K. PARAMASIVAM versus THE KARUR VYSYA BANK LTD. & ANR.

Citation: [2022] 18 S.C.R. 100 · Decided: 06-09-2022 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Dismissed
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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 18 S.C.R.
K. PARAMASIVAM
v.
THE KARUR VYSYA BANK LTD. & ANR.
(Civil Appeal No. 9286 of 2019)
SEPTEMBER 06, 2022
[INDIRA BANERJEE AND J. K. MAHESHWARI, JJ.]
Insolvency and Bankruptcy Code, 2016: ss. 3(7), 3(8), 5(5A),
7, 62 – Initiation of Corporate Insolvency Resolution Process-CIRP
– Borrowers failed to repay the debts to financial creditor –
Application u/s. 7 by the financial creditor for initiating CIRP against
corporate debtor; and that corporate guarantor liable to re-pay
loan having extended guarantee for the loans availed by borrowers
– Guarantor’s case that they were not corporate debtors –
Application admitted by NCLT and upheld by NCLAT – On appeal,
held: Liability of the guarantor is co-extensive with that of the
principal borrower – It was open to the financial creditor to proceed
against the guarantor without first suing the principal borrower, in
respect of the guarantee given by it, once the borrower commited
default – Guarantor is then, the corporate debtor.
Dismissing the appeal, the Court
HELD: Under Section 7 of the Insolvency and Bankruptcy
Code, 2016, CIRP can be initiated against a corporate entity who
has given a guarantee to secure the dues of a non-corporate entity
as a financial debt accrues to the corporate person, in respect of
the guarantee given by it, once the borrower commits default.
The guarantor is then, the Corporate Debtor. Liability of the
guarantor is co-extensive with that of the Principal Borrower. It
was open to the Financial Creditor to proceed against the
guarantor without first suing the Principal Borrower. There is no
ground to interfere with the concurrent findings of the Adjudicating
Authority (NCLT) and the Appellate Authority (NCLAT).
[Para 13, 16, 17][104-A-B; 109-B, C]
   [2022] 18 S.C.R. 100
100
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Laxmi Pat Surana v. Union Bank of India and Another
(2021) 8 SCC 481: [2021] 2 SCR 924 – relied on.
Case Law Reference
[2021] 2 SCR 924
relied on
Para 12
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9286
of 2019.
From the Judgment and Order dated 18.11.2019 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Ins) No.538 of 2019.
Amitesh Chandra Mishra, P. J. Sriganesh, Ankit Chaturvedi for
M/s ACM Legal, Advs. for the Appellant.
Nikhil Nayyar, V. Prakash, Sr. Advs., T. V. S. Raghavendra Sreyas,
Vijay Kumar, Ms. Sugandha Batra, Siddharth Vasudev, Iyengar
Shubharanjani Ananth, Adarsh Mohandas, Ms. R. Sowmya, Advs. for
the Respondents.
The Judgment of the Court was delivered by
INDIRA BANERJEE, J.
This appeal under Section 62 of the Insolvency and Bankruptcy
Code, 2016, hereinafter referred to as the “IBC”, is against a final
judgment and order dated 18th November 2019, passed by the National
Company Law Appellate Tribunal (NCLAT) dismissing the Company
Appeal (AT) (Insolvency) No.538 of 2019, against an order dated  8th
April 2019 passed by the Adjudicating Authority, admitting the application
filed by the Respondent No.1 being CP/1314/IB/2018 under Section 7
of the IBC for initiation of the Corporate Insolvency Resolution Process
(CIRP) against the Corporate Debtor, Maharaja Theme Parks and
Resorts Private Limited, hereinafter referred to as “Maharaja Theme
Parks and Resorts”.
2. The Appellant is the promoter, shareholder and suspended/
discharged director of Maharaja Theme Parks and Resorts, a company
registered under the Companies Act, 1956.   The Respondent No.1,
hereinafter referred to as “Financial Creditor” had advanced credit
facilities to the following three entities:-
K. PARAMASIVAM v. THE KARUR VYSYA BANK LTD.
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SUPREME COURT REPORTS
[2022] 18 S.C.R.
(i) Sri Maharaja Refineries, a Partnership Firm;
(ii) Sri Maharaja Industries, a proprietary concern of K.
Paramasivam; and
(iii) Sri Maharaja Enterprises, a proprietary concern of P.
Sathiyamoorthy
3. Maharaja Theme Parks and Resorts stood guarantor for the
loans availed by all the three borrowers.  The borrowers failed to repay
the debts payable by them to the Financial Creditor.
4. On or about 24th October 2018, the Financial Creditor filed an
application under Section 7 of the IBC being CP/1314/IB/2018 for
initiation of CIRP against Maharaja Theme Parks and Resorts.   In the
said application the Financial Creditor stated that Maharaja Theme Parks
and Resorts had extended corporate guarantee(s) for loans availed by
each of the borrowers.  On failure of the borrowers to repay the loans,
Maharaja Th
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