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

> NCLAT judgment dated 2018-07-13. Citation: TCN-2018-NCLAT-00205. Andhra Bank, claiming to be a financial creditor as a guarantor for M/s F.M.Hammerle Textiles…

- **Court:** NCLAT
- **Order date:** 13 Jul 2018
- **Citation:** TCN-2018-NCLAT-00205
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/andhra-bank-vs-ms-fm-hammerle-textile-ltd-ca-6e6b277f

## Summary

### Background

Andhra Bank, claiming to be a financial creditor as a guarantor for M/s F.M.Hammerle Textiles Limited (the corporate debtor), had its claim rejected by the Adjudicating Authority (National Company Law Tribunal), Chandigarh Bench. The Adjudicating Authority ruled that Andhra Bank could not be treated as a financial creditor under Section 3(6) of the Insolvency and Bankruptcy Code (I&B Code) because it had no right to claim any amount, stating that the appellant's remedy could only arise in case of breach of contract. Andhra Bank appealed this decision.

## Facts

Andhra Bank claimed to be a financial creditor to M/s F.M.Hammerle Textiles Limited, acting as a guarantor. The Adjudicating Authority rejected Andhra Bank's claim, stating it could not be treated as a financial creditor. The Adjudicating Authority observed that the right of remedy of appellant can arise only in case of breach of contract. The Appellant challenged this decision. The counsel for the Appellant referred to Sections 5(7) r/w (8) of the Insolvency and Bankruptcy Code, 2016. The corporate debtor has a counter-indemnity obligation in respect of the guarantee given to Andhra Bank. A Resolution Plan approved by the State Bank of India, the sole member of the Committee of Creditors, was pending consideration before the Adjudicating Authority. The appeal was

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## Issues and analysis

### Issue 1: Whether Andhra Bank, as a guarantor for the Corporate Debtor, qualifies as a 'Financial Creditor' …

**Ratio:** A guarantor with a counter-indemnity obligation from the corporate debtor falls within

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**Reasoning:** The tribunal reasoned that the 'Corporate Debtor' had a counter-indemnity obligation in

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**Interpretation:** Section 5(8) of the I&B Code defines 'financial debt' to include

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**Application:** The tribunal applied this principle to the facts, noting that the Corporate

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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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