TaxTMI 
TaxTMI 
2024 (5) TMI 1524
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....The petitioner is a promoter of a Company by name 'Star Panel Boards Limited' which comes to be incorporated as a public Company in 2011 and its name was then changed to Associate Décor Limited ('the Company for short). Later the petitioner was suspended from the Company. Respondents 1 to 3 Banks acting as consortium of Banks enter into term loan agreements with the Company to grant term loan facilities. The loan becomes sticky. The consortium of Banks later began legal proceedings against the Company initiating proceedings under sub-section (2) of Section 13 of the SARFAESI Act by filing original application before the Debt Recovery Tribunal, Bengaluru in O.A. No. 804 of 2017. The 2nd respondent then initiates proceedings under Section 7 of the Insolvency and Bankruptcy Code ('the Code' for short) against the Company and the proceedings under the Code are under progress before the Tribunal. On 11-08-2020, respondent No. 1 issues a notice to the petitioner seeking to invoke the personal guarantee executed by the petitioner collectively on 10-07-2014. Despite the reply of the petitioner, demand notices come to be issued under the Code without replying to the defence of t....
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....y to the submissions would contend that the judgment in the case of DILIP B. JIWRAJKA (supra) does not delve with regard to maintainability of the petition before the Tribunal. Since maintainability cuts at the root of the matter, the petition cannot be dubbed as premature. It is an admitted fact that the petitioner is no longer a personal guarantor and, therefore, the Tribunal would not get jurisdiction is his submission. 7. The learned senior counsel for the respondents would further submit that his submissions be taken as objections to the petition and that is all that he has to say against the petition. Therefore, though the matter was listed for preliminary hearing, with consent of parties the matter is taken up, and heard for its final disposal. 8. I have given my anxious consideration to the submissions made by the respective learned senior counsel and have perused the material on record. 9. The afore-narrated facts are not in dispute. The petitioner enters the scene as a guarantor executing a deed of guarantee on 10-07-2014. In the deed of guarantee, the name of the petitioner figures at Sl.No.3 and it reads as follows: "THIS DEED OF GUARANTEE made and exe....
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.... Re: Review with increase of Credit facilities We are pleased to inform you that our higher authorities has sanctioned reviewed with increase following credit facilities for a further period of -12- months i.e. up to 09.05.2017 as per detailed in Annexure A attached herewith. Please note that any advance granted to you under the aforesaid credit facilities is repayable on demand and the terms and conditions of the same are subject to change without prior notice at the discretion of the Bank. Please also note that the Bank reserves the right to discontinue the facilities/advances/loans and to withhold/stop any disbursements without giving any notice, In case of non-compliance/breach of any of the terms and conditions stipulated herein and from time to time as also in the relevant documents or any Information/particulars furnished to us found to be incorrect or in case of any development or situation wherein in the opinion of the Bank its interest will be/is likely to be prejudicially affected by such continuation or disbursements. You are also requested to note that the credit facilities sanctioned to you are valid up to 09.05.2017 subject to ann....
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.... along with several others was waived by individual documentation of Bank of Baroda with the sanction by the consortium. Therefore, the personal guarantee of the petitioner stood waived. The petitioner has instituted certain proceedings before this Court in Writ Petition No. 483 of 2023 which may not be germane to be considered at this juncture. The Tribunal on 16-02-2024 passes the following order: "1. This is a Company Petition filed by the Bank of Baroda ("the Financial Creditor") under Section 95 (1) of the I&B Code, 2016 read with Rule 7(2) of the I&B (Application Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, seeking to initiate Insolvency Resolution Process in respect of Mr. Farooq Ali Khan ("the Personal Guarantor") for a default of amount of Rs. 2,58,60,17,543.61/-. 2. It is stated that the Petitioner has separately filed the recovery application being O.A No. 629 of 2021 before the Debt Recovery Tribunal-I Bengaluru and the same is pending. The Personal Guarantor has not paid the outstanding amount and therefore continues to be default till the date of filing of this applicati....
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....as referred under Section 99(1) of the Code. 9. The interim-moratorium under Section 96(1)(a) of the I&B Code, 2016 has commenced on the date of filing of this Application by the Financial Creditor and will cease to have effect on the date of admission. 10. During such interim-moratorium period - a. any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and b. the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt. 11. The Resolution Professional is directed to serve a copy of his report on the Personal Guarantor. List the case for further consideration on 20.03.2024. Sd/- Sd/- (MANOJ KUMAR DUBEY) (K. BISWAL) MEMBER (TECHNICAL) MEMBER (JUDICIAL)" It is this order that has driven the petitioner to this Court. 10. Whether the proceedings against the petitioner could be maintainable or otherwise is the question that needs consideration. This issue need not detain this Court for long or delve deep into the matter. This Court in a judgment rendered on 06-03-2024 in the case of M/s MANYATA REALLTY v. REGISTRAR, NATIONAL COMPANY LA....
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....es a debt to any person;" Section 3(7) defines who is a corporate person. A corporate person, under the Code, is the one defined under clause 20 of Section 2 of the Companies Act, 2013. Corporate debtor would mean, a corporate person who owes a debt to any person. Therefore, a corporate person must owe a debt to any person and the said corporate person would mean a Company as defined under clause 20 of Section 2 of the Companies Act, 2013. The Code nowhere brings in a partnership firm or directors who are individuals of the said partnership firm under the ambit of the Code. 11. Part III of the Code deals with 'Insolvency resolution and bankruptcy for individuals and partnership firms'. For partnership firms and individuals the Adjudicating Authority is the Debts Recovery Tribunal and the Appellate Authority is the Debts Recovery Appellate Tribunal. Part III runs from Section 78 to Section 187 in the Code. Therefore, the entire part deals with insolvency resolution and bankruptcy for individuals and partnership firms. The petitioners in one of the petitions is a partnership firm and the other are individuals i.e., the Directors of the partnership firm. The jurisdic....
