Insolvency proceedings can be initiated against corporate guarantors, NCLT, Chennai, said in the Coastal Energen insolvency case.
Logistics Private was the guarantor to Coastal Energen Pvt Ltd, which is under CIRP for owing banks ₹2,932 crore, as of September 2018, which it was classified as a non-performing asset. According to the lenders, the companyt today owes them ₹4,102 crore.
The SBI-led consortium had lent to Coastal Energen’s 1,200 MW thermal power project at Thoothukudi.
The company relied on the decision of National Company Law Appellate Tribunal (NCLAT) in the matter of Dr Vishnu Kumar Agarwal Vs Piramal Enterprises of October 2019, but the said order is under challenge in the Supreme Court. It also relied on the judgement of SEW Infrastructure Ltd Vs Mahendra Investment and Bijoy Kumar Agarwal Vs SBI of 2019.
The financial creditor also relied upon the judgement of NCLAT in the matter of SBI vs Athena Energy Ventures Pvt Ltd of 2020. The above decision of NCLAT overruled the case of Dr Vishnu Kumar Agarwal Vs Piramal Enterprises.
The NCLT in its order said that the loans were given by the bank to Coastal Energen, and the Fossil Logistics had given a guarantee. It is also not a dispute that the account of the borrower had become NPA.
“The CIRP was initiated against the principal borrower — Coastal Energen — but this would not bar this Tribunal from initiating CIRP against the corporate debtor/guarantor on the same set of facts and claims,” the order by Sanjiv Jain (member, Judicial) and Sameer Kakar (member, Technical) said.
In the Emerald Realtors Pvt Ltd Vs Suraksha Asset Reconstruction Ltd of 2021 decided in July 2021, it was held that, “Section 60(2) itself makes it clear that if CIRP or liquidation proceeding of a corporate debtor is pending before the NCLT, an application relating to insolvency resolution of a corporate guarantor or personal guarantor as the case may of such corporate debtor is filed, it shall be filed before such NCLT. This Section speaks for itself that parallel proceedings against borrower and guarantor are maintainable,” the order said.
“We order for initiating CIRP against the corporate debtor admitting the application of the financial creditor under Section 7 of IBC, 2016,” the order said.
The Tribunal also appointed R Dharmarajan as the Interim Resolution Professional and directed him to take charge of the corporate debtor’s management immediately.
Sources said Fossil Logistics is active in business and reported a turnover of ₹33 crore last year.