TaxTMI 
TaxTMI 
2022 (2) TMI 675
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....d order dated 4th December, 2019 (delivered on 17th December, 2019) in MA/1189/2019 in Company Petition No. IBA/434/2010 (filed by the Applicant/Resolution Professional) passed by the 'Adjudicating Authority' (National Company Law Tribunal, Division Bench, Chennai). 2. The 'Adjudicating Authority' (National Company Law Tribunal, Division Bench, Chennai) while passing the 'impugned order' dated 04.12.2019 (delivered on 17.12.2019) in MA/1189/2019 in Company Petition No. IBA/434/2010 (filed by the Applicant/Resolution Professional under Section 33 & 60(5) of the I & B Code, 2016 read with Regulation 33(2) of IBBI (Liquidation Process Regulations, 2016) at paragraphs 8 to 17 had observed the following:- "8. At this juncture, it is pertinent on the part of us to mention that since the Suspended Directors and their counsel have kept on saying that money would come from various sources so as to avoid sending this company to liquidation, we have also believed that this payment would avert sending this company into liquidation in that belief waited again and again hoping that this money, which the Suspended Directors promised to bring in, would come but whereas the timelines given by th....
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..... The suspended director has further stated that the aforesaid sum will be paid by raising funds through DCB Bank and/or Phoenix ARC and/or Kotak Mahindra Bank and/or Financial Institutions and friends and relatives with an undertaking that upon failure to pay the aforesaid amount within sixty days i.e. with effect from 23.07.2019, the Financial Creditor (M/s Muthoot Fincorp Ltd) may proceed in accordance with the procedure under Insolvency and Bankruptcy Code, 2016 (IBC). The suspended director has also mentioned that the undertaking has been given to Muthoot Fincorp Ltd (Financial Creditor) without prejudice to the rights and contentions of the suspended director. Looking at the affidavit filed by the suspended director, we hereby hold that he shall procced as stated in the affidavit but until such time, the management of the company will run as contemplated under IBC by making it clear that the affidavit will be considered without prejudice to the rights and contentions of the suspended director as well as M/s Muthoot Fincorp Ltd. List this application as fixed earlier i.e. 23.09.2019." 15.In the above order, it was held that the affidavit of undertaking given by the Sus....
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....el for the Appellant contends that the 'Adjudicating Authority' had failed to appreciate that the 'Corporate Applicant' should have remained as a 'Going Concern' under the I & B Code with a view to arrive at a suitable Resolution Plan. 5. According to the Learned Counsel for the Appellant, the 'Adjudicating Authority' had not taken into account of the prime fact that without the 'Corporate Applicant' being a 'Going Concern' the pending debts would not possibly be repaid by it which would finally affect the interest of all stake holders. 6. The Learned Counsel for the Appellant takes a plea that the 'Adjudicating Authority' had committed an error in not appreciating the fact that the 'Suspended Directors' were not in possession of the Hospital Premises under the Equipment and Machinery present therein had provided all the information that were available with them. 7. The Learned Counsel for the Appellant proceeds to point out that the physical possession of the Hospital(asset of the 'Corporate Applicant') was with the 1st Respondent, which should have been under the custody of the 'Resolution Professional' after the order of 'Moratorium' dated 4.4.2019 in terms with Section 14 r.....
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....er, the 'Memorandum of Deposit of Title Deed' was prepared by the 1st Respondent and presented before the 'Office of the Sub-Registrar' where the Director of 'Corporate Applicant' had executed the said document and that 1st Respondent had conveyed that only on execution of 'Deposit of Title Deeds', the balance amount of Rs. 7 Crores would be released to the 'Corporate Applicant'. 14. The Learned Counsel for the Appellant submits that the 1st Respondent had only released a sum of Rs. 3 Crores, as against Rs. 7 Crores and the balance of Rs. 4 Crores was not released by the 1st Respondent till date. 15. The Learned Counsel for the Appellant, pertaining to the issue of 'Application' under Section 87 of the Companies Act, 2013 made by the 1st Respondent and the resultant order dated 10.01.2018 passed by the 'Regional Director' points out that the 'Corporate Debtor' was filing the statutory compliance before the 'Registrar of Companies' and the 'Ministry of Corporate Affairs', maintaining the records of the 'Corporate Debtors' for 30 years and having access to all the information relating to the loan facilities availed by the 'Corporate Debtor', including the facility availed from the ....
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....s executed by the Appellant, to keep the record straight and to recognize that the Schedule Property stands vested with 'Corporate Applicant' by means of incorporation and to undertake that the Appellant will not treat the property as his personal property. 20. The Learned Counsel for the Appellant submits that on 13.01.2020, the 1st Respondent had issued a notice under Section 13(4) of the SARFAESI Act 2002 read with Rules 8(6) of the Security Interest (Enforcement) Rules, 2002 of the 'Corporate Applicant' and its 'Suspended Director' providing one last and final opportunity to them, to discharge their liability within a period of 30 days, post which the 'Assets of the 'Corporate Applicant' presently under the physical possession of the 1st Respondent shall be exposed for Sale through e-auction. In fact, the action of the 1st Respondent is in contradiction to Section 52 of the Code and that the Appellant apprehends that the 1st Respondent might illegally and against the provisions of the I & B Code, 2016, Sell Off of the Hospital under SARFAESI Act, 2002 which the 'Adjudicating Authority' had failed foresee. 21. On behalf of the Appellant, it is brought to the fore that the 'Cor....
