LexBRS VENTURES INVESTMENTS LTD. versus SREI INFRASTRUCTURE FINANCE LTD. & ANR.
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[2024] 7 S.C.R. 2143 : 2024 INSC 548 BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd. & Anr. (Civil Appeal No. 4565 of 2021) 23 July 2024 [Abhay S. Oka* and Pankaj Mithal, JJ.] Issue for Consideration Whether the payment of Rs.38.87 crores to the financial creditor under the resolution plan of the corporate guarantor will extinguish the liability of the principal borrower/corporate debtor 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; whether a holding company is the owner of the assets of its subsidiary and can the assets of the subsidiaries be included in the resolution plan of the holding company; can the financial creditor file simultaneous/separate applications under Section 7 of the IBC against the corporate debtor and the corporate guarantor as well. Headnotes† Insolvency and Bankruptcy Code, 2016 – ss.7, 31 – Contract Act, 1872 – ss.126, 128, 133-139 – 1st respondent-financial creditor granted a loan of Rs.100 crores to the 2nd respondent- corporate debtor – Corporate guarantee furnished by ACIL-Corporate Guarantor – Corporate debtor defaulted payment of the loan – s.7 application filed against Corporate Guarantor – Corporate Insolvency Resolution Process (CIRP) against the Corporate Guarantor commenced, Rs.38.87 crores paid to the financial creditor under the resolution plan – Corporate debtor, if liable to pay the entire amount payable under the loan transaction after deducting the aforesaid amount paid on behalf of the corporate guarantor: Held: Yes – Payment of Rs.38.87 crores to the financial creditor under the resolution plan of the corporate guarantor will not extinguish the liability of the corporate debtor to pay the entire amount payable under the loan transaction after deducting the amount paid on behalf of the corporate guarantor in terms of * Author 2144 [2024] 7 S.C.R. Digital Supreme Court Reports its resolution plan – As far as the guarantee is concerned, the liability of the surety and the principal debtor is co-extensive – The creditor has remedies available to recover the amount payable by the principal borrower by proceeding against both or any of them – The creditor can proceed against the guarantor first without exhausting its remedies against the principal borrower – If the creditor recovers a part of the amount guaranteed by the surety from the surety and agrees not to proceed against the surety for the balance amount, that will not extinguish the remaining debt payable by the principal borrower and the creditor can proceed against the principal borrower to recover the balance amount – Where a company furnishes a corporate guarantee for securing a loan taken by another company and if the CIRP of the corporate guarantor ends in a resolution plan, it will bind the creditor of the corporate guarantor – The corporate guarantor’s liability may end in such a case by operation of law – However, such a resolution plan of the corporate guarantor will not affect the liability of the principal borrower to repay the loan amount to the creditor after deducting the amount recovered from the corporate guarantor or the amount paid by the resolution applicant on behalf of the corporate guarantor as per the resolution plan – View taken by NCLAT cannot be faulted. [Paras 14, 15, 17, 28] Insolvency and Bankruptcy Code, 2016 – ss.7, 60 – Contract Act, 1872 – Simultaneous proceedings against the Corporate Debtor and the Guarantor – Permissibility: Held: Is permissible – Consistent with the basic principles of the Contract Act that the liability of the principal borrower and surety is co-extensive, the IBC permits separate or simultaneous proceedings to be initiated u/s.7 by a financial creditor against the corporate debtor and the corporate guarantor. [Para 19] Insolvency and Bankruptcy Code, 2016 – ss.18(1) Explanation (b), 36(4)(d) – Whether a holding company is the owner of the assets of its subsidiary – Can the assets of the subsidiaries be included in the resolution plan of the holding company – Whether the assets of the 2nd respondent-corporate debtor were a part of the CIRP in respect of ACIL-Corporate Guarantor (holding company of the corporate debtor): Held: No – NCLAT rightly held that the resolution plan took care only of the investments of ACIL in the subsidiaries and not the assets of subsidiaries – A
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