TaxTMI 
TaxTMI 
2025 (2) TMI 1020
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....y Code, 2016 ("Code") against the Impugned Order dated 11.06.2024 passed in Interlocutory Application No.2699 of 2022 in IB No. 382 (PB)/ 2021 by the National Company Law Tribunal, New Delhi, Court-III ('Adjudicating Authority'). 2. Piramal Enterprises Ltd. earlier known as PHL Fininvest Pvt. Ltd. is the Respondent No.1 herein, engaged in various financial services business. 3. Mr. Jayant Prakash who is the Resolution Professional of the Corporate Debtor is the Respondent No.2 herein. 4. It has been brought to our notice that the facility in question was initially granted by Piramal Finance Limited ("PFL") to Hema Engineering Industries Limited ("HEIL") ('Corporate Debtor') under the Facility Agreement dated 20.07.2017. The Appellant further submitted that following the order of the National Company Law Tribunal, Mumbai Bench, dated 06.04.2018, and pursuant to the scheme of amalgamation, PFL (the original lender) and Piramal Capital Limited ("PCL") were amalgamated with Piramal Housing Finance Limited ("PHFL"). Subsequently, the name of PHFL was changed to Piramal Capital & Housing Finance Limited ("PCHFL"), as reflected in the Certificate of Incorporation dated 12.06.2018....
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.... the name of Respondent No. 2 without filing the required AFA, and therefore the post-facto consent obtained from the Respondent No.2 is contrary to the mandates of the Code. 9. The Appellant submitted that, even otherwise, the appointment of the Respondent No.2 does not comply with the 'Insolvency Professionals to Act as Interim Professionals, Liquidators, Resolution Professionals & Bankruptcy Trustees (Recommendation) (Second) Guidelines dated 01.12.2021 ("Guidelines"). The Appellant submitted that the said Guidelines outline the procedure for preparing a panel of Insolvency Professionals to act as Interim Resolution Professionals, Liquidators, Resolution Professionals, and Bankruptcy Trustees and as per the said Guidelines the Respondent No.2 with a registered office in Allahabad was not eligible for appointment within the jurisdiction of Delhi. 10. The Appellant submitted that there was no privity of contract between the parties, as the Deed of Guarantee dated 20.07.2017 ("Guarantee Deed") was executed by the Appellant in favour of PTSPL (the Security Trustee), and not with Respondent No. 1. It is the case of the Appellant that it is a settled principle of law that a ....
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..... 1 in the form of a first and exclusive mortgage over various properties both immovable and movable, which were charged in favour of Piramal Finance Limited at the time of the execution of the Facility Agreement dated 20.07.2017 by HEIL.The Appellant submitted that a Guarantor is not a primary party to the agreement but is considered as an additional comfort for the lender. The Appellant further submitted that Respondent No. 1 has already filed its claim for an amount of Rs. 4,43,36,21,727/- before the Respondent No.2 in the Corporate Insolvency Resolution Process ('CIRP') initiated against HEIL vide order dated 05.04.2021, which is currently under liquidation, hence there is no need to initiate PIRP against him. 14. Concluding his arguments, the Appellant requested this Appellate Tribunal to set aside the Impugned Order and allow his appeal. 15. Per contra, the Respondent No.1 denied all averments made by the Appellant as misleading and baseless. 16. The Respondent No. 1 submitted that the debt is due and payable from HEIL ("Corporate Debtor"), and the Appellant, as the Personal Guarantor of the Corporate Debtor, has committed defaults in repaying the same. The Responden....
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....spondent No. 1. In this regard, the Respondent No.1 submitted that, without prejudice to the fact that the Board Resolution dated 19.04.2021, was valid and sufficiently broad to cover the proceedings against the Appellant, the Respondent No. 1 had placed on record a revised Board Resolution dated 05.01.2022, in its Rejoinder, thereby ratifying all actions taken pursuant to the previous Board Resolution. The Respondent No. 1 relies on the judgment in United Bank of India v. Naresh and Ors. [(1996) 6 SCC 660] which establishes that a corporation can ratify the actions of its officers, including pleadings signed by them. 20. The Respondent No. 1 submitted that the Appellant objected to the proceedings before the Adjudicating Authority on the ground that there was no privity of contract with the Corporate Debtor and PHL Fininvest, as there had been no novation of the Facility Agreement executed in favor of Piramal Capital & Housing Finance Limited, following its merger. The Respondent No.1 stated that another objection of the Appellant was that the Facility Agreement could not be assigned to PHL Fininvest. In this regard, Respondent No. 1 submitted that the Facility Agreement explic....