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....Authority' had failed to appreciate that the delay in settlement was on account of the 1st Respondent and after the filing of MA No. 1189/2019 by the Resolution Professional praying to liquidate the 'Corporte Applicant' on 22.10.2019, the Promotors on 06.11.2019 had filed the Memo before the 'Adjudicating Authority' mentioning that leading Financial Institutions are in constant touch to settle the outstanding dues and whole deal would be struck in the next 15 days and that the outstanding dues of the 1st Respondent will be settled by them and sought to exclude the 26 days from the CIRP period. However, the 'Adjudicating Authority' without considering these prays, had passed the 'Liquidation' order. 27. The Learned Counsel for the Appellant projects an argument that only 180 days plus 30 days extension was granted to the 'Corporate Applicant' but the Code as it stood had provided for the time period of 180 days and extension upto 90 days namely viz., 270 days for the resolution of the 'Corporate Debtor'. In fact, the 3rd Respondent had prayed for an extension of 30 days only in spite of availability of extension upto 90 days. 28. The Learned Counsel for the Appellant contends that....
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.... vests with the 'Corporate Applicant'. 33. The Learned Counsel for the Appellant submits that the 'Resolution Professional' Sripriya Kumar was replaced in the first meeting of the CoC dated 03.07.2019 (the 1st Respondent/Majority Member of CoC had voted in the first meeting of the CoC to replace the 'Resolution Profession' Sripriaya Kumar with that of Deepa V Ramani) and that the replaced Resolution Professional Ms Deepa V Ramani had not pressed for the adjudication of MA 363/2019, but moved an 'Application' to Liquidate the 'Corporate Applicant' at the instant of 1st Respondent/Financial Institution. Apart from that, the Resolution Professional/Liquidator was reluctant to take possession on numerous occasions. 34. The Learned Counsel for the Appellant comes out with a stand that the 'Resolution Professional' had time and again failed to take possession of the Assets of the 'Corporate Debtor' as per Section 25(2)9a) of the Code which reads: "Section 25 - Duties of resolution professional: 2(a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor:" 35. The Learned Counsel for the Appellant submits....
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....Tribunal' in Company Appeal (AT)(Ins) 146/2020. 39. The Learned Counsel for the Appellant adverts to the fact that IA 699/IBA/2020 filed by the (1st Respondent/Financial Corporation) was allowed by the 'Adjudicating Authority in disregard to the 'Principles of Natural Justice' and contrary to the pleadings and documents available on record, without hearing the impleadment Application IA 933/IB/2020 filed by the Appellant and also without considering the corrected pending MA No. 363/2019. As such, a request is made on behalf of the Appellant for passing of an order against the 1st Respondent/Financial Corporation under Section 65 of the I&B Code for taking steps against the Order dated 24.01.2010 passed by this 'Tribunal'. 40. The Learned Counsel for the Appellant makes a fervent plea before this 'Tribunal' to consider IA 2936/2020 (Filed by the Appellant/Applicant) in permitting the Appellant to complete the process of settlement within 90 days of acceptance of the same from the 1st Respondent or from 90 days of the Order as passed by this 'Tribunal' and to allow the Appellant to deposit the amount so calculated and communicated by the Respondents within a period of 90 days. 41.....
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....dator can sell the business of the corporate debtor as a going concern. (See ArcelorMIttal (Arcelor Mittal (India)(P)Ltd V Satish Kumar Gupta, (2019) 2 SCC 1] at para 83, fn 3). 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resoluti....
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....vide Civil Appeal No. 10673 of 2018) dated 05.02.2019 wherein at paragraph 61 and 62 it is observed as under:- 61. Assuming that this provision was applicable to the cases on hand, non-recording of reasons for approving or rejecting the resolution plan by the concerned financial creditor during the voting in the meeting of CoC, would not render the final collective decision of CoC nullity per se. Concededly, if the objection to the resolution plan is on account of infraction of ground(s) specified in Sections 30(2) and 61(3), that must be specifically and expressly raised at the relevant time. For, the approval of the resolution plan by the CoC can be challenged on those grounds. However, if the opposition to the proposed resolution plan is purely a commercial or business decision, the same, being non-justiciable, is not open to challenge before the Adjudicating Authority (NCLT) or for that matter the Appellate Authority (NCLAT). If so, non-recording of any reason for taking such commercial decision will be of no avail. In the present case, admittedly, the dissenting financial creditors have rejected the resolution plan in exercise of business/commercial decision and not because ....
