TaxTMI 
TaxTMI 
2020 (9) TMI 358
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any consequent coercive steps; pending the disposal of the present application; b) Direct the Liquidator to submit the terms of the biding proposal by Gabs Megacorp and accepted by the Corporate Debtor; c) Direct the Liquidator to disclose the amounts set to be received by Respondent No. 1 Bank as per the binding proposal by Gabs Megacorp and accepted by the Corporate Debtor; and d) Direct the Liquidator to place on record all the discussions involving the approval of the proposal of Gabs Megacorp Limited, especially where Respondent No. 1 Bank was a party, pending the disposal of the interim application and pass any other order or orders, as it may deem fit. 3. The brief facts of the case as submitted by the Applicants are as under: a. That this Adjudicating Authority vide its order dated 23.02.2018, admitted the Application filed by the State Bank of India for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor i.e., M/s. IVRCL Limited and appointed Mr. Sutanu Sinha as Interim Resolution Professional. Later, he was confirmed as Resolution Professional for the duration of the CIRP of the Corporate Debtor. b. That Since no resoluti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....laim, justify though in accordance with law and proceeded with in terms of the decision of this appellate Tribunal passed in Company Appeal (AT) (Insolvency) No. 224 of 2018 in the matter of Y. Shivram Prasad Vs. S. Dhanapal & Ors. on 27th February, 2019." f. That in compliance with the orders of the Hon'ble NCLAT, the Liquidator informed the National Stock Exchange vide letter dated 03.03.2020 found a bidder, one M/s. Gabs Megacorp Limited to sell the Corporate Debtor as a going concern for Rs. 1654.77 crores. g. That the Respondent No. 1 Bank being a financial creditor of the Corporate Debtor without awaiting the sale of liquidation of the Corporate Debtor as a going concern where the Respondent No. 1 Bank is receiving substantial amounts and scuttling the sale of liquidation of the Corporate Debtor as a going concern as the Corporate Debtor holds 100% shares in the Applicant Companies has arbitrarily and illegally proceeded to issue the demand notice only with an intention to scuttle the liquidation of the Corporate Debtor as a going concern, and unjustly enrich itself by attempting to avail both the remedies, i.e., through the process under the Code and other process as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rofessional of that company we had allowed vide order 06.12.2018. A direction stand issued to the RP to admit the said claim as Financial Debt. This is again raised for admission in the present proceeding. Such a course obviously is not permissible in law as laid down in Dr. Vishnu Kumar Agarwal case (supra). k. That once the principal debt of the Corporate Debtor qua the Respondent No. 1 Bank stands extinguished due to the admission of the claim by the Liquidator. The Respondent No. 1 bank ought not to initiate any coercive steps against the Applicant Companies as any of the liability of the Applicant Companies stand discharged with the admission of the claim by the Liquidator. l. That the Respondent No. 1 bank ought to await the sale of the Corporate Debtor as a going concern before attempting to sell the assets of the Applicant by means of issuing the impugned notice as the entire debt of the Corporate Debtor could stand extinguished by the sale of the assets of the Corporate Debtor. m. There is a binding proposal by Gabs Megacorp to acquire the entirety of the Corporate Debtor for Rs. 1654.77 crores and that the Respondent No. 1 bank is set to receive significant amounts ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich states that the liability of the guarantor and the liability of the principal debtor/borrower are coextensive. This position has been upheld in numerous judgements by the Hon'ble Supreme Court and is a well-established principle of law. This action of the Respondent initiating proceedings against the Applicants is clearly lawful and permissible under the law. c) That the assets of the Applicants (being subsidiaries of the Corporate Debtor) do not form part of the liquidation estate and inasmuch, the Respondent can take recourse of initiating action against the Applicants under the SARFAESI Act, owing to the settled principles of law read in conjunction with the provisions of the Code and the SARFAESI Act without needing to wait for the liquidation process. The Guarantor and the Corporate Debtor are liable at the same time and, the Respondent need not wait for the liquidation process to conclude. It is true that the Corporate Debtor owes significant amount of dues to the Respondent. The mere fact that the Corporate Debtor