TaxTMI 
TaxTMI 
2024 (4) TMI 826
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....I & B Code, 2016, r/w. Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016), passed by the 'Adjudicating Authority', 'National Company Law Tribunal', Division Bench - II, Chennai, in admitting the Section 7 Application of the 'Financial Creditor', appointing the 'Respondent No. 2' as 'Interim Resolution Professional' and declaring 'Moratorium', etc. Appellant's Contentions : 2. The Learned Counsel for the Appellant, submits that the 'Impugned Order', dated 15.06.2023, in CP / IB / 140 (CHE) 2022, passed by the 'Adjudicating Authority', 'National Company Law Tribunal', Division Bench, Chennai, suffers from 'Legal Infirmity', and that the 'Adjudicating Authority' / 'Tribunal', has over looked to consider the Judgment of this 'Tribunal', dated 08.01.2019, in the matter of Dr. Vishnu Kumar Agarwal v. M/s. Piramal Enterprises Ltd. (vide Comp. App (AT) (INS) No. 346 & 347 / 2018), wherein, it is observed and held that 'once for a same set of claim(s) an Application under Section 7 filed by a Financial Creditor is admitted against one of the Corporate Debtors be it, the 'Principal Borrower' or a 'Corporate Guarantor', a second Application, by ....
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....d 05.07.2016, between the Respondent / Corporate Debtor, to and in favour of 'SBICAP Trustee Company Limited', which proceeds, as under: '... 22. This Guarantee shall be a continuing one and shall be valid and in full force till the Debt to Equity Ratio is reduced to 80:20 (eighty to twenty). The liability of the Guarantor under this Guarantee shall not exceed the value of the land (1) admeasuring in aggregate approximately 300.52 acres situate at Dalavaypuram and Vellam villages, Ottapidaram Taluk, Tuticorin District, in the State of Tamilnadu (worth Rs.200,00,00,000/- as on date of this Guarantee); and (ii) admeasuring in aggregate approximately 200 acres situate at Kumarreddiapuram, Vallaram, Kutcheri Dalavaypuram and Eeppodum villages, Ottapidaram Taluk, Tuticorin District, in the State of Tamilnadu (worth Rs.153,00,00,000/- as on date of this Guarantee). ...' 8. According to the Appellant, the total Sum in 'Default', as on 20.09.2018 to the '1st Respondent / Bank / Financial Creditor', in the instant case, was Rs.2,932,69,53,916.57, that the 'Date of Default', was mentioned, in the main CP (IB) / 140 (CHE) / 2022, by the Bank, as 27.09.2018. Furth....
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....ying the 'Debt' obligations. It was further, observed by the Hon'ble Supreme Court that initiating 'CIRP', against a Company for its 'temporary default', in repayment, is not a solution and will go against the 'intent' of the 'Code'. 13. The Learned Counsel for the Appellant, points out that the 'Adjudicating Authority' / 'Tribunal', is conferred with a 'Discretionary Power', either to 'Admit' or 'Reject', a 'Section 7 Application' (filed under the I & B Code, 2016), after appreciating all 'Question of Laws and Facts', involved in that particular case. 14. Added further, the Hon'ble Supreme Court of India, in 'Vidarbha Industries case', while examining the ambit of Section 7 (5) (a) of the I & B Code, 2016, had clarified that a 'Discretionary Power', is conferred upon the 'Tribunal', and stated that such 'Discretion', shall be used based on the facts and circumstances of a case, which warrants, such an exercise of 'Discretion'. 15. According to the Appellant, the 'Default', on the part of 'Coastal Energen', which has led to the filing of this 'Application', is primarily, because of the 'Defaults', on the part of 'TANGEDCO', in releasing 'Timely Payments', against the power....
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....t and the said Judgment does not overrule the Judgment, passed by the 'Appellate Tribunal', in the matter of 'Piramal Enterprises'. 20. According to the Appellant, in terms of the 'Third Amended and Re-stated Common Loan Agreement', dated 05.07.2016, a Sum of Rs.1139 Crores, was sanctioned additionally by the 'Lender Consortium and the Guarantee', was provided by the Corporate Debtor in regard to the 'Additional Loans', availed by the 'Principal Borrower', Viz. Coastal Energen Private Limited. 21. The Learned Counsel for the Appellant, points out that the 'Second Respondent / Resolution Professional, has conducted '9 Committee of Creditors' Meetings, and the 'Committee of Creditors', are in the process of 'negotiating / deliberating on the 'Resolution Plans', and serious 'prejudice', will be caused, to the 'Corporate Debtor', if further action, is taken in the matter, through a 'Resolution Plan process' or if the 'Corporate Debtor', is forced to undergo 'Liquidation', for 'no Defaults', committed by it. 1st Respondent / Bank's Submissions : 22. The Learned Counsel for the 1st Respondent / Bank (Financial Creditor), contends that the Respondent / Corporate Debtor, (as pe....
