# Laxmi Pat Surana Vs. Union Bank of India & Ars., Civil Appeal No. 2734 of 2020

> SC judgment dated 2021-03-26. Citation: TCN-2021-SC-00058. The case involves an appeal against the initiation of Corporate Insolvency Resolution Process…

- **Court:** SC
- **Order date:** 26 Mar 2021
- **Citation:** TCN-2021-SC-00058
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/supreme-court-of-india/laxmi-pat-surana-vs-union-bank-of-india-ars-civil-appeal-no-2734-of-2020-b872f36d

## Summary

### Background

The case involves an appeal against the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by Union Bank of India (financial creditor) against Laxmi Pat Surana (corporate guarantor). The financial creditor extended credit facilities to M/s. Mahaveer Construction, a proprietary firm of the appellant, through two loan agreements in 2007 and 2008. M/s. Surana Metals Limited, where the appellant is a Promoter/Director, offered a guarantee for the loan accounts. The loan accounts were declared NPA on 30.01.2010. The financial creditor filed an application under Section 7 of the IBC on 13.02.2019, which was resisted by the appellant on the grounds that the principal borrower was not a 'corporate

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## Facts

In 2007 and 2008, Union Bank of India extended credit facilities to M/s. Mahaveer Construction, a proprietary firm owned by Laxmi Pat Surana, through two loan agreements. The total loan amount was Rs. 9,60,00,000 and Rs. 2,45,00,000. M/s. Surana Metals Limited, where Laxmi Pat Surana is a Promoter/Director, provided a guarantee for these loans. The loan accounts were declared Non-Performing Assets (NPA) on January 30, 2010. The bank issued a recall notice on February 19, 2010. The bank also filed an application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, against the principal borrower before the Debt Recovery Tribunal (DRT) at Kolkata. On December 3, 2018, the bank sent a notice of payment under Section 4(1) of the IBC

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## Issues and analysis

### Issue 1: Whether an action under Section 7 of the Insolvency and Bankruptcy Code, 2016 can be initiated by …

**Ratio:** Section 7 of the IBC allows a financial creditor to initiate CIRP against a corporate

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**Reasoning:** The court reasoned that accepting the appellant's argument would dilute the expression

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**Interpretation:** The court interpreted Section 7 and related definitions in the IBC to allow

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**Application:** The court applied the ratio to the facts of the case, holding that the

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## Parties

- **Judges:** A.M. KHAN…; B.R. G…; +1 more
- **Appellants:** Laxmi Pat…
- **Respondents:** Surana Metals…; Union Bank of…
- **Other parties:** 7th Edition…; Corporate…; +4 more

## Timeline

- **2007-01-01 — Loan Agre…**: Union Bank of India extended credit facilities to M/s. Mahaveer Construction through two…
- **2008-01-01 — Loan Agre…**: Union Bank of India extended credit facilities to M/s. Mahaveer Construction through two…

## 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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