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.... so important from the point of view of the economy of the country and would serve the purpose in the growth of a healthy economy. It would certainly provide guidance to the secured debtors in general in conducting the affairs in a manner that they may not be found defaulting and being made liable for the unsavoury steps contained under sub-section (4) of Section 13. At the same time, more importantly we must make it clear unequivocally that communication of the reasons not accepting the objections taken by the secured borrower may not be taken to give an occasion to resort to such proceedings which are not permissible under the provisions of the Act. But communication of reasons not to accept the objections of the borrower, would certainly be for the purpose of his knowledge which would be a step forward towards his right to know as to why his objections have not been accepted by the secured creditor who intends to resort to harsh steps of taking over the management/business of viz. secured assets without intervention of the court. Such a person in respect of whom steps under Section 13(4) of the Act are likely to be taken cannot be denied the right to know the reason of non- acce....
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....titutions, are secured creditors whereas most operational creditors are unsecured, payments for goods and services as well as payments to workers not being secured by mortgaged documents and the like. The distinction between secured and unsecured creditors is a distinction which has obtained since the earliest of the Companies Acts both in the United Kingdom and in this country. Apart from the above, the nature of loan agreements with financial creditors is different from contracts with operational creditors for supplying goods and services. Financial creditors generally lend finance on a term loan or for working capital that enables the corporate debtor to either set up and/or operate its business. On the other hand, contracts with operational creditors are relatable to supply of goods and services in the operation of business. Financial contracts generally involve large sums of money. By way of contrast, operational contracts have dues whose quantum is generally less. In the running of a business, operational creditors can be many as opposed to financial creditors, who lend finance for the set up or working of business. Also, financial creditors have specified repayment schedul....
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.... of the property in question of which the 'Corporate Debtor' is the owner". (vi) The Learned Counsel for the Appellant cites the judgement of this Tribunal in M/s Unigreen Global Pvt Ltd V. Punjab National Bank (vide Comp App (AT)(Ins) No.81/2017 wherein at paragraph 26 it is observed as under:- "26. Any proceeding under Section 13(4) of the SARFAESI Act, 2002 or suit under Section 19 of the DRT Act, 1993 pending before Debt Recovery Tribunal or appeal pending before Debt Recovery Appellate Tribunal cannot proceed in view of the order of moratorium as may be passed." (vii) The Learned Counsel for the Appellant adverts to the order of the 'Adjudicating Authority' dated 12.12.2019 (NCLT Mumbai Bench in MA No.130/2019 CP/IB/3863/MB/2018) in Goa Auto Accessories V Suresh Saluja, Nagpur wherein at paragraph 17, 19, 23,26, 29 it is observed as under:- 17. The counsel representing the RP relied on the judgement of NCLAT in CA No.719 of 2018, wherein it was held that at para 13 as follows: 13. It is not the case of the Appellant that the title of the assets has already been transferred or they have sold the assets in terms of Section 13(4) of the 'SARFAESI Act, 2002'. It is also no....
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....3 of the Code further bars the jurisdiction of the Civil Court in matters pertaining to the NCLAT, section 231 of the Code also bar the jurisdiction of the civil court from granting any injunction in respect of any action taken or in pursuance of any order passed by the Adjudicating Authority under this Code. This code is a self-contained legislation conferring the supervisory powers on the NCLT over CIRP process right from the stage of application being made for initiation of the CIRP process to the completion of the CIRP/Liquidation as the case may be. Upon conjoint reading of section 60(5), Section 63, Section 231 and section 238, the jurisdiction of Civil Court is excluded related to the matters related to I&B Code. Therefore, it can be held that NCLT can order possession of the property of Corporate Applicant to facilitate the CIRP process and allow the Resolution Professional to take possession of the assets of Corporate Applicant. 26. Further the non-obstante clause as prescribed section 238 of the I&B Code, 2016, provides that the provisions of the Code shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in for....
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....om the above reply it is also clear that the petitioner has not disputed the claim made by the 1st Respondent. In fact they specifically admitted the claim and only sought three months' time to settle the outstanding. But in spite of seeking for three months' time to settle the outstanding as early as 03.10.2007, it is pertinent to note that even till date, the petitioner has not settle the loan account with the 1st Respondent...." "12. It is also pertinent to note that even before this Court, when the matter came up on 11.10.2018, undertaking was made by the petitioner that the entire due payable to the respondent would be paid within a period of 45 days. To that effect the petitioner has also filed an affidavit of undertaking dated 17.10.2018. Thereafter, without honouring the undertaking given before this Court, the petitioner filed an application seeking for an extension of time and this court also showed indulgence to the petitioner by order dated 05.12.2018 extending the time for compliance till 10.01.2019. Even then, without complying with the undertaking given before this Court the petitioner again sought for extension of time. However, this Court declined to accept the r....
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.... of Creditors' by a majority of 73.44% and even the 'remainder' of the 'Committee of Creditors' had just abstained from voting, but had not voted against the said 'Resolution' and in this regard, the pertinent portion of the said 'Resolution' of the 'Committee of Creditors' qua Liquidation of the 'Corporate Debtor' is mentioned as under: "Resolved that pursuant to the provisions of Section 33 of the Insolvency and Bankruptcy Code, 2016 of the Committee of Creditors be and is hereby given for submitting an application to the Honourable National Company Law Tribunal, Chennai Bench for Liquidation of M/s Santhosh Hospitals Private Limited, in the event of non-completion of the Settlement and withdrawal of the process under Section 12-A of the Code by 19.10.2019 and subject to the decision of the Hon'ble Tribunal on 21.10.2019." 51. The Learned Counsel for the 1st Respondent forcefully submits that the language of the I & B Code is very clear and once a 'Resolution' was passed by the 'Committee of Creditors' of the 'Corporate Debtor', in terms of Section 33 of the I & B Code, the commercial wisdom of the 'Committee of Creditors' cannot by questioned and the same is binding. 52. The....