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....at of the 'Principal Borrower', and that 'Corporate Insolvency Resolution Process', can be initiated simultaneously against both. 30. The Learned Counsel for the 1st Respondent / Bank, relies upon the Judgment of this 'Tribunal', dated 16.05.2023 in Naresh Kumar Aggarwal v. CFM Asset Reconstruction Private Limited, reported in MANU / NL / 0458 / 2023 (Comp. App (AT) (INS) No. 470 / 2023), wherein, at Paragraph Nos. 14 to 16, it is observed as under: 14. 'Now, we come to last submission of learned counsel for the Appellant that application under Section 7 having admitted against the Principal Borrower, it was not open for the Respondent No.1 to file application against the Corporate Guarantor since two simultaneous proceedings under Section 7 cannot be proceeded with. Learned counsel for the Appellant has placed reliance on judgment of this Tribunal in 'MANU/NL/0003/2019, Dr. Vishnu Kumar Agarwal vs. Piramal Enterprises Ltd.', where in Para 32 following observations have been made by this Tribunal: '32. There is no bar in the 'I&B Code' for filing simultaneously two applications under Section 7 against the 'Principal Borrower' as well as the '....
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....ation of the guarantor is coextensive and coterminous with that of the principal borrower to defray the debt, as predicated in Section 128 of the Contract Act. As a consequence of such default, the status of the guarantor metamorphoses into a debtor or a corporate debtor if it happens to be a corporate person, within the meaning of Section 3(8) of the Code. For, as aforesaid, expression 'default' has also been defined in Section 3(12) of the Code to mean non-payment of debt when whole or any part or instalment of the amount of debt has become due or payable and is not paid by the debtor or the corporate debtor, as the case may be.' 16. The scheme of I&B Code, in view of law laid down by the Hon'ble Supreme Court in 'Laxmi Pat Surana vs. Union of India & Anr.', we are not persuaded to follow judgment of this Tribunal in Dr. Vishnu Kumar Agarwal (Supra).' 31. The Learned Counsel for the 1st Respondent / Bank, adverts to the Judgment of this 'Tribunal', dated 24.11.2020 (in the matter of State Bank of India v. Athena Energy Ventures Private Limited (vide Comp. App (AT) (INS) No. 633 of 2020), wherein, at Paragraph Nos. 15, 16 & 19, it is observed as under: 15. 'Th....
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....w as laid down by the Hon'ble Supreme Court for the whole country is binding. In the matter of Piramal, the Bench of this Appellate Tribunal "interpreted" the law. Ordinarily, we would respect and adopt the interpretation but for the reasons discussed above, we are unable to interpret the law in the manner it was interpreted in the matter of Piramal. For such reasons, we are unable to uphold the Judgement as passed by the Adjudicating Authority.' 32. The Learned Counsel for the 1st Respondent / Bank, falls back upon the Judgment dated 26.03.2021 of the Hon'ble Supreme Court of India, in Laxmi Pat Surana v. Union Bank of India (vide Civil Appeal No. 2734 of 2020), reported in MANU / SC / 0221 / 2021, wherein, at Paragraph Nos. 18 to 20 & 41, it is observed as under: 18. 'The term 'financial creditor' has been defined in Section 5(7) read with expression 'Creditor' in Section 3(10) of the Code to mean a person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. This means that the Applicant should be a person to whom a financial debt is owed. The expression 'financial debt' has been defined in Section 5....
