Case Note & Summary
The case involved two appeals filed by Amit Bhatnagar and Sumit Bhatnagar, personal guarantors of Diamond Power Transformers Ltd. (DPTL), against an order of the National Company Law Tribunal (NCLT) regarding insolvency proceedings initiated by UCO Bank and Indian Overseas Bank. The appellants contended that the banks failed to disburse a portion of the sanctioned credit facility, which they argued constituted a breach of the Consortium Agreement and discharged their liability under the Deed of Guarantee. They claimed that the debts owed to the banks were extinguished following the approval of a Resolution Plan for the corporate guarantor, Diamond Power Infrastructure Ltd. (DPIL). The banks, however, maintained that the personal guarantees remained enforceable and that the claims were not barred by limitation. The NCLT had admitted the petitions under Section 95 of the Insolvency and Bankruptcy Code, 2016, leading to the appeals. The court analyzed the claims and found that the liability of the personal guarantors was co-extensive with that of the principal debtor and that the claims were within the limitation period due to the extension granted by the Supreme Court during the pandemic. The court ultimately upheld the banks' claims against the personal guarantors, emphasizing that the approval of the Resolution Plan did not discharge their liability.
Headnote
A) Insolvency Law - Personal Guarantor's Liability - Co-extensive Liability - Insolvency and Bankruptcy Code, 2016, Section 31 - The liability of personal guarantors remains co-extensive with that of the principal debtor and is not extinguished merely by the approval of a Resolution Plan. The court held that the claims against the personal guarantors were maintainable despite the Resolution Plan approved for the corporate guarantor (Paras 41-42). B) Limitation Law - Bar of Limitation - Limitation Act, 1963 - The court found that the claims were not barred by limitation as the invocation of guarantees and subsequent actions were within the permissible time frame, considering the extension of limitation due to the COVID-19 pandemic. The court held that the proceedings under Section 95 were maintainable (Paras 39-40).
Issue of Consideration
Whether the claims against the personal guarantors were extinguished by the approved Resolution Plan and whether the proceedings under Section 95 of the Code were barred by limitation.
Final Decision
The Appellate Tribunal upheld the claims against the personal guarantors, ruling that their liability remained co-extensive with that of the principal debtor and that the claims were not barred by limitation. The Tribunal dismissed the appeals without costs and affirmed the NCLT's orders.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Section 61
- Section 95
- Section 99
- Indian Contract Act
- 1872
- Section 128
- Limitation Act
- 1963
