M/s. Q West Infrastructure Private Limited vs M/s. Gujarat Positra Steel Company Limited

[PER: CORAM]

This C.P. (IB) No.581/MB/2025 (Application) was filed on 22.01.2025 by M/s Q West Infrastructure Private Limited, the Financial Creditor (FC), having CIN No.: U43299MH2014PTC252734 under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, for initiating Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) in respect of M/s Gujarat Positra Steel Co. Limited, the Corporate Debtor (CD) having CIN No.: U27100MH2005PLC152813.

This Application has been affirmed by one Mr. Jigar Doshi, authorised signatory of the Applicant. As per Part IV of the Application, the amount claimed to be in default is Rs.20,01,69,863/- (Twenty Crores One Lakh Sixty-Nine Thousand Eight-Hundred Sixty-Three Rupees) and the date of default is 24.10.2024.

The Applicant has proposed NPV Insolvency Professional Private Limited (Formerly known as Mantrah Insolvency Private Limited), having Registration No. -IBBI/IPE-0040/IPA-2/2022-23/50021, to act as the Interim Resolution Professional (IRP).

The Financial Creditor and one M/s Starwort Engineers Pvt. Ltd. (the Borrower) had entered and executed an Inter-Corporate Deposit Agreement (ICD Agreement) dated 10.11.2020 for Rs.11,00,00,000/- (“ICD Amount”) with 15% p.a. interest, repayable on or before 10.11.2021 (the Due Date). Disbursement was made on 11.11.2020 via cheque no. 000336. Unpaid interest attracted an additional interest at 5% p.a. for the continuing period of default.

The Borrower issued a Demand Promissory Note dated 10.11.2020 for repayment of the ICD Amount along with the interest on demand by the Applicant.

As security, various security providers issued irrevocable and unconditional corporate guarantees on 10.11.2020.

An addendum dated 12.11.2020 to the ICD Agreement added the CD (a wholly owned subsidiary of the Borrower) as Corporate Guarantor, which accordingly executed an irrevocable and unconditional corporate guarantee.

Security for ICD amount of Rs. 11,00,00,000/- included:

Demand Promissory Note dated 10.11.2020 by the Borrower.

Individual irrevocable and unconditional corporate guarantee of various security providers dated 10.11.2020.

Irrevocable and unconditional Corporate Guarantee dated 12.11.2020 of the CD.

Relevant clauses of the Deed of Corporate Guarantee in brief:

Clause 23 ~ Any demand for payment or notice under this Corporate Guarantee shall be sufficiently given if sent by post to or left at the last known address of the Corporate Guarantor and shall be assumed to have reached the addressee in the course of post, if given by post, and no period of limitation shall commence to run in favour of the Corporate Guarantor until after demand for payment in writing shall have been made or given as aforesaid and in proving such notice when sent by post, it shall be sufficiently proved that the envelope containing the notice was posted and a certificate by any of the responsible officers of the Lender that to the best of his knowledge and belief, the envelope containing the said notice was so posted, shall be conclusive as against Corporate Guarantor, even though it was returned unserved on account of refusal of the Corporate Guarantor or otherwise.

On the due date, Rs.12,65,00,000/- (ICD Amount + 15% interest) became payable. Borrower sought a 1-year extension via letter dated 05.11.2021, in consonance with Clause 1.5 of the ICD Agreement. On 08.11.2021, the said extension request was approved, and the due date was revised to 10.11.2022 (“Extended Due Date”). However, the Borrower failed to make payment and did not adhere to the Extended Due Date, citing financial constraints, and sought relief from the Financial Creditor regarding the repayment amount and the time to repay the same.