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....G OF LOAN 56. The Learned Counsel for the 1st Respondent submits that the 3rd Respondent availed the loan from the 1st Respondent to a sum of Rs. 42,00,00,000/- as per sanction letter dated 14.07.2016 and later executed a loan agreement dated 06.08.2016 indicating clearly that the 'Appellant' stood as 'Guarantors' and furnished security, in the nature of the subject property. Furthermore, the subject property was mortgaged by the Appellant, being the owner of the same, through a 'Memorandum of Deposit of Title Deeds' dated 17.08.2016, registered in the 'Office of the Sub-Registrar' (vide Document No.8571 of 2016). 57. The Learned Counsel for the 1st Respondent takes a plea that the 'Resolution' passed by the Board of Directors of the 3rd Respondent specifically mentions that the Appellant (and not the 'Corporate Debtor') was to mortgage the said property in favour of the 1st Respondent and the recitals of the 'Resolution' is as follows:- "the company do request Dr. P. Mahalingam to agree to provide equitable mortgage of the landed property owned by him presently occupied by M/s Santhosh Hospitals Private Limited and to offer the said immovable properties as securities to the lo....
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.... state that the land of commercial Plot No.1, 7th Avenue, Besant Nagar, Chennai - 600090, comprised in Survey No.154 Part, Thiruvanmiyur Village, Mylapore-Triplicane Taluk, measuring about 7 Grounds and 963 Sq. Fee was originally owned by Dr. P.M. Narguman (wife of Dr. P. Mahalingam) and thereafter by renowned cardiologist Dr. P Mahalingam (the Petitioiner's Founder and Chairman).." "...6. I state that the loan Agreement executed----Subsequent to completion of the necessary formalities, legal requirements and in pursuance of the Loan Agreement, a Memorandum of Deposit of Title Deeds in respect of the premises, being land and building situated at Commercial Plot No.1, 7th Avenue, Besant Nagar, Chennai 600090 comprised inn Survey No.154 Part, Thiruvanmlyur Village, Mylapore -Triplicane Taluk measuring about 7 Grounds and 963 Sq feet was executed on 17.08.2016 by Dr. P. Mahalingam in favour of the 1st Respondent, as required by it, to secure the Petitioner's loan. 62. The Learned Counsel for the 1st Respondent points out that the Writ Petition No.24867 of 2018 was dismissed by the Hon'ble High Court of Madras and it was observed that the proper remedy, if any, for the Respondents w....
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.... which he undertook to pay a sum of Rs. 57,50,00,000/- to the 1st Respondent in satisfaction of the debt owed by the 3rd Respondent, within 60 days. 1ST RESPONDENT'S CITATIONS: 68.(a) The Learned Counsel for the 1st Respondent adverts to the Judgement of this 'Tribunal' dated 31.07.2019 in 'Kautilya Industries Pvt. Ltd. v. Parasrampuriya Synthetic Ltd. [Comp. Appeal (AT)(INS) No. 282 of 2019] wherein at paragraph 6 to 11 it is observed as under: "6. On 3rd January, 2019, the Hon'ble High Court of Judicature for Rajasthan, Bench at Jaipur, taking into consideration the fact that the 'Resolution Professional' has been appointed under the 'I&B Code' by the Adjudicating Authority on 17th May, 2018, recalled the earlier order and disposed of all the Company Petitions to enable the 'Resolution Process' to continue. 7. From the aforesaid fact, it appears that there was no specific prohibition on the 'Committee of Creditors' for considering one or other 'Resolution Plan'. They held meeting after the first order of the Hon'ble High Court of Judicature for Rajasthan, Bench at Jaipur, i.e. on 27th September, 2018 and on different dates i.e. 8th October, 2018, 22nd October, 2018, 30th Oc....
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....mmittee of Creditors' in its meeting held on 31st August, 2017 asked the 'Resolution Professional' to come forward with concrete proposal for revival of the company as otherwise they will have to consider the question of liquidating the company. Thereafter in absence of 'resolution plan', the 'Committee of Creditors' decided to go ahead with the liquidation of the company. Learned counsel appearing on behalf of the promoter submits that the appellant could have submitted a 'Resolution Plan' but in view of Section 29A, as the appellant is not eligible to file the 'Resolution Plan', no such claim can be accepted. We find no ground to interfere with the impugned order. The appeal is dismissed. No cost." (c). The Learned Counsel for the 1st Respondent refers to the Judgment of this 'Tribunal' dated 10.002.2020 in 'Sunil S. Kakkad v. Atrium Inforcom Private Limited & Ors.' [vide Comp. App.(AT)(INS 194 of 2020] wherein at paragraph 19, 20 and 21 it is observed as under: "19. It is pertinent to mention that explanation to sub-section (2) of Section 33 of the I&B Code, 2016 depicts that the CoC is fully empowered to order for liquidation at any stage of the CIRP, but before the confir....
