TaxTMI 
TaxTMI 
2023 (8) TMI 998
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....been rejected. The Appellant who was Successful Resolution Applicant aggrieved by the order rejecting his Resolution Plan has come up in this Appeal. 2. Brief facts of the case necessary to be noticed for deciding this Appeal are: 2.1. Corporate Insolvency Resolution Process (CIRP) was initiated against Corporate Debtor- 'M/s. Ujaas Energy Limited' vide order dated 17.09.2020. In pursuance of publication of Form-G, Appellant submitted its Resolution Plan. There were multiple rounds of discussions and deliberations with regard to Final Resolution Plan dated 05.07.2021 read with addendum dated 03.08.2021 submitted by the Appellant which was placed before the Committee of Creditors (CoC) in its 18th CoC meeting. Resolution Plan of the Appellant was approved by the CoC by 78.04% vote shares on 30.08.2021. The Letter of Intent was issued to the Appellant on 31.08.2021 and thereafter on 16.09.2021, Resolution Professional filed an I.A No. 190 of 2021 before the Adjudicating Authority for approval of the Resolution Plan. Bank of Baroda, one of the members of the CoC holding 5.83% voting share, had filed an Affidavit objecting to the Resolution Plan on the basis that it provided for ....
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....he submissions of the Appellant and submits that when CoC has approved the Resolution Plan with majority vote of 78.04%, the plan could not have been interfered with by the Adjudicating Authority. It is submitted that there is no bar in the Code to release personal guarantees. 6. Learned Counsel appearing for the Bank of Baroda has supported the impugned order passed by the Adjudicating Authority and submits that the plan could not have contained any provision by which personal guarantees given in favour of the Bank of Baroda could have been extinguished. Bank of Baroda is fully entitled to proceed to realise its dues from the personal guarantors since the payment under the plan does not liquidate the dues of the Bank of Baroda. 7. We have considered the submissions of the parties and perused the record. 8. The Adjudicating Authority in the impugned order has also noticed the fact that out of the amount proposed in the Resolution Plan, Rs.45,00,00,000/- is towards the value of the Corporate Debtor and Rs.23,81,75,744/- is towards the release of personal guarantees. The Adjudicating Authority, however, accepted the objection of the Bank of Baroda that CoC cannot extinguish ....
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....e" 12. There can be no dispute that Bank of Baroda has security interest as per guarantee agreements dated 16.09.2011 and 04.03.2014 executed by personal guarantors in favour of the Bank of Baroda. 13. Regulation 37 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("Regulations 2016" for short) deals with 'Resolution Plan' which provides as follows:- "37. Resolution plan.- A resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximization of value of its assets, including but not limited to the following: - (a) transfer of all or part of the assets of the corporate debtor to one or more persons; (b) sale of all or part of the assets whether subject to any security interest or not; [(ba) restructuring of the corporate debtor, by way of merger, amalgamation and demerger;] (c) the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons; [(ca)cancellation or delisting of any shares of the corporate debtor,....
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....ation 36 of the CIRP Regulations, the information memorandum that is given to each member of the CoC and to any potential resolution applicant, will contain details of guarantees that have been given in relation to the debts of the corporate debtor (see Regulation 36(2)(f) of the CIRP Regulations). Also, Under Regulation 37(d) of the CIRP Regulations, a resolution plan may provide for satisfaction or modification of any security interest. Security interest is defined by Section 3(31) of the Code as follows: "3. Definitions.--In this Code, unless the context otherwise requires,-- xxx xxx xxx (31) "security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee;" 15. The Hon'ble Supreme Court again in "Lalit Kumar Jain v. Union of India- (2021) 9 SCC 321" had occas....
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.... Bank i.e. the guarantor. Under Section 128 of the Indian Contract Act, the lia- bility of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract. A surety is no doubt discharged under Section 134 of the Indian Contract Act by any contract between the creditor and the principal debtor by which the principal debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. But a discharge which the principal debtor may secure by operation of law in bankruptcy (or in liquidation pro- ceedings in the case of a company) does not absolve the surety of his liability (see Jagannath Ganeshram Agarwala v. Shivnarayan Bhagirath [AIR 1940 Bom 247; see also In re Fitzgeorge Ex parte Robson [(1905) 1 KB 462] )." 109. This legal position was noticed and approved later in Industrial Finance Corpn. of India Ltd. v. Cannanore Spg. & Wvg. Mills Ltd. 69An earlier decision of three judges, Punjab National Bank v. State of U.P pertains to the issues regarding a guarantor and the principal debtor. The court observed as follows: "1. The appellant had, after Responden....