Thereafter, the Applicant and the Borrower later entered into a settlement agreement dated 15.02.2023 (“the Settlement Agreement”) to amicably settle the outstanding debt. Under this agreement, the Borrower had to pay only the ICD Amount in the following manner: -

The Borrower once again failed to follow the repayment schedule as agreed under the Settlement Agreement. Because of this default, the Applicant initiated CIRP against the Borrower by filing the Application bearing Company Petition No.229/MB/2024 before this Hon’ble Tribunal. The said Petition was admitted on 16.07.2024, and the Borrower was admitted under CIRP.

On 21.10.2024, the Applicant issued a Demand-cum-Invocation Notice to the CD, in its role as the Corporate Guarantor for the Borrower, demanding repayment of Rs.19,55,89,041/-. This amount consisted of:

After receiving this notice, the CD approached the Applicant to negotiate a settlement and assured that it would submit a payment proposal after the Diwali festival in November 2024. However, it failed to do so. As a result, the Applicant sent a reminder email on 11.11.2024.

In its email dated 14.11.2024, the CD informed the Applicant that it was working on a payment proposal and needed more time to prepare a workable schedule, considering its business and financial constraints. It requested time until 19.11.2024 and also requested that no legal or recovery actions be taken in the meantime.

On 19.11.2024, the CD submitted a proposal to pay the total amount of Rs.19,55,89,041/- in the following instalments:

On 21.11.2024, the Applicant responded that the proposal was unacceptable because it stretched payments over seven months. It asked the CD to make an upfront payment of Rs.50,00,000/- by 30.11.2024 to demonstrate its genuine intention to pay the dues. However, the CD neither replied to the Applicant’s email dated 21.11.2024 nor made the upfront payment or the first instalment promised in its own proposal.

Given the above facts, it is clear that the CD has failed to repay the financial debt owed to the Applicant. There is a clear default. Even after guaranteeing the repayment of the ICD Amount and acknowledging its liability to pay both principal and interest, the CD has not made the payments.

The Applicant has attached the following documents along with the Application and Additional Affidavit dated 10.07.2025:

The date of default is mentioned as 24.10.2024.

Additional Affidavit dated 21.06.2025 was filed by the Applicant through Mr. Jigar Doshi, who is stated to be an authorized signatory of the Applicant.

This Tribunal, vide order dated 04.06.2025, directed the Applicant to prove the maintainability of this Application since the guarantee against the CD was invoked only after the principal borrower was admitted to the CIRP and thus moratorium. Here is the relevant extract of the said Interim Order dated 04.06.2025:

The Applicant submits that the terms of the Guarantee clearly show that the CD has an independent and binding obligation to fulfil the payment commitments under the ICD Agreement. In any case, and without affecting these terms, the law also treats a Guarantee as a separate and independent agreement between the guarantor (the CD) and the creditor (the Applicant).

The Principal Borrower failed to repay the amounts owed under the ICD Agreement and the Settlement Agreement. Therefore, the Financial Creditor filed a petition under Section 7 of the IBC, 2016, before the Hon’ble NCLT, Mumbai, being Company Petition No. (MB)/229 of 2024, which was admitted on 16.07.2024.

After the CIRP began, the Financial Creditor submitted its claim of Rs.19,10,08,219/- to the IRP of the Principal Borrower, and the IRP admitted the entire claim.

The CIRP of the Principal Borrower concluded with a Resolution Plan dated 24.12.2024, submitted by M/s Hexen Engineering, which was approved by the Hon’ble NCLT on 29.04.2025. Two important facts must be noted:

Under the Guarantee, the CD’s payment obligation exists alongside that of the Borrower. The Guarantee also explicitly states that even if the Borrower is discharged, the CD’s liability does not get discharged.

Accordingly, the Financial Creditor invoked the Guarantee by issuing a Demand-cum-Invocation Notice dated 21.10.2024, calling upon the CD to pay Rs.19,55,89,041/-, which was the amount due as of 30.09.2024.

The CD did not respond to this notice. The Applicant sent multiple reminders as mentioned in the Application, but the CD still did not make any payment. This makes it clear that the CD is unable to pay its debts, leading to the present Application.

