TaxTMI 
TaxTMI 
2022 (11) TMI 952
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....A Kannan Tiruvengadam, Bank of Baroda, State Bank of India, Union Bank of India, UCO Bank, Axis Bank Limited, M/s Roshan Engineers,India Forgings & Engineering Co. Private Limited, M/s Sunshri Engineers, Soni Rollers Private Limited, Benson Engineers Private Limited, Shubham Enterprises, Pilania Road Carriers,, S hree Vinayak Transport, A ayush Manufacturers & Financers Pvt. Ltd.,Jyotirmoyee International Private Limited , Khaitan Udyog Pvt. Ltd., Navneet Trading & Investment Co. Pvt. Ltd., Nobel Consultancy Pvt. Ltd.,Shivshakti Communication & Investment Pvt. Ltd., T .R. Investments Private Limited [Justice Ashok Bhushan] Chairperson , [Justice M. Satyanarayana Murthy] Member (Judicial) And [Mr. Barun Mitra] Member (Technical) For the Appellants: Mr. Vivek Chib, Sr. Advocate with Mr. Anirudh Wadhwa, Mr. Rohit Sharma & Mr. Bhargav Thali, Mr. Aditya Mittal, Ms. Unnati Jhunjhunwala, Advocates For the Respondents: Mr. Rishav Banerjee & Mr. Rajarshi Banerjee, Advocates for R-1, Liquidator. Ms. Neha Dutt Tenani, Mr. Soumya Dutta, Mr. Avishek Guha, Advocates for R-2 to R-6. JUDGMENT (Per Hon'ble Mr. Justice M. Satyanarayana Murthy) The Petitioners/Appellants in I.A.(IB)....
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....s of Hari Machines Ltd. From the list of claims of Hari Machines Ltd, admitted by the Respondents, the Applicants came to know that the Respondents had admitted the claim of Consortium of Banks comprising State Bank of India, Axis Bank Ltd, Union Bank of India, Bank of Baroda and UCO Bank. The consortium of Banks had lodged its claim with the Respondent No. 1 on the basis of Corporate Guarantee furnished by Hari Machines Ltd. for the loan facility availed by one PMPL from the consortium of Banks. The purported Corporate Guarantee furnished by Hari Machines Ltd. in respect of facility availed by PMPL from the consortium has been rendered void and thus the claim of the consortium ought not to have been admitted by the Respondent in view of the following: "i. The consortium had lodged its claim with the Resolution Professional of Hari Machines Limited on the basis of the purported corporate guarantee given by Hari Machines Limited in respect of facilities availed of by Pro Minerals Pvt. Ltd. from the consortium. ii. Corporate Insolvency Resolution Process of Pro Minerals Private Limited has commenced on or about 22nd February, 2019. iii. The resolution profe....
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....etween the consortium members who are lenders of PMPL and Hari Machines Ltd. On verifying the claims, it was found that the Corporate Debtor executed a Contract of Guarantee in favour of Financial Creditors for the loan sanctioned to PMPL. 5. On 16.11.2018, the Adjudicating Authority appointed Respondent No. 1 as Liquidator and CIRP was initiated against PMPL After undergoing resolution process and after negotiation with the Bankers, a Resolution Plan submitted by Essel Mining & Industries was finalized and approved. Upon approval of CoC under Section 30(4) of IBC, the same was approved by Adjudicating Authority under Section 31 of IBC. 6. As per terms of the Resolution Plan, the Consortium of Banks were to receive a sum of Rs. 37,02,26,590/- as full and final settlement of their debt due and payable by PMPL. In the said Resolution Plan it has been clearly set out that the final settlement with the Financial Creditors are without prejudice to their right to proceed against the guarantors under the relevant Deeds of Guarantee. Such agreement was executed in order to secure the due repayment of the entire dues under the relevant credit facility. A perusal of the contents of the....
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.... others was constituted. Total nine expression of interest were received from which two expressions were accepted namely, M/s Essel Mining & Industries Ltd. and AIC Steel Pvt. Ltd. In the 9th CoC meeting on 10.01.2019, CoC approved the Resolution Plan submitted by M/s Essel Mining & Industries Ltd by 100% voting share, requested the Resolution Professional to submit the Plan for approval. Accordingly, Resolution Professional filed application for approval of Plan and after hearing the parties, Adjudicating Authority by an order dated 22.2.2019 approved the Resolution Plan for PMPL. 9. The Respondents were to receive a sum of Rs. 269,51,45,209/- as full and final settlement of their dues in proportion of their debt but according to the Plan, the amount was received by Financial Creditors with prejudice to their rights to proceed against the Guarantors under Deeds of Guarantee. Therefore, Respondent Nos. 2 to 6 submitted their claim before the Liquidator, who in turn admitted their claims though it reduced the amount payable to other Operational Creditors. The admission of the claim of the Respondent Nos. 2 to 6 is in accordance with law since they reserved the right to proceed ag....
