Law is well settled that proceeding under Section 7 can be initiated against both the Principal Borrower and Corporate Guarantor and there is no inhibition in proceeding against the Corporate Guarantor although proceeding against Principal Borrower under Section 7 was admitted-NCLAT

MOHAN KUMAR GARG VS OMKARA ASSETS RECONSTRUCTION PVT LTD. AND ANR

CA (AT) (Ins) 993 of 2023

Facts:

1.Appeal has been filed against order dated 15.06.2023 passed by the Adjudicating Authority by which an application under Section 7 filed by the Financial Creditor against the Appellant who was Corporate Guarantor has been admitted

Issue: Whether order passed by the AA is correct?

Arguments:

For Appellant:

1.Counsel for the Appellant challenging the order contends that the proceedings against the Corporate Guarantor ought not to have been initiated since proceeding under Section 7 against the Principal Borrower has already been admitted and proceeding.

For Respondent

1.Counsel for the Respondent submits that the Corporate Guarantee was never disputed by the Appellant, hence, necessity did not arise to bring the same on record.

Decision: NCLAT upheld the decision of the NCLT.

Rationale:

1.NCLAT noted that Appellant cannot be allowed to raise the issue of non-filing of the Corporate Guarantee on the record when the existence of Corporate Guarantee was not even disputed in the proceeding.

2.NCLAT after relying on various judgments noted that simultaneous proceedings against the Principal Borrower and the Corporate Guarantor can be initiated.

Order: