Corporate Debtor defaulted in payment to be regarded as a wilful defaulter even after liability is absolved via CIRP

Case details: Ishwari Prasad Tantia v. IDBI Bank Ltd. - [2021] 128 taxmann.com 98 (Calcutta)

Judiciary and Counsel Details

• • Hiranmay Bhattacharyya, J.
  • Jishnu Saha, R.N. Ghose and Ishan Saha, Advs. for the Petitioner
  • Kaushik Dey, Chayan Gupta, Mohini Majumder, Ms. K. Mehrotra and Rohan Pathak for the Respondent

Facts of the Case

The DBI Bank granted fund-based working capital loan facilities to corporate debtor company ‘TCL’ in order to finance the company’s ongoing projects. The petitioners being promoter/director of corporate debtor stood as guarantor in respect of the said loan.

Thereafter, the Deputy General Manager, of IDBI Bank issued a show-cause notice to the petitioners alleging that the petitioners have failed and neglected to pay the principal as well as the interest in terms of the loan agreement and committed defaults in the performance of other conditions of the loan agreement.

Moreover, it was specifically stated in the said show-cause notice that it had been decided that the names of the petitioners be reported to RBI for inclusion in the list of wilful defaulters.

However, the petitioners contended that the corporate debtor was absolved of the wilful default upon approval of the resolution plan and was taken over by the successful resolution applicant. Thereafter, no allegation of wilful default could survive against the petitioners as promoters/directors.

High Court Held

The High Court held that in cases where a director found to be in wilful default is a guarantor or a mortgagor, they have to carry the burden of the financial obligation to ensure repayment. In the instant case, the directors were guarantors and failed and neglected to fulfill their financial obligation of repayment, they could be classified as wilful defaulters.

For the reasons as aforesaid, the names of the petitioners could not be removed from the list of wilful defaulters merely on the ground that the company was absolved of its liability as the petitioners have furnished personal guarantees to the loan facility extended by the bank.

List of Cases Referred to

• • Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [2019] 111 taxmann.com 234 (SC) (para 4)
  • Gaurav Dalmia v. Reserve Bank of India 2020 SCC Online (Cal.) 668 (para 4)
  • Axis Bank Ltd. v. Gaurav Dalmia [FMA 906 of 2020, dated 18-9-2020] (para 4)
  • State Bank of India v. Jah Developers (P.) Ltd. AIR 2019 SC 2854 (para 4)
  • Prestige Lights Ltd. v. State Bank of India [2007] 78 SCL 467 (SC) (para 5)
  • Gouri Shankar Jain v. Punjab National Bank [2020] 117 taxmann.com 613 (Cal.) (para 5).