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Judgment
ORAL ORDER
Our attention is drawn to order dated 07.03.2022 passed by this Tribunal in CP IB-943/2020, preferred under Section 7 of IBC, 2016 qua one of the Principal Debtors for whom the respondent stood as Corporate Guarantor. The relevant excerpt of the order reads thus:
As can be seen from the aforementioned order, the CIRP qua the Principal Debtor has already been ordered. The Ld. Counsel for the Petitioner pointed out that the aforementioned petition was preferred by the original Creditor viz. SREI Infrastructure Finance Ltd., which assigned the debt to the present creditor viz., Prudent Arc Limited (PRUDENT TRUST 108/25), thus the present petition has been preferred by the Assignee. To buttress the plea he made reference to assignment deed dated 03.08.2024, placed on record as Annexure A-11. The relevant excerpt of the assignment deed dated 03.08.2024, reads thus:-
The Applicant has also placed on record amended agreement to the assignment deed dated 03.08.2024, which reads thus:
Today, no request for extension of time to file a reply has been made on behalf of the Respondent, and no arguments have been advanced by the Corporate Guarantor to oppose the application. We granted a couple of opportunities to the Corporate Debtor to file its reply, however, no reply was filed. As can be seen from the Deed of Guarantee dated 07.07.2018, the Corporate Debtor has undertaken liability to discharge the obligations of the Principal Debtor in the event of default. The relevant Clause 2 of the Deed of Guarantee, along with the schedule appended thereto, reads thus:-
Clause-2 of deed of guarantee:
XXXX
Schedule-I
As has been held by the Hon’ble Supreme Court in ICICI Bank Ltd. v. ERA Infrastructure (India) Ltd., (2026) ibclaw.in 107 SC, decided on 26.02.2026, the liability of the Corporate Guarantor is co-extensive with that of the Principal Debtor. The relevant excerpt of the judgment reads thus:
73.In cases where the application was rejected, reliance was chiefly placed on Vishnu Kumar Agarwal (supra). The relevant portion from such decision reads thus:
32.There is no bar in the 'I&B Code' for filing simultaneously two applications under Section 7 against the 'Principal Borrower' as well as the 'Corporate Guarantor(s)' or against both the 'Guarantors'. However, once for same set of claim application under Section 7 filed by the 'Financial Creditor' is admitted against one of the 'Corporate Debtor' ('Principal Borrower' or 'Corporate Guarantor(s)'), second application by the same 'Financial Creditor' for same set of claim and default cannot be admitted against the other 'Corporate Debtor' (the 'Corporate Guarantor(s)' or the 'Principal Borrower'). Further, though there is a provision to file joint application under Section 7 by the 'Financial Creditors', no application can be filed by the 'Financial Creditor' against two or more 'Corporate Debtors' on the ground of joint liability ('Principal Borrower' and one 'Corporate Guarantor', or 'Principal Borrower' or two 'Corporate Guarantors' or one 'Corporate Guarantor' and other 'Corporate Guarantor'), till it is shown that the 'Corporate Debtors' combinedly are joint venture company.
74.It was, thus, held that once an application stood admitted, either against the principal borrower or the guarantor, no further application could be maintained against the guarantor or co-guarantor or principal borrower. Following this, the impugned orders too, were passed by the respective tribunals, rejecting the initiation of CIRP.
75.An appeal was carried to this Court from Vishnu Kumar Agarwal (supra); however, the parties having reached a settlement, the appeal stood disposed of without expression of any opinion on the merits thereof.
76.Conversely, the impugned order(s) allowing CIRP to be initiated simultaneously placed reliance on a judgment of the NCLAT in Athena Energy Ventures (supra). NCLAT in Athena Energy Ventures (supra) preferred not to follow Vishnu Kumar Agarwal (supra) for the reason as under:
19.It is clear that in the matter of guarantee, CIRP can proceed against Principal Borrower as well as Guarantor. The law as laid down by the Hon'ble High Courts for the respective jurisdictions, and law as laid down by the Hon'ble Supreme Court for the whole country is binding. In the matter of Piramal, the Bench of this Appellate Tribunal "interpreted" the law. Ordinarily, we would respect and adopt the interpretation but for the reasons discussed above, we are unable to interpret the law in the manner it was interpreted in the matter of Piramal. For such reasons, we are unable to uphold the Judgement as passed by the Adjudicating Authority.