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....rporate Debtor subject to only exception that such course cannot be adopted after its confirmation i.e. after approval of the Resolution Plan by the Adjudicating Authority. We find no merit in this appeal. The same is dismissed." and the same was upheld by the Hon'ble Supreme Court in Civil Appeal No.5640 of 2021. (e). The Learned Counsel for the 1st Respondent places reliance on the decision of the Hon'ble Supreme Court in 'K Shashidhar v. Indian Overseas Bank' [(2019) 12 SCC 150 at Spl Pages 183 and 184] wherein at paragraphs 52 & 53 it is observed as under: "52. As aforesaid, upon receipt of a "rejected" resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new appro....
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....all financial creditors have votes in proportion to the magnitude of debt that they hold. In the past, laws in India have brought arms of the Government (legislature, executive or judiciary) into this question. This has been strictly avoided by the Committee. The appropriate disposition of a defaulting firm is a business decision, and only the creditors should make it." (emphasis supplied) (f). The Learned Counsel for 1st Respondent refers to the decision of the Hon'ble Supreme Court in Committee of Creditors of Essar Steel V. Satish Kumar Gupta 2019 SCC Online SC 1748 wherein at paragraph 46 it is observed as under:- "46. In K. Sashidhar (supra) this Court was called upon to decide upon the scope of judicial review by the Adjudicating Authority. This Court set out the questions to be determined as follows: "18. Having heard learned counsel for the parties, the moot question is about the sequel of the approval of the resolution plan by the CoC of the respective corporate debtor, namely KS&PIPL and IIL, by a vote of less than seventy five percent of voting share of the financial creditors; and about the correctness of the view taken by the NCLAT that the percentage of voting sh....
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....nd legitimate 'Title Documents' and not in terms of the Balance Sheet entries in the 'Corporate Debtor's Financial Statements'. THE REGISTRATION ACT, 1908 69. The Learned Counsel for the 1st Respondent refers to Section 51 of the Registration Act, 1908 and submits that documents concerning immovable property are required to be maintained only in Book I which relates to 'Register of Non-Testamentary Document relating to Immovable Property'. 70. The Learned Counsel for the 1st Respondent contends that only a legally recognised registered document will convey Title/Ownership, (vide as per Section 54 of the Transfer of Property Act, 1882) as per decision of the Hon'ble Supreme Court in Suraj Lamp Industries V State of Haryana (2012) 1 SCC 656 wherein it is observed as under:- 11. Section 54 of TP Act makes it clear that a contract of sale, that is, an agreement of sale does not, of itself, create any interest in or charge on such property. This Court in Narandas Karsondas V S.A Kamtam and Anr.(1977) 3 SCC 247, observed: A contract of sale does not of itself create any interest in, or charge on, the property. This is expressly declared in Section 54 of the Transfer of Property Ac....
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.... 71. The Learned Counsel for the 1st Respondent comes out with a plea that the 'Deed of Solemn Undertaking' vest/convey the property in favour of the 'Corporate Debtor' in the year 1988, prior to the 'Asset' coming into ownership of Dr.PM Nargunam, as per Sale Deed dated 30.01.1989 and prior to the gift thereof to the Appellant (28.09.2002) and this is contrary to the Financial Statements of the 'Corporate Debtor' which only recorded the 'subject property' as an asset of the 'Corporate Debtor' only from the year 2002 and not from its incorporation in the year 1988. PROCEEDING UNDER SARFAESI ACT, 2002 72. The Learned Counsel for the 1st Respondent points out that the 'Appellant' was a Guarantor qua the debts of 'Corporate Debtor' and that the 1st Respondent is empowered to proceed against the Appellant, in terms of SARFAESI Act, 2002 and in this regard adverts to the decision of Hon'ble Supreme Court in State Bank of India V. V.Ramakrishnan & Others 2018 17 SCC 394 wherein it is held that SARFAESI proceedings against the personal Guarantor of Corporate Debtor (as already initiated in present case), can continue under the SARFAESI Act, even though a moratorium may be enforced again....
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....id section, therefore, leads to the conclusion that the moratorium referred to in Section 14 can have no manner of application to personal guarantors of a corporate debtor. XXX XXX XXX 25. Section 31 of the Act was also strongly relied upon by the respondents. This section only states that once a resolution plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, under Section 133 of the Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the resolution plan, which has been approved, may well include provisions as to payments to be made by such guarantor. This is perhaps the reason that Annexure VI(e) to Form 6 contained in the Rules and Regulation 36(2) referred to above, require information as to personal guarantees that have been given in relation to the debts of the corporate debtor. Far from supporting the stand of the respondents, it is clear that in point of fact, Section 31 i....
