not necessary for the creditor, before proceeding against the surety, to request the principal debtor to pay, or to sue him, although solvent, unless this is expressly stipulated for."

17. In Hukamchand Insurance Co Ltd Vs. Bank of Baroda, AIR (1977) Kant 204, a Division Bench of the High Court of Karnataka had an occasion to consider the question of liability of the surety vis-

a-vis the principal debtor. Venkatachaliah, J. (as His Lordship then was) observed:-

"The question as to the liability of the surety, its extent and the manner of its enforcement have to be decided on first principles as to the nature and incidents of suretyship. The liability of a principal debtor and the liability of a surety which is co-extensive with that of the former are really separate liabilities, although arising out of the same transaction. Notwithstanding the fact that they may stem from the same transaction, the two liabilities are distinct. The liability of the surety does not also, in all cases, arise simultaneously."

18. It will be noticed that the guarantor alone could have been sued, without even suing the principal debtor, so long as the creditor satisfies the court that the principal debtor is in default."

58. The Learned Senior Counsel for the 1st Respondent/Bank relies on the decision

of the Hon'ble Supreme Court in Industrial Finance Corporation of India Ltd V.

Cannanore Spinning and Weaving Mills and others reported in (2002) 5 SCC 54 at

Spl Page 73 and 74, wherein the Hon'ble Supreme Court at paragraph 33 had observed

the following:-

33"Adverting to the contract of guarantee be it noted that though it

is not a contract regarding a primary transaction : but it is an

independent transaction containing independent and reciprocal

obligations. It is on principal to principal basis and by reason

wherefor the Statute has provided both the creditor and the

guarantor some relief as specified in this Chapter of Contract Act Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 25 of 63 (between Sections 130 to 141). Section 141 thus involves an issue of

a deliberate action on the part of the creditor and not a mere

fortuitous situation beyond the control of the creditor. It is in this

context strong reliance was placed on a decision of the Privy Council

in China and South Sea Bank Ltd. v. Tan ( 1989 (3) All ER 839),

wherein Lord Templeman speaking for the Council stated the law as

below :- (All ER p.842 c-h)

"In the present case the security was neither surrendered nor

lost nor imperfect nor altered in condition by reason of what was

done by creditor. The creditor had three sources of repayment. The

creditor could sue the debtor, sell the mortgage securities or sue the

surety. All these remedies could be exercised at any time or times

simultaneously or contemporaneously or successively or not at all.

If the creditor chose to sue the surety and not pursue any other

remedy, the creditor on being paid in full was bound to assign the

mortgage securities to the surety. If the creditor chose to exercise his

power of sale over the mortgage security he must sell for the current

market value but the creditor must decide in his own interest if and

when he should sell. The creditor does not become a trustee of the

mortgaged securities and the power of sale for the surety unless and

until the creditor is paid in full and the surety, having paid the whole

of the debt is entitled to a transfer of the mortgaged securities to

procure recovery of the whole or part of the sum he has paid to the

creditor.

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 26 of 63

The creditor is not obliged to do anything. If the creditor does

nothing and the debtor declines into bankruptcy the mortgaged

securities become valueless and if the surety decamps abroad the

creditor loses his money. If disaster strikes the debtor and the

mortgaged securities but the surety remains capable of repaying the

debt then the creditor loses nothing. The surety contracts to pay if

the debtor does not pay and the surety is bound by his contract. If

the surety, perhaps less indolent or less well protected than the

creditor, is worried that the mortgaged securities may decline in

value then the surety may request the creditor to sell and if the

creditor remains idle then the surety may bustle about, pay off the

debt, take over the benefit of the securities and sell them. No creditor

could carry on the business of lending if he could become liable to a

mortgagee and to a surety or to either of them for a decline in value

of mortgaged property, unless the creditor was personally

responsible for the decline. Applying the rule as specified by Pollock

CB in Watts v. Shuttleworth (1860) 5 H&N 235 at 247-248, 157 ER

1171 at 1176, it appears to their Lordships that in the present case

the creditor did not act injurious to the surety, did not act

inconsistent with the rights of the surety and the creditor did not

omit any act which his duty enjoined him to do. The creditor was not

under a duty to exercise his power of sale over the mortgaged

securities at any particular time or at all."

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 27 of 63

59. The Learned Senior Counsel for the 1st Respondent/Bank seeks in

aid of the decision of Hon'ble Supreme Court in the matter of 'Syndicate

Bank V. Channaveerappa Beleri & Ors reported in (2006) 11 SCC 506 at

Spl Page 517 wherein at paragraph 9 is it observed as under:-

"9. A guarantor's liability depends upon the terms of his contract. A

'continuing guarantee' is different from an ordinary guarantee. There is also

a difference between a guarantee which stipulates that the guarantor is liable

to pay only on a demand by the creditor, and a guarantee which does not

contain such a condition. Further, depending on the terms of guarantee, the

liability of a guarantor may be limited to a particular sum, instead of the

liability being to the same extent as that of the principal debtor. The liability

to pay may arise, on the principal debtor and guarantor, at the same time or

at different points of time. A claim may be even time-barred against the

principal debtor, but still enforceable against the guarantor. The parties may

agree that the liability of a guarantor shall arise at a later point of time than

that of the principal debtor. We have referred to these aspects only to

underline the fact that the extent of liability under a guarantee as also the

question as to when the liability of a guarantor will arise, would depend purely

on the terms of the contract."

60. The Learned Senior Counsel for the 1st Respondent/Bank adverts

to the decision of Madras High Court in Gopilal Q Nichani V Track

Industries and Components Ltd and others AIR 1978 Mad 134, at 137

and 138 wherein at paragraph 12 to 13 it is observed as under:-

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 28 of 63

12. "We shall now take the question of interpretation of Section 128 of the Indian Contract Act. No other section of the Contract Act or and general principle has been relied on before us on behalf of the guarantor. We shall extract Section 128 of the Indian Contract Act: --

"The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract."

13.The section talks of only one thing and that is about the liability of the guarantor as being co-extensive as that of the principal debtor. The word co- extensive is an objective for the word 'extent' and it can relate only to the quantum of the principal debt. This question has been dealt with and discussed at length in a Full Bench decision of this court in Su-bramania v. Narayanaswami . That was a case arising out of a reference made by Subba Rao J. (as he then was) on the question whether a non-agriculturist surety would be liable for the entire debt even though the principal debt was scaled down under the provisions of the Tamil Nadu Agriculturists Relief Act. In this decision, reference was made to the well-known principle that a guarantee is not put an end to by reason of the debt becoming unenforceable against the principal by reason of matters happening subsequently, and that a surety is liable though the claim against the principal is barred by the statute of limitation or by reason of the bankruptcy of the principal. No doubt, there is the provision in Section 45(4)

of the Presidency Towns Insolvency Act expressly enacting that the fact the principal debtor has become an insolvent did not affect the liability of the surety. But this provision in the statute does not deterect from the principle that we have stated above. The liability of the guarantor arising as it doe from an independent contract, even in cases where the guarantor is a privy to the contract between the principal debtor and the creditor, stands on a different footing, and unless we are able to say that by necessary implication that liability is also affected by some conduct of the principal debtor or any agreement between the principal debtor and the creditor, attracting the provisions of Section 133, 134, or 135 of the Contract Act, the principle laid down in Subramania V Narayanaswami , will not extend to a case where temporarily the liability of the principal debtor has been suspended and has therefore become unenforceable. A reference to Section 7 of the. Act indicates that it is only a suspension and the liability is not affected at all, Section 7 of the Act specifically provides that in computing the period of limitation for the enforcement of any right, privilege, obligation or liability referred to in Clause

