# In the matter of Ghotaringa Minerals CP (IB) No. 758-KB-2017

> NCLT judgment dated 2018-02-16. Citation: TCN-2018-NCLT-01812. The State Bank of India filed an application under Section 7 of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 16 Feb 2018
- **Citation:** TCN-2018-NCLT-01812
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/ghotaringa-minerals-cp-ib-no-758-kb-2017-6d602537

## Summary

### Background

The State Bank of India filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Ghotaringa Minerals Ltd., alleging a default in payment of Rs. 982,82,01,341.70 as of 13/12/2017. The application was filed due to the corporate debtor's failure to discharge its liability as a guarantor for the principal borrower, Visa Steel Ltd. The applicant contended that the corporate debtor is liable for the claimed amount due to the default in payment. The respondent/corporate debtor raised objections, arguing that the application was not maintainable without first exhausting remedies against the principal borrower and that the authorized letter of the applicant was defective.

## Facts

State Bank of India (SBI) filed an application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, against Ghotaringa Minerals Ltd. SBI claimed that Ghotaringa Minerals Ltd. defaulted on a payment of Rs. 982,82,01,341.70 as of 13/12/2017. SBI, a body corporate under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, initiated the insolvency process based on a Letter of Authority. Ghotaringa Minerals Ltd. is identified as the corporate debtor with Identification No. U101020R2003PLC007348. The proposed Interim Resolution Professional (IRP) was Mr. Ashok Kumar Gulla. Visa Steel Ltd., the principal borrower, availed credit facilities including a fund-based limit of Rs. 628,36,00,000/- and a non-fund-based limit of Rs.

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## Issues and analysis

### Issue 1: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, is …

**Ratio:** The liability of a guarantor is co-extensive with that of the principal debtor, and the

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**Reasoning:** The court relied on the Supreme Court's judgment in State Bank of India v. Indexport

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**Interpretation:** The principle of co-extensive liability means that the guarantor is equally

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**Application:** In this case, Ghotaringa Minerals Ltd. acted as a guarantor for Visa Steel Ltd.

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## Parties

- **Judges:** Jinan…
- **Appellants:** State Bank of…
- **Respondents:** Ghotaringa…
- **Advocates:** Poonam Ke…; Dwaipayan…; +7 more

## Timeline

- **2016-08-18 — Sanction…**: Sanction letter dated 18/8/2016 for renewal of working capital credit facility of…
- **2017-12-13 — Default…**: Corporate debtor committed default in making payment of Rs.982,82,01,341.70 as on…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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