TaxTMI 
TaxTMI 
2022 (9) TMI 952
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....Property Private Limited. The Company Appeal (AT) (Insolvency) No.468 of 2022 has been filed against the order dated 11.03.2022 passed by National Company Law Tribunal, Mumbai Bench, Court III, by which order C.P. No.2312/IBC/MB/2019 filed by the Respondent IL&FS Financial Services Ltd. ("IL&FS") has been admitted. The Company Appeal (AT) (Insolvency) No.1027 of 2022 has been filed against the order dated 06.07.2022 in the same CP(IB) - 2312/IBC/MB/2019 by which Application filed by the Resolution Professional under Section 33 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code") for passing an order of liquidation has been allowed and the Adjudicating Authority directed for liquidation of the Corporate Debtor. 2. Brief facts of the case giving rise to these two Appeals are: (i) IL&FS vide its offer letter 27.12.2017 offered to extend to Smt. Anupama Agarwal ("the Borrower") a Rupee Term Loan facility upto Rs.30,00,00,000/- (Rupees Thirty Crores Only). The Offer Letter itself, while noticing the terms and conditions noticed in "Security Package", consisting of Primary Security, mortgage by way of deposit of original title deeds over residential prem....
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....earned Counsel for the Appellant challenging the order dated 11.03.2022 admitting Section 7 Application, raised following submissions: (i) That letter of Guarantee dated 29.12.2017 issued by the Corporate Debtor and relied by IL&FS is not a valid document in the eye of law. It is submitted that learned Adjudicating Authority failed to consider that the document is insufficiently stamped and cannot be received in evidence or acted upon. The Tribunal has erred in relying upon the Letter of Guarantee dated 29.12.2017 to establish the debt against the Corporate Debtor and an unstamped Letter of Guarantee could not have been relied upon for any purpose whatsoever. (ii) The Respondent No.1 does not come within the meaning of Financial Creditor as defined under Section 5(7) read with Section 5(8) and 5(5A) of the Code. The Corporate Debtor who is alleged as Guarantor does not fall within the definition of Corporate Debtor. Borrower being individual is not a 'Corporate Person', hence, Corporate Debtor by no stretch of imagination can fall within the meaning of 'Corporate Debtor'. (iii) Loan transaction between the Borrower and IL&FS is a Circular Loan Transaction, since Borrower imme....
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....r under the Loan Agreement/ Guarantee Agreement. 6. We have considered the submissions of learned Counsel for the parties and have perused the record. 7. Before we proceed to consider the respective submissions of the parties, we need to first notice certain terms and conditions of the Offer Letter as well as the Agreement entered between the Borrower and ILFS, as well as other relevant materials pertaining to the impugned property owned by the Corporate Debtor, i.e., Flat No.6. The Offer Letter dated 27.12.2017 has been part of the reply filed by the Appellant, which was issued by IL&FS to Principal Borrower in reference to Term Loan Facility of up to Rs.300 million to Smt. Anupama Agarwal. The Security Package as referred to at Sl. No.13 under heading 'Principal terms and conditions to Offer Letter' is as follows: "Security Package (13) Security : The Facility shall be secured by the following Security: Primary Security (a) Mortgage by way of deposit of original title deeds over residential premises namely "Flat No.6, Gold Croft, 39, Bhulabhai Desai Road, Mumbai - 26" having carpet area of ~ 3,150 sqft (builtup area of ~ 4109 sq. ft.) by Third Properties Pvt. Ltd. ("TPPL....
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....nal was that Facility Agreement was not sufficiently stamped, hence, Application ought not to have been admitted. The said submission was dealt by this Tribunal in paragraph 34 to 37. Ultimately, this Tribunal recorded conclusion in paragraph 42 to the following effect: "42. We are thus of the view that the decision of the Adjudicating Authority that Corporate Debtor has committed default is not vitiated which was fully supported by the materials on record even if Facility Agreement dated 22nd May, 2013 and 19th August, 2013 are ignored. The Corporate Debtor has taken a Financial Benefits from Standard Chartered Bank and obtained disbursal in three tranches of 5 Million Dollar each, which disbursements have not been denied in a pleading before the Adjudicating Authority. The submission of the Appellant that facility agreement being not stamped Section 9 Proceeding ought not to have proceeded has to be rejected. We thus find no substance in any of the submissions of Learned Sr. Counsel for the Appellant. There is no merit in the Appeal. The Appeal is dismissed." 11. Now, when we look into the materials, which are available on the record, suffice it to say that actions of the C....
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....rantor Company. Reliance has been placed on definition given in Section 5(5-A), defining "corporate guarantor". Section 5(5-A) is as follows: "5(5-A) "corporate guarantor" means a corporate person who is the surety in a contract of guarantee to a corporate debtor; 15. The submission of the Appellant is that since Corporate Debtor is not surety in a contract of guarantee and Corporate Debtor is only Guarantor in a Term Loan Facility taken by one Smt. Anupama Agarwal (Borrower), who is an 'individual' within the meaning of Section 2(g) of the Code and is not a 'Corporate Person', thus the Corporate Debtor by no stretch of imagination can fall within the meaning of 'Corporate Debtor' under Section 3(8) of the Code. 16. The above submission raised by learned Counsel for the Appellant has to be rejected in view of the law laid down by the Hon'ble Supreme Court in Laxmi Pat Surana vs. Union Bank of India and Another - (2021) SccOnLine SC 267. The Hon'ble Supreme Court has laid down in the above case where an Application was filed under Section 7 by Financial Creditor against a Corporate Person who had offered guarantee to the two loans of Principal Borrower. In the above case, one of....
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....corporate guarantor in the same Tribunal pertaining to same transaction, which has territorial jurisdiction over the place where the registered office of the corporate debtor is located. That does not mean that proceedings under Section 7 IBC cannot be initiated against a corporate person in respect of guarantee to the loan amount secured by person not being a corporate person, in case of default in payment of such a debt. 30. In law, the status of the guarantor, who is a corporate person, metamorphoses into corporate debtor, the moment principal borrower (regardless of not being a corporate person) commits default in payment of debt which had become due and payable. Thus, action under Section 7 IBC could be legitimately invoked even against a (corporate) guarantor being a corporate debtor. The definition of "corporate guarantor" in Section 5(5-A) IBC needs to be so understood. 31. A priori, we find no substance in the argument advanced before us that since the loan was offered to a proprietary firm (not a corporate person), action under Section 7 IBC cannot be initiated against the corporate person even though it had offered guarantee in respect of that transaction. Whereas,....
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....ed of Flat No.6 on 29.12.2017, with regard to which Charge was also registered. We do not find any malafide in initiation of Section 7 proceedings by the Financial Creditor. There is no denial to default committed in repayment of the loan. When default was committed in the repayment of the loan and debt became due on both Principal Borrower and Corporate Debtor, no error can be said to be committed by the Financial Creditor in filing Application under Section 7 against the Corporate Debtor. The Hon'ble Supreme Court in Laxmi Pat Surana (supra) has categorically laid down that Financial Creditor can legitimately invoke the proceedings under Section 7 when Principal Borrower commits a default. It has been held that Guarantor, who is a Corporate Person, metamorphoses into Corporate Debtor, the moment Principal Borrower commits default. 19. Now coming to the challenge to order of liquidation, we need to first notice the resolution of CoC, where the resolution for opting for liquidation was passed. The CoC in its 2nd Meeting, on items which were discussed through e-voting facility recorded following in the minutes: "The members discussed in detailed and informed Resolution Profession....