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....ted, in place of PHL Fininvest Private Limited. The Respondent No.1 asserted that once the order for issuance of notice and the order allowing the substitution application have attained finality, they cannot be challenged by way of an appeal at a later stage. 24. In response to the appellant's objections about non speaking impugned order passed by the Adjudicating Authority Respondent No. 1 asserts that the Adjudicating Authority duly considered the Resolution Professional's report, evidence, and relevant facts in paragraphs 11 and 12 of the Impugned Order, thus meeting the standards of a reasoned order while adhering to the principles of natural justice. The Respondent No.1 emphasizes the Adjudicating Authority's summary jurisdiction, distinct from that of a civil court, which implies that the criteria for a reasoned order may differ and this limited scope prevents the Adjudicating Authority from interfering with the commercial wisdom of the Committee of Creditors ('CoC'). 25. The Respondent no.1 submitted that the Resolution Professional was appointed by an order dated 08.04.2022, which was not challenged by the Appellant. As such, the order has attained finalit....
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....under the Code. 28. Concluding his pleadings, the Respondent No.1 requested this Appellate Tribunal to dismiss this appeal with cost. 29. The Respondent No.2 also denied all averments made by the Appellant as frivolous, misleading and baseless. 30. The Respondent No.2 submitted that on 21.04.2021, the Financial Creditor served a statutory demand notice under Section 95(4)(b) of the Code to the Appellant/Personal Guarantor for an outstanding debt of Rs.443,26,21,727/-, encompassing principal, interest, penal interest, and un-deposited TDS. In response, the Appellant/Personal Guarantor, in a reply dated 24.05.2024, claimed to have never personally taken a loan from the Financial Creditor, asserting that the matter pertains to HEIL ("Principal Borrower") and transfer the demand notice is required to be served on HEIL demanding payment of the amount of default. 31. The Respondent No. 2 submitted that on 21.06.2021, the Financial Creditor initiated an Insolvency Resolution Process against the Appellant/Personal Guarantor by filing Application IB No. 382 (ND) of 2021 before the Adjudicating Authority under Section 95(1) of the Code, r/w Rule 7(2) of the Insolvency and Bankrup....
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.... financial assistance of Rs. 400 cr extended to HEIL. The Respondent No.2 explained that the obligations of the Principal Borrower to repay the loan and all associated amounts under the Facility Agreement were secured by an irrevocable and unconditional guarantee dated July 20, 2017, from the Appellant in favor of the Security Trustee for the benefit of the Financial Creditor. 38. The Respondent No. 2 submitted that the Financial Creditor issued a demand letter on 24.10.2020, to the Principal Borrower, the Appellant/Personal Guarantor, and others, highlighting the defaults and demanding clearance of outstanding dues with interest. The Respondent No.2 stated that on 24.02.2021, a recall/demand notice was issued to the same parties, recalling the entire loan as per the Facility Agreement. This notice directed the Principal Borrower and the Guarantors, including the Appellant/Personal Guarantor, to pay the outstanding amounts as of 23.02.2021, within 7 days of receipt. The Respondent No.2 stated that despite receiving the demand letter, the Appellant/Personal Guarantor and the Principal Borrower remained in default, and no payment was made to the Financial Creditor and Respondent N....
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....cy Resolution Process could be initiated against the Appellant/Personal Guarantor. 43. The Respondent No. 2 strongly refuted the Appellant's allegation that the impugned order is a non-speaking order and terms such allegations as an attempt to delay the Personal Insolvency Resolution Process through technical objections, challenging Adjudicating Authority directions that have already been decided and for which no appeal has been filed. It is the case of the Respondent No. 2 that the gave reasonable opportunity following the principle of Natural Justice and considered the various documents including copy of the Information Utility Report evidencing record of Default; Copy of the Letter of Intent; along with Deed of Guarantee; Copy of the Letter of Invocation of Guarantee and Copy of the Statutory - Demand Notice in Form B and has come to a conclusion that Insolvency Proceedings be initiated against the Personal Guarantor. 44. The Respondent No. 2 submitted that the objections raised by the Appellant are substantially the same as those presented in response to IA No. 2680 of 2022. The Adjudicating Authority considered these submissions and ruled on them in an order dated 27....
