Dismissed

Assets Reconstuction Company India Ltd. v. the Official Liquidator High Court Calcutta for Consolidated Fibers and Chemicals Limited & Ors.

DRAT9 Aug 2023REGULAR APPEAL/132/2013

Case brief

AI extract

What is this about?

The Appellant sought to challenge the DR.T order limiting recovery to the first defendant by claiming non-suit on guarantors. The Tribunal dismissed the appeal, upholding findings that the personal guarantee was discharged upon creation of security and the corporate document was an indemnity, not a guarantee for the loans.

What did the court decide?

The appeal against the DR.T order dismissing claims against guarantors is dismissed, upholding the findings that the guarantee was discharged upon security creation.

Assets Reconstuction Company India Ltd. versus the Official… — Company and Corporate | DRAT (2023)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr. Justice Ashok Menon, Chairperson

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Appeal No. 132/2013

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Between

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Asset Reconstruction Company (India) Ltd. V/s.

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The Official Liquidator, High Court Calcutta, for Consolidated Fibres and Chemicals Ltd.

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… Appellant/s

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…Respondent/s

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Mr Priyansh Jain, i/b M/s Apex Law, Advocate for Appellant.

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Mr Madhur Rai along with Mr Yogesh Mishra & Ms Sneha, i/b M/s. PRS Legal, Advocate for Respondent No. 2 & 3.

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-: Order dated: 09/08/2023

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The Applicant in Original Application (O.A.) No. 139 of 2007 on the files of the Debts Recovery Tribunal-II, Mumbai (D.R.T.) files this Appeal aggrieved by the dismissal of the O.A. against Defendants Nos. 2 and 3 therein and limiting the decree against the first Defendant alone.

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The only question that arises for consideration in this appeal is whether the D.R.T was justified in non-suiting the Appellant as regards the claim against Defendants Nos. 2 and 3 who are the guarantors to the loan availed by the first Defendant company on the ground that the Appellant has not succeeded in establishing the existence of a valid guarantee.

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The facts, in brief, are encapsulated thus:

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The first Respondent company named Consolidated Fibres and Chemicals Ltd. had been granted loans under several facilities by a consortium of the Banks/ Institutions with the IFCI as the leader and consisting of ICICI Bank, IDBI Bank and Respondents Nos. 4 to 9. The Appellant Asset Reconstruction Company (India) Ltd (ARCIL) got an assignment of the debts due to IFCI, ICICI and IDBI. The first Respondent went into liquidation before the High Court of Calcutta. For recovery of the amount, the aforesaid O.A. was filed against the first Respondent represented by the Official Liquidator and the others. The second Respondent who was a director of the borrower company, was a personal guarantor alleged to have executed letters of guarantee on 30.11.1989 and on 11.03.1992. The third Defendant company named M/s Bakelite Hylum Ltd. stood as a corporate guarantor for the loan, and executed a guaranteed deed on 09.12.1993. The first Respondent company had through one of its directors deposited the title deeds of two items of the properties with the intention to create a mortgage. In 2005, there was an attempt to restructure the loan but failed. The borrower company made a reference to the BIFR which by order dated 29.12.2005 declared it as a sick company and appointed IFCI as an operating agent.

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The first Defendant did not contest the O.A. while Defendants Nos. 2 and 3 appeared and contested the claim. The primary convention of the second Defendant was that the deeds of guarantee executed by him on 30.11.1989 and 11.03.1992 were ad-hoc

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arrangements pending the creation of substantial security. The first Defendant had created a mortgage by deposit of title deeds on 09.12.1993 and hence, the guarantee was no longer valid. It was also pointed out that the balance sheets of the company for years ending 31.03.1992 and 31.03.1993 specifically state that a personal guarantee was not available.

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The third Defendant contended that the guarantee was given for transactions pertaining to Calcutta Port Trust (CPT). The purported guarantee executed by the third Defendant on 09.12.1993 was not actually a deed of guarantee but a counter-guarantee cum indemnity for the vouchsafing transaction of the lease with the CPT.

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The Ld. Presiding Office has in the impugned judgment observed that the original guarantee deed purportedly executed by the second Defendant on 30.11.1989 was not produced. Paragraphs 3 and 18 of the guarantee deed executed by the second Defendant are extracted in the judgment which would indicate that the guarantor and lenders have agreed to make the guarantee valid for repayment of the loan valid and in force till the final security is created. In clause 18 it is stated that the guarantee shall be a continuing one and shall remain in full force and effect till such time, the borrower repays in full the loans together with all interest, liquidated damages, costs, charges and all other monies that may from time to time become due and payable and remain unpaid to the lenders under the loan agreement or till the creation of final security whichever is earlier.

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A perusal of these clauses referred to in the impugned judgment would undoubtedly establish that the guarantee is only till the creation

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of substantive security by the borrower. Under the circumstances, on the creation of substantive security by the borrower on 09.12.1993, the effect of the guarantee deed executed by the second Defendant ceases to exist.

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The purported guarantee deed executed by the third Defendant on 09.12.1993 is not regarding the borrowals made by the first Defendant which is sought to be recovered. It concerns the transaction with the CPT and it is more of an indemnity than a guarantee.

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On an anxious consideration of the entire material on record, this Tribunal does not find any merit in the appeal which is sufficient to upset the findings arrived at by the Ld. Presiding Officer in the impugned judgment.

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The Appeal is without any merits and is, therefore, dismissed.

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mks-1

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Assets Reconstuction Company India Ltd. v. the Official Liquidator High Court Calcutta for Consolidated Fibers and Chemicals Limited & Ors.

Case brief

What is this about?

What did the court decide?

Assets Reconstuction Company India Ltd. v. the Official Liquidator High Court Calcutta for Consolidated Fibers and Chemicals Limited & Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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