TaxTMI 
TaxTMI 
2024 (10) TMI 510
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.....2023 passed by National Company Law Tribunal, Cuttack Bench by which an application filed by Respondent No. 1 (State Bank of India). under Section 95 of the Insolvency and Bankruptcy Code, 2016 (in short 'Code) has been admitted. 2.In brief, 'Vandana Vidhyut Limited' secured loan from a consortium of six banks (including Respondent No.1) in which the PNB was the lead bank. The said loan was secured by present appellants in both the appeals along with others as guarantors by executing a deed of guarantee on 27.10.2010. 3.The principal borrower, namely, Vandana Vidhyut Limited was admitted into CIRP on 26.04.2021 by the National Company Law Tribunal, Mumbai on an application filed under Section 7 of the Code by the State Bank of India/Respondent No.1. It is an admitted fact that the principal borrower has already gone into liquidation. 4.The present proceedings were initiated at the instance of Respondent No. 1 by filing an application under Section 95 on 02.12.2021 in terms of provisions of the Code and Rule 7(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority for Insolvency Process of Personal Guarantors to Corporate Debtors), Rules, 2019 (in short 'Rules'....
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....reafter. List this Appeal on 07.11.2023. In the meantime, the Resolution Professional may collate claims, however, no further steps shall be taken." 8.Both the respondents have filed the reply to the appeal and rejoinder has also been filed. 9.While attacking the findings recorded by Ld. Tribunal, on the issue of limitation, Counsel for the Appellant has vehemently argued that the Tribunal has committed a patent error in treating the notice dated 21.06.2021 as the notice invoking the Bank Guarantee which is otherwise a statutory notice issued under Rule 7 (1) of the Rules in consonance with Section 95 (4) (b) of the code. It is submitted that the said notice dated 21.06.2021 was mainly for the purpose of filing the application under Section 95 as the language of Section 95 (4) (b) itself suggests that the application under section 95 cannot be filed until unless the notice is issued. He further submits that Rule 3 (e) of the Rules provides the definition of the guarantor which says that "guarantor" means a debtor who is a personal guarantor to a corporate debtor and in respect of whom guarantee has been invoked by the creditor and remains unpaid in full or part'. The main thrus....
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....le 7 (1) is concerned, it is submitted that by issuing that notice, the appellants were asked to make the payment of the amount due within a period of 14 days. It is argued that the said Rule is akin to Rule 8 of the code which is for the purpose of filing of an application under Section 9. It is argued that an application under Section 9 has to be filed, notice under Section 8 has to be given enabling the corporate debtor to make the payment. 12.Mr. Bajaj, appearing on behalf of Respondent No. 2, has also submitted that guarantee deed is a continuing guarantee, therefore, it could have been invoked by virtue of notice issued under Rule 7 (1) of the rules. Otherwise, he has submitted that by the notice issued on 26.05.2016 the appellant have been categorically asked to discharge their liability as guarantors within the period of 60 days, therefore, that has to be treated as a notice issued for the purpose of invoking guarantee. 13.We have heard counsel for the parties and perused the record with their able assistance. 14.There is no dispute that the appellant extended their personal guarantee for the facilities availed by the Corporate Debtor. The relevant part of the guarantee ....
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....ed on the Guarantors either by actually delivery thereof to the Guarantors or by despatch thereof by Registered Post or Certificate of Posting to the Guarantors addresses herein given or any other address in India to which the Guarantors may by written intimation have given to the Lenders. Any notice dispatched by the Lenders or any of them by Registered Post or Certificate of Posting to the address to which it is required to be dispatched under this Clause shall be deemed to have been duly served on the Guarantors four days after the date of posting thereof, and shall be sufficient if signed by any officer of any of the Lenders and in proving such service it shall be sufficient if it is established that the envelope containing such notice, communication or demand was property addressed and put into the post." 15.The notice issued on 26.05.2016 was at the instance of five banks including Respondent No. 1 and in that notice it has been categorically averred that: "Simultaneously you notices Nos. 2, 3, 4 & 5 are aware that you have by a guarantee / joint guarantee guaranteed payment on demand of all moneys and discharge all obligations and liabilities then or at any time thereafte....