(b) of Section 4, the period during which it or the remedy for the enforcement thereof was suspended, shall be excluded. It is, therefore, clear that there is no extinguishment of the principal debt, and the contract between the guarantor and the creditor stands absolutely unaffected by the passing of the notification under Section 3, declaring a particular undertaking as a relief undertaking, with great respect we are unable to agree with the reasoning of Sethuraman J. in Appln. No. 1849 of 1973 in C.S. 155 of 1973. The suit has been instituted after the notification, Section 6 of the Act provides for a stay of

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 29 of 63 the pending proceedings against the relief undertaking. But the suit as against the relief undertaking having been instituted after the notification is not maintainable. The dismissal of the suit as against the relief undertaking must therefore stand. But the dismissal of the suit as against the guarantors cannot be sustained. The suit as against them must proceed. In the other judgment which is under appeal in O. S. A. 68 of 1976, Suryamurthy J. has held that the action taken to adjudge the surety as an insolvent is not an action for recovery of the debt, and in this appeal, a determination of this question, is unnecessary. If a suit against the guarantor would lie, we have no doubt that proceedings for adjudging the guarantor as insolvent would equally lie."

61. The Learned Senior Counsel for the 1st Respondent/Bank refers to the decision

of the Hon'ble Supreme Court in Dena Bank (now Bank of Baroda) V. C. Shivakumar

Reddy and others 2021 SCC Online SC 543 (Civil Appeal No.1650 of 2020 decided

on 04.08.2021) wherein at paragraph 142 to 143 it is observed as under:-

"142. To sum up, in our considered opinion an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years.

143. Moreover, a judgment and/or decree for money in favour of the Financial Creditor, passed by the DRT, or any other Tribunal or Court, or the issuance of a Certificate of Recovery in favour of the Financial Creditor, would give rise to a fresh cause of action for the Financial Creditor, to initiate proceedings under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the Certificate of Recovery, if the dues of the Corporate Debtor to the Financial Debtor, under the judgment and/or decree and/or in terms of the Certificate of Recovery, or any part thereof remained unpaid."

62. The Learned Senior Counsel for the 1st Respondent/Bank relies on the decision

of the Hon'ble Supreme Court in Rajendra Narotamdas Sheth V. Chander Prakash

Jain and another 2021 SCC Online 843 wherein at paragraph 21 to 24 it is observed

as under:-

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 30 of 63

"21. There can be no doubt that it is the responsibility of the financial creditor to give all particulars relating to the debt due and the date of default, along with the requisite documents, at the time of filing of an application under Section 7 of the Code. A plain reading of Section 7, Rule 4 of the 2016 Rules and Form 1 makes it clear that the Adjudicating Authority may admit an application under Section 7 only if he is satisfied that a default has occurred. The definition of 'default' under Section 3 (12) of the Code refers to non-payment of debts which are "due and payable" in law, meaning thereby that an application under Section 7 of the Code is maintainable only with respect to debts that are not time-barred. (See:B.K. Educational Services Private Limited V. Parag Gupta and Associates.( (2019) 11 SCC 633). The primary obligation of making out a prima facie case of default is on the financial creditor. There is no necessity for the corporate debtor to provide any information at the stage of admission of the application under Section 7 of the Code, as the burden of showing non-payment of a legally recoverable debt, which is not time-barred, is on the financial creditor. At the same time, it is clear from the judgments of this Court in Asset Reconstruction (supra) and Dena Bank (supra) that non-furnishing of information by the financial creditor at the time of filing an application under Section 7 of the Code need not necessarily entail in dismissal of the application. An opportunity can be provided to the financial creditor to provide additional information required for satisfaction of the Adjudicating Authority with respect to the occurrence of the default.

22. In the instant case, there is no dispute that the date of default is 30.09.2014 and the application under Section 7 of the Code was filed on 25.04.2019. According to the Financial Creditor, Section 18 of the Limitation Act is applicable in view of the Corporate Debtor acknowledging its debt by way of letters, written in and after 2018, giving details of amount repaid, acknowledging the amount outstanding and requesting consideration of one-time settlement proposal. Sub-section (1) of Section 18 of the Limitation Act reads as under:

18. Effect of acknowledgement in writing. - (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.

23.It is no more res integra that Section 18 of the Limitation Act is applicable to applications filed under Section 7 of the Code. In case the application under Section 7 is filed beyond the period of three

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 31 of 63 years from the date of default and the financial creditor furnishes the required information relating to the acknowledgement of debt, in writing by the corporate debtor, before the Adjudicating Authority, with such acknowledgement having taken place within the initial period of three years from the date of default, a fresh period of limitation commences and the application can be entertained, if filed within this extended period.

24. There is no dispute that the date of default in this case is 30.09.2014, as mentioned by the financial creditor in its application under Section 7. A copy of the debit balance confirmation letter dated 07.04.2016 was filed along with the application. As the application was filed only on 25.04.2019, which is beyond a period of three years even after taking into account the debit balance confirmation letter dated 07.04.2016, the application was barred by limitation.

However, the Corporate Debtor had, in its reply before the Adjudicating Authority, placed on record a letter dated 17.11.2018, which detailed the amount repaid till 30.09.2018 and acknowledged the amount outstanding as on 30.09.2018. On the basis of this letter and the record showing that the Corporate Debtor had executed various documents amounting to acknowledgement of the debt even in the financial year 2019-20, the NCLT was of the opinion that the application was filed within the period of limitation. The said view was upheld by the NCLAT."

63. The Learned Senior Counsel for the 1st Respondent/Bank refers to the Full

Bench decision of the Hon'ble Madras High Court between ALSP PL Subramania

Chettiar (deceased) & Anr V. Moniam. P Narayanaswamy Gounden, reported in AIR

1951 Mad 48 (FB) wherein it is held that the Guarantee does not extinguish by the

reason of the debt becoming an unenforceable against the 'Principal' by the reasons

of the matter happening subsequently, and that the 'surety' is liable though the claim

against the 'Principal' is barred by limitation or by the reasons of 'Bankruptcy of the

Principal'.

64. The Learned Senior Counsel for the 1st Respondent/Bank refers to the

judgement of this Tribunal 30.06.2021 in Vivek Malik V. Punjab National Bank

(Company Appeal (AT)(Ins) No.224/2021) wherein at paragraph 17 it is observed as

under:-

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 32 of 63

"17. Now keeping in view the different orders passed by the Hon'ble Supreme

Court while disposing the matter with regard to "Asset Reconstruction Company

(India) Ltd. vs. Bishal Jaiswal & Anr" it shows that the pleadings can be brought

on record or amended even at the NCLAT stage."

65. The Learned Senior Counsel for the 1st Respondent/Bank submits

that Clause 5 of the 'Corporate Guarantees' clearly allow the 1st

Respondent/Bank to vary the terms of the loan sanctioned to the

'Principal Borrower' without affecting the liability of the 'Corporate

Debtor'. Also Clause 6 of the Guarantee permits the 1st

Respondent/Bank to release or forbear to enforce any securities for the

loan and such forbearance or release shall not 'discharge the liability of

the Guarantor' in any manner.

66. It is pointed out by the Learned Senior Counsel for the 1st

Respondent/Bank that as per Clause 7 of the 'Guarantee', the 1st

Respondent/Bank is empowered to forbear or enforce the payment of

loan or any interest thereof and the same shall not release the

'Guarantor' and further that the 'Guarantor' had waived all suretyship

rights which the 'Guarantor' might otherwise entitle to enforce.

