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Informist, Wednesday, Jul 24, 2024

 

NEW DELHI – The Supreme Court has upheld insolvency proceedings against Gujarat Hydrocarbon and Power SEZ Ltd and said that its liability will not be extinguished even after payment by its guarantor Assam Co India Ltd's resolution applicant to their financial creditor SREI Equipment Finance Ltd. 

 

The apex court said that a financial creditor can always file separate applications under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the corporate debtor and the corporate guarantor. "Thus, the view taken by NCLAT (National Company Law Appellate Tribunal) cannot be faulted. Accordingly, the appeal is hereby dismissed with no order as to costs," said the top court.

 

Under an agreement in 2011, SREI Infrastructure Finance granted Gujarat Hydrocarbon a loan of 1 bln rupees for setting up a special economic zone project. The loan granted by SREI was secured by a mortgage made by Gujarat Hydrocarbon of its leasehold land and a pledge of shares of the company and Assam Co India. The loan was also secured by corporate guarantee furnished by Assam Co. Gujarat Hydrocarbon is a subsidiary of Assam Co India.

 

On account of default by Gujarat Hydrocarbon, SREI invoked the corporate guarantee of Assam Co. An insolvency petition filed by SREI against Assam Co was admitted in 2017. Assam Co's successful resolution applicant BRS Ventures Investments Ltd paid 388.7 mln rupees to SREI against the admitted claim of 2.41 bln rupees in full and final settlement of all its dues and demands submitted in the resolution plan. 

 

In 2020, SREI filed an insolvency petition against Gujarat Hydrocarbon for balance amount payable to it under the loan agreement. The insolvency petition was admitted by the National Company Law Tribunal and upheld by the National Company Law Appellate Tribunal subsequently. BRS Ventures Investments moved the apex court challenging the appellate tribunal's order.

 

"Payment of the sum of Rs.38.87 crores (388.7 bln rupees) to the 1st respondent-financial creditor (SREI) under the resolution plan of the corporate guarantor-ACIL (Assam Co) will not extinguish the liability of the 2nd respondent-principal borrower/corporate debtor(Gujarat Hydrocarbon) to pay the entire amount payable under the loan transaction after deducting the amount paid on behalf of the corporate guarantor in terms of its resolution plan," said the court.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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