S Sephulohniam Vs Hotel Radhaprasad Private Limited (NCLT Chennai)
Summary: NCLT Chennai admitted a Section 7 IBC petition filed by S. Sephulohniam against Hotel Radhaprasad Private Limited, which had furnished a guarantee for a ₹12 crore loan advanced to partnership firm Hotel Radhaprasad. The Tribunal held that insolvency proceedings could be maintained directly against a corporate guarantor even though the principal borrower was a partnership firm. Relying on the statutory treatment of guarantee liabilities as financial debt and the co-extensive liability of a surety, it rejected the objection that proceedings first had to be initiated against the principal borrower. The record included the 16.07.2018 Guarantee Agreement, acknowledgment dated 22.04.2019, bank records, repayments, dishonoured cheques and the demand notice invoking the guarantee. The Tribunal found the existence of financial debt and default established.
It also rejected the contention that the guarantee was void for uncertainty under Section 29 of the Indian Contract Act, noting that the parties had acted upon the transaction for several years. On Section 10A, it distinguished the principal borrower’s initial default from the enforceability of the guarantee upon invocation. Regarding limitation, the Tribunal treated cheques issued by a guarantor in 2023 and 2024 as acknowledgment and concluded that the Section 7 petition was within limitation. Accordingly, CP(IB)/185(CHE)/2025 was admitted, CIRP was initiated against Hotel Radhaprasad Private Limited, Palanigounder Eswaramoorthy was appointed IRP and the statutory moratorium was imposed.
