# In the matter of Jotindra Steel and Tubes Limited CP (IB) No. 12-Chd-HRY-2021

> NCLT judgment dated 2022-10-21. Citation: TCN-2022-NCLT-00625. Kotak Mahindra Bank Limited filed a petition under Section 7 of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 21 Oct 2022
- **Citation:** TCN-2022-NCLT-00625
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/jotindra-steel-and-tubes-limited-cp-ib-no-12-chd-hry-2021-a500dbca

## Summary

### Background

Kotak Mahindra Bank Limited filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Jotindra Steel and Tubes Limited, who acted as a corporate guarantor for its associate company, Mauria Udyog Limited. The financial creditor claimed that the corporate debtor furnished an unconditional corporate guarantee for the credit facilities extended to the borrower. The borrower defaulted on repayment, leading to the account being classified as NPA. The financial creditor recalled the loan facility and invoked the corporate guarantee. The corporate debtor argued that it never stood as a corporate guarantor and that the 'letter of comfort' provided was not a contract of guarantee. The

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## Facts

Kotak Mahindra Bank Limited (financial creditor) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Jotindra Steel and Tubes Limited (corporate debtor) to initiate CIRP. The petition was based on the premise that Jotindra Steel and Tubes Limited acted as a corporate guarantor for a loan facility extended to Mauria Udyog Limited (borrower). The financial creditor claimed that the corporate debtor had furnished an unconditional corporate guarantee. The borrower defaulted on repayment, leading to the account being classified as a Non-Performing Asset (NPA) on 2020-02-04. The financial creditor recalled the loan facility and invoked the corporate guarantee. The corporate debtor argued that it never stood as a corporate guarantor and that

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## Issues and analysis

### Issue 1: Whether the 'letter of comfort' issued by the respondent/corporate debtor amounts to a contract of …

**Ratio:** A contract of guarantee requires the presence of three parties: a surety, a principal

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**Reasoning:** The NCLT reasoned that the 'letter of comfort' was undated, lacked proper authorization

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**Interpretation:** The 'letter of comfort' does not fulfill the legal requirements of a contract

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**Application:** The 'letter of comfort' issued by Jotindra Steel and Tubes Limited does not

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## Parties

- **Judges:** Harnam Singh…; SUBRATA KUM…
- **Appellants:** Kotak Mahindra…
- **Respondents:** Jotindra Steel…

## Timeline

- **1970-03-16 — Incorporation of…**: Jotindra Steel and Tubes Limited…
- **2017-08-22 — Sanction…**: Sanction Letter issued for credit facilities to Mauria Udyog Limited, mentioning…

## 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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