67. Beside the above, it is pointed out on the side of the 1st

Respondent/bank that the NOC provides a pre-condition that the Tender

Document must require that 'Selected Bidder' to discharge the liability of

the 'Principal Borrower'. Further that the 1st Respondent/Bank

continues to hold the security interest over the 'Project Land' as

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 33 of 63 evidenced by the Possession Notice and that the 'Tender' was cancelled,

as recorded by an order of the Hon'ble High Court of Punjab & Haryana.

68. The Learned Senior Counsel for the 1st Respondent/Bank,

therefore prays for dismissing the instant 'Appeal' since it lacks merits.

APPRAISAL

69. The 1st Respondent/Financial Creditor/Applicant in Company

Petition No. CP(IB)- 3000/MB/2019 under 'Part IV Particulars of Debt'

had mentioned that it had granted 'Financial Debt' to the borrower/Great

Indian Nautanki Company Pvt Ltd, being the company promoted and

owned by the 'Corporate Debtor'. In fact, the 'Term Loan' of Rs.35 crores,

cash credit of Rs.2 crore and 'Bank Guarantee' of Rs.4 crores was

sanctioned and later the term loan of Rs.12 crores was sanctioned and

Bank Guarantee was reduced from Rs.4 crores to Rs.1 crore vide

Sanction Letter dated 24.02.2010. The additional facility of Rs.6.70

crores (LC-Capex- Rs.5.00 crore, sub limit of LC/TCBG-(Rs.5.00 crores),

LER-(Rs.1.70 Crore) was sanction in 2012 as per Sanction Letter dated

28.12.2012 ('Financial Facility'). The borrower and the Financial

Creditor had executed loan cum hypothecation agreement dated June

26, 2009, February 25, 2010 and January 3, 2013 (hereinafter referred

to as 'Facility Agreement'). The total principal amount of debt disbursed

under the 'Facility Agreement' is Rs.56.70 crores.

70. The 1st Respondent/Financial Creditor/Applicant under Part IV

'Particulars of the Financial Debt' in Serial No.1 had mentioned as

under:-

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 34 of 63

"The Corporate Debtor had entered into Guarantee Agreement dated

January 14, 2013, February 25, 2010 and June 26, 2009 with the

Financial Creditor (Guarantees) under the terms of which the

Corporate Debtor has agreed and undertaken to pay on demand an

amount of Rs.56.70 Crore in case the Borrower commits any

payment defaults or any other defaults under the Facility

Agreements.

The Financial Creditor has filed this Application for initiating

Corporate Insolvency Resolution Process against the Corporate

Debtor based on the failure of the Corporate Debtor to pay the

amounts due pursuant in the Guarantee furnished by the Corporate

Debtor in favour of the Financial Creditor pursuant to the defaults

committed by the Borrower in respect of the Financial Facility

granted pursuant to the Facility Agreements. This Application under

Section 7 of the Insolvency and Bankruptcy Code, 2016 as amended

(the Code) is being filed without prejudice to the rights of the

Financial Creditor to submit its claims before the Interim Resolution

Professional or the Resolution Professional, as the case may be

under the provisions of the Code with respect to any other financial

debt granted by the Financial Creditor to the Corporate Debtor or

otherwise."

71. In fact, under Part IV of the Application in Serial No.2, the

aggregate amount of default under the Facility Agreement as on

01.06.2019 was mentioned as Rs.60,39,87,991.41 and which includes

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 35 of 63 the defaulted amounts of principal, interest and penal interest and

charges.

72. In the Application filed by the 1st Respondent/Financial

Creditor/Applicant under Part V 'Particulars of the Financial Debt

Documents, Records and Evidence of Default at Serial No.8, it was

mentioned that the following documents were attached to the Application

to prove the existence of Financial Debt etc. and they are as under:-

"1) Notice dated 14, 2014 sent by the IDBI Bank to the Borrower

recalling the Financial Facility and for the payment of outstanding

dues under the Facility Agreements in view of the default committed

by the Borrower under the Facility Agreement.

2) Notice dated December 8, 2014 sent by IDBI Bank Ltd to the

Corporate Debtor invoking the Guarantees furnished by the

Corporate Debtor to IDBI Bank demanding that the Corporate Debtor

pay forthwith the Guaranteed Sums.

3) Notice dated November 29, 2014 under Section 13(2) of the

SARFAESI Act, by the Financial Creditor to the Managing Director of

Borrower and Mortgager and the Corporate Debtor being the

promoter and guarantors of the Borrower calling upon them to pay

a sum of Rs.39,43,32,818.08 as on November 14, 2014 and with

further interest with effect from November 15, 2014 until realization

of payment failing which IDBI shall be entitled to enforce its security

interest and take over the possession and/or management of

secured assets. Therefore, the symbolic possession of the assets

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 36 of 63 was taken over by IDBI on July 2, 2018 and the publication of the

possession notice was made on July 7, 2018.

4) Letter dated August 25, 2017 by the Financial Creditor to the

Corporate Debtor stating that if the payment under the Guarantees

are not cleared then the Financial Creditor would be constrained to

initiate steps under the Insolvency and Bankruptcy Code, 2016 and

the letter dated September 27, 2017 from the Corporate Debtor to

the Financial requesting the Financial Creditor not to initiate any

action under the Insolvency and Bankruptcy Code 2016 and provide

the Corporate Debtor an opportunity to present a plan that is

acceptable to the Financial Creditors.

5) True copy of the Stand Alone Financial Statements for the

Corporate Debtor for the period 01.04.2017 to 31.03.2018.

6) True copy of the Written Statement filed by the Corporate Debtor

before the Debt Recovery Tribunal."

73. Before the 'Adjudicating Authority', the 'Corporate Debtor' had filed

a Reply to CP(IB)/3000(MB)/2019, filed by the 1st Respondent/Financial

Creditor/Bank, inter alia stating that the 'Corporate Debtor' had not

taken any 'Financial Debt' from the 'Financial Creditor' and that the 1st

Respondent/Financial Creditor had neither sanctioned nor disbursed

any 'Loan', 'Debt', 'Money' against the consideration for the 'time value'

of money.

74. Furthermore, the 1st Respondent/Financial Creditor/Bank had

violated the terms of the sanction letter and for this reason the 'Corporate

Guarantee' executed on 26.06.2009, 25.02.2010 and 14.01.2013 are

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 37 of 63 illegal, unauthorised and unenforceable one. Apart from this, the

'Corporate Debtor' is not liable to pay to the 1st Respondent/Bank, the

purported sum of INR 60,39,87,991.41 or otherwise and as such the

Application filed under Section 7 of the Code by the 1st Respondent/Bank

is not maintainable.

75. Added further, the 'Corporate Debtor' had taken a stand in its

'Reply' (to the application filed by the 1st Respondent/Financial Creditor)

that the 1st Respondent/Financial Creditor/Bank initiated proceedings

under SARFAESI Act, 2002, in which the 1st Respondent/Financial

Creditor/Bank can recover entire alleged outstanding due. In fact, the 1st

Respondent/Financial Creditor/Bank should exhaust remedies available

for recovery of its alleged dues before proceeding with an 'Insolvency

Application'. Indeed, without completion of proceedings under

SARFEASI Act, 2002, it does not lie for the 1st Respondent/Financial

Creditor/Bank to file the Section 7 Application under IBC.

76. Also, a plea is taken before the 'Adjudicating Authority' that the

'invocation of guarantee' is premature and that the liability of the

'Corporate Debtor' arises only in case there is default on the part of the

Borrower to pay the amounts, payable by the Borrower. The liability of

Borrower is to be adjudicated by the 'Adjudicating Authority' as to what

amount is payable by the 'Borrower' and pending adjudication of amount

payable by the Borrower, the invocation of Guarantee by the 1st

Respondent/Financial Creditor/Bank is a premature one.