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....le and is not paid by the debtor or the corporate debtor, as the case may be. 20. A priori, in the context of the provisions of the Code, if the guarantor is a corporate person (as defined in Section 3(7) of the Code), it would come within the purview of expression 'corporate debtor', within the meaning of Section 3(8) of the Code. 41. .....The financial creditor has not only the right to recover the outstanding dues by filing a suit, but also has a right to initiate resolution process against the corporate person (being a corporate debtor) whose liability is coextensive with that of the principal borrower and more so when it activates from the written acknowledgment of liability and failure of both to discharge that liability.' 33. The Learned Counsel for the 1st Respondent / Bank, seeks in aid of the Judgment, dated 18.08.2009 of the Hon'ble Supreme Court of India in Industrial Investment Bank of India Ltd. v. Bishwanath Jhunjhunwala (vide Civil Appeal No. 4613 of 2000), reported in 2009, 9 SCC 478, wherein, at Paragraph Nos. 14, 15, 18 & 20, it is observed as under: 14. 'Mr. Gupta, in support of his submission, placed reliance on a judgment of this ....
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....ancial creditor) to proceed against the principal borrower, as well as the guarantor in equal measure in case they commit default in repayment of the amount of debt acting jointly and severally. It would still be a case of default committed by the guarantor itself, if and when the principal borrower fails to discharge his obligation in respect of amount of debt. For, the obligation of the guarantor is coextensive and coterminous with that of the principal borrower to defray the debt, as predicated in Section 128 of the Contract Act. As a consequence of such default, the status of the guarantor metamorphoses into a debtor or a corporate debtor if it happens to be a corporate person, within the meaning of Section 3(8) IBC. For, as aforesaid, the expression 'default' has also been defined in Section 3(12) IBC to mean non-payment of debt when whole or any part or instalment of the amount of debt has become due or payable and is not paid by the debtor or the corporate debtor, as the case may be.' 35. The Learned Counsel for the 1st Respondent / Bank, points out that in Clause 22 of the 'Deed of Guarantee' dated 05.07.2016 (vide Vol. I, Page 145 of the 'Appeal Paper Book'), executed b....
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....757 / 2019, filed by the State Bank of India as 'Applicant', before the 'Adjudicating Authority' / 'NCLT', Chennai Bench), in its submissions (vide Paragraph 18), relating to the 'reasons', for the 'delay in completion of OTS' (vide Vol VI at Pages 981, 982, 983 & 986 of the Appellant's Appeal Paper Book, at Paragraph 18, 19, 23 & 33, had observed the following: 18. 'It is submitted that the Applicant is well aware of the fact that the OTS has been obtained from 15 out of 17 banks in the Consortium. It is submitted that the Applicant is also aware of the fact that the OTS has been accepted by 93% of the Consortium and pursuant to the same, the Respondent herein was in the process of entering into a formal agreement for completion of OTS. It is submitted that when the Respondent was in the process of arranging funding from the two investors as mentioned in the earlier paragraphs. 19. It is submitted that as a well-known fact, the unprecedented COVID- 19 pandemic, has caused huge disruptions to the world economy and that the funding from the aforesaid investors were hugely affected as a result of the pandemic. It is submitted that the investors who have accepted to ....
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....6), by a 'Financial Creditor', against the 'Corporate Debtor' and the 'Corporate Guarantor', in a simultaneous fashion. 44. The Learned Counsel for the 2nd Respondent, refers to the decision of the Hon'ble Supreme Court of India in Laxmi Pat Surana's case, reported in (2021) ibclaw.in 53 SC, wherein, at Paragraph Nos. 18 & 38, it is observed as under: 18. 'The term 'financial creditor' has been defined in Section 5(7) read with expression 'Creditor' in Section 3(10) of the Code to mean a person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. This means that the applicant should be a person to whom a financial debt is owed. The expression 'financial debt' has been defined in Section 5(8). Amongst other categories specified therein, it could be a debt along with interest, which is disbursed against the consideration for the time value of money and would include the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub−clauses (a) to (h) of the same clause. It is so provided in sub− clause (i) of Section 5(8) of the Code to take within....
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....editor' is admitted against one of the 'Corporate Debtor' ('Principal Borrower' or 'Corporate Guarantor(s)', second application by the same 'Financial Creditor' for same set of claim and default cannot be admitted against the other 'Corporate Debtor' (the 'Corporate Guarantor(s)' or the 'Principal Borrower'). Further, though there is a provision to file joint application under Section 7 by the 'Financial Creditors', no application can be filed by the 'Financial Creditor' against two or more 'Corporate Debtors', on the ground of joint liability ('Principal Borrower' and one 'Corporate Guarantor', or 'Principal Borrower' or two 'Corporate Guarantors' or one 'Corporate Guarantor' and other 'Corporate Guarantor'), till it is shown that the 'Corporate Debtors', combinedly are joint venture Company.' 46. The Learned Counsel for the 2nd Respondent, cites the Judgment dated 25.04.2022 of this 'Tribunal', in S. Elangovan v. ASREC (India) Ltd. & Anr. (Comp. App (AT) (CH) (INS) 102 / 2022), wherein at Paragraph Nos. 47 & 48, it is observed as under: 47. 'In the decision of Hon'ble Supreme Court in Central Bank of India and Others V C.L. Vimala and Others, etc., decided on 28.04.20....
