TaxTMI 
TaxTMI 
2025 (4) TMI 378
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....s of the case 2. On 21.11.2017, the Bank of India filed Company Petition CP (IB) No. 72/CHD/HRY/2017 under Section 7 of the IBC against CD-M/s Vegan Colloids Limited. The petition was admitted by the Adjudicating Authority, initiating CIRP. Mr. Anil Kohli (Appellant) was appointed as the Interim Resolution Professional (IRP) on 04.12.2017 and later confirmed as the Resolution Professional. On 10.10.2018, the CD-M/s Vegan Colloids Limited was directed to undergo liquidation, and the Appellant was appointed as the Liquidator. 3. During liquidation, Respondent No. 1- PNB filed a claim of Rs.18,17,55,581/- on 17.12.2018, which was admitted by the Liquidator. Respondent No. 1- PNB relinquished its security interest to the Liquidation Estate, agreeing to receive proceeds from the asset sale. The Appellant initiated statutory audits for FY 2018-19 and obtained the audited financials on 08.01.2020. Discrepancies in financials prompted the Appellant to seek clarifications from Personal Guarantors - Respondents No. 2 and 3, and the late Mr. Bajrang Dass Aggarwal, who provided explanations on 25.02.2020. 4. The Appellant-Liquidator claimed that Rs.4,50,44,500/- deposited with the Res....
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.... of the IBC Code. 7. There has been a decrease in the balance of trade receivable and an amount of Rs. 4,50,44,500/- has been reduced from the short-term borrowing in the balance sheet of the Corporate Debtor. In the event, any amount, if believed to be correct as contented and relied by the Adjudicating Authority was paid by Respondent Nos 2 and 3 as guarantors, then no such reduction in the short-term borrowing was required to be made in the balance sheet of the Corporate Debtor. 8. During the liquidation process no creditor can realise any amount towards its debt satisfaction from the account of the Corporate Debtor. The only mechanism under which a creditor can realise its security interest is either through Sections 52 or 53 of the Code. Since the Respondent No. 1-PNB had relinquished its security interest to the Liquidation Estate and, therefore, any realisation which Respondent No. 1 could have done towards its debt from the loan account of the Corporate Debtor can only be as per waterfall priority provided under Section 53 of the Code. 9. The Adjudicating Authority negated to consider the treatment in the balance sheet of FY 2018-19 whereby the short-term borrowing....
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....ees one crore only) received from M/s Vikas Chemical Gums (India)/ Corporate Guarantor on 19.03.2019. c. Rs. 44,500/- (Rupees Forty four lakhs five hundred only) received from M/S Vikas Chemical Gums (India) Corporate Guarantor on 19.03.2019. d. Rs. 2,50,00,000/- (Rupees two crore fifty lakhs only received from M/s True Value Traders on 05.01.2019." 14. Shri B. D Aggarwal/Guarantor acting as a guarantor, had entered into a OTS with the Bank and acknowledged individual liability through a letter dated 22.01.2019. The letter also referenced mortgaged properties not belonging to the Corporate Debtor, which the guarantor sought to release through settlement. The Bank accepted this proposal. Since Banks do not maintain separate accounts for borrowers and guarantors, any payment made by the guarantors is credited to the principal borrower's account and adjusted against its liability. Consequently, payments made by the guarantors reduced the Corporate Debtor's liability to the bank. 15. Respondents No. 1-PNB claims in its reply that the appellant is not entitled to refund as the amount of Rs. 4,50,44,500/- was deposited towards OTS which was entered into by the Gua....
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....mself for the payment of a sum of money or the performance of something else for another who is already bound for the same. The word 'co-extensive' is an adjective for the word 'extent' and relates to the quantum of the principal debt. It is a settle proposition of law that the discharge of the principal debtor by operation of law does not discharge the surety and suit may also be maintained against the surety for the full payment of the debt where the principal-debtor has been adjudged insolvent or gone into liquidation. Further, as per the provisions of Code, separate proceedings may also be instituted against the personal/corporate guarantor of the Corporate Debtor, which clearly proves that the liability of surety is co-extensive with the borrower and guarantors are equally liable to pay the dues of the Corporate Debtor. 21. The guarantors of the loan account of Corporate Debtor entered into compromise with the answering Respondent Bank and amount was deposited/arranged by the guarantors to clear their liabilities being as guarantors, towards Bank. As such amount which was deposited and adjusted towards liability of the Corporate Debtor cannot be part of the ....