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....stitution to proceed under the SARFAESI Act, 2002 remains suspended for a limited period. The existing contracts between the surety, principal debtor and the creditor remains unaffected. 37. Section 14 of the Code of 2016 does not apply to a personal guarantor. The Code of 2016 does not allow personal guarantors to escape their liability. When an application under Section 7 of the Code of 2016 is admitted by the Adjudicating Authority, the steps taken subsequent thereto flows out of the statute. The two termination points of an application under Section 7 of the Code of 2016, after the admission of such application, do not result in any variance, made without the surety's consent, in the terms of the contract between the principal debtor and the creditor to constitute a discharge of a surety under Section 133 of the Act of 1872." APPELLATE TRIBUNAL'S DECISIONS 76. The Learned Counsel for the 1st Respondent refers to the judgement of this 'Tribunal' in Karan Gambhir, Director, Forgings Pvt Ltd V. Sajeve Bhushan Deora dated 09.01.2019 (vide Comp App (AT)(Ins) No.779/2018 wherein at paragraph 1 to 4 it is observed as under:- "1.This appeal has been preferred by the appell....
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....application to the Adjudicating Authority for extension of the period of the corporate insolvency resolution process, only if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 75% of the voting shares. The provision does not stipulate that such application is to be filed before the Adjudicating Authority within 180 days. If within 180 days including the last day i.e. 180th day, a resolution is passed by the committee of creditors by a majority vote of 75% of the voting shares, instructing the resolution professional to file an application for extension of period in such case, in the interest of justice and to ensure that the resolution process is completed following all the procedures time should be allowed by the Adjudicating Authority who is empowered to extend such period up to 90 days beyond 180th day. 5. In the present case, the Adjudicating Authority has not hold that the subject matter of the case do not justify to extend the period. It has not been rejected on the ground that the committee of creditors or resolution professional has not justified their performance during the 180 days. In such circumstances, it was duty on t....
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....e excluded for all purpose. Now the Resolution Professional, Committee of Creditors and the Adjudicating Authority will proceed in accordance with law. 5.The appeal is allowed with the aforesaid observations. No cost." 3RD RESPONDENT'S PLEAS: 79. The Learned Counsel for the 3rd Respondent submits that the 3rd Respondent/Liquidator is a proforma party to the present Appeal and that the Interim Resolution Professional preferred MA 363/2019 before the 'Adjudicating Authority', on 13.04.2019 claiming 'possession of the Hospital premises' from the 1st Respondent and that the 1st Respondent took a plea that the land upon which the Hospital was situated belongs to the Appellant, in its individual capacity and was not an Asset of the 'Corporate Debtor'. However, no orders was passed in MA 363/2019 although the matter was argued on numerous occasions and that no orders were passed as regards the Issue of possession of such premises and despite the Status Quo orders passed by the 'Adjudicating Authority' on 23.4.2019, 2.5.2019 and 27.5.2019 the possession of the Hospital Premises continued to remain with the 1st Respondent. 80. It is represented on behalf of 3rd Respondent that an 'Affi....
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...., Regulations, 2016 and Section 60(5) of the Code) had prayed for passing of an appropriate order to liquidate Corporate Debtor as per Chapter III of the I&B Code and Regulations framed thereunder etc. 85. As a matter of fact, the Applicant/Resolution Professional in MA 1189/2019 in IBA/434/2019 had averred that the Committee of Creditors at the 5th CoC Meeting that took place on 18.10.2019 had passed a Resolution for liquidation of the Corporate Debtor, because of the fact that the extended time for completion of 'CIRP' had lapsed on 19.10.2019. 86. Furthermore, in the 5th Meeting of the Committee of Creditors (Members holding 73.44%) had voted in favour of liquidating the 'Assets of the Corporate Debtor' and the Assets of the Company be sold by the liquidator either as a going concern (if feasible as deemed by the decision of the Stakeholders' Consultation Committee) or individual sale of assets or any other manner as deemed fit by the Liquidator in order to maximise the value of the Assets of the Company. 87. It comes to be known that the Applicant/Resolution Professional (Ms Deepa Venkataramani) was appointed by the CoC (Members holding 73.44%) as the Liquidator of the Corpo....
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....ssistance as may be necessary to take possession of such land and building and to stay all further proceedings in respect of Sale Notice dated 11.04.2019. GIST OF REPLY 93. The 1st Respondent/Muthoot Fincorp Ltd in its reply/counter to MA 363/2019 had averred that the 'Corporate Debtor'/Santhosh Hospital Pvt Ltd had approached the 1st Respondent in 2016 with a request to give financial assistance to take over its liability with the Indian Overseas Bank and fund its project for renovation and its working capital requirements. In fact, the Corporate Debtor had offered 'collaterals' including mortgage of 7 grounds 963 sq. ft of land with building thereof in survey No.154(Part), Besant Nagar, Thiruvanmiyur Village, Mylapore Triplicane Taluk, Chennai, owned by Dr. P. Mahalingam (Appellant). 94. According to the 1st Respondent/Muthoot Fincorp, it accorded approval of loan of Rs. 42.00 crores to the 'Corporate Debtor' as per approval letter dated 14.7.2016, conveying the terms and conditions of the approval, (including the securities against which the loan was sanctioned) which among other things mentioned that the primary security as equitable mortgage of the site measuring 177.63 sq ....