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....the principle of the aforesaid decision of this Court is equally applicable in the present case. The right of the appellant to recover money from Respondents 1, 2 and 3 who stood guarantors arises out of the terms of the deed of guarantee which are not in any way superseded or brought to a naught merely because the appellant may not be able to recover money from the principal borrower. It may here be added that even as a result of the Nationalisation Act the liability of the principal borrower does not come to an end. It is only the mode of recovery which is referred to in the said Act." 124. In Kaupthing Singer and Friedlander Ltd. (supra) the UK Supreme Court re- viewed a large number of previous authorities on the concept of double proof, i.e. re- covery from guarantors in the context of insolvency proceedings. The court held that: "11. The function of the rule is not to prevent a double proof of the same debt against two separate estates (that is what insolvency practitioners call "double dip"). The rule prevents a double proof of what is in substance the same debt being made against the same estate, leading to the payment of a double dividend out of one estat....
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....n paragraphs 25, 26, 26.1 of the said judgment, following was held:- "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 Indian 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 is one more factor in favour of a personal guarantor having to pay for debts due without any moratorium appl....
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....nr. vs. Sanidhya Industries LLP and Ors.- 2021 SCC OnLine NCLAT 302". Reliance has been placed in paragraphs 21 and 24 of the said judgment which are to the following effect:- "21. The Hon'ble Supreme Court observed that Section 31 is one more factor in favour of the fact that a personal guarantor is required to pay for debts due without any moratorium applying to save him. What is clear is that Section 31 does not absolve the personal guarantor from liability. But then the Respondents are trying to rely on para 22 of the judgment of the Hon'ble Supreme Court to say that in the Resolution Plan itself there can be provision to move against personal guarantor. We do not agree with these submissions. It appears Resolution Plan can have jurisdiction as to right of payment to be received from Personal Guarantor. To us, it does not appear that the Judgment lays down that in the Resolution Plan of the Corporate Debtor itself provision could be made to consume property of Personal Guarantor without recourse to appropriate proceedings which were, earlier as per Acts then applicable (and now without recourse to Part III of IBC). Before Part-III was enforced against person....
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.... of Baroda in the present case. 21. Learned Counsel for the Appellant has relied on the judgment of the Hon'ble Supreme Court in "Karad Urban Cooperative Bank Limited vs. Swwapnil Bhingardevay and Ors.- (2020) 9 SCC 729". In the said judgment, the Hon'ble Supreme Court after referring to its judgments in "K. Sashidhar v. Indian Overseas Bank- (2019) 12 SCC 150" and "Essar Steel (India) Ltd. Committee of Creditors v. Satish Kumar Gupta- (2020) 8 SCC 531" laid down following in paragraph 14:- "14. The principles laid down in the aforesaid decisions, make one thing very clear. If all the factors that need to be taken into account for determining whether or not the corporate debtor can be kept running as a going concern have been placed before the Committee of Creditors and CoC has taken a conscious decision to approve the resolution plan, then the adjudicating authority will have to switch over to the hands off mode. It is not the case of the corporate debtor or its promoter/Director or anyone else that some of the factors which are crucial for taking a decision regarding the viability and feasibility, were not placed before CoC or the resolution professional. The only bas....
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....ing in force. Observations and findings of the Appellate Tribunal in paragraphs 106 to 112 of the impugned order dated 17.02.2022 (reproduced hereinabove in paragraph 19.4.2.) deserve to be and are approved. xxx xxx xxx 189. As noticed hereinbefore, commercial wisdom of CoC is given such a status of primacy that the same is considered rather a matter nonjusticiable in any adjudicatory process, be it by the Adjudicating Authority or even by this Court. However, the commercial wisdom of CoC means a considered decision taken by CoC with reference to the commercial interests and the interest of revival of the corporate debtor and maximization of value of its assets. This wisdom is not a matter of rhetoric but is denoting a well-considered decision by the protagonist of CIRP ie., CoC. As observed by this Court in K. Sashidhar (supra), the financial creditors forming CoC act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. This Court also obse....
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....recent judgment of this Tribunal in Company Appeal (AT) (Ins.) No.517 & 518 of 2023- "Edelweiss Asset Reconstruction Company Ltd. vs. Mr. Anuj Jain, Resolution Professional of Ballarpur Industries Ltd. & Ors." decided on 04.07.2023. In the above case, the Financial Creditor of the Corporate Debtor aggrieved by the approval of the Resolution Plan has filed the Appeal. The grievance of the Appellant was that Appellant has security interest in land of the Corporate Debtor which was proposed to be sold in the Resolution Plan. The submission of the Appellant was negated by this Tribunal and it was held that such security interest by the Corporate Debtor could have been very well dealt in the Resolution Plan. In paragraphs 29 to 32 of the judgment, following was held:- 29. From the facts of the present case, it is clearly noticeable that security interest of the Appellant was part of the CIRP process since the Appellant has filed its claim on 05.02.2020 in Form 'C' and its claim although was rejected as Financial Creditor but was accepted as 'Other Creditor' with notional value of Re.1. The Resolution Professional has communicated to the Appellant on 19.10.2020 that since no def....