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....the matter of Shantanu Jagdish Prakash Vs. State Bank of India & Anr. in Company Appeal (AT) (Ins.) No. 1609 of 2024 decided on 23.01.2025, where we upheld the decision of the Adjudicating Authority in favour of the Lenders. We note that the facts are similar in the present case, however, we shall deal the issue in the present appeal based on the facts of the present appeal. (ii) As regard, the issue of privity of contract, it has been pleaded by the appellant that the personal guarantee was between the Appellant along with other guarantors with PTSPL and the Respondent No. 1 was not signatory to personal guarantee as such the Respondent No. 1 could not have initiated application under Section 95 of the Code. (iii) We note that concept of trusteeship is to act on behalf of the creditors/ Lenders. Such trusteeship deeds are generally signed between the trust on behalf of the lenders and the personal/ corporate guarantor of the principal borrower. However, by its inherent nature and intent, the lenders or the Financial Creditors are the true beneficiaries of such deed of guarantee. (iv) We further note that Section 95 of the Code provides right to the credi....
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.... shall, for the transfer, novation or assignment of the Facility to any person, Including bank, financial institution or public financial institution (under section 4A of the Companies Act 1956), or institutional lender subject to the provisions of this Agreement, execute necessary amendments to the Financing Documents, as may be mutually agreed between the Parties, with respect to any one or all of the following provisions: (a) to the dispute resolution provisions under this agreement; (b) to incorporate the names and details of any such assignee, novatee or transferee of the Lender; (c) to the administrative procedures specified under this Agreement; and (d) such other deeds, documents and writings as may be required under the Applicable Laws to facilitate or otherwise give effect to such assignment, transfer, novation, or securitization, as the case may be." ( Emphasis Supplied ) (vii) We note that Section 5(7) of the Code which defines 'financial creditor' to mean any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. We observe that the defini....
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....re issued by the Lender to the Appellant, including the Demand Notice dated October 24, 2020, Demand / Recall Notice dated February 24, 2021, and Statutory Demand Notice dated April 21, 2021; however, no such objection was ever raised by the Appellant in this regard. (iii) We also observe that the Respondent No. 1 / Lender, being the ultimate beneficiary under the Personal Guarantee, could institute and maintain the proceedings initiated against the Appellant under the Code. (iv) The Appellant further challenged that the report is not infirmity of the Code especially under Section 99(1), 99(7) and 99(9) of the Code, he specifically referred to Para 11 of the Impugned order in its record. (v) We take into consideration para 11 of the Impugned Order along with other relevant paras of the Impugned Order dated 11.06.2024 which read as under:- "7. This Adjudicating Authority vide order dated 08.04.2022 initiated the interim moratorium period in terms of Section 96 of IBC and appointed Mr. Jayant Prakash (having IBBI Registration: - IBBI/IPA-001/IP-P-00597/2017-2018/11049) as the Resolution Professional and the Resolution Professional was directed to s....
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....he Facility to the Borrower per the terms of Financing Documents, the adequacy of which is hereby acknowledged, the Guarantor guarantees to pay to the Lender, on failure to pay the Outstanding Amounts by the Borrower and on demand by the Lenders and/or the Trustee, all Outstanding Amounts and discharge any outstanding obligations and liabilities now or hereafter due, owing or incurred by the Borrower to the Lenders and/or Trustee under or pursuant to the Financing Documents, and whether such obligations or liabilities are express or implied, present, future or contingent, joint or several, incurred as principal or surety, originally owing to them. Clause 3.1 In the event of any default on the part of the Borrower in payment/repayment of any of the monies referred to in Clause 2 above the Guarantor shall, upon demand, forthwith pay to the Lenders and/or the Trustee, without demur, all the amounts demanded by the Lenders and/or the Trustee and payable by the Borrower under the Financing Documents. Clause 4.1 INDEMNITY BY THE GUARANTOR The Guarantor shall also indemnify and keep the Lender and the Trustee indemnified against all losses, dam....