is under liquidation does not eliminate the Guarantor's liability. It was held by the Hon'ble Supreme Court in the case of Maharashtra State Elec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....prayed against him. That if Respondent No. 1 is allowed to go through with action under the SARFAESI Act 2002, against the Applicants, it will affect the ability of the Liquidator to sell the Corporate Debtor as a going concern. II. That M/s. First Global Finance Private Limited challenged the Liquidation Order before the Hon'ble NCLAT. At the hearing held on September 6, 2019, the Hon'ble NCLAT passed the following direction: "The liquidator will not sell or transfer or alienate moveable or immoveable property of the Corporate Debtor nor create any third-party encumbrance on the same, without prior approval of this Appellate Tribunal." III. That the Hon'ble NCLAT vide its order dated 29.05.2020, dismissed the appeal and permitted Respondent No. 3 to proceed with the sale of the Corporate Debtor as a going concern. In view of the aforesaid, at present there is no fetter on the sale of the Corporate Debtor as a going concern. The process of the sale of the Corporate Debtor as a going concern to the successful bidder viz. Gabs Megacorp Limited ('Sale') is at an advanced stage. IV. That there is no requirement to seek any approval from this Adjudicating Aut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing maintained as a going concern undergoing process of liquidation and that one M/s. Gabs Megacorp Ltd. has bid to take the CD as a going concern for a value of Rs. 1654.77 crores. 7.3. That the CD holds majority shares in the Applicant companies herein and that the Applicant companies herein stood as guarantors and have mortgaged some of its Assets respectively, against the loan obtained by the Corporate Debtor. 7.4. That Andhra Bank/Respondent No. 1 Bank being one of the Financial Creditor, without awaiting sale of liquidation assets and scuttling the liquidation of Corporate Debtor as going concern, the R1 Bank herein is contemplating to proceed against the properties offered by the Applicants as collateral security by issuing a Demand Notice dated 18.12.2019, followed by Possession Notice dated 11.03.2020. 8. Basing on the above facts, the points for consideration before this Adjudicating Authority are as under: a. Whether the instant Application filed by the Applicant companies is maintainable under provisions of IB Code, 2016 or not? b. Whether the Respondent No. 1 bank can initiate the proceedings under SARFAESI Act, 2002 and sell the assets of the Applicant companie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tments would depend, inter-alia, on the value of the assets owned by the subsidiary companies, apparently, the successful bidder has bid the acquisition amount based on the value of the assets of the Corporate Debtor which include the investment in the shares of the Applicant companies i.e., the subsidiary companies herein. 14. In case, the Respondent No. 1 bank is allowed to proceed with the sale of the Applicants, there is every chance that it would diminish the value of the Applicants, which would result in diminishing the value of the Corporate Debtor, since the value of the Corporate Debtor includes the value of its shareholding in the Applicant companies. 15. The Hon'ble Supreme Court in the matter of Swiss Ribbons Pvt. Ltd. vs. Union Of India has held as under:- ... .... The Preamble of the Code states as follows:-- --An Act to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time- bound manner for maximization of value of assets of such persons, to promote entrepreneur ship, availability of credit and balance the interests of all the stakeholders including....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion for creditors. " 16. Further Hon'ble NCLAT vide Company Appeals (AT) (Insolvency) Nos. 82, 123, 188, 216 & 234 of 2018 in the matter of Binani Industries limited vs. Bank of Baroda and ors, has categorically held as under:- 17. To decide the issue, it will be desirable to notice the object of the T&B Code', object of 'Resolution' and what is expected from the 'Committee of Creditors', as summarized below: - 1. The objective of the 'I&B Code' As evident from the long title of the 'I&B Code', it is for reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons to promote entrepreneur ship, availability of credit, and balance the interests all stakeholders. The recent Ordinance explicitly aims to promote resolution over liquidation. 2. The objective of the 'I&B Code' is Resolution. The Purpose of Resolution is for maximisation of value of assets of the 'Corporate Debtor' and thereby for all creditors. It is not maximisation of value for a 'stakeholder' or 'a set of stakeholders' such as Credi....