It is well settled in law that a guarantee is an independent contract between the creditor and the guarantor, separate from the financial arrangement between the creditor and the principal borrower. The guarantor’s liability is co-extensive with that of the principal borrower. In this case, the CD executed a Guarantee Agreement dated 12.11.2020, making it independently liable, though jointly with the Borrower.

Therefore, the initiation of CIRP against the Borrower and the moratorium imposed on it do not prevent the Applicant from invoking the Guarantee.

It is also well established that even after approval of a resolution plan for a corporate debtor, the guarantor’s liability continues. The creditor can still proceed against the guarantor to recover its dues. Sections 60(2) and 60(3) of the IBC expressly allow simultaneous and independent proceedings against both the corporate debtor and the guarantor. Thus, merely filing a claim before the IRP of the Principal Borrower does not stop the Financial Creditor from invoking the Guarantee or taking further legal action.

This Tribunal, vide order dated 24.06.2025, directed the Applicant to place on record the Resolution Plan with respect to the Principal Borrower, duly approved by a co-ordinate Bench of the Hon’ble NCLT, Mumbai.

The said Additional Affidavit (dated 10.07.2025), affirmed by the Applicant’s authorised representative, Mr. Jigar Doshi brought on record the Resolution Plan submitted for Starwort Engineers Private Limited and Order passed in I.A.No.24 of 2025 in Company Petition (IB) No.229 of 2024 by the Hon’ble NCLT Mumbai (Bench – I).

There has been no representation of the CD on any occasion despite receiving multiple notices from this Tribunal. The CD never appeared; hence, vide Order dated 02.09.2025, the CD was set ex-parte.

Short synopsis was filed by the Applicant on 04.10.2025.

The terms of the lCD Agreement provide as follows:

On 12.11.2020, an Addendum to the lCD Agreement was executed to include the Corporate Debtor as a Corporate Guarantor.

Along with the Addendum, the Corporate Debtor execute a Deed of Corporate Guarantee ("Guarantee Deed") guaranteeing the repayment by Starwort of the monies disbursed under the lCD Agreement. The important terms of the Guarantee Deed are summarised below:

The term of repayment under the ICD Agreement was coming to an end on 10.11.2021. Time was extended by a period of 1 year till 10.11.2022, in the following manner:

Since Starwort was unable to repay the Financial Debt within the agreed period, Starwort approached the Financial Creditor for a full and final settlement. This was recorded in a Settlement Agreement dated 15.02.2023, the important terms whereof are summarised as under:

However, Starwort failed to honour the terms of the Settlement Agreement and did not make any payments as contemplated therein.

In view thereof, the Financial Creditor filed Company Petition (IBC) No. 229 of 2024 ("Starwort CP") seeking initiation of CIRP against Starwort in terms of Section 7 of the IBC. The Starwort CP was admitted by this Hon'ble Tribunal vide order dated 16.07.2024.

Pursuant to the admission of Starwort into CIRP, the Applicant addressed a Demand-Cum-Invocation Notice dated 21.10.2024 ("Demand Notice") calling upon the CD to pay the Debt Amount of Rs.19,55,89,041/- (Rs.11 Crores of Principal and accrued interest Rs.9,55,89,041/- as on 30.09.2024) on or before 24.10.2024. However, since. there was no response to the Demand Notice. The Applicant addressed an email dated 11.11.2024 calling upon the CD to repay the Debt Amount. The CD responded vide its email dated 14.11.2024, stating that they were working on a payment proposal and sought time till 19.11.2024.

On 19.11.2024, the CD addressed an email proposing to pay the Debt Amount in 6 tranches by 31.07.2025. The text of the email is reproduced hereinbelow:

On 21.11.2024, the Applicant addressed an email to the CD calling upon it to pay an amount of Rs. 50 Lakhs on or before 30.11.2024 to show its bona fides. However, neither did the CD deposit the said amount and nor did it respond to the aforesaid email. Hence, it is clear that there has been a default.