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....ted to set aside the order passed by the Adjudicating Authority dated 24.11.2021. 14. Respondent No. 1 filed Reply in Appeal reiterating the contentions raised in reply submitted in the main Petition. Therefore, the contentions raised in Reply needs no further reiteration. 15. Learned Sr. Counsel for the Appellant reiterated the contentions besides filing Written Submissions raising specific contentions contending that when the claim of Respondent Nos. 2 to 6 i.e., the Consortium of banks was approved, both by CoC of PMPL and Adjudicating Authority, the liability of Guarantor stood discharged and thereby not entitled to make a claim before the Liquidator of Hari Machine Ltd. It is also contended that there was no clause 2.9.5. of Resolution Plan of PMPL reserving the right to proceed against the Guarantor and even if any such reservation is made, it is not binding on the Appellants. It is also contended that as per Section 146 of Indian Contract Act, the Appellants are entitled to be liable only to contribute equally along with other seven Guarantors but the Respondent Nos. 2 to 6 did not proceed against other Guarantors. Therefore, the acceptance of claim of Consortium of Ba....
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.... with other six/seven guarantors. PMPL failed to discharge the loan borrowed from consortium of Banks, thereby filed a petition under Section 6 of IBC to initiate Corporate Insolvency Resolution Process (hereinafter referred 'CIRP'). The petition was allowed and CIRP was initiated. In the process, the consortium of Banks agreed to receive amount of Rs.37,02,26,590/-while reserving their right to proceed against the guarantors for recovery of the outstanding amount in the Resolution Plan, vide clause 2.9.5. Hari Machine Ltd also went to liquidation, appointing 1st Respondent herein as Liquidator under Section 33 of IBC. It is also an admitted fact that the consortium of Banks filed their claim for the balance amount of loan advanced by consortium of Banks to PMPL. The same was admitted by 1st Respondent/Liquidator. Challenging the same, they preferred Application before the Adjudicating Authority to direct the Liquidator to reject the claim of consortium of Banks. 21. The Appellants raised several contentions hence, it is necessary to advert to certain provisions of IBC which deal with Resolution Plan, liquidation. Section 33 deals with the initiation of liquidation process and S....
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....duties, obligations and responsibilities; (j) to invite and settle claims of creditors and claimants and distribute proceeds in accordance with the provisions of this Code; (k) to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor; (l) to investigate the financial affairs of the corporate debtor to determine undervalued or preferential transactions; (m) to take all such actions, steps, or to sign, execute and verify any paper, deed, receipt document, application, petition, affidavit, bond or instrument and for such purpose to use the common seal, if any, as may be necessary for liquidation, distribution of assets and in discharge of his duties and obligations and functions as liquidator; (n) to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation of the corporate debtor and to report the progress of the liquidation process in a manner as may be specified by the Board; and (o) to perform such other functions as may be specified by the Board. (2) The liquidator shall have the power to consult ....
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....ation but passed an order against the Appellants, which is now under challenge before this Appellate Tribunal. 25. The major contention of the Appellants is that when Respondent Nos. 2 to 6 accepted the Resolution Plan, being the members of CoC for Rs. 37,02,26,590/-, the liability of guarantors is ceased to exist or the claim against the guarantors, under the Agreement of Guarantee, is extinguished thereby the consortium of Banks is not entitled to put forth claim under Chapter-III, Section 38 & 39 of IBC and 1st Respondent/Liquidator ought to have rejected the claim under Section 40 of IBC. 26. Learned Sr. Counsel for the Appellants has drawn attention of this Tribunal to Sections 133, 134, 135 and 136 of the Indian Contract Act to contend that when once Respond Nos. 2 to 6 agreed to receive Rs. 37,02,26,590/- as approved Resolution Plan by CoC, the Corporate Debtor is deemed to have been discharged. But Section 133 has no relevance to decide the present issue. However, Section 134 deals with discharge of surety by release or discharge of principal debtor by surety. Discharge by any contract between the creditor or principal debtor by which the principal debtor is released ....
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.... 30. The Hon'ble Apex Court in the case of "Lalit Kr. Jain vs. Union of India" referred supra, held in paragraph -111 as follows: 111. In view of the above discussion, it is held that approval of a resolution plan does not ipso factor discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee. As held by his court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process i.e., by operation of law, or due to liquidation or insolvency proceeding, does not of an independent contract.' 31. The IBC legislation is subsequent to the Indian Contract Act and as such it will prevail over the provision of Indian Contract Act. In view of the principle laid down in "State Bank of India vs. V. Ramakrishnan" and "Lalit Kr. Jain vs. Union of India" referred supra, the Guarantors are not absolved from their liability since Consortium of Banks, i.e., Respondent Nos. 2 to 6 reserved their right in the Resolution Plan to proceed against the Guarantors for recovery of the balance amount of loan. 32. During hearing, learned Sr. Counsel for the Appellants drawn attention of t....
