2024 (11) TMI 1286 - AT - IBC

Section 95 petition dismissed as premature when filed before contractual 60-day payment period expired after demand notice

Neon Laboratories Ltd. Versus Mayank Shah & Anr.

NCLAT Principal Bench dismissed appellant's challenge to tribunal's rejection of Section 95 petition. Appellant argued petition timing should follow ... Service of demand notice - whether petition filed under Section 95 was premature? - appellant argued that period of service of demand notice has to be counted in terms of Section 95(4)(b) of the Code and the period mentioned in the guarantee agreement should not be taken into consideration - HELD THAT:- The facts are not in dispute that a personal guarantee deed was executed on 27.07.2011 amongst the Appellant as a lender, SPIL as the Borrower and Respondent No. 2 as the Guarantor. Clause 3 of the said agreement categorically lays down that the Guarantor would pay the amount of ICD of Rs. 1 Cr. 75 Lac to the lender within 60 days from the date of demand notice served by the Lender requiring the payment. Therefore, from the plain reading of this clause it is apparent that the liability to pay by the Guarantor to the lender shall arise only in two circumstance firstly, on the service of demand notice and secondly, within the period of 60 days from the receipt of demand notice. In fact the time was provided in the agreement to the guarantor to arrange payment of the lender to avoid legal complications. The right to file the petition under Section 95 thus would not arise after 14 days of service of the notice in view of the specific agreement between the parties that after the demand notice is served, 60 days time shall remain available with the guarantor for discharging his liability whereas in the present case the demand notice is dated 01.11.2021 and the application was filed on 01.12.2021, just after the expiry of one month, which is contrary to clause 3 of the agreement. It is obvious from the dates because the petition under Section 9 of the Act was filed by Respondent No. 1 on 30.11.2021 and when the case was adjourned to 03.12.2021 for orders, the petition under Section 95 was filed on 01.12.2021 as a result of which the petition filed under Section 9 had to be adjourned by the Hon’ble Bombay High Court. There are no error in the findings recorded by the Tribunal for not only allowing the application of the Respondent No. 1 but also dismissing the application filed under Section 95 of the Code by the Appellant and imposition of cost. There are no merit in the present appeal and hence, the same is hereby dismissed. Issues:- Dismissal of CP (IB) No. 794 of 2022 filed by Neon Laboratories Ltd.- Imposition of cost of Rs. 5,00,000 on the Appellant.- Allegation of collusion between Appellant and Corporate Debtor.- Interpretation of personal guarantee deed clause and its relevance to the case.- Prematurity of the petition filed under Section 95 of the Code.- Impact of Section 96 of the Code on arbitration proceedings.- Consideration of evidence for proving collusion.- Applicability of legal precedents cited by the parties.- Timing of filing the petition under Section 95 in relation to pending proceedings before the High Court.- Justification of Tribunal's findings and dismissal of the appeal.The judgment involves an appeal filed by Neon Laboratories Ltd. against the dismissal of CP (IB) No. 794 of 2022 and the imposition of a cost of Rs. 5,00,000 due to alleged collusion with the Corporate Debtor. The case revolves around the interpretation of a personal guarantee deed clause specifying the timeline for payment by the Guarantor. The Tribunal found the petition under Section 95 of the Code premature as it was filed before the expiration of the 60-day period mentioned in the guarantee agreement. Additionally, the impact of Section 96 of the Code on arbitration proceedings was considered, leading to adjournment. The Tribunal assessed evidence of collusion and the timing of the petition filing concerning pending High Court proceedings. Legal precedents were cited by both parties regarding the interpretation of relevant laws and the issue of collusion. The Tribunal upheld its findings, dismissing the appeal based on the lack of merit and declining to award costs.In the judgment, the Tribunal highlighted the significance of the personal guarantee deed clause, emphasizing the specific timeline for payment by the Guarantor as per the agreement. The Tribunal noted that the petition under Section 95 was filed prematurely, contrary to the terms of the agreement, as it was submitted before the completion of the 60-day period following the demand notice. The Tribunal also considered the alleged collusion between the parties, pointing out instances where the actions of the Appellant and the Corporate Debtor seemed coordinated to delay proceedings before the High Court. The timing of the petition filing in relation to the pending High Court case was a crucial factor in the Tribunal's decision.The judgment delved into the legal arguments presented by both parties, including references to relevant legal precedents. The Tribunal examined the applicability of these precedents to the current case, particularly regarding the interpretation of laws related to personal guarantees and collusion allegations. The Tribunal ultimately upheld its findings, concluding that there was no error in dismissing the Appellant's application under Section 95 and imposing costs. The decision was based on a comprehensive analysis of the facts, the terms of the guarantee agreement, the timing of the petition filing, and the alleged collusion between the parties.