The Principal Bench of the National Company Law Appellate Tribunal (NCLAT) recently held that the guarantor is obligated to pay off the dues of the Corporate Debtor, Infrastructure Leasing & Financial Services (IL&FS) in case of default of payment and upheld the order of liquidation passed by the Committee of Creditors (CoC) in favour of Infrastructure Leasing and Financial Services.
The Agreement was entered between IL&FS Financial Services Ltd. and the Principal Borrower by which the Financial Facility of Rupee Term Loan of Rs.30 crores was extended under the terms and conditions mentioned therein. A Letter of Guarantee was issued by the Corporate Debtor, Sadguru Krupa CHS Limited, guaranteeing repayment of the loan in pursuance of the said Agreement.
The Financial Creditor issued a Demand Notice asking for overdue payment with reference to the term loan of Rs.30 crores. Notices were issued both to Principal Borrower as well as Personal Guarantor and Pledgors.
In the absence of an interim order staying the Corporate Insolvency Resolution Process (CIRP), the CoC passed a resolution for liquidation of the corporate debtor, M/s G.C. Property Private Limited.
The present appeal was filed challenging this order of insolvency passed by the adjudicating authority consequent to the resolution and application under Section 7 of Insolvency and Bankruptcy Code, 2016.
The major contention raised by the appellants was that the guarantor against whom the corporate insolvency resolution process was passed could not be liquidated.
Observing that no infirmity could be found in the resolution of liquidation passed by the CoC for liquidating the corporate debtor, the Tribunal comprising Chairperson Justice Ashok Bhushan, Judicial Member Justice M Satyanarayana Murty and Technical Member Barun Mitra dismissed the appeal as it was bereft of any merit.
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