2020 (7) TMI 205 - Tri - IBC

Tribunal Rejects Financial Creditor's Second Insolvency Application Against Guarantor Due to Duplicate Claims.

Bank of India State 8 Versus M/s. Athena Energy Ventures Pvt. Limited

The NCLT dismissed the Financial Creditor's application to initiate a second CIRP against the Corporate Guarantor, as it was based on the same claims and ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - Where an Application U/ s. 7 of the Code as filed by the 'Financial Creditor' is already admitted against the 'Principal Borrower', whether another Application under Section 7 of the Code, by the same Financial Creditor can be admitted against the Corporate Guarantor for the same set of claims and default or not? - HELD THAT:- It is pertinent to note here that under the provisions of IBC 2016, there is no bar against filing an application u/ s. 7 either against the Principal Borrower or the Corporate Guarantor. It is also not necessary that an application U/ s. 7 must be filed by the Financial Creditor against the Principal Borrower first, and an application u/ s. 7 against the Corporate Guarantor must be filed after exhausting the rights against the Principal Borrower, as the Financial Creditor is also the Financial Creditor qua the Corporate Guarantor. Hon'ble NCLAT have categorically laid down in the case of DR. VISHNU KUMAR AGARWAL VERSUS M/S. PIRAMAL ENTERPRISES LTD. [2019 (2) TMI 316 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] that since a Financial Creditor cannot make a claim for the same set of debt in two separate CIRP processes, he cannot be allowed to pursue two separate Sec. 7 applications for the same claim. If the CIRP is initiated against one of the Corporate Debtors, after such initiation the Financial Creditor cannot trigger CIRP against the other Corporate Debtor/ Corporate Guarantor for the same claim amount. This Adjudicating Authority is not inclined to admit the instant application, which is filed on the same set of facts, claim and default in respect of which a CIRP is already under progress and wherein the claim of the applicant herein is already admitted. Application dismissed. Issues Involved:1. Whether the Financial Creditor can initiate another Corporate Insolvency Resolution Process (CIRP) against the Corporate Guarantor for the same set of claims and defaults after initiating CIRP against the Principal Borrower.2. Whether the Financial Creditor, holding a major stake in the Principal Debtor Company, can invoke provisions of the Insolvency & Bankruptcy Code, 2016 against the Corporate Guarantor.Detailed Analysis:Issue 1: Initiation of CIRP against Corporate Guarantor for the same claims and defaultsThe Financial Creditor, State Bank of India, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) to initiate CIRP against the Corporate Guarantor, Athena Energy Ventures Private Limited. The Financial Creditor had previously filed a similar application against the Principal Borrower, Athena Chhattisgarh Power Limited, which was admitted by the National Company Law Tribunal (NCLT), Hyderabad bench, and CIRP was in progress.The Respondent argued that the present application is a duplication of the earlier claim and is not permissible under the IBC. They cited the case of 'Vishnu Kumar Agarwal Vs. Piramal Enterprises Limited,' where the National Company Law Appellate Tribunal (NCLAT) held that a Financial Creditor cannot file another application for the same set of claims once CIRP is initiated against either the Principal Borrower or the Corporate Guarantor.The Applicant contended that the Corporate Guarantor and Principal Borrower are Joint Venture Companies, and thus, the judgment in the Vishnu Kumar Agarwal case does not apply. However, the Tribunal noted that both entities are independent companies with separate Memorandum of Association/Articles of Association and cannot be considered a Joint Venture Company.The Tribunal concluded that based on the NCLAT ruling, the Financial Creditor cannot pursue two separate Section 7 applications for the same claim. Therefore, the application against the Corporate Guarantor cannot be admitted.Issue 2: Financial Creditor's major stake in Principal Debtor CompanyThe Respondent also argued that the Financial Creditor, being a major shareholder in the Principal Debtor Company, lacks the locus standi to file the present application. The Applicant countered that the application is against the Corporate Guarantor, not the Principal Borrower, and the Financial Creditor has satisfied all the necessary conditions for admission under Section 7 of the IBC.The Tribunal observed that the Financial Creditor had demonstrated the existence of debt exceeding Rupees One Lakh and the default by the Principal Borrower. The Corporate Guarantor had also executed Corporate Guarantee Documents, making it jointly and severally liable for the Principal Borrower's obligations.Despite these arguments, the Tribunal emphasized that the primary issue is the duplication of claims, which is not permissible under the IBC as per the NCLAT ruling.Conclusion:The Tribunal, guided by the NCLAT's judgment in the Piramal Enterprises case, rejected the application filed by the Financial Creditor against the Corporate Guarantor, as it was based on the same set of facts, claims, and defaults for which CIRP was already in progress against the Principal Borrower. The application CP(IB)No.466/07/HDB/2019 was accordingly dismissed.