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....d under Section. Further, Section 95 of the Code stipulates that if the application is made under Section 94 or 95 through resolution professional, the Adjudicating Authority shall appoint the Resolution Professional, recommended under sub-Section 2 or else nominated by board under sub-Section 4 of the code. (iii) We also note that the Resolution Professional is required to submit his report under Section 99 of the Code after examination the application made under Section 95 of the Code and after examination the Resolution Professional may recommend the acceptance or rejection of the application in his report. (iv) In terms of Section 100 of the Code, the Adjudicating Authority is required to adjudicate on the application filed by the Resolution Professional under Section 99 and pass an order either admitting or rejecting the application. (v) Thus, significate role of the investigations has bee assigned to the Resolution Professional who has to examine the various documentations and reply of the debtor like Appellant/Personal guarantor in the present case. (vi) In above background, we note that the Impugned Order clearly stipulate that the Adjudi....
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....rcumstances, principles of natural justice on some occasions may extend to the right to a full-fledged evidentiary hearing while in certain cases may be circumscribed to a bare minimum opportunity to furnish an explanation by the affected party. (ix) Based on the provisions of the code the documents made available to us and taking into account the Impugned Order dated 11.06.2024 passed by the Adjudicating Authority and the Hon'ble Supreme court judgements, we do not find merit in the contention of the Appellant that the Impugned Order is a non speaking order and against the principal of natural justice. (x) We also state that the principal of natural justice could vary with different circumstances and the Adjudicating Authority is not bound to give exhausting hearing on each and every objection raised by the Appellant in the same intensity. (xi) Therefore, the Impugned Order is found to be valid and was passed while keeping in mind the principles of natural justice and equity. (xii) The judgment of the Hon'ble Supreme Court of India passed in the matter of Dilip B Jiwrajka vs. Union of India & Ors. in [Writ Petition (Civil ) No. 1281 of 2021] doe....
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....ll' occurred in Section 97(1) of 'IBC' employed in Section 97(1) of 'IBC', this 'Tribunal' is of the considered view that it is only 'Directory' and not 'Mandatory' and holds it so, in the teeth of Rule 8(1) of the Insolvency and Bankruptcy (Application to 'Adjudicating Authority' for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 and also by which the NCLT may pick up any one from the Panel for appointment of 'IRP' Liquidator, Resolution Professional and Bankruptcy Trustee. As such, when the 'Adjudicating Authority' had exercised its judicial discretion in fair manner for the appointment of Mr. Anil Kohli as an 'IRP', the same cannot be found fault with as opined by this 'Tribunal'. Para 34- In view of the foregoing, the contra plea, taken on behalf of the Appellants that before passing of an order under Section 97(5) of 'IBC', the ingredients of sections 91 and 92 of 'IBC', are ought to be satisfied, is not acceded to by this 'Tribunal'. Looking at from any angle, the 'Impugned Orders' dated 23.07.2021 in I.A.(IBC) No. 346 of 2021 CP(IB) No. 02/95/HDB/2021 and I.A.(IBC) No. 347 of 2021 in CP(IB) No. 03/95/HDB/2021 for appointment ....
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....ion dated 05.01.2022, thereby ratifying all acts undertaken under the previous board resolution dated April 12, 2021. (ii) We find sufficient logic in pleadings of the Respondent No. 1 which is covered by the judgment of the Hon'ble Supreme Court of India in the matter of United Bank of India (Supra). We do not find any merit in the contention of the Appellant on this point. 52. Issue No. (V) Whether when adequate securities are already available with the Respondent No. 1 by way of first and exclusive mortgage of various properties (both immoveable and moveable) charged in favour of the Piramal Finance Limited at the time of execution of the Facility Agreement dated 20.07.2017 by Corporate Debtor (HEIL) and therefore, the Appellant as Guarantor is not liable for outstanding dues. (i) We noted the pleading of the Appellant that adequate securities were already available with the Respondent No. 1 by way of first and exclusive mortgage of various properties (both immoveable and moveable) charged in favour of the Piramal Finance Limited at the time of execution of the Facility Agreement dated 20.07.2017 by HEIL/Corporate Debtor. It is the case of the Appellant that....