Appeal Against Acceptance of CIRP Plea u/s 7 Dismissed as CD or Guarantor Failed to Show Any Error in NCLT’s Admission

Case Details: Seeta Shah vs. ICICI Bank Ltd. - [2025] 170 taxmann.com 815 (NCLAT-New Delhi)

Judiciary and Counsel Details

• Justice Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
• Abhijeet Sinha, Sr. Adv., Ms Shaista Pathan, Bhavya Sethi & Tushar Bagga, Advs. for the Appellant.
• Krishnendu Datta, Sr. Adv., Nitesh Jain, Prakshal Jain, Kartikeya Yadav, Ms Pooja Mahajan, Savar Mahajan & Ms Komal, Advs. for the Respondent.

Facts of the Case

In the instant case, Appellant/ Corporate debtor had executed corporate guarantee for securing credit facility extended by financial creditor to principal borrower. Principal borrower committed default in repayment.

Thus, corporate guarantee of corporate debtor was invoked – No payment having been made by corporate debtor, a section 7 application was filed by financial creditor against corporate debtor. NCLT by impugned order admitted said petition.

Corporate debtor by instant appeal challenged NCLT’s order on grounds that principal borrower had already been in CIRP and in view of the entire debt of principal borrower being discharged by approval of the resolution plan of the principal borrower, the corporate guarantor stood discharged.

Further, as per clause 33 of corporate guarantee, in event outstanding of borrower was less than Rs.218 crore, guarantee would fall off. It was noted that resolution plan of principal borrower clearly contemplated that guarantee in favour of financial creditor would continue and would not be discharged.

Also, the Supreme Court in its various judgments clearly lays down that by approval of the resolution plan guarantor was not absolved from its liability to financial creditors. Further, the initiation of proceeding against the principal borrower for admitted claim of Rs.294 crore itself proves that debt of the principal borrower was more than Rs.218 Crores, and thus, clause 33 of the corporate guarantee was not applicable and the corporate debtor could not claim that it was discharged from debt.

NCLAT Held

The NCLAT held that the NCLT, after considering all relevant aspects of the matter, had admitted a section 7 application against the corporate debtor/guarantor, in which there was no infirmity. Accordingly, the instant appeal was to be dismissed.

List of Cases Reviewed

• Order dated 26.04.2023 passed by the NCLT in C.P. (IB) No. 119 of 2021 [2025] 170 taxmann.com 692 (NCLT-Mum.) (Para 34) affirmed.
• Lalit Kumar Jain v. Union of India &Ors. (2021) 9 SCC 321 (Para 23)
• State Bank of India v. V. Ramakrishnan, (2018) 17 SCC 394 (Para 24) followed.

List of Cases Referred to

• Aypunni Mani v. Devassy Kochouseph & Ors. AIR 1966 Ker 203 (para 14)
• Bhabani Shankar Patra v. State Bank of India & Anr. AIR 1986 Ori 247 (para 16)
• S. K. Gupta v. K. P. Jain (1979) 3 SCC 54 (para 18)
• Lalit Kumar Jain v. Union of India (2021) 9 SCC 321 (para 20)
• Maharashtra State Electricity Board, Bombay v. High Court Ernakulan (1982) 3 SCC 358 (para 20)
• Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation India Ltd (2023) 10 SCC 545 (para 23)
• State Bank of India v. V. Ramakrishnan (2018) 17 SCC 394 (para 24).