77. In this connection, it is pertinent for this 'Tribunal' to make a

significant mention that at paragraph 22 of the Reply of the 'Corporate

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 38 of 63 Debtor' (before the 'Adjudicating Authority') wherein it is mentioned as

under:-

"22. The Financial Creditor and the Borrower are under continuous

consultation and negotiation for one time settlement (hereinafter

called as "OTS") of the current outstanding loan amount. As recent

as on 27.11.2019, the Director of the Borrower has submitted the

proposal for the OTS to the Financial Creditor in the presence of the

representative of the Respondent and the representatives of the

Respondent's Banker. It is submitted that the Borrower during the

process of negotiation has submitted in its letter dated 27.11.2019

that the talks/negotiations are under way with the potential

investors and once the formal RFP is issued, the Borrower would

finalize the deal for the investment within 2 to 3 weeks thereafter

and will submit a OTS proposal against the Credit Facility along with

upfront amount to the Financial Creditor. It is relevant to mention

that the Financial Creditor has agreed to consider the same on the

submission of the detailed proposal which the Borrower has

undertaken to submit."

78. It is the plea of the 'Corporate Debtor' before the 'Adjudicating

Authority' by way of an averment in its 'Reply' to the main Section 7

Application that the 1st Respondent/Financial Creditor/Bank had

arbitrarily and without any justification had initiated insolvency

proceedings against it on the basis that the 'Corporate Debtor' is only the

'Guarantor' for the 'Financial Debt' provided to the 'Borrower'.

Furthermore, it was mentioned in the 'Reply' that the 'Borrower' is

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 39 of 63 continuously paying the money against it liability towards its debt and

also the 'Borrower' and the 1st Respondent/Financial Creditor/Bank are

working and negotiating the 'OTS proposal' etc.

79. The 'Corporate Debtor' before the 'Adjudicating Authority' had also

averred in its 'Reply' that the 1st Respondent/Financial Creditor/Bank

instead of moving against any other or all other personal and corporate

guarantors, had arbitrarily and without any reason etc. had initiated

'Corporate Insolvency Proceeding' only against it ('Corporate Debtor')

which shows mala fide.

INDIAN CONTRACT ACT, 1872

80. Be it noted, that Section 126 of the Indian Contract Act, 1872 deals

with 'Contract of 'Guarantee', 'surety', 'Principal Debtor and Creditor'.

Section 127 of the Act pertains to 'Consideration for Guarantee'. Section

128 of the Act pertains to 'Surety's liability'. Section 129 of the Act refers

to 'Continuing Guarantee'. Section 135 of the Act is concerned with

'Discharge of Surety when Creditor compounds with, gives time to, or

agrees not to sue, principal debtor'. Section 140 of the Act provides for

the 'Rights of Surety on Payment or Performance'. Section 146 of the

Indian Contract Act, 1872 deals with 'Co-Sureties' liable to contribute

equally.

SUING SURETY

81. It is to be pointed out that a 'Creditor' can sue the 'surety' directly

without suing the 'Principal Debtor'. In reality, 'surety' provides

'Guarantee' only when requested by the 'Principal Debtor' in a 'Contract

Of Guarantee'. In Law, in a 'Contract of Guarantee' there is an existing

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 40 of 63 liability for 'Debt' and 'Surety' guarantees the performance of such

liability.

SURETY'S RIGHT

82. A 'Surety' is eligible to proceed against the 'Principal Debtor' on

payment of 'Debt', in case 'Principal Debtor' fails to pay the same. A

'Creditor' can sue their surety directly without proceeding against the

Principal Debtor. As per Law, the 'surety' does not have the right to

dictate terms to the creditor as to how he should make the recovery and

pursue its remedy against the 'Principal Debtor' at his instance.

FINANCIAL DEBT AND DEFAULT UNDER IBC.

83. It is to be pointed out that a 'Financial Debt' includes Debt owed

to the Creditor by both the 'Principal' and the 'Guarantor'. Failure by the

'Guarantor' to pay the 'Financial Creditor' when the 'Principal Debt'

amount is demanded will amount to a 'Default' as per Section 3(12) of

the Code. A Financial Creditor who has a 'Guarantee' on the debt due

can initiate proceedings under Section 7 of the I&B Code, 2016 against

the 'Guarantor' for failure to repay the amount borrowed by the 'Principal

Borrower'.

GUARANTEE AGREEMENTS

84. The 'Corporate Debtor'/Promoter Company of the Principal

Borrower had executed 'Corporate Guarantee Agreement' dated

26.06.2009, 25.02.2010 and 14.01.2013 (Corporate Guarantees) to and

in favour of the 1st Respondent/Bank, in respect of the loan availed by

the 'Principal Borrower'. The 'Account' of the 'Principal Borrower/

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 41 of 63 Corporate Debtor' was classified and declared as 'Non-Performing Assets'

on 29.07.2014.

LOAN RECALL

85. On 14.11.2014, the 1st Respondent/Bank had recalled the loan

granted to the 'Principal Borrower' and a sum of Rs.39,43,32,818.08 was

demanded. On 29.11.2014 the 1st Respondent/Bank had issued the

Demand Notice under Section 13(2) of the SARFEASI Act, to the 'Principal

Borrower' and demanded a sum of Rs.39,43,32,818.08. Prior to the

initiation of the I&B Code proceedings, the Bank had taken other

proceedings for recovery of the loan sum.

86. The 1st Respondent/Bank had invoked the 'Corporate Guarantee'

of the Appellant and other 'Corporate and Personal Guarantees' on

08.12.2014 wherein a sum of Rs.34,40,08,119.61 was demanded

together with further interest w.e.f. 01.12.2014 at the contractual rate,

upon the footing of compound interest, until payment/realisation.

ISSUANCE OF DEMAND NOTICE

87. The 1st Respondent/Bank on 25.08.2017 issued a Demand Notice

to the Appellant/Corporate Guarantor demanding to pay the 'Financial

Debt' sum/Loan, whereby and whereunder it is mentioned as follows:-

"Please refer to letter Ref.No.IDBI/ND/MCG.GINCPL/16-17/795

dated 07.03.2017 issued by IDBI Bank Ltd (hereafter referred to

"The Bank'), wherein you were advised to arrange for payment of

default committed by our assisted company M/s Great India

Nautanki Company Pvt Ltd (hereafter referred to 'the company for

which Wizcraft International Entertainment Pvt Ltd (WIEPL)

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 42 of 63 (hereafter referred as 'The Guarantor") have provided guarantee

vide Guarantee Agreement dated June 26, 2009, February 25, 2010

and January 14, 2013.

2.Despite our repeated follow-up for said payment, you have failed,

neglected and not taken any step to clear the overdue as referred in

above mentioned letter dated 07.03.2017.

3.In the premises, we hereby give you final Notice to arrange for

clearance of overdue on immediate basis, failing which, IDBI Bank

shall be constrained to take such steps against the Company,

including initiating action under Insolvency and Bankruptcy Code

for recovering the dues at your own risk as to the costs and

consequences thereof.

4. Please note that this Notice is issued without prejudice to all the

other rights and remedies available to IDBI Bank against

you/guarantors/pleadings, if any, under the applicable laws and

under the respective contracts entered into by the respective parties

in favour of IDBI Bank, in law or in contract or both, in respect of the

Financial Assistance."

CORPORATE DEBTOR'S REPLY

88. On 27.09.2017 the 'Corporate Debtor' issued a Reply to the 1st

Respondent/Bank wherein at paragraph 2, 4 and 6 it is mentioned as

under:-

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 43 of 63

2. "We understand that GINC has failed to pay its dues to IDBI, as

a result of which IDBI has invoked the above mentioned guarantees

and called upon Wizcraft to pay IDBI the dues of Rs. 48.39 Cr.

