# In the matter of Andhra Bank Vs F. M. Hammerele Textile Ltd. CA (AT) No. 61-2018

> NCLAT judgment dated 2018-07-13. Citation: TCN-2018-NCLAT-00207. Andhra Bank, claiming to be a Financial Creditor as a guarantor for the Corporate Debtor, M/s…

- **Court:** NCLAT
- **Order date:** 13 Jul 2018
- **Citation:** TCN-2018-NCLAT-00207
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/andhra-bank-vs-f-m-hammerele-textile-ltd-ca-702ea017

## Summary

### Background

Andhra Bank, claiming to be a Financial Creditor as a guarantor for the Corporate Debtor, M/s F.M.Hammerle Textiles Limited, had its claim rejected by the Adjudicating Authority (National Company Law Tribunal), Chandigarh Bench. The rejection was based on the premise that Andhra Bank could not be treated as a Financial Creditor under Section 3(6) of the Insolvency and Bankruptcy Code (I&B Code), as the right to claim any amount would only arise in case of breach of contract. The Resolution Professional also took a similar plea on behalf of the Corporate Debtor.

## Facts

Andhra Bank claimed to be a 'Financial Creditor' based on being a guarantor for the 'Corporate Debtor', M/s F.M.Hammerle Textiles Limited. The Adjudicating Authority rejected Andhra Bank's claim, stating it couldn't be treated as a 'Financial Creditor' under Section 3(6) of the I&B Code, as the right to claim would only arise upon breach of contract. The Resolution Professional supported this view. Andhra Bank appealed this decision. The Appellant's counsel referred to Sections 5(7) r/w (8) of the I&B Code, arguing Andhra Bank falls within the definition of 'Financial Creditor'. The Corporate Debtor has a counter-indemnity obligation in respect of the guarantee given to Andhra Bank. A 'Resolution Plan' approved by State Bank of India (sole member of the

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## Issues and analysis

### Issue 1: Whether Andhra Bank, as a guarantor, can be considered a 'Financial Creditor' under the Insolvency …

**Ratio:** A guarantor can be considered a 'Financial Creditor' if the debt falls within the meaning

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**Reasoning:** The tribunal reasoned that Section 5(8) of the I&B Code defines 'Financial Debt'

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**Interpretation:** The interpretation of 'Financial Debt' under Section 5(8) is broad enough to

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**Application:** In this case, the tribunal applied the ratio to the facts by finding that the

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## Parties

- **Judges:** S.J. Mukhop…; Bansi Lal…
- **Appellants:** Andhra…
- **Respondents:** M/s F.M.Hammerle…; M/s. F.M.Hammerle…

## Timeline

- **2017-11-17 — Impugned…**: The Adjudicating Authority…
- **2018-02-20 — Appeal F…**: Andhra Bank filed an…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 3(6) — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-3)

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