NCLAT upheld the enforceability of personal guarantors' obligations despite the presence of assignment and Put Option Agreements.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra and Mr. Arun Baroka (Technical Members) reviewed a bunch of two appeals and observed that the personal guarantors' obligations under the Deed of Guarantee were enforceable independently of any separate securities or the Put Option Agreement, affirming that the assignment of debt to the asset reconstruction company was valid and that the invocation of the guarantee was appropriate, irrespective of claims against the borrower.
The NCLAT addressed appeals filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging orders from the NCLT, Ahmedabad Bench, which had initiated insolvency proceedings against personal guarantors Paresh Parekh and Manish Patel for Sort India Enviro Solutions Ltd. The appeals arose from petitions filed by Alchemist Asset Reconstruction Company Limited, following the Corporate Debtor's default and its classification as a non-performing asset (NPA) by RBL Bank Ltd. The assignment of debt to Alchemist and the subsequent failure of the guarantors to settle liabilities led to the filing of Section 95 applications.
The Appellate Tribunal highlighted the enforceability of the Deed of Guarantee, emphasizing that the personal guarantors’ obligations persisted independently of any separate securities or collateral. It recognized the Deed as an independent contract, allowing the lender to assign the guarantee without the guarantors' consent, as stipulated in the relevant clauses. The NCLAT also addressed the appellants’ argument regarding a Put Option Agreement, clarifying that the invocation of the guarantee was valid and did not depend on the exhaustion of claims against the borrower, thereby reinforcing the distinct nature of the guarantee and the Put Option Agreement.
Furthermore, the NCLAT found the Assignment Agreement valid under the SARFAESI Act, affirming that the assignee had the right to act as the lender. The appellants were deemed to lack standing to contest the assignment due to the binding nature of the Deed of Guarantee. The NCLAT dismissed claims of procedural impropriety, stating that the Adjudicating Authority had adequately considered all relevant issues and complied with the principles of natural justice. Ultimately, the appeals were dismissed, and the NCLAT upheld the decision to admit the Section 95 application, affirming the legitimacy of the invoked guarantee without awarding costs.
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