4. We understand that GINC is dealing with the current financial

situation of the company in full force as belief in the potential of KOD

will exists. GINC has sought certain subsidies from the Government

of Haryana and the Chief Minister's office has in light of relevance

of the KOD project to the state of Haryana tourism, appointed a

committee to consider the requests of GINC and make its

recommendations. The recommendation we understand, are in its

final stages and expected to be submitted anytime soon.

6. In light of the above, we request you not to initiate any action

under the Insolvency and Bankruptcy Code and provide us the time

necessary to present a plan that is acceptable to you."

SUPREME COURT'S DECISION

89. At this stage this 'Tribunal' worth recalls and recollects the

decision of the Hon'ble Supreme Court in Syndicate Bank V. Chan

Naveerappa Beleri & Ors. reported in AIR 2006 Supreme Court 1874

wherein at paragraph -11 to 14, it is observed as under:

"11. But in the case on hand, the guarantee deeds specifically state that the guarantors agree to pay and satisfy the Bank on demand and interest will be payable by the guarantors only from the date of demand. In a case where the guarantee is payable on demand, as held in Bradford [(1918) 2 KB 833 : 88 LJKB 85 : 119 LT 727 (CA)] and Hartland [ (1863) 1 H&C 667 : 7 LT 792] , the limitation begins to run when the demand is made and the guarantor commits breach by not complying with the demand.

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 44 of 63

12. We will examine the meaning of the words "on demand". As noticed above, the High Court was of the view that the words "on demand" in law have a special meaning and when an agreement states that an amount is payable on demand, it implies that it is always payable, that is payable forthwith and a demand is not a condition precedent for the amount to become payable. The meaning attached to the expression "on demand" as "always payable" or "payable forthwith without demand" is not one of universal application. The said meaning applies only in certain circumstances. The said meaning is normally applied to promissory notes or bills of exchange payable on demand. We may refer to Articles 21 and 22 in this behalf. Article 21 provides that for money lent under an agreement that it shall be payable on demand, the period of limitation (3 years) begins to run when the loan is made. On the other hand, the very same words "payable on demand" have a different meaning in Article 22 which provides that for money deposited under an agreement that it shall be payable on demand, the period of limitation (3 years) will begin to run when the demand is made. Thus, the words "payable on demand" have been given different meanings when applied with reference to "money lent" and "money deposited". In the context of Article 21, the meaning and effect of those words is "always payable" or payable from the moment when the loan is made, whereas in the context of Article 22, the meaning is "payable when actually a demand for payment is made".

13. What then is the meaning of the said words used in the guarantee bonds in question? The guarantee bond states that the guarantors agree to pay and satisfy the Bank "on demand". It specifically provides that the liability to pay interest would arise upon the guarantor only from the date of demand by the Bank for payment. It also provides that the guarantee shall be a continuing guarantee for payment of the ultimate balance to become due to the Bank by the borrower. The terms of guarantee, thus, make it clear that the liability to pay would arise on the guarantors only when a demand is made. Article 55 provides that the time will begin to run when the contract is "broken". Even if Article 113 is to be applied, the time begins to run only when the right to sue accrues. In this case, the contract was broken and the right to sue accrued only

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 45 of 63 when a demand for payment was made by the Bank and it was refused by the guarantors. When a demand is made requiring payment within a stipulated period, say 15 days, the breach occurs or right to sue accrues, if payment is not made or is refused within 15 days. If while making the demand for payment, no period is stipulated within which the payment should be made, the breach occurs or right to sue accrues, when the demand is served on the guarantor.

14. We have to, however, enter a caveat here. When the demand is made by the creditor on the guarantor, under a guarantee which requires a demand, as a condition precedent for the liability of the guarantor, such demand should be for payment of a sum which is legally due and recoverable from the principal debtor. If the debt had already become time-barred against the principal debtor, the question of creditor demanding payment thereafter, for the first time, against the guarantor would not arise. When the demand is made against the guarantor, if the claim is a live claim (that is, a claim which is not barred) against the principal debtor, limitation in respect of the guarantor will run from the date of such demand and refusal/non-compliance. Where guarantor becomes liable in pursuance of a demand validly made in time, the creditor can sue the guarantor within three years, even if the claim against the principal debtor gets subsequently time-barred. To clarify the above, the following illustration may be useful:

Let us say that a creditor makes some advances to a borrower between 10-4-1991 and 1-6-1991 and the repayment thereof is guaranteed by the guarantor undertaking to pay on demand by the creditor, under a continuing guarantee dated 1-4-1991. Let us further say a demand is made by the creditor against the guarantor for payment on 1-3-1993. Though the limitation against the principal debtor may expire on 1-6-1994, as the demand was made on 1-3- 1993 when the claim was "live" against the principal debtor, the limitation as against the guarantor would be 3 years from 1-3-1993. On the other hand, if the creditor does not make a demand at all against the guarantor till 1-6-1994 when the claims against the principal debtor get time-barred, any demand against the guarantor

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 46 of 63 made thereafter say on 15-9-1994 would not be valid or enforceable."

CONTINUOUS GUARANTEE

90. In terms of the 'Guarantee', the 'Guarantee' is a continuous one

and as such the right to sue accrues and when the guarantee was

invoked and the date when the 'Corporate Debtor' had failed to discharge

its obligation as per Guarantee. Although a plea is taken on behalf of the

Appellant that the Reply dated 27.09.2017 of the 'Corporate Guarantor'

to the 'Demand Notice' dated 25.08.2017 is not an acknowledgement at

all and in any event, the same is beyond the three years of classification

of account of the Principal Borrower as Non-Performing Assets on

29.07.2014, beyond three years of the Limitation Period, this Tribunal is

of the considered view that the 'Reply' dated 27.09.2017 of the Corporate

Debtor is nothing but an 'Acknowledgement of Debt' coming within the

ambit of Section 18 of the Limitation Act, 1963. As such, the contra plea

taken on behalf of the Appellant is not acceded to by this 'Tribunal'

Acknowledgment of Liability:

91. To constitute an 'acknowledgement of liability, within the meaning

of the Section 18 of the Limitation Act, it need not be accompanied by a

promise to any either expressly or even by implication as long as the

statement amounts to an admission, acknowledging the jural

relationship and existence of liability, it is immaterial that the admission

is accompanied by an assertion that nothing would be found due from

the person making the admission or that on account being taken

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 47 of 63 something may be found due and payable to the person making the

acknowledgement by the person to whom the statement made as per

decision in Food Corporation of India V. Assam State Cooperative

Marketing and Consumers Federation Ltd. (2005) 1 JCR 49 (SC).

REQUIREMENT OF SECTION 18

92. For the purpose of satisfying the requirement of Section 18 of the

Limitation Act, 1963 whereby the balance was confirmed, i.e. sufficient

decision Allahabad Bank, Rewa V. Pramod Kumar Singh reported in AIR

2006 MP Page 10 at Spl Page 12. An 'acknowledgement' within the

meaning of Section 18 of the Limitation Act, 1963 is an

'acknowledgement' of liability existing at the time of 'acknowledgement'

and not of its having existed, sometime earlier as per decision Pandit Ram

Hazari V. Ram Narain, AIR 1963 All 422 at Page 424. An

'acknowledgement' must be before the prescribed period for a suit or an

application in respect of such property or right as per decision Shivam

Construction Co V. Vijaya Bank, Ahmedabad, AIR 1997 Guj. 24, at Pages

29, 30.

93. In the 'Guarantee Agreement' executed by the 'Corporate Debtor'/

M/s Wizcraft International Entertainment Pvt Ltd (Guarantor) on

26.06.2009 to and in favour of the 1st Respondent/Bank, Clause 3 and

4 reads as under:-

"3. In the event of any default on the part of the Borrower in

payment/repayment of any of the monies referred to above, or in the

event of any default on the part of the Borrower to comply with or

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 48 of 63 perform any of the terms, conditions and covenants contained in the

Agreement, Guarantor shall upon demand, forthwith pay to the

Bank without demur all the amounts payable by the Borrower,

under the Agreement.

4.The Guarantor shall also indemnify and keep the Bank

indemnified against all cases, damages, costs, claims and expenses

whatsoever which the Bank may suffer, pay or incur by reason of or

in connection with any such default on the part of the Borrower

including legal proceedings taken against the Borrower and/or the

Guarantor for recovery of the moneys referred to in Clause 2 above."

94. The other two Guarantee Agreements dated 25.02.2010 and

14.01.2013 executed by the 'Corporate Debtor' proceeds like the 1st

Guarantee Agreement dated 26.06.2009.

95. Although, on behalf of the Appellant it is emphatically submitted

that the date of invocation of Guarantee by the 1st Respondent/Bank on

08.12.2014 cannot be the date of default, such a plea projected on the

side of the Appellant is not a tenable one, because of the fact that the

'Contract of Guarantee' is an independent transaction having separate

and reciprocal obligation and that apart the 'Contract of Guarantee'

Agreement is made on a Principal-to-Principal basis despite the fact that

the issue arises out of the same Transaction, in the considered opinion

of this 'Tribunal'.

96. It cannot be forgotten that there exists a difference in regard to a

'Guarantee' which contemplates that the Guarantor is liable to pay only

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 49 of 63 on a demand by the creditor and the 'Guarantee' which is conspicuously

absent on this aspect. In Law the parties may consent/agree that the

liability of 'Guarantor' shall arise at a subsequent point of time than that

of the 'Principal Debtor'.

97. When the 1st Respondent/Bank had invoked the Corporate

Guarantee/Guarantee Agreement upon the 'Corporate Debtor', in the

event of a claim which is not time barred against the 'Principal Debtor',

limitation as regards the 'Guarantor' will start from the date of Demand

and refusal/not complying with the Demand made thereto, as opined by

this Tribunal.

98. It is well settled principle of law that the 'Guarantee' will not get

wiped out because of the reason that the 'debt' had become an

unenforceable one against the Principal because of the occurrence of

events that took place later. Even on account of the 'Bankruptcy' of the

Principal, yet the surety is liable in Law though in a given case the claim

against the Principal may be barred the plea of Limitation, as opined by

this Tribunal.

99. In pith and substance, this 'Tribunal' significantly points out that

when a 'Demand' is made on the 'Guarantor' and when the 1st

Respondent/Bank had invoked the 'Bank Guarantee' against the

'Corporate Debtor' on 08.12.2014 and also issued a 'Demand Notice' to

the 'Corporate Debtor' on 25.08.2017 and a 'Reply' was furnished to the

1st Respondent/Bank by the 'Corporate Debtor' on 27.09.2017 wherein

at paragraph 2, the 'Corporate Debtor' had stated in a 'crystalline and

unequivocal term' that it was required to pay to the Bank, due amount

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 50 of 63 of Rs.48.39 crores and also at paragraph 6 had made a request to the 1st

Respondent/Bank not to initiate any action under IBC etc. and in the

teeth of the 'Debt' being not time barred against the 'Principal Debtor',

the 'Limitation' begins to run only cementing on the 'Demand' made for

the repayment of due amount as opined by this 'Tribunal'.

100. It is not out of place for this Tribunal to make a pertinent mention

that a mere running of the eye of the contents of Reply dated 27.09.2017

of the 'Corporate Debtor' who had executed the 'Corporate Guarantee' on

26.06.2009, 25.02.2010 and 14.01.2013 latently, patently and

unerringly points out that the aforesaid 'Reply' Letter of the Corporate

Debtor is nothing but a 'tacit acknowledgement' of the liability in

question and furthermore, a fervent request was made to the 1st

Respondent/Bank not to initiate any action under the I&B Code, 2016

etc.

101. As a matter of fact, in the 'Reply' dated 27.09.2017 of the

'Corporate Debtor' addressed to the 1st Respondent/Bank, the Corporate

Debtor had mentioned 'GNIC has failed to pay its dues to IDBI, as a result

of which IDBI has invoked the abovementioned Guarantees and called

upon Wizcraft to pay IDBI their due of Rs.48.39 crores'. Therefore, the

aforesaid contents of Reply dated 27.09.2017 of the Corporate Debtor is

'an acknowledgement of liability'. Also that a 'Debt' liability of a person

can be projected and enforced by a 'Creditor' through initiation of

numerous proceedings known to Law.

102. If an 'Acknowledgement' is valid, then, there is no fetter in 'Law'

whereby the liability against the particular person/entity can be

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 51 of 63 enforced, in accordance with Law. In Law, an 'Acknowledgement of

Liability' merely extends the limitation period and does not create a' new

right of action', as per decision of Hon'ble Supreme Court in Tilak Ram

V. Nathu reported in AIR 1967 SC 935.

103. This 'Tribunal' relevantly points out the decision in Maniram V.

Seth Rup Chand (1906) 16 Mad Law Journal, 300 wherein it is observed

that an 'Unconditional Acknowledgment' has always been held to imply

a 'promise to pay' because that is the natural inference.

104. Further, a simple 'Acknowledgement of a Debt' without any express

promise is sufficient for the purpose of an 'Acknowledgement' implying a

promise to pay. It is to be remembered that an 'Acknowledgement' need

not contain a promise to pay express or implied as per decision

Subbaraudu V. Narasimha Reddi reported in AIR 1936 Madras Page

939. An 'Acknowledgement' is sufficient even with an absolute refusal to

pay.

Guarantor

105. A 'Guarantor' is one who 'Guarantees' to 'perform the promise' of

or 'discharge the liability of a person' for whom he stands Guarantee. In

regard to any 'Debt' incurred by 'Principal' during the currency of

'Guarantee' the 'Surety' is liable as long as the 'Debt' is recoverable from

'Principal'. It does not matter that the 'Principal' has kept the 'Debt' alive

by an 'acknowledgement' under Section 19 of the Limitation Act, 1963 or

by payments under Section 20 of the Limitation Act for, by these actions,

there is no 'Renewal of Debt' and no new 'Debt' is created, which is not

covered by 'Guarantee'. As a matter of fact, the 'Debt' remains the same,

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 52 of 63 viz., the 'Debt' 'Guaranteed' and only the 'bar of time' against recovery is

postponed.

GUARANTOR'S LIABILITY

106. As long as the 'account' is a live account, the 'Guarantor' is liable,

because of the fact that the said 'Account' has not been discharged by

payment or by other arrangement.

107. An Agreement executed by a 'Guarantor' is a separate and

collateral contract distinct from the contract of debt between 'Principal

Debtor' and 'Creditor'. It cannot be brushed aside that an

'Acknowledgement of Liability' will save liability only against the person

who acknowledges the liability.

DECISIONS ON BANK GUARANTEE

108. In the decision of Hon'ble Supreme Court in Ansal Engineering

Projects Ltd V Tehri Hydro Development Corporation Ltd and Anoter

reported in 1196 5SCC at page 450 wherein at paragraph 4 and 5 it is

observed as under:-

"4.It is settled law that bank guarantee is an independent and

distinct contract between the bank and the beneficiary and is not

qualified by the underlying transaction and the validity of the

primary contract between the person at whose instance the bank

guarantee was given and the beneficiary. Unless fraud or special

equity exists, is pleaded and prime facie established by strong

evidence as a triable issue, the beneficiary cannot be restrained from

encashing the bank guarantee even if dispute between the

beneficiary and the person at whose instance the bank guarantee

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 53 of 63 was given by the Bank, had arisen in performance of the contract or

execution of the Works undertaken in furtherance thereof. The Bank

unconditionally and irrevocably promised to pay, on demand, the

amount of liability undertaken in the guarantee without any demur

or dispute in terms of the bank guarantee. The object behind is to

inculcate respect for free flow of commerce and trade and faith in the

commercial banking transactions unhedged by pending disputes

between the beneficiary and the contractor.

5........The Court exercising its power cannot interfere with

enforcement of bank guarantee/letters of credit except only in cases

where fraud or special equity is prime facie made out in the case as

triable issue by strong evidence so as to prevent irretrievable

injustice to the parties."

109. In the decision of the Hon'ble Supreme Court in Gujarat Maritime

Board V. Larsen & Toubro Infrastructure Development Project Ltd

and Another reported in 2016 (10)SCC at page 46 wherein it is observed

as under:

"14. From the discussions made hereinabove relating to the principles for grant or refusal to grant of injunction to restrain enforcement of a bank guarantee or a letter of credit, we find that the following principles should be noted in the matter of injunction to restrain the encashment of a bank guarantee or a letter of credit:

(i) While dealing with an application for injunction in the course of commercial dealings, and when an unconditional bank guarantee or letter of credit is given or accepted, the beneficiary is entitled to realise such a bank guarantee or a letter of credit in terms thereof irrespective of any pending disputes relating to the terms of the contract.

(ii) The bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer.

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 54 of 63 (iii) The courts should be slow in granting an order of injunction to restrain the realisation of a bank guarantee or a letter of credit.

(iv) Since a bank guarantee or a letter of credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the parties to the contract is not a ground for issuing an order of injunction to restrain enforcement of bank guarantees or letters of credit".

110. In the decision of the Hon'ble Supreme Court in Hindustan

Construction Co Ltd V State of Bihar & Others reported in 2006 (6)

SCC 293 wherein it is at paragraph 9 it is observed as under:-

"What is important, therefore, is that the Bank Guarantee should be in unequivocal terms, unconditional and recite that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the Bank Guarantee or the person on whose behalf the Guarantee was furnished. The terms of the Bank Guarantee are, therefore, extremely material. Since the Bank Guarantee represents an independent contract between the Bank and the beneficiary, both the parties would be bound by the terms thereof. The invocation, therefore, will have to be in accordance with the terms of the Bank Guarantee; or else, the invocation itself would be bad."

111. No absolvement of surety

Even if a discharge, a Principal Debtor gets by operation of law in

Bankruptcy or in Liquidation proceeds in respect of a Company, the same

does not absolve the surety of its liability in the considered of this

'Tribunal'.

HON'BLE SUPREME COURT DECISION

112. In the Judgement of Hon'ble Supreme Court dated 26.03.2021 in

Laxmipat Surana V. Union of India (vide Civil Appeal No.2734 of 2020)

wherein at paragraph 12 and 13 it is observed as under:-

12. "The Finance Creditor has refused the plea regarding

maintainability of the application against the Corporate Debtor.

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 55 of 63

According to the Financial Creditor, the liability of the Principal

Borrower and of the Guarantor is coextensive or coterminous, as

predicated in Section 128 of the Indian Contract Act, 1872. This

legal position is well-established by now (see- Bank of Bihar Ltd Vs.

Dr Damodar Prasad & Anr). Section 7 of the Code enables the

financial creditor to initiate CIRP against the principal borrower if it

is a corporate person, including against the corporate person being

a guarantor in respect of loans obtained by an entity not being a

corporate person. The Financial Creditor besides placing reliance on

Section 7, would also rely on definition of expressions "corporate

debtor" in Section 3(8), "debt" in Section 3(11), and financial creditor

in Section 5(7) and "financial debt" in Section 5(8) of the Code. It is

urged that upon conjoint reading of these provisions, it is crystal

clear that a "financial debt" includes the amount of any liability in

respect of any guarantee or indemnity for any money borrowed

against interest. Resultantly, the money borrowed against interest.

Resultantly the money borrowed by sole proprietorship

of the appellant against payment of interest for which the

Corporate Debtor stood guarantee or indemnity, was also a

"financial debt" of the Corporate Debtor and for that reason, the

Financial Creditor- Respondent No. could proceed under Section 7

of the Code. It is further urged that the definition of "corporate

guarantor" introduced by way of amendment of 2018 is to define a

corporate guarantor in relation to a corporate debtor against whom

any CIRP is to be initiated, in reference to Section 60 of the Code.

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 56 of 63 The objection regarding maintainability of the application against a

corporate guarantor, if, therefore, devoid of merit and needs to be

rejected.

13..........The Code is a special enactment for resolution of a

financial debt and it is in larger public interest that financial debts

are recovered and the debts of corporate person are restructured to

revive the failing corporate entity.

19. Indubitably a right or cause of action would enure to the lender

(financial creditor) to proceed against the principal borrow, as well

as the guarantor in equal measure in case they commit default in

repayment of the amount of debt acting jointly and severally. It

would still be a case of default committed by the guarantor itself, if

and when the principal borrower fails to discharge his obligation in

respect of amount of debt. For, the obligation of the guarantor is

coextensive and coterminous with that of the principal borrower to

defray the debit, as predicated in Section 128 of the Contract Act. As

a consequence of such default, the status of the guarantor

metamorphoses into a debtor or a corporate debtor if it happens to

be a corporate person, within the meaning of Section 3(8) of the

Code. For, as aforesaid, expression "default" has also been defined

in Section 3(12) of the Code. For, as aforesaid, express "default"

has also been defined in Section 3(12) of the Code to mean non-

payment of debt when whose or any part or instalment of the

amount of debt has become due or payable and is not paid by the

debtor or the corporate debtor, as the case may be."

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 57 of 63 CIRP INITIATION

113. A 'Financial Creditor' is entitled to initiate 'CIRP' against a

'Guarantor' or 'Surety' although the Creditor holds enough security over

the assets. A Surety has no right to dictate terms to the 'Creditor' as to

how he ought to make a 'recovery' and pursue his remedies against the

'Principal Debtor' at his instance.

APPELLATE TRIBUNAL DECISION:

114. In the judgment of this 'Tribunal' in 'Ferro Alloys Corporation Ltd

V. Rural Electrification Corporation Ltd. (vide Comp. App. (AT)(Ins)

921/2017, it is held that the 'Insolvency' proceedings against the

'Corporate Debtor' may be undertaken without initiating prior

proceedings gains the 'Principal Debtor' under I & B Code. In fact,

requiring/asking the 'Financial Creditor'/'Operational Creditor' to

postpone in availing its remedy against the 'Corporate Debtor' will

undoubtedly defeat the purpose of obtaining 'Guarantee' as that would

result in restricting the rights of a 'Creditor'.

115. The 'Financial Creditor' has the option of commencing the

'Insolvency' proceeding against the 'Corporate Grantor' only without even

resorting to any legal proceeding against the 'Corporate Debtor'.

SECTION 7 APPLICATION:

116. A glance of the 'Section 7 Application' filed by the 1st

Respondent/Bank under the Code before the 'Adjudicating Authority'

shows that the date of default of the 'Principal Borrower' was mentioned

as 29.07.2014. However, the said 'Application' clearly mentions the date

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 58 of 63 of default of the 'Corporate Debtor' as 08.12.2014, on which date the 1st

Respondent/Bank had invoked the 'Corporate Guarantee' of the

'Corporate Debtor'. As such, it cannot be said by any stretch of

imagination that there exists a discrepancy in regard to the mentioning

of the two dates of default in the 'Section 7 Application' filed by the 1st

Respondent/Bank. Per contra, the mentioning of two dates in the

'Section 7 Application', one relating to 'Principal Debtor' as 29.07.2014

and another relating to 'Corporate Debtor' as 08.12.2014 is in order as

held by this 'Tribunal'.

UNDISCHARGED LIABILITY

117. Admittedly, there is an 'undischarged live liability' and the amount

due to the Bank has not been paid by the 'Corporate Debtor/Guarantor'

of the 'Principal Debtor'. For the undischarged live liability for which the

'Guarantor'/Corporate Debtor has obliged by its three 'Corporate

Guarantee Agreements' dated 26.06.2009, 25.02.2010 and 14.01.2013,

it is undoubtedly responsible for the liability of 'Principal Debtor'.

118. Dealing with the plea projected on behalf of the 'Appellant' that the

Settlement Agreement between the 1st Respondent/Bank and the

Principal Borrower and the 'No Objection Certificate' dated 02.07.2019

granted by the Bank in favour 'HSVP' to re-bid the project land amount

to a discharge of the 'Corporate Debtor's liability' under Section 135 and

139 of the Contract Act, 1872, the same is not a valid one in the teeth of

Clause 5 to 7 of the Guarantee Agreement dated 25.02.2010 which

permits the 1st Respondent/Bank to vary the loan term sanctioned to the

'Principal Borrower' without affecting the 'Corporate Debtor's' liability,

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 59 of 63 the Bank being allowed to release or restrain or to enforce any securities

for the loan and further the Bank is entitled to restrain to enforce the

payment of loan or any interest thereof and the same shall not release

the 'Guarantor' and apart from that, the 'Guarantor' had waived all the

suretyship rights which it might otherwise entitled to enforce. Viewed in

that perspective, this 'Tribunal' unhesitatingly comes to a consequent

conclusion that the 'Guarantor' had waived all rights as 'Surety' and

assumed more liability.

CONTENTS OF FORM 1 FOR FILING (SECTION 7 APPLICATION)

UNDER IBC.

119. It is to be pointed out that the Hon'ble Supreme Court of India in

the decision in Dena Bank (now Bank of Baroda) V. C. Shivakumar Reddy

& Another reported in 2021 SCC Online 543 wherein at paragraph at 73

and 91 it is observed as under:

"73. Since a Financial Creditor is required to apply under Section 7 of the IBC,

in statutory Form 1, the Financial Creditor can only fill in particulars as

specified in the various columns of the Form. There is no scope for elaborate

pleadings. An application to the Adjudicating Authority (NCLT) under Section

7 of the IBC in the prescribed form, cannot therefore, be compared with the

plaint in a suit. Such application cannot be judged by the same standards, as

a plaint in a suit, or any other pleadings in a Court of law.

91. On a careful reading of the provisions of the IBC and in particular the

provisions of Section 7(2) to (5) of the IBC read with the 2016 Adjudicating

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 60 of 63 Authority Rules there is no bar to the filing of documents at any time until a

final order either admitting or dismissing the application has been passed."

120. As far as the present case is concerned, the 'Corporate Debtor'

through its Reply/letter dated 27.09.2017 addressed to the 1st

Respondent/Bank had mentioned that it understood the 'GNIC/Principal

Borrower' had failed to pay its dues to IDBI (1st Respondent) of which the

IDBI had invoked the 'Bank Guarantees' and called upon the 'Corporate

Debtor/Guarantor', to pay the Bank the dues of Rs.48.39 crores and also

the 'Corporate Debtor/Guarantor' had requested the 1st

Respondent/Bank not to initiate any action under the I&B Code etc. and

this Letter/Reply dated 27.09.2017 is an 'Acknowledgement' of the 'Debt'

which extends the period of 'Limitation' in conformity with Section 18 of

the Limitation Act, 1963.

121. In order to sustain an 'Application' under Section 7 of the Code, an

applicant must satisfy the conscience of the 'Adjudicating Authority'

about the existence of 'Debt' which is due from the 'Corporate Debtor'. It

is true that the 'Adjudicating Authority' is to find out whether there is

'Debt' and 'Default' committed by the 'Corporate Debtor'. Always it is

open to the Corporate Debtor that a 'Default' had not occurred.

Moreover, it is open to the 'Corporate Debtor' to point out that the 'Debt'

is not payable by it either in Law or in fact.

122. In the instant case, the 'Corporate Debtor/Guarantor' had

committed 'Default', as per the ingredients of Section 3(2) of the Code.

The Section 7 Application under the Code was filed before the

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 61 of 63 'Adjudicating Authority' on 01.08.2019 by the 1st Respondent/Bank.

Notwithstanding the fact that the 'Account' of the 'Principal

Borrower'(Great Indian Nautanki Company Private Limited) was

classified as 'Non-Performing Asset' by the First Respondent/Bank in the

instant case on hand, in regard to the 'Debt' incurred by the Principal

Borrower for the 'Loans' availed by it and that the 'Corporate Guarantee

Agreements' dated 26.06.2009, 25.02.2009 and 14.01.2013 were

executed by the 'Corporate Debtor'/Promoter Company of the Principal

Borrower and since there is an undischarged 'Live Liability', in that the

'Debt' due and payable to the First Respondent/Bank was not paid by

the 'Principal Debtor', by virtue of the aforesaid three 'Corporate

Guarantee Agreements'('Corporate Guarantee') , the 'Corporate Debtor' is

responsible for the liability of the 'Principal Borrower'/ Great Indian

Nautanki Company Private Limited.

123. Besides the above, this 'Tribunal' keeping in mind of a primordial

fact that the 'Debt Liability' is arising from the Guarantee, which is due

and payable as per the invocation of 'Corporate Guarantee' by the First

Respondent/Bank on 08.12.2014 and the 'Guarantee Agreements' are

'Independent Rights', containing separate and reciprocal obligations and

taking note of the fact that the 'Corporate Debtor' had issued a Reply on

27.09.2017 to the 'Demand Notice' of the First Respondent/Bank dated

25.08.2017, which is an 'Acknowledgment' of Liability of the 'Corporate

Debtor' which extends the period of Limitation from 27.09.2017 to

26.09.2020 under the Limitation Act, 1963 (even though the 'Account' of

the Principal Borrower was classified as NPA on 29.07.2014) and as such,

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 62 of 63 the Section 7 Application filed by the First Respondent/Bank on

01.08.2019 is well within the period of three year's Limitation Period as

held by this 'Tribunal'. Viewed in that perspective, the 'impugned order'

of admitting the Application filed by the First Respondent/Bank (under

Section 7 of the I & B Code, 2016) against the 'Corporate Debtor', by the

'Adjudicating Authority' is free from legal flaws. Resultantly, the 'Appeal'

fails.

DISPOSITION:

In fine, the instant Comp. App. (AT)(INS) No. 411 of 2021 is

dismissed. No costs. Connected I.A. No. 1036/2021, I.A. No. 1037/2021,

I.A. No. 1038/2021 and I.A. No. 1039/2021 are closed.

[Justice M. Venugopal] Member(Judicial)

(V.P. Singh) Member(Technical)

(Dr. Ashok Kumar Mishra) Member(Technical) 27th January, 2022 Bm/Akc

Company Appeal (AT)(Insolvency) No. 411 of 2021 Page 63 of 63