77.The reasoning against simultaneous proceedings, at first blush, would seem simple: one debt, one proceeding. However, this reasoning was considered and negatived by this Court in BRS Ventures (supra), which held as under:
28.Sub-section (2) of Section 60 contemplates separate or simultaneous insolvency proceedings against the corporate debtor and guarantor. Therefore, sub-section (3) of Section 60 provides that if CIRP in respect of the corporate guarantor is pending before an adjudicating authority and if the CIRP against the corporate debtor is pending before another adjudicating authority, CIRP proceedings against the corporate guarantor must be transferred to the adjudicating authority before whom CIRP in respect of the corporate debtor is pending. Thus, consistent with the basic principles of the Contract Act that the liability of the principal borrower and surety is coextensive, the IBC permits separate or simultaneous proceedings to be initiated under Section 7 by a financial creditor against the corporate debtor and the corporate guarantor.
78.Thus, the question, whether simultaneous proceedings against the corporate debtor and/or the guarantor(s) can be maintained or not, is no longer res integra. All the arguments that have been canvassed before us, including the interpretation of sub-section (8) of section 5 and sub-section (2) of section 60 of the IBC, as well as regulation 8 of the 2016 Regulations read with Schedule-I, Form C, have been considered by the coordinate bench in BRS Ventures Investments Ltd. (supra).
In Laxmi Pat Surana v. Union Bank of India, (2021) ibclaw.in 53 SC, the Hon’ble Supreme Court ruled that the Guarantor is even independently liable for the financial facility extended to the Principal Debtor in the event of default committed by him. The relevant excerpt of the judgement reads thus:-
“27.In law, the status of the guarantor, who is a corporate person, metamorphoses into corporate debtor, the moment principal borrower (regardless of not being a corporate person) commits default in payment of debt which had become due and payable. Thus, action under Section 7 of the Code could be legitimately invoked even against a (corporate) guarantor being a corporate debtor. The definition of "corporate guarantor" in Section 5(5A) of the Code needs to be so understood.
28.A priori, we find no substance in the argument advanced before us that since the loan was offered to a proprietary firm (not a corporate person), action under Section 7 of the Code cannot be initiated against the corporate person even though it had offered guarantee in respect of that transaction. Whereas, upon default committed by the principal borrower, the liability of the company (corporate person), being the guarantor, instantly triggers the right of the financial creditor to proceed against the corporate person (being a corporate debtor). Hence, the first question stands answered against the appellant.”
In the totality of the facts, we are of the view that the present petition deserves to be admitted. Ordered accordingly. No Cost.
In light of the above facts and circumstances, it is, hereby ordered as follows:-
As a consequence of the Application C.P. (IB) 608/ND/ 2025 being admitted in terms of Section 7 of the Code, moratorium as envisaged under the provisions of Section 14(1) of the Code, shall follow in relation to the Respondent/ Corporate Guarantor as per clauses (a) to (d) of Section 14(1) of the Code. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(3) of the Code shall come into force.
As proposed by the Petitioner, this Bench appoints Mr. Manish Agarwal as IRP having Registration No. IBBI/IPA-002/IP-N00223/2017-2018/10904, Email id: [email protected]. He has filed his written communication, as per the requirement of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Form 2 furnished by the IP has been placed on record as enclosure to the petition. There is a declaration made by him that there are no disciplinary proceedings pending against him with the Board of Insolvency Professional Agency. In addition, further necessary disclosures have been made by Mr. Manish Agarwal as per the requirement of the IBBI Regulations.
In pursuance of Section 13 (2) of the Code, we direct the IRP or the RP, as the case may be to make a public announcement immediately with regard to the admission of this application under Section 7 of the Code. The expression ‘immediately' means within three days as clarified by Explanation to Regulation 6 (1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
During the CIRP period, the management of the Respondent/Corporate Guarantor shall vest in the IRP or the RP, as the case may be, in terms of Section 17 of the IBC. The officers and managers of the Respondent/ Corporate Guarantor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within one week from the date of receipt of this Order, in default of which coercive steps will follow. There shall be no future opportunities in this regard.
The IRP is expected to take full charge of the Respondent/ Corporate Guarantor's assets, and documents without any delay whatsoever. He is also free to take police assistance in this regard, and this Court hereby directs the Police Authorities to render all assistance as may be required by the IRP in this regard.
The IRP or the RP, as the case may be shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIRP in respect of the Respondent/ Corporate Guarantor.
The Applicant is directed to deposit Rs.1,00,000/- (One Lakh only) with the IRP to meet the immediate expenses. The amount, however, will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Applicant.
In terms of Section 7(7) of the Code, the Registry/Court Officer is hereby directed to communicate a copy of the order to the Applicant/FC, the Respondent/ Corporate Guarantor, the IRP and the Registrar of Companies, NCR, New Delhi, by Speed Post and by email, at the earliest but not later than seven days from today. The Registrar of Companies shall update his website by updating the status of the Respondent/ Corporate Guarantor and specific mention regarding admission of this petition must be notified.
The Registry/Court Officer is further directed to send a copy of this order to the Insolvency and Bankruptcy Board of India for their record.