Tribunal Upholds Adjudicating Authority's Decision on Section 7 Application

The Tribunal upheld the Adjudicating Authority's decision to admit the Section 7 application filed by Respondent No.1, dismissing the appeal. It confirmed the validity of the unregistered Assignment Agreement, the entitlement of Respondent No.1 to initiate proceedings, and the permissibility of simultaneous CIRP proceedings against the Principal Borrower and Corporate Guarantor. The Tribunal found no error in the Adjudicating Authority's jurisdiction and authority, concluding that the debt and default were uncontested, justifying the admission of the application.

---

---

Issues Involved:
1. Validity of the unregistered Assignment Agreement.
2. Simultaneous CIRP proceedings against Principal Borrower and Corporate Guarantor.
3. Entitlement of Respondent No.1 to initiate Section 7 proceedings.
4. Jurisdiction and authority of the Adjudicating Authority.

Summary:

1. Validity of the unregistered Assignment Agreement:
The Appellant challenged the admission of the Section 7 application on the grounds that the Assignment Agreement dated 18.01.2021 was unregistered and thus invalid. The Tribunal rejected this argument, stating that the Assignment Agreement was in accordance with Section 5 of the SARFAESI Act, 2002, which does not require registration. The Tribunal emphasized that the Asset Reconstruction Company (Respondent No.1) is deemed to be the lender with all the rights vested in the original lender (State Bank of India), thus validating the Assignment Agreement.

2. Simultaneous CIRP proceedings against Principal Borrower and Corporate Guarantor:
The Appellant argued that simultaneous CIRP proceedings against the Principal Borrower and the Corporate Guarantor for the same debt were not permissible. The Tribunal referred to the Supreme Court judgment in "Laxmi Pat Surana vs. Union of India & Anr." which clarified that a Financial Creditor can initiate CIRP against both the Principal Borrower and the Corporate Guarantor. The Tribunal noted that the liability of the Corporate Guarantor is co-extensive with the Principal Borrower, allowing for simultaneous proceedings.

3. Entitlement of Respondent No.1 to initiate Section 7 proceedings:
The Tribunal held that Respondent No.1, being an Asset Reconstruction Company, was fully entitled to initiate Section 7 proceedings. The Tribunal referenced the SARFAESI Act, which allows Asset Reconstruction Companies to acquire financial assets and exercise all rights of the original lender. The Tribunal dismissed the Appellant's claim that the Deed of Guarantee could only be enforced by the SBICAP Trustee Company, affirming that the Respondent No.1 had the right to initiate proceedings under Section 7.

4. Jurisdiction and authority of the Adjudicating Authority:
The Tribunal affirmed the Adjudicating Authority's jurisdiction and authority to admit the Section 7 application. It was noted that the Adjudicating Authority had already initiated CIRP against another Corporate Guarantor based on the same Assignment Agreement. The Tribunal found no error in the Adjudicating Authority's decision to admit the Section 7 application, concluding that the debt and default by the Corporate Debtor were uncontested and thus the admission of the application was justified.

Conclusion:
The Tribunal dismissed the appeal, upholding the Adjudicating Authority's order admitting the Section 7 application filed by Respondent No.1. The Tribunal found no merit in the arguments presented by the Appellant and confirmed the validity of the unregistered Assignment Agreement, the entitlement of Respondent No.1 to initiate proceedings, and the permissibility of simultaneous CIRP proceedings against the Principal Borrower and Corporate Guarantor.

---