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....e same. The Company has not taken the effect of the same in books of accounts. Interest provision on the FDRs has not been done, the impact of the same will be given after settlement with the banks. Note-34:- (A)The Punjab National Bank (PNB) along with other consortium banks i.e. State Bank of India, Allahabad Bank, Bank of India and Central Bank of India, has issued a notice under Section 13 of SARFAESI Act, 2002 vide letter dated 22nd October 2016, regarding exercise of symbolic possession on account of non-payment of debts. (B)Punjab National Bank and other Consortium Banks had filed Original Applications against the Company before the Debt Recovery Tribunal, Jabalpur (DRT") under section 19 of the Recovery of Debts due to Banks and Financial Institution Act, 1993. In that respect the DRT has issued show cause notice to the company on dated 12.06.2017." NOTE-4 LONG-TERM BORROWINGS Secured loans Term loans From Banks* 13,03,51,39,288 16,22,39,59,995 From Financial Institutions 2,47,54,65,422 - Total 15,51,06,04,710 16,22,39,59,995 (i) Uco Banks has assigned and transfer it's total debt along with all underlying rights, benefits and obligations to Edelw....
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.... Lakh, Twenty Four Thousand and Two Hundred Twenty five and Paisa Eighty One Only) as on 31.05.2021 (Account wise outstanding and interest in part-A of annexure-I) 2 Amount of debt in default Rs. 340,30,24,040,34/- (Rupees Three Hundred Forty crore, Thirty Lakh, Twenty Four Thousand and Forty and Paisa Thirty Four Only) as on 31.05.2021. (Account wise outstanding in Part-A of annexure-I). "The undersigned request you to unconditionally pay the unpaid debt in default in full within fourteen days from the receipt of this letter failing which insolvency resolution process, under the Code, shall be initiated against you." 18.Since the application has been filed under Section 95, therefore, it is relevant to refer to Section 95 of the code which is reproduced as under:- "Section 95: Application by creditor to initiate insolvency resolution process. *95. (1) A creditor may apply either by himself, or jointly with other creditors, or through a resolution professional to the Adjudicating Authority for initiating an insolvency resolution process under this section by submitting an application. (2)A creditor may apply under sub-section (1) in relation to any partnershi....
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....ot be equatedwith a notice which is required for the purpose of invoking personal guarantee in terms of the guarantee deed. Whereas while arguing this case before this Court on 26.09.2023 he had made the submission that the personal guarantee was invoked on 26.05.2016 while issuing the notice under Section 13(2). We are totally amazed with the diametrically opposite arguments raised by the appellants before the same court, firstly, when the stay order was obtained and then when the case was finally argued. If it was argued before this Tribunal on 26.09.2023 that the notice dated 26.05.2016 was for the purpose of invoking personal guarantee then how the appellant can argue before this court today that the said notice was not for the purpose of invoking the personal guarantee and cannot be used. It appears that while preparing his case, the appellant came across a decision of this court rendered in the case of Amanjyot Singh V. Navneet Kumar Jain & Ors. (supra) to take a summersault from his earlier stand and argue the case in such a faishon. 22.We do not want to say much about the act and conduct of the appellant but before we proceed further we would like to discuss the Judgment w....
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....rs if the payment is not made or refused 'on demand'." 10.The RP came to the conclusion that the Bank has not invoked the guarantee. 11.In its reply, the Bank has submitted that although after sale of the mortgaged asset, part of the facility was realized, but no steps have been taken by the Bank against the Appellant for recovery of any dues. The notice, which is the basis of the Application, was issued on 04.10.2013. Nine years have been passed from issuance of the notice and no steps have been taken by the Bank so far for recovery of any amount from the Appellant. Default, which is claimed by the Appellant, at best can be said to be a technical default and when substantially, no steps have been taken by the Bank and the Bank's categorical case is that guarantee of the Appellant has not been invoked, it is the Bank, who after invoking the guarantee shall proceed against the Appellant. 12.We, thus, are satisfied that foundation which was laid down by the Appellant for initiating the CIRP against the Appellant, was not sufficient to admit Section 94 Application and initiate the CIRP against the Appellant. We may further notice that Section 10 Application against the Corporate....