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....'Title' to the land, claimed to be in the ownership of 'Corporate Debtor' (including for the plot of land valued at Rs. 1.37 crores in the 'Balance Sheet'). As such, the stand of the 1st Respondent is MA/363/2019 is to be dismissed. 99. As seen from the GOMS No.635 Housing & Urban Development Department dated 07.05.1987 of the Government of Tamil Nadu, the Chairman of the Tamil Nadu Housing Board through its letter dated 01.04.1987 had recommended to allot the vacant land in SO No.154(Part) in Thiruvanmiyur Village with an extent of 7 grounds and 963 sq. feet to Tmt P.M. Nargunam in lieu of the site already allotted as she has represented that the site No.E.158A allotted to her at Besant Nagar is not suitable for construction of Nursing Home and the Government after due consideration had accepted the recommendation of the Chairman, Tamil Nadu Housing Board and allotted the vacant site measuring 7 grounds and 0.963 sq feet in S.No.154/Part Thiruvarmiyur Village to Dr. (Tmt) P. M.Nargunam No.140, Tiger Varadhachari Road, Kalakeshtra Colony, Besant Nagar, Madras-90 on hire purchase basis subject to the usual terms and conditions prescribed by the Tamil Nadu Housing Board as per allot....
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.... registered 'Rectification Deed' to and in favour of the Appellant in correcting the Schedule of the property in accordance with the Plan annexed with the Sale Deed dated 30.01.1989 (vide Document No.258/89, DRO Madras (South)). It is evident that the measurement mentioned in the Schedule at Page No.8 in Line No.5 of the Original Sale Deed executed by the vendor was rectified and to be read as 'measuring on the North 185' on the East 100' on the'. In all other aspects, it was mentioned that the Sale Deed dated 30.01.1989 (vide registered as Document No.258/1989 DRO, Madras (South)) was held to be good. DEED OF SOLEMN UNDERTAKING 105. It is evident that the Appellant and M/s Santhosh Hospitals Pvt Ltd (through a registered Document No.1503 of 2002) on the file of Joint Sub-Registrar-I South Chennai had executed a 'Deed of Solemn Undertaking' dated 05.11.2002 (in respect of the Scheduled Land bearing Plot No.1, 7th Avenue, Besant Nagar, Chennai 90, comprised in S.No.154 Part of Thiruvanmiyur Village formerly Saidapet Taluke at present Mylapore-Triplicane Taluk with an extent of 7 Ground 0963 Sq Ft with specified boundaries) mentioning that the Appellant (the party of the 1st Part) ....
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.... of which registration is compulsory" 1. The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which Act XVI of 1864, or the Indian Registration Act, 1866 or the Indian Registration Act, 1871 or the Indian Registration Act, 1877, or this Act came or comes into force namely:- (a) instruments of gift of immovable property; (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property; (c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration , assignment, limitation or extinction of any such right, title or interest; and (d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent; MORTGAGE, MORTGAGOR, MORTGAGEE AND MORTGAGE DEED 110. Section 58(a) of the Transfer of Property Act, 1882 defines 'Mortgage' as the ....
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....ortgage' by delivery or the deposit of writings may be proved by written documents or coupled with parole evidence or by an inference arising from deposit, where the possession of the document by the holder cannot be otherwise explained. 115. If the form of documents of title were delivered to the creditor is such that from the deposit of such document alone the Court would be entitled to conclude that the documents were deposited with the intention of creating a security for the repayment of the debt, prima facie a mortgage by deposit of title deeds would be proved. 116. It cannot be gainsaid that only by a 'Valid Registered Document' 'the ownership/title of an immovable property' shall be conveyed and that the 'Deed of Solemn Affidavit Undertaking' dated 05.11.2002 is not a 'substitute one' pertaining to the Title/Transfer of the immovable property. In this connection, it is not out of place for this Tribunal to make a relevant mention that Section 6 of the Transfer of Property Act, 1882 provide that 'property of any kind may be transferred, except as otherwise provided by this Act or by any other law for the time being in force'. WHAT MAY BE TRANSFERRED AND OPERATION OF TRANS....
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....g an 'Absolute Settlement' unerringly points out that the 'Appellant' is a lawful owner, in respect of the subject property. As such, the contra plea taken on behalf of the Appellant that the ownership and title in respect of the subject property is in favour of the Corporate Debtor/Santhosh Hospitals Pvt Ltd is negatived by this Tribunal. 123. When the Corporate Debtor executed a loan agreement dated 06.08.2016 with the 1st Respondent, the 'Appellant', as owner of the said property stood as 'Guarantor' and 'Mortgagor' as evidenced from the sanctioned Letter dated 14.07.2016 in respect of the loan taken by the 3rd Respondent from the 1st Respondent. In fact, the Appellant in his personal capacity had executed the 'Memorandum of Deposit of Title Deeds' dated 17.08.2016 in favour of the 1st Respondent. 124. To put it precisely, in respect of an application filed by the 1st Respondent before the Regional Director, Ministry of Corporate Affairs, under Section 87 of the Companies Act, 2013, the 3rd Respondent's plea that the subject property was a personal property and hence 'charge' could not be registered in the name of the 'Corporate Debtor' was turn down and through an order dated....