On 04.06.2025, this Hon'ble Court was pleased to approve the Resolution Plan for Starwort. However, even the terms of the Resolution Plan do not provide for recovery of the Debt Amount.

Clause 7 of the Resolution Plan records that under the Resolution Plan, only an amount of Rs. 25 Lakhs was going to be repaid. However, Clause 16(vii) of the Resolution Plan categorically stipulates that existing guarantors and third parties shall not be relieved or discharged from their liabilities, and financial creditors will have the right to recover the residual amount from them.

Therefore, the approval of the Resolution Plan does not provide for recovery of the Debt Amount, and neither does it extinguish the Applicant's right to proceed against the CD.

Section 128 of the Indian Contract Act stipulates that the liability of the Guarantor is co-extensive with that of the principal debtor. Therefore, the Financial Creditor can proceed against the CD in the present case for the recovery of the entire amount due.

Section 60(2) of the IBC itself recognises simultaneous CIRP proceedings against the principal debtor and corporate guarantors. For ease of reference, S. 60(2) of the IBC is reproduced hereinbelow:

Furthermore, various rulings of the Hon’ble Supreme Court have also laid down that even for the purpose of the IBC, the liability would be co-extensive and the CIRP of one would not discharge the other from its obligations. In this regard, reliance is placed on the following:

Thus, the present Petition deserves to be admitted, and appropriate direction for commencement of CIRP against the CD ought to be passed by this Hon'ble Tribunal.

We have perused the documents as placed before us and heard the Ld. Counsels for the Applicant.

The present Application under Section 7 of the IBC is founded upon the Applicant’s assertion that the CD has committed a default in discharging its liability arising under an unconditional and irrevocable corporate guarantee executed in respect of the financial facilities extended to the Principal Borrower. The evidentiary record placed before us consists of the ICD Agreement dated 10.11.2020, the Demand Promissory Note issued by the Principal Borrower, the Addendum dated 12.11.2020 bringing the CD on board as a guarantor, and the Deed of Corporate Guarantee executed on the same day. These documents, accompanied by proof of disbursement of the ICD Amount, correspondence evidencing extension of repayment timelines, the Settlement Agreement dated 15.02.2023, and subsequent communications exchanged between the parties, constitute the unchallenged material on record.

From the material brought on record, it appears that the Principal Borrower repeatedly failed to honour its repayment obligations under the ICD Agreement, despite extension of the due date by a year and despite entering into a Settlement Agreement whereby it undertook to repay only the principal ICD Amount in two instalments. Upon the Principal Borrower’s continued default, the Applicant initiated and successfully obtained admission of a CIRP against the Principal Borrower vide order dated 16.07.2024. After the commencement of the CIRP, the Applicant invoked the Corporate Guarantee by issuing a Demand-cum-Invocation Notice dated 21.10.2024 to the CD, calling upon it to discharge its liability of Rs.19,55,89,041/-, being the principal amount together with accrued interest. The CD sought time on the pretext of preparing a payment proposal, and by email dated 19.09.2024, itself proposed a structured repayment schedule extending up to 31.07.2025. However, neither the CD acted upon its own proposal nor did it respond to the Applicant’s subsequent communication. The CD has, at no point, disputed the execution of the Corporate Guarantee, the invocation thereof, or the quantum of outstanding financial debt. In such circumstances, the default stands prima facie established based on documentary evidence, supported further by the NeSL Record of Default placed before us.

