The NCLAT, New Delhi Bench has opined that the default date for the principal borrower cannot be put to be the default date for the corporate guarantor.
It was further ruled that the liability of corporate guarantor and the principal borrower is coextensive, but when the guarantee requires invocation of the deed, the default date of the guarantor should be when the corporate guarantee has been invoked.
Brief Facts:
The present appeal has been filed against the order of the NCLT vide which the Section 7 application under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) was rejected as barred by Section 10A.
Brief Background:
The Appellant invoked the bank guarantee of the Corporate Debtor. The NCLT ruled that the default of the Corporate debtor fell under Section 10A period and hence, dismissed the application on ground of time.
Observations of the Tribunal:
It was noted that the corporate guarantee was invoked by issuing a notice and the same notice provided 7 days to the corporate debtor to make the payment.
The default date for the principal borrower cannot be put to be the default date for the corporate guarantor.
It was opined that the liability of corporate guarantor and the principal borrower is coextensive, but when the guarantee requires invocation of the deed, the default date of the guarantor should be when the corporate guarantee has been invoked.
The decision of the Tribunal:
Based on aforementioned findings, the appeal was dismissed.
Case Title: Mudhit Madanlal Gupta v. Supreme Constructions and Developers Pvt. Ltd.
Case No.: Company Appeal (AT)(Insolvency) No. 920 of 2023
Coram: Justice Ashok Bhushan, Barun Mitra (Technical Member)
Advocate for Appellant: Adv. Kanishk Ahuja
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