Tribunal Upholds IBC Decision on Financial Debt: Personal Guarantees Enforceable

The Tribunal upheld the Adjudicating Authority's decision to admit the application under Section 95(1) of the IBC, finding a clear financial debt due and not paid. The application was deemed timely filed within the limitation period based on relevant Supreme Court judgments. Personal guarantees given by directors were enforceable under the IBC regime. The Tribunal clarified that there was no need to approach the DRT before enforcing claims against the corporate debtor and personal guarantor under the IBC. The provision of interest by the Adjudicating Authority was deemed consistent with the DRT's final order. The appeals were dismissed, and pending interlocutory applications were closed.

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Issues Involved:
1. Whether debt was due and default took place.
2. Whether the present application filed under Section 95(1) of the IBC is barred by the law of limitation.
3. Whether the guarantee given as Managing Director/Director of CD shall be treated as a personal guarantee or otherwise.
4. Whether, on failure of the settlement agreement, the FC needs to go to DRT or can directly approach the Adjudicating Authority for enforcing claims against CD and personal guarantor.
5. Whether the provision of interest by the Adjudicating Authority was incorrect and contrary to the DRT final order.

Detailed Analysis:

Issue 1: Whether debt was due and default took place.
The Tribunal examined the definitions of "debt," "claim," and "default" under Sections 3(11), 3(6), and 3(12) of the IBC. The Tribunal noted that the financial creditor (FC) had produced a statement of account with a certificate issued under the Bankers Books Evidence Act, 1891, proving the debt, which was not disputed by the appellant. The total outstanding debt as of 31.07.2021 was Rs. 1,97,54,49,848.81. The Tribunal found that various term loans and working capital facilities were given by SBT & SBBJ, later merged into SBI (FC), and this fact was never disputed by the appellant. The compromise settlement between CD and FC also clearly stipulated the existence and acceptance of debt in terms of both principal and interest. Therefore, there was a clear financial debt due and not paid, and the Adjudicating Authority rightly admitted the application under Section 95(1) of the IBC.

Issue 2: Whether the present application filed under Section 95(1) of the IBC is barred by the law of limitation.
The Tribunal considered the timeline of events and noted that the final order was passed by the DRT on 20.09.2019, and the last payment of Rs. 5 crore was made by CD on 31.12.2019. The application under Section 95(1) was filed before the Adjudicating Authority on 03.11.2021. Considering the Hon'ble Supreme Court's Suo Moto Writ Petition No. 2020 excluding the period of limitation from 15.03.2020 to 28.02.2022, the application was filed within 74 days from the last payment of 31.12.2019. The Tribunal referred to judgments of the Hon'ble Supreme Court in the matters of Dena Bank vs. C. Shivakumar Reddy and Sesh Nath Singh vs. Baidyabati Sheoraphuli Co-operative Bank Ltd., which supported the view that the application was within the limitation period.

Issue 3: Whether the guarantee given as Managing Director/Director of CD shall be treated as a personal guarantee or otherwise.
The Tribunal referred to the judgment of the Hon'ble Supreme Court in Lalit Kumar Jain vs. Union of India, which dealt with personal guarantees given by directors, promoters, or managing directors. The Supreme Court had rejected the challenge by PGCD to the notification dated 15.11.2019, bringing PGCD within the same regime of IBC as the CD themselves. The Tribunal found that personal guarantees given by Mrs. Merin Jose and Mr. Jose M.M were enforceable, and the Adjudicating Authority had correctly taken decisions accordingly.

Issue 4: Whether, on failure of the settlement agreement, the FC needs to go to DRT or can directly approach the Adjudicating Authority for enforcing claims against CD and personal guarantor.
The Tribunal examined the final order of the DRT, Ernakulam, which stated that in case of failure of the compromise settlement, the entire amount as claimed in the OA along with interest and costs would become payable. The order also mentioned that the applicant would be entitled to apply for and obtain a Recovery Certificate but did not make it mandatory. The Tribunal referred to its judgment in Bimalkumar Manubhai Savalia vs. Bank of India, which stated that SARFAESI and DRT proceedings would not extend the period of limitation and that IBC has an overriding effect on other laws. Therefore, there was no requirement to approach the DRT before approaching the Adjudicating Authority.

Issue 5: Whether the provision of interest by the Adjudicating Authority was incorrect and contrary to the DRT final order.
The Tribunal noted that the final order of the DRT, Ernakulam, provided for the recovery of the full principal amount along with interest and costs in case of failure of the compromise settlement. The Tribunal also noted that the DRT's final order provided for future interest at 13.95%. The Tribunal found that the financial creditor had produced the statement of account proving the debt, which included the interest component. Therefore, the provision of interest by the Adjudicating Authority was not incorrect or contrary to the DRT's final order.

Conclusion:
The Tribunal found no ground for interference with the impugned order dated 24.02.2022 passed by the Adjudicating Authority, National Company Law Tribunal, Kochi Bench, Kerala, and dismissed the appeals. The connected pending interlocutory applications, if any, were also closed.

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