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....mount has not been paid/deposited by the Corporate Debtor directly in the loan account nor Bank has received the same from the realisation of assets of the Corporate Debtor. 24. The said amount has been paid/arranged by the surety/guarantors of the Corporate Debtor. It is also submitted that the said amount has not been paid/deposited by the Corporate Debtor directly in the loan account nor Bank has received the same from the realisation of assets of the Corporate Debtor. It is further submitted that the liability of the surety/guarantors continues till the payment has been made by them against the amount outstanding to be paid in the loan account of the Corporate Debtor, as such, no question arises to remit the amount paid/arranged by the guarantors and credited/adjusted towards liability of the Corporate Debtor in the loan account standing in the name of the Corporate Debtor, to the Applicant. It is submitted that since no asset in the name of the Corporate Debtor has been touched by the Bank/answering Respondent in such transaction being performed, the demand to refund the credited amount is against the settled preposition of law, as such, Application filed by the Applicant d....
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.... in the 3rd Meeting of SCC convened on 06.02.2020 which the following was noted: "i. There is a Decrease in Short Term Borrowings by an amount of Rs. 4,50,44,500/- however no such difference was there in Balance Sheet till LCD. There is an increase in trade payables by an amount of Rs. 2,50,37,504/- however in Balance Sheet till LCD the decrease was of Rs. 84,302/- only. There is an increase in Deferred Tax Liabilities by an amount Rs. 2,26,20,676/-. ii. There is a decrease in balance of Trade receivables by an amount of Rs. 2,15,88,181/- however in Balance Sheet till LCD the decrease was of Rs. 26,01,427/- only. iii. It was discussed that since during Corporate Insolvency Resolution Process (CIRP), bank accounts were to be operated by the RP only and debiting by any unauthorized means was discussed to be taken seriously. Also, the concerned bank account where such realized amount was deposited and utilized were found to be unknown." 29. On 25.02.2020 vide a letter by one of the ex-directors of CD-M/s Vegan Colloids Ltd., Sh, Bajrang Dass Aggarwal (now deceased) the Appellant- liquidator got the following clarification: - i. The short terms bo....
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....f India vs. Ramakrishnan & Anr., Civil Appeal no 3505 of 2018 of 14.05.2018 the moratorium under Section 14 of the IBC applies only to the assets of the Corporate Debtor and does not extend to the assets of guarantors. Further it held that the deposited amount does not form part of the Corporate Debtor's estate. 33. AA held as follows: "7. After hearing the learned counsel and careful perusal of the record carefully, we are of the considered view that the present application for a refund of Rs.4,50,44,500/- against respondent No.3 Bank is misconceived. A perusal of the records shows that the said amount was deposited with respondent No.3 Bank by the guarantors under the OTS proposal. Although, it is contended by learned counsel for the applicant that the said amount has been deposited during the moratorium period and that too from the Bank account of the corporate debtor, therefore, this amount forms the assets of the corporate debtor. However, this contention of learned counsel for the applicant is devoid of legal force because there is only one loan account with the corporate debtor because the said properties are not owned by the corporate debtor but these are th....
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....ownership rights, including all rights and interests therein as evidenced in the balance sheet of the corporate debtor or an information utility or records in the registry or any depository recording securities of the corporate debtor or by any other means as may be specified by the Board, including shares held in any subsidiary of the corporate debtor; (b) assets that may or may not be in possession of the corporate debtor including but not limited to encumbered assets; (c) tangible assets, whether movable or immovable; (d) intangible assets including but not limited to intellectual property, securities (including shares held in a subsidiary of the corporate debtor) and financial instruments, insurance policies, contractual rights; (e) assets subject to the determination of ownership by the court or authority; (f) any assets or their value recovered through proceedings for avoidance of transactions in accordance with this Chapter; (g) any asset of the corporate debtor in respect of which a secured creditor has relinquished security interest; (h) any other property belonging to or vested in the corporate debtor at the i....
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....guarantors and no amount is paid by the Corporate Debtor directly to the Bank. 37. As noted, earlier Section 36 (1) of the Code provides that for the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub-section (3) which will be called the liquidation estate in relation to the Corporate Debtor. Further, Section 36 (2) provides that the Liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors. Any amount reflected in the balance sheet of the Corporate Debtor is admittedly an asset of the Corporate Debtor and, therefore, the Adjudicating Authority ought to have considered the balance sheet of the Corporate Debtor which reflects a reduction of short-term borrowing during the Liquidation process. The Adjudicating Authority failed to consider that in terms of Section 36 (3) (a) and (g) of the Code, any assets over which the Corporate Debtor has ownership right, including all rights and interest therein as evidenced in the balance sheet of the Corporate Debtor or any asset of the Corporate Debtor in respect of which a secured creditor has relinquished security interest, becomes part of the liquidation estat....