Punjab National Bank Vs Jay Ambey Rice Mills Ltd. (NCLT Allahabad)
The present application was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by a financial creditor on 15.01.2025 seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against a corporate debtor, which had acted as a corporate guarantor for credit facilities extended to a principal borrower. The principal borrower had availed various credit facilities including cash credit and working capital term loans, sanctioned and enhanced from time to time, aggregating to ₹66 crore. To secure these facilities, the corporate debtor executed a corporate guarantee dated 23.11.2022 guaranteeing repayment up to ₹52.77 crore.
Due to failure in servicing the debt, the loan account of the principal borrower was classified as a Non-Performing Asset (NPA) on 08.06.2023. The outstanding amount as on 30.11.2024 stood at ₹74.35 crore. The financial creditor placed on record statements of account and authenticated records of default from the Information Utility (NeSL), reflecting default as of 08.06.2023. A demand notice invoking the corporate guarantee was issued, granting seven days for repayment; however, no payment was made by either the principal borrower or the guarantor.
The corporate debtor opposed the application on multiple grounds, including alleged non-compliance with the Code, improper invocation of the guarantee, inconsistencies in the date of default, wrongful classification of the account as NPA, and pendency of recovery proceedings before the Debt Recovery Tribunal (DRT). It was also contended that default for a guarantor arises only upon valid invocation of the guarantee and that discrepancies in dates rendered the petition defective.
