Corporate Guarantee Invoked Not Protected u/s.10A IBC After Stipulated Period: NCLAT Dismisses Appeal in ₹104 Cr HDFC Bank Loan Dispute [Read Order]

The Principal Bench of the National Company Law Appellate Tribunal (NCLAT) at New Delhi recently dismissed an appeal, noting that a corporate guarantee invoked outside the stipulated suspension period under Section 10A of the Insolvency and Bankruptcy Code, 2016 (IBC) was not barred by the limits of Section 10A.

The present appeal stems from an order dated 30 November 2023 by which the Adjudicating Authority admitted HDFC Bank’s application against the corporate debtor and appointed Umesh Gupta as Interim Resolution Professional (IRP).

Appellant Mani Gupta, suspended director of M/s Mountain Meadow Holidays Pvt. Ltd approached the NCLAT against the admission of HDFC Bank’s Section 7 application under the Insolvency and Bankruptcy Code, 2016, with regards to a financial debt of ₹104,91,22,695.66 against a loan availed from HDFC Bank.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The corporate debtor had executed a guarantee securing credit facilities extended to M/s Madhuvan Tieup Pvt. Ltd., which had itself been admitted into CIRP on 5 July 2023. HDFC Bank’s Section 7 application against the guarantor was filed on 4 August 2023. Despite service of notice, the corporate debtor failed to appear and was proceeded against ex parte on 14 September 2023.

Prakhar Mithal and Arjun Katyal appeared for the appellant. Although the appeal originally challenged only the ex parte proceedings, during the hearing the appellant contended that the application was barred by Section 10A of IBC.

The appellant further argued that as per the corporate guarantee deed, guarantee can only be invoked by way of a demand notice. Consequently, it was argued that the notices dated 28 July 2020 and 1 August 2020 fell within the suspension period under Section 10A of the IBC.

Bheem Sai Jain appearing for HDFC Bank submitted that the last and final notice was served 11 June 2022, well outside the suspension period. The respondent relied on the decision of the Delhi NCLAT in Harish Raghavij Patel v. Clearwater Capital Partners Singapore Fund IV Pvt. Ltd. (2023) to contend that the last notice is thus not hit by the suspension under Section 10A of the Code.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The Bench of Justice Rakesh Kumar Jain (Member - Judicial), Justice Mohammad Faiz Alam Khan (Member - Judicial) and Naresh Salecha (Member - Technical) examined the notices dated 28.07.2020 and 01.08.2020, but noted that the language used in them did not indicate that they were final in nature, rather the final notice was issued by the bank on 11 June, 2022.

The Bench also referred to the decision in Harish Raghavij Patel (supra) to note that the actual default in this case rose from the June 2022 notice, which lay outside the stipulated period under Section 10A and thus was not statutorily barred. Accordingly, the NCLAT found no merit in the appeal and dismissed it.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates