As per clauses of the Deed of Guarantee, it is clear that although the Guarantor immediately become liable for any default committed by the Principal Borrower for initiating any action against the Guarantor, demand is to be made. Without there being any demand to the Guarantor, it cannot be accepted that period of limitation against the Guarantor shall commence. In the present case, the Section 7 application filed by the Bank has been brought on the record. When we look into the Part IV of the application, the date of NPA i.e. 31.03.2017 has been mentioned in Part IV and the total amount in default as of 31.12.2019 has been computed. The Application under Section 7 thus, proceeds on the date of NPA.
In the present case, the demand notice was issued by the Bank on 03.04.2017 to the Guarantors and its Directors. The notice was issued to the Guarantor in reference to the Deed of Guarantee and the Corporate Guarantor was called upon to discharge their dues and the time was granted for 60 days to make the payment. The Appellate Authority were of the view that default on the part of the Guarantor cannot be treated to be on 31.12.2016 when the Principal Borrower committed Default.
It is also relevant to notice that the Corporate Debtor did not file any reply in the Section 7 application despite giving the opportunity by the Adjudicating Authority and the right to reply was also forfeited. The Corporate Debtor, however, had filed an I.A. questioning the maintainability of the application. The application under Section 7 filed against the Principal Borrower was also noted to be pending before the Adjudicating Authority. In the facts of the present case, where the Corporate Debtor did not file any reply and also did not file an application for recall of order dated 23.11.2021 forfeiting the right to file a reply, the Adjudicating Authority did not commit any error in admitting Section 7 application.
The submission made by learned counsel for the Appellant that there has been no disbursement to the Principal Borrower as per the sanction and apart from Rs. 25 Crores no amount was disbursed and the amount which was disbursed in the Escrow Account was adjusted by the Bank towards repayment and there has been no disbursement of the entire sanctioned amount, need no further consideration since disbursement to the extent of Rs. 25 Crores is not disputed either in this Appeal or before the Adjudicating Authority.
The submission of the learned counsel for the Appellant is that present was a case where the Adjudicating Authority ought to have exercised its discretion in not admitting Section 7 application as per the law laid down by the Hon’ble Supreme Court in Vidarbha Industries Power Limited v. Axis Bank Limited, REED 2022 SC 07529. The Appellant cannot claim the assistance of Vidarbha Industries Power Ltd. in the present case due to the reason that the basis on which it was held that application under Section 7 need not to have been admitted for the reasons indicated in the judgment of the Hon’ble Supreme Court itself clearly distinguishes it from the present case.
In the instant case, the Appellate Authority were of the view that the application filed by the Bank under Section 7 cannot be said to be barred by time and no error has been committed by the Adjudicating Authority in admitting the Section 7 application. We, thus do not find any ground to interfere with the order of the Adjudicating Authority admitting Section 7 application.
The Appeal was dismissed.