# In the matter of Shaliwahan Farms Private Limited CP(IB)-1280(MB)-2022

> NCLT judgment dated 2023-03-03. Citation: TCN-2023-NCLT-04325. State Bank of India filed a Company Petition under Section 7 of the Insolvency & Bankruptcy…

- **Court:** NCLT
- **Order date:** 3 Mar 2023
- **Citation:** TCN-2023-NCLT-04325
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/shaliwahan-farms-private-limited-cpib-1280mb-2022-a11a6245

## Summary

### Background

State Bank of India filed a Company Petition under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) to initiate Corporate Insolvency Resolution Process (CIRP) against Shaliwahan Farms Private Limited, the Corporate Debtor/Guarantor. The petition was based on the Corporate Guarantor's liability to pay ₹26,44,96,625/- due to the Principal Borrower's default. The Financial Creditor had provided loan facilities to Deogiri Infrastructure Pvt. Ltd. (Principal Borrower), with Shaliwahan Farms acting as the Corporate Guarantor. The date of default was 10.04.2019.

## Facts

State Bank of India (Financial Creditor) filed a petition under Section 7 of the IBC to initiate CIRP against Shaliwahan Farms Private Limited (Corporate Debtor/Guarantor). The petition stemmed from a default by Deogiri Infrastructure Pvt. Ltd. (Principal Borrower), to whom the Financial Creditor had extended loan facilities. Shaliwahan Farms acted as a guarantor for the loan. The date of default was 10.04.2019, and the outstanding amount was ₹26,44,96,625/-. The Financial Creditor issued a notice under Section 13(2) of the SARFAESI Act to the Principal Borrower on 10.04.2019, but no separate demand notice was issued to the Corporate Guarantor invoking the guarantee. The Corporate Debtor executed a Guarantee Agreement on 23.09.2009 securing the debt to the Principal

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## Issues and analysis

### Issue 1: Whether the Financial Creditor made a valid demand upon the Corporate Guarantor before initiating …

**Ratio:** A demand upon the guarantor is a prerequisite for initiating CIRP against the guarantor

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**Reasoning:** The court reasoned that the Financial Creditor had not made any demand upon the

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**Interpretation:** The interpretation of Section 7 of the IBC requires a clear and unambiguous

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**Application:** In this case, the Financial Creditor only sent a notice to the Principal

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## Parties

- **Judges:** Prabhat…; KISHORE VEMULAPALL…
- **Appellants:** State Bank of…
- **Respondents:** Shaliwahan Farms…

## Timeline

- **1998-12-24 — Incorporation of…**: Shaliwahan Farms Private Limited…
- **2007-11-06 — Sanction…**: Sanction Letter issued for loan facility to Principal Borrower/Corporate Debtor for ₹80…

## 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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