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Showing contexts for: revocation of guarantee in State Bank Of India vs Gourishankar Poddar & Anr on 6 January, 2025Matching Fragments
26. The key issues to be decided in the instant matter relates to:
Company Appeal (AT) (Ins.) No. 689, 663 of 2024
(i) Whether revocation of guarantee by the personal guarantor is valid?
(ii) Whether changes in terms and conditions of the guarantee if any, would lead to novation?
(iii) Whether the CIRP proceedings against the guarantor are maintainable on the grounds of limitation?
We examine these issues one by one.
27. Regarding the first issue, Adjudicating Authority has held that the Respondent No.1 has resigned from the position of the Director of the CD on 06.03.2014 which was accepted by the Board on 18.03.2014. He wrote to the SBI and its groups of Banks stating that he has resigned seeking relief of guarantee. The first letter in this regard was written by Respondent No.1 on 06.03.2014 to the banks. In reply, SBI (Financial Creditor), vide its letter dated 12.03.2014 informed the Respondent No.1 that his resignation would not absolve him as personal guarantor of his liabilities to the bank.
(Emphasis supplied) It is clear from the above that the approval of resolution plan of Raj Rayon Ltd/ Corporate Debtor on 5.10.2021 in the CIRP proceeding does not discharge the liability of personal guarantor. This has been one of the contentions of respondent No. 1.
39. The Respondent No.1 on the other hand has relied upon the Judgment of Hon'ble Supreme Court in the case of Margaret Lalita v. Indo Commercial Bank Limited [AIR 1979 SC 102]. It is the argument of the Respondent that as decided in the aforesaid case the liability of the guarantor is limited to transactions prior to the revocation of the guarantee. This case emphasized that a guarantor can revoke a continuing guarantee for future transactions, but remains liable for those prior to revocation. However, in the present case, the respondent executed a subsequent irrevocable and unconditional guarantee on 29.03.2014, superseding the earlier guarantee. This 2014 Guarantee clearly waived any right to unilateral revocation, binding the guarantor until all liabilities of the corporate debtor were settled. The Company Appeal (AT) (Ins.) No. 689, 663 of 2024 aforesaid precedent is distinguishable because the 2014 Guarantee is irrevocable and such right has been explicitly granted by the Respondent No.1.
40. We note that the guarantee as is evident from Clause 2, 8, 11 and 12 of the 2013 Guarantee and Clause 5 and 14 of the 2014 Guarantee was intended to be irrevocable and continuous in nature and thus in accordance with the Syndicate Bank Judgment, the guarantee was intended to be applicable to all subsequent transactions as well.
41. It is clear from the above that unilateral revocation of guarantee by the Respondent No.1 does not absolve him from his obligations under the guarantee agreement as the Financial Creditor has not agreed to such revocation. The terms of contract agreement also clearly show that the contract was irrevocable. The legal precedent clearly supports the case of appellant.
75. The findings of Adjudicating Authority are based on revocation of guarantee letters sent by the Personal Guarantor/Respondent No. 2 and the revival letter dated 06.02.2016. In the list of events above the following is recorded against 06.02.2016:
"The guarantor executed a revival letter dated 06.02.2016 in favour of the applicant."
Company Appeal (AT) (Ins.) No. 689, 663 of 2024 The guarantor referred to here is Respondent no. 2/ Gaurishankar Poddar and applicant being State Bank of India.