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....petitioner again sought for extension of time. However, this Court decided to accept the request of the petitioner and posted the Writ Petition on 28.01.2019 for hearing on merits. Therefore, the conduct of the petitioner has been to merely seek time and not repay the loan as promised by them. Inspite of filing of an affidavit of undertaking before this Court, so far the petitioner has not honoured their commitment. Therefore, just for the sake of prolonging the matter, they have filed an affidavit of undertaking dated 17.10.2018 before this Court, stating that they would settle the entire dues within a period of 45 days. 13.In these circumstances, the ratio laid down by the Apex Court in the judgement reported in 2018 (2) GTC 569 (ITC Vs Blue Coast Hotels Ltd, & Others) squarely applies to the facts and circumstances of the present case. Following the ratio laid down by the Apex Court, we are of the considered view that non-compliance of sub-section (3-A) of Section 13 cannot be of any avail to the petitioner whose conduct has been merely to seek time and not to repay the loan as promised on several occasions." and the 'Writ Petition' came to be dismissed without costs. 128. I....
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....etc. He is to file the information so collected with the Information Utility wherever required. Where the sum claimed by a creditor is not precise due to any contingency or other reason, the 'Interim Resolution Professional' or the Resolution Professional, shall make the best estimate of the sum of the claim resting on the information available with him as per Regulation 14 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. 133. The Interim Resolution Professional/Resolution Professional as per Regulation 10 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 may call for such other evidence or clarification as he deems fit from a creditor for substantiating the whole or part of its claim. As per Regulation 12 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 a creditor is to submit the 'proof of claim' on or before the last date mentioned in the public announcement but a creditor, who fails to submit proof of claim within the time stipulated in the public announcement, may submit such proof to the Interim Resolution Professional or the Resolution Professional, till the approval of the Resoluti....
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.... Committee of Creditors to liquidate the Corporate Debtor or (c) where the Resolution Plan approved by an Adjudicating Authority is violated by the concerned Corporate Debtor. The reality of the matter is anyone, other than the Corporate Debtor, whose interest are vitally affected by such breach may apply to the Adjudicating Authority, who may then pass a liquidation order, on such application. PURVIEW OF SECTION 65 OF I&B CODE 139. Section 65 of the I&B Code, 2016 mentions penalty for fraudulent or malicious initiations of proceedings, which can be levied by the 'Adjudicating Authority' if a person initiates the IRP or liquidation proceedings either fraudulently or with malicious intent or for any other aim other than the resolution of insolvency or liquidation. 140. To impose a penalty, under Section 65 of the Code, an 'adjudicating authority' is to arrive at an ex facie opinion in the subject in issue. No such penalty under sub-section (1) or sub-section (2) of Section 65 can be saddled upon a person, by an 'adjudicating authority' without recording an opinion for arriving at an conclusion that the prime facie case is made out to suggest that the person 'fraudulently' or with....
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....e terms of mortgage, created by the 'Guarantor' of the 3rd Respondent/Santosh Hospitals Pvt. Ltd. 145. Even the Hon'ble Madras High Court in WP 24867/2018, on 20.02.2019 (filed by the 3rd Respondent/Santosh Hospitals Pvt. Ltd against the 1st Respondent/M/s Muthoot Fincorp Ltd) had clearly observed at paragraph-12 that 'for the sake of prolonging the matter, they have filed an Affidavit of Undertaking dated 17.10.2018 before this Court that they would settle the entire dues within a period of 45 days. Also, the Hon'ble High Court went on to observe at paragraph-13 that 'we are of the considered view that non-compliance of sub section (3-A) of Section 13 cannot be of any avail to the Petitioner whose conduct has been merely to seek time and not to repay the loan as promised on several occasions.' 146. Any person who desires to submit a 'Resolution Plan', if he or it does so acting jointly or in concert with other persons, which person or other persons happened to either manage or control or be promotors of a 'Corporate Debtor'/classified as a 'Non-Performing Asset' and whose Debts were not paid for a period atleast one year prior to the commencement of CIRP, is not eligible to furn....
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....rongly handing over the possession of the Hospital premises/asset of the Corporate Applicant, which should actually be under the custody of the Liquidator/3rd Respondent as per order dated 24.01.2020 in Comp App (AT)(Ins) No.146/2020 passed by this Tribunal. 151. The Learned Counsel for the Appellant contends that the 'Adjudicating Authority' was not correct in allowing the IA/699/IB/2020 in CP No.434/IBA/2019 by passing the impugned order on 17.12.2020 when custody of the Hospital premises in IA/363/2019 in CP No.434/IBA/2019 was pending adjudication. 152. The other contention of the Learned Counsel for the Appellant is that because of the allowing of IA/699/2020 in CP No.434/IBA/2019 by the 'Adjudicating Authority' on 17.12.2020, the total value of the machinery which might get under the possession of the 1st Respondent, worth about Rs. 40 crores, the possession of the Hospital building will be retained by the 1st Respondent against the order dated 04.04.2019 passed by the 'Adjudicating Authority'. 153. The Learned Counsel for the Appellant submits that the 1st Respondent cannot be allowed to take the benefit on the ground that they violated the order dated 24.01.2020 passed b....