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....the creditor. In the instance case, the Respondent Nos. 2 to 6 are proceeding against these Appellants, who are independent Guarantors for the loan obtained by Corporate Debtor PMPL, leaving other Guarantors. This contention was strongly refuted by the learned Counsel for the Respondents on the ground that it is the prerogative of the Creditor to proceed against all or any of the sureties including principal debtor and one surety cannot direct the creditor to proceed against any of them or all of them. Therefore, it is for the Respondent Nos. 2 to 6 to recover the amount from either of the sureties or from principal debtor or against all in terms of Section 140 of Indian Contract Act since the liability of sureties is co-extensive with that of the principal debtor. The Adjudicating Authority adverted to Sections 140 and 146 of Indian Contract Act and decided this issue against the Appellants. 35. Learned Sr. Counsel for the Appellants had drawn the attention of this Tribunal, the decision of the Hon'ble Apex Court in the matter of "Ram Kishun & Ors v. State of U.P. and others" where Hon'ble Supreme Court had an occasion to decide the prerogative of the Creditors to proceed again....
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....y, he would not pay enough to bring an assumpsit against the other and if a surety pays a part of the debt only and less than his moiety, he cannot be entitled to call on his co-surety who might himself subsequently pay an equal or greater portion of the debt, in the former of which cases, such cosurety would have no contribution to pay, and in the latter he would have one to receive. In truth, therefore, until the one has paid more than his proportion, either of the whole debt, or of that part of the debt which remains unpaid by the principal, it is not clear that he ever will be entitled to demand anything from the other, and before that, he has no equity to receive a contribution, and consequently no right of action, which is founded on the equity to receive it. Thus, if the surety, more than six years before the action, have paid a portion of the debt, and the principal has paid the surety within six years, the Statute of Limitations will not run from the payment by the surety, but from the payment of the residue by the principal, for until the latter date it does not appear that the surety has paid more than his share. In Re Snowdown (1881) 17 Ch.D. 44, the Court of A....
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.... begin to run as between the co-trustees until the claim of the cestui que trust has been established against one of them. In Pendlebury v. Walker 160 E.R. 1072 the Court considered the liability of co-sureties and held that where the default of the principal renders all the co-sureties responsible, all are to contribute and then the law superadds that they should all contribute equally if each is surety to an equal amount; and if not equally, then proportionately to the amount for which each is a surety. Thus, from the law declared by various Courts in England, Supreme Court of India and judgments of Madras High Court, it is abundantly clear that when one surety discharged the liability of the principal debtor to the creditor, the other sureties are liable to contribute equally based on the Principle of Equity, till the surety paid part or whole of the debt due to the creditor by the principal debtor, the question of claiming right of contribution against the co-surety does not arise. The judgments of England referred supra, though not binding precedent under Article 141 of Constitution of India, they are of greater persuasive value, since the principles of Indian C....
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....ndian Contract Act and when it would arise more particularly when a decree making all respondents liable jointly and severally. 37. In view of the law laid down by the Hon'ble Apex Court and other Courts, a Creditor may proceed against one or all Guarantors and principal debtor for recovery of the amount. Therefore, the contention of the learned Sr. Counsel for the Appellants is without any merit and liable to be rejected. 38. Learned Counsel for the Respondent Nos. 2 to 6 placed reliance on the same judgment but needs no further consideration. 39. Learned Counsel for Respondent No. 1/Liquidator has pointed out that the Appellants have no right to direct the Creditor/Respondent Nos. 2 to 6 to proceed against any one Guarantor, more particularly, when the Respondents reserved the right to appropriate claim against the Guarantor and proceed in accordance with law. The Hon'ble Supreme Court in the matter of "Lalit Kr. Jain vs. Union of India" has held in paragraphs 111 and 104 that the approval of the Resolution Plan does not absolve the surety/guarantor of his or her liability, which arises out of independent contract. In "Maharashtra State Electricity Board Bombay Vs. Offic....
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....mnify S if and so far as S discharges PD's liability, and the secondary right of obtaining an indemnity from PD. C can (after notice) proceed against either or both of PD and S. If both PD and S are in insolvent liquidation, C can prove against each for 100p in the pound but may not recover more than 100p in the pound in all." 41. In view of the law laid down in the above judgments, Respondent Nos. 2 to 6 are not getting any double benefit on the other hand they are loosing part of the claim even after admission of claim in the liquidation process of Hari Machines Ltd, thereby the reduction in the claim of the Petitioner/Appellant on account of admission of the claim of the Respondents is not sufficient ground to reject the claim of Respondent Nos. 2 to 6. 42. Therefore, we find absolutely no error in the order passed by the Adjudicating Authority, warranting interference by this Tribunal while exercising the power under Section 61 of IBC since the order is free any illegality. 43. The Adjudicating Authority recorded its findings based on the material. Hence the finding of the Adjudicating Authority is hereby affirmed. Accordingly, the point is answered in favour of the Re....