The central legal issue for consideration is whether the invocation of the Corporate Guarantee after the admission of the Principal Borrower into CIRP affects the maintainability of the present Application. It is well-settled that a contract of guarantee is an independent and autonomous contract between the creditor and the guarantor. Section 128 of the Indian Contract Act, 1872, unequivocally stipulates that the liability of the guarantor is co-extensive with that of the principal debtor, unless otherwise provided by the contract. The Deed of Corporate Guarantee placed on record expressly characterises the guarantee as absolute, irrevocable, unconditional, and continuing. It further provides that the liability of the CD as guarantor shall not be discharged by reason of any variation in the principal contract, by the insolvency or liquidation of the Principal Borrower, or by the release of any other security. Clauses 3, 18, 19, and 21 of the Guarantee Deed leave no ambiguity that the CD remains bound to honour the invoked guarantee until full repayment of all sums due under the ICD Agreement.

The jurisprudence of the Hon’ble Supreme Court reinforces this position. In Lalit Kumar Jain v. Union of India, (2021) 9 SCC 321, the Hon’ble Supreme Court authoritatively held that the moratorium imposed under Section 14 of the IBC does not extend to guarantors, and that the commencement of CIRP or the approval of a resolution plan in respect of the principal borrower does not extinguish the liability of the guarantor. The Court reiterated that the guarantor’s liability survives independently and may be enforced concurrently with proceedings against the principal borrower. In BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd., (2025) 1 SCC 456, the Hon’ble Supreme Court reaffirmed that the creditor is entitled to pursue insolvency proceedings against a corporate guarantor irrespective of the stage of proceedings involving the principal borrower. It further held that approval of a resolution plan concerning the principal borrower does not operate to discharge or impair the liability of guarantors unless the plan expressly provides otherwise. The present record demonstrates that the Resolution Plan approved in the CIRP of the Principal Borrower not only does not discharge guarantors but expressly preserves the rights of financial creditors to proceed against them.

The statutory framework under the IBC also approves parallel and independent proceedings against guarantors. Section 60(2) mandates that insolvency proceedings relating to corporate guarantors shall be instituted before the same NCLT where proceedings against the principal borrower are pending, thereby facilitating simultaneous adjudication. The existence of a moratorium in the CIRP of the Principal Borrower does not, therefore, in any manner curtail or bar the present proceeding. The Applicant was legally entitled to invoke the guarantee at any time upon occurrence of default, and the timing of invocation (whether before or after the Principal Borrower’s admission into CIRP) doesn’t affect the enforceability of the Corporate Guarantee or the maintainability of this Application.

The present Application has been proceeded ex-parte as the CD failed to enter an appearance or contest the proceedings. The Applicant has placed on record sufficient documentary evidence to establish the existence of a financial debt, the occurrence of default on the part of the CD. In the absence of any rebuttal or contrary evidence, the claim of the Applicant remains uncontroverted.

In light of the foregoing analysis, it is evident that the CD remains liable under an independent and unconditional Corporate Guarantee; that the moratorium under Section 14 applicable to the Principal Borrower does not shield the guarantor; that Section 60 of the IBC expressly permits simultaneous proceedings against guarantors; that the approval of the Resolution Plan for the Principal Borrower does not discharge or dilute the CD’s liability; and that the existence of a financial debt and default is firmly established through uncontroverted documentary evidence. The Section 7 Application, therefore, is maintainable, and the CD’s continued non-payment unmistakably demonstrates its inability to discharge its financial obligations, warranting the initiation of CIRP.

The Applicant has also proposed the name of an IPE, NPV Insolvency Professional Private Limited (Formerly known as Mantrah Insolvency Private Limited), and as per the Form 2 attached along with the Application, no disciplinary proceedings are going on against it. Further, this Application is complete as all the required documents have been attached along with the Application.

We make it clear that at this stage we have not crystallised the amount as claimed in this Application; the same is left to be collated by the IRP.

In view of the aforesaid findings, this Application bearing C.P. (IB) 581/MB/2025 filed under Section 7 of IBC, 2016, by M/s. Q West Infrastructure Pvt. Ltd., the Applicant (FC) for initiating CIRP in respect of M/s Gujarat Positra Steel Co. Ltd., the CD, is admitted.

We further declare a moratorium under Section 14 of IBC, 2016 with consequential directions as mentioned below: