Mumbai: The National Company Law Tribunal (NCLT) has admitted the initiation of insolvency proceedings against Poonam Wadhera, one of the personal guarantors of Frost International Limited (FIL), in connection with a default amounting to Rs 671,56,76,843.68. The insolvency petition was filed against FIL by Canara bank.
The tribunal held that the personal guarantor of FIL had committed a default in repayment of the loan after invocation of the personal guarantee by the financial creditor, thereby attracting insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).
In its order, the tribunal noted that the financial creditor had issued a demand notice dated December 1, 2023, under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019, calling upon the personal guarantor to pay the outstanding debt. Upon examining the documents on record, the tribunal observed that the corporate debtor had committed default in repayment of the loan, and that the personal guarantor had also failed to repay the amount demanded after invocation of the guarantee.
The petition filed by Canara Bank against the personal guarantor was opposed by Wadhera, who challenged its maintainability on the grounds of limitation, waiver, and estoppel.
In her reply, the personal guarantor submitted that she neither held any executive position nor participated in the financial, managerial, or decision-making functions of the corporate debtor, and that she held only 0.09% of the share capital of the company. She further contended that the personal guarantee was executed in 2013 and renewed in 2015 solely in connection with the mortgaging of a jointly owned property, and that she was informed that her signature was a mere formality linked to the mortgage.
She claimed that the guarantee was signed without informed consent and under pressure related to her inherited property, and that material facts regarding the financial position and functioning of the corporate debtor were never disclosed to her. It was also submitted that she was never informed of any defaults, restructuring, enhancement of credit facilities, or invocation of the guarantee, and that she received demand notices only in December 2023. She further alleged that repeated requests by her family for release of the mortgaged property and removal of her name as guarantor were ignored, despite assurances purportedly given by the promoters of the corporate debtor.
The personal guarantor also informed the tribunal that she had instituted a suit, before the Delhi High Court, challenging the validity, enforceability, and legal effect of the deed of guarantee.
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Additionally, she objected to the filing of an affidavit by the financial creditor, the Canara bank, at a belated stage, contending that arguments in the company petition had already concluded and the matter had been reserved for orders without liberty to file additional documents. She argued that the attempt to introduce fresh documents after closure of arguments was contrary to settled principles of procedural law and amounted to an effort to fill lacunae, thereby violating principles of natural justice.
After hearing the parties, the tribunal held that the corporate insolvency resolution process (CIRP) against Frost International Limited had commenced on February 9, 2023, pursuant to an application filed by Bank of India. The tribunal noted that the claim of the financial creditor had been verified and admitted by the resolution professional during the CIRP of the corporate debtor.
The NCLT observed that such admission of the claim constituted an acknowledgment of liability by the corporate debtor within the period of limitation, which was binding on the guarantor as well and extended the limitation period in view of settled judicial precedents. Accordingly, the tribunal held that the petition was within limitation and maintainable.
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