Case Note & Summary
The dispute arose from insolvency proceedings initiated against the Corporate Debtor, M/s. Furnace Fabrica (India) Limited, for which the Appellant, Dr. Badri Prasad, was a personal guarantor. The Corporate Debtor had obtained a loan of Rs. 39.60 crore from Tata Capital Financial Services Limited in 2019, which was secured by personal guarantees from several individuals, including the Appellant. The Appellant contended that he had been ousted from management roles as per a Memorandum of Understanding (MoU) dated 01.03.2014, and thus should not be held liable for the loan default. However, the court found that the Appellant's signature on the loan documents and his acknowledgment as a guarantor established his liability. The Corporate Debtor defaulted on the loan, leading to the account being declared a Non-Performing Asset (NPA) on 16.12.2022, and subsequent notices were issued to the guarantors. The Appellant's arguments regarding the lack of a report from the Resolution Professional under Section 99 of the IBC were dismissed, as the court determined that the existence of debt and default was sufficiently established by the documents and facts presented. The court concluded that the Appellant could not retract his admission of liability and dismissed the appeal, affirming the proceedings under Section 95 of the IBC as valid. The final decision was to dismiss the appeal, with all interlocutory applications closed.
Headnote
A) Insolvency Law - Personal Guarantee - Liability of Guarantor - Insolvency and Bankruptcy Code, 2016, Section 95 - The Appellant, as a personal guarantor, could not evade liability for the loan default as he had signed the loan sanction letter and the letter of guarantee, admitting his status. The court held that the execution of these documents established his liability, and the proceedings under Section 95 were valid despite the absence of a report from the Resolution Professional (Paras 20-25).
Issue of Consideration
Whether the Appellant, as a personal guarantor, could be held liable for the loan default despite claiming to have been ousted from management.
Final Decision
The appeal was dismissed, affirming the proceedings under Section 95 of the IBC as valid and enforceable against the Appellant as a personal guarantor. All interlocutory applications, if any, would stand ‘closed’.
Law Points
- Insolvency proceedings
- personal guarantee
- corporate debtor
- loan default
- NPA declaration
- IBC provisions
- guarantor's liability
