Vikram Kumar vs Aranca (Mumbai) Private Limited - (NATIONAL COMPANY LAW APPELLATE TRIBUNAL) (14 Sep 2023)

CIRP cannot be initiated for defaults arising within 12 months period beginning 25th March, 2020

MANU/NL/0774/2023

Insolvency

The Borrower had raised funds for `Celebrity Football Match' to be held at Dubai. Since the Borrower had not repaid the loan, the Appellant had invoked the Guarantee seeking repayment from the Guarantor. As the Guarantor had not paid in response to invocation of Guarantee, the Appellant had filed Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) for initiation of Corporate Insolvency Resolution Process (`CIRP') against the Corporate Guarantor, the Respondent herein.

The AA (NCLT) vide their Order had dismissed the Application as not maintainable on the grounds that, Financial Creditor had invoked the Corporate Guarantee on 25th August, 2020, which is falling under the period specified under Section 10-A of the IBC, 2016 and for which CIRP cannot be initiated. Learned Counsel for the Appellant submitted that the AA erred in taking date of invocation of Guarantee and the Guarantee was invoked vide letter dated 11th June, 2019.

Notice for invocation of Bank Guarantee addressed to the Corporate Guarantor, the Respondent herein was issued by the Advocate of the Appellant on 25th August, 2020. In this Notice, nowhere the Appellant had mentioned the earlier letter dated 11th June, 2019. The earlier letter dated 11th June, 2019 was addressed to Mr. Hemendra Aran and Mrs. Gitanjali Sinha in their personal names as Directors of Aranca Mumbai Pvt. Limited. However, both the persons were not Directors of Aranca Mumbai Pvt. Limited on the said date and this letter cannot be treated as invocation of deed of guarantee. Further, in the formal Notice for invocation of Deed of Guarantee dated 25th August, 2020, the Appellant has not even referred to this letter dated 11th June, 2019.

Before the AA, in Form - I, Part IV, the Appellant had clearly stated that the Bank Guarantee was invoked on 25th August, 2020. Since the Corporate Guarantee was invoked on 25th August, 2020, the debt became due for payment thereafter. As per the provisions of Section 10-A of IBC, 2016, CIRP cannot be initiated for defaults arising in 12 months period beginning 25th March, 2020.

Since the Deed of Guarantee was invoked on 25th August, 2020, CIRP cannot be initiated for default in repayment as the default arises in the period excluded by provisions of Section 10A of IBC, 2016. The AA has rightly held that the default falls within the specified period in Section 10-A of the IBC, 2016 and the Application under Section 7 of IBC, 2016 is non maintainable. Appeal dismissed.

Tags : CIRP INITIATION SPECIFIED PERIOD