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....he I & B Code, 2016. In reality, it is the 'Liquidity', which is the basis for triggering the 'Corporate Insolvency Resolution Process'. 55. It is relevantly pointed out that an 'Adjudicating Authority' / 'Tribunal'. is having a limited / restricted role, to determine, whether the 'Application', is 'complete' and whether, there is 'any Debt' or 'Default'. Adjudicating Authority / Tribunal : 56. An 'Adjudicating Authority' / 'National Company Law Tribunal', in a 'Proceeding', under Section 7 of the I & B Code, 2016, is not deciding a 'Money Claim' or 'Suit'. For triggering the 'Insolvency Resolution Process', an 'Adjudicating Authority' / 'Tribunal', is not to decide the 'Claim' of 'Interest'. 57. The 'proceedings', under the I & B Code, 2016 are 'summary in character'. In fact, the said proceedings, are not like 'Civil Litigation', to be determined by a 'Competent Court of Law'. Ofcourse, the 'Corporate Debtor', is entitled to point out in a 'CIRP' proceedings, before the 'Adjudicating Authority' / 'Tribunal', that the 'Default', has not occurred. A 'Debt', may not be due, if it is 'not payable in Law' or 'on facts'. Proof of Debt & Default : 58. In order to maint....
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....l Energen Private Limited', as against the 'Coastal Energen Private Limited' / 'Principal Borrower', an 'Application IBA No. 757 / 2019, for initiating 'CIRP', was filed by the 1st Respondent / Bank, before the 'Adjudicating Authority' / 'Tribunal', and an 'Order of Admission', was passed on 04.02.2022 and later, as against the above Order, the Company Appeal (AT) (CH) (INS) No. 89 of 2022, filed by the 'Shareholder Cum Investor', before this 'Appellate Tribunal', came to be dismissed. 67. In present Comp. App (AT) (CH) (INS.) No. 284 of 2023, the Appellant is the 'Suspended Director' of 'Fossil Logistics Private Limited' ('Corporate Debtor'), being the 'Corporate Guarantor', for the 'Loans', availed by 'M/s. Coastal Energen Private Limited' ('Principal Borrower'). 68. A perusal of the contents of Application (filed by the 1st Respondent / Bank, under Section 7 of the I & B Code, 2016), against the 'Corporate Debtor' / 'Guarantor', the amount mentioned to be in 'Default', was Rs.2,932,69,53,916.57, as on 27.09.2018. 69. The 1st Respondent / Bank, in its Section 7 Application (before the 'Adjudicating Authority' / 'National Company Law Tribunal', Division Bench - II, Chenna....
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....brushed aside that Clause 3 & 5 of the 'Deed of Guarantee', dated 05.07.2016, unerringly, mentions that the 'Guarantor' ('Corporate Debtor'), shall 'Indemnify', and keep indemnified the 'Secured Parties' Viz. '1st Respondent / Bank', against 'Losses', 'Damages', 'Costs', 'Claims', and 'Expenses', whatsoever which the 'Secured Parties', would suffer. 74. To put it precisely and succinctly in Law, as on date, there is no 'embargo', under the I & B Code, 2016, to initiate 'simultaneous / independent proceedings', under Section 7 of the I & B Code, 2016, by a 'Financial Creditor', against the 'Principal Borrower' and the 'Corporate Debtor' / 'Guarantor', in the considered opinion of this 'Tribunal'. 75. In terms of Section 7(4) of the I & B Code, 2016, an 'Adjudicating Authority' / 'Tribunal', is to ascertain an 'Existence of a Debt', within 14 days. In reality, as per Section 7(5) (a) of the Code, an 'Adjudicating Authority' / 'Tribunal', is either to admit an 'Application' or 'reject', the 'Application', as per Section 7(5)(b) of the 'Code'. 76. Ordinarily, the 'Adjudicating Authority' / 'Tribunal', is to exercise its 'Discretion', in admitting an 'Application', as per Secti....