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HC reprieve for brother of former CMD of Parekh Aluminex in ₹2,762 cr loan case
The Bombay High Court halted enforcement of a ₹2,762 crore loan guarantee by Deepen Parekh, citing it did not become operative after his brother's death.
MUMBAI: The Bombay high court recently halted enforcement of the guarantee given by Deepen Parekh, brother of late Amitabh Parekh, the then chairman and managing director of Parekh Aluminex Ltd, purportedly for recovery of outstanding loans of ₹2,762 crore from the company, which once claimed to be the largest manufacturer of aluminium foil containers, aluminium rolls and aluminium lids, in India.
A single judge bench of justice NJ Jamadar on December 14 declared that the ‘Deed of Guarantee’ executed by Deepen on April 10, 2014, had not become operative, which means that the consortium of banks, which extended the loans to Parekh Aluminex would not be able to enforce the guarantee given by Deepen, who is a financial consultant and mutual fund distributor.
The management and financial affairs of the company were severely affected after its chairman and managing director, Amitabh Parekh, passed away suddenly on 6 January 2013, at the age of 39 years. The company then owed a liability of ₹2762.09 crore towards the loans and financial assistance availed from the consortium of banks, led by the Indian Overseas Bank.
Deepen approached the high court this year, seeking a restraint on banks from enforcing the ‘Deed of Guarantee’ executed by Parekh, way back in April 2014, contending that after his brother’s death, he was coerced by the lenders to join the board of directors of the company and, hence, he should not be held liable for any affair of the company, prior to his joining.
He claimed that despite clear stipulations in the deed that it had been executed for the purpose of corporate debt restructuring proposed by banks, and the backing off by the banks from the restructuring thereafter, they started naming him in their recovery proceedings, just because he was the personal guarantor and legal heir of Amitabh Parekh. He further pointed out that he did not fall in the category of ‘class I heirs’ of his brother and had not inherited any property from him.
The banks raised technical objections to the suit filed by Deepen, but those failed to impress upon Justice Jamadar. The bench said the terms of the Deed of Guarantee make it, prima facie, clear that the sanction of corporate debt restructuring package and its acceptance by the lenders was peremptory to infuse life into the contract of guarantee.
“The non-approval of CDR package, prima facie, dismantled the very edifice on which the contract of guarantee could have been built,” the court said, while declaring that the “the Deed of Guarantee, thus, did not come into force.”