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....ation of a petition under Section 95 of the Code before the Tribunal. The aftermath is found in Sections 96 and 97 of the Code. All the three run as follows: "95. Application by creditor to initiate insolvency resolution process.-(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 partnership debt owed to him for initiating an insolvency resolution process against- (a) any one or more partners of the firm; or (b) the firm. (3) Where an application has been made against one partner in a firm, any other application against another partner in the same firm shall be presented in or transferred to the Adjudicating Authority in which the first mentioned application is pending for adjudication and such Adjudicating Authority may give such directions for consolidating the proceedings under the applications as it thinks just. (4) An application under sub-section (1) shall be accompanied ....
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....ary proceedings pending against resolution professional. (2) The Board shall within seven days of receipt of directions under sub-section (1) communicate to the Adjudicating Authority in writing either- (a) confirming the appointment of the resolution professional; or (b) rejecting the appointment of the resolution professional and nominating another resolution professional for the insolvency resolution process. (3) Where an application under Section 94 or 95 is filed by the debtor or the creditor himself, as the case may be, and not through the resolution professional, the Adjudicating Authority shall direct the Board, within seven days of the filing of such application, to nominate a resolution professional for the insolvency resolution process. (4) The Board shall nominate a resolution professional within ten days of receiving the direction issued by the Adjudicating Authority under sub-section (3). (5) The Adjudicating Authority shall by order appoint the resolution professional recommended under sub-section (2) or as nominated by the Board under sub-section (4). (6) A resolution professional appointed by the Adjudi....
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.... ambit of the Code, it touches upon the jurisdiction, to even file a petition, under Section 95 of the Code, by any creditor against a debtor and if it is a question of jurisdiction, the answer to such question is always either a "yes", or a "no", it can never be a "may be". 16. Learned senior counsel Sri. M. S. Shyamsundar has contended what if a petition is filed before a Tribunal, it is still at the stage of the scrutiny, it has not even come up before the Tribunal. I decline to accept the said submission, as it is fundamentally flawed. If a quasi judicial authority or a Tribunal does not have jurisdiction to entertain a petition merely because it is at the stage of filing, it cannot be permitted to be proceeded further. If these submissions of the learned senior counsel is to be accepted, then it would be diluting the concept of jurisdiction itself, which dilution this Court would never even attempt to make. Therefore, if the petition is not fileable before the Tribunal, it cannot be allowed to be proceeded up to the stage of whether it is entertainable. A non-fileable petition has dire consequences, let alone its entertainment. Therefore, such proceedings which are on....
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.... of katha with regard to all the Lands which are listed in the Schedule 'A' of the said Memorandum of Understanding and the Principal Agreement to the name of the present owners in the records of the Bruhat Bangalore Mahanagara Palike (d) Making out good and marketable title with regard to the Properties mentioned in Schedule 'A' to the Memorandum of Understanding dated 23.12.2009 and Joint Development Agreements dated 29/10/2010, 31/3/2011 & 26/8/2010 to the satisfaction of the Purchaser, 3) The Owner acquiring additional 11 plus Acres of lands detailed in the annexure-1 attached hereto to make a contiguous single parcel of land. 4) For purpose of clause 2 compliance of the conditions precedent on part of the Owner shall be treated to be 15 days from the date of the Owners proving such compliance of the condition precedent to the Second Party by furnishing documentary evidence of the same. 5) In the event of failure on the part of the Owner in complying with the conditions precedent in terms of clause 2 above before 31st March 2013, then in such event, the Second Party shall become entitled to seek repayment of the amounts treate....
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....aper cannot move before a fora that has no jurisdiction. It is un-understandable as to how and why the petitioners have to go before the Tribunal and tell the Tribunal that it has no jurisdiction to entertain the petition. The very acceptance of filing by the Tribunal is contrary to law." 11. Therefore, the proceedings against an individual before the Tribunal would become maintainable, only if he has stood as personal guarantor to any loan of any Company. No doubt, the petitioner did give his approval, as a guarantor in the year 2010, when the term loan was granted. Subsequently, the personal guarantee of the petitioner stood waived in terms of what is noted supra. If personal guarantee of the petitioner has stood waived, he is no longer a guarantor to the finance availed by Company. The proceedings before the Tribunal can be maintained only against a person in default or against a personal guarantor of a Company in terms of the amendment considered in the aforesaid judgment. Therefore, if the petitioner is no longer a personal guarantor, proceedings before the Tribunal against him, depicting him to be a personal guarantor would not be maintainable. 12. The learned senior co....
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....he adjudicatory authority must observe the principles of natural justice when it exercises jurisdiction under section 100 for the purpose of determining whether to accept or reject the application; (viii) The purpose of the interim-moratorium under section 96 is to protect the debtor from further legal proceedings; and (ix) The provisions of section 95 to section 100 of the Insolvency and Bankruptcy Code are not unconstitutional as they do not violate article 14 and article 21 of the Constitution." The Apex Court holds that no judicial adjudication is involved at the stages envisaged in Sections 95 to 99 of the Code. The Resolution Professional is appointed under Section 97 and serves in a facilitative role. There is no violation of natural justice under Sections 95 to 100 of the Code and the report of the Resolution Professional is only a recommendatory and does not bind the adjudicating authority. The purpose of interim moratorium under Section 96 is to protect the debtor from further legal proceedings. Therefore, the provisions i.e., Sections 95 to 100 of the Code were held to be not unconstitutional in a challenge to the constitutional validity. There can b....