TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 526
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....einafter 'Code'), which allowed the initiation of insolvency proceedings against Mr. Y.Y. Butchi Babu/Appellant, in his capacity as a Personal Guarantor to the Corporate Debtor, M/s Abir Infrastructure Private Limited which is Respondent No.2 in this appeal. 2. The Adjudicating Authority, vide the impugned order, admitted the Section 95 application filed by State Bank of India /Respondent No.1 and appointed Mr. Rajesh Chillale as Resolution Professional and directed him to file his report under Section 99 of the Code. Appellant asserts that despite production of documents like bank-issued certificates; statutory auditor confirmations; and documentary computations, and that the Bank had already received sums far exceeding the claimed liability and that no debt subsisted as on the date of the Demand Notice. The Appellant, therefore, has filed this appeal under Section 61(1) of the Code, challenging the impugned order. Brief facts of the case: 3. The brief facts of the case are as given below: (i) The Corporate Debtor, M/s Abir Infrastructure Private Limited, was placed in CIRP when the Adjudicating Authority issued an order on 30.01.2019 initiating insolvency procee....
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....the Demand Notice. (vii) The Adjudicating Authority admitted the application on 24.05.2022 and appointed Mr. Rajesh Chillale as Resolution Professional; ordered commencement of interim moratorium; directed the RP to examine the debt; and file a report under Section 99 of the Code. (viii) The RP thereafter issued a communication dated 27.05.2022, followed by an e-mail dated 30.05.2022, asking the Appellant to disclose details of payments made by the Corporate Debtor or guarantors after issuance of the Demand Notice and to clarify whether any amounts had been paid subsequently, effectively seeking confirmation of liability or absence thereof. (ix) The Appellant replied by e-mail on 07.06.2022, enclosing the earlier reply to SBI dated 20.11.2020, and reiterating that IA 2251/2019 filed in DRT contained the correct computation sheets. The Appellant asserted that no debt was due and further highlighted that substantial sums had been deposited towards reduction of liability prior to and after filing of the DRT OA. (x) The RP filed his Section 99 Report to the Adjudicating Authority on 13.06.2022, relying on the Bank's version that only Rs. 85,25,00,000....
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....and the amended Written Statement filed on 07.12.2022 before the DRT. Appellant stated that these documents confirm (a) the total remittances, (b) SBI's acknowledgment thereof, (c) that SBI had not disputed these figures before the DRT, and (d) that there existed no subsisting debt payable by the Personal Guarantor. (xvi) The Adjudicating Authority, vide its order dated 22.03.2024, accepted the RP's Report and admitted the Section 95 application, and thereby initiated the Insolvency Resolution Process against the Personal Guarantor. This impugned order is the subject of the present appeal under Section 61(1) of the Code. 4. The appellant has made the following prayers in his appeal: a) Kindly set aside the Impugned Orders dated 22.03.2024 passed by the National Company Law Tribunal, New Delhi III IN CP (IB) NO. 361(ND) 2021. b) Pass an order directing the Adjudicating Authority to consider the relevant material submitted by the Appellant. c) Pass any such other or further order(s) as this Hon'ble Appellate Tribunal may deem fit and proper in the facts and circumstances of the present case. Comp. App. (AT) (Ins.) No. 936 of 2024: Second ....
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....(Ins.) No. 936 of 2024 would be referred to as the second appeal for the purpose of disposal of these matters. As the facts in both these appeals are identical and the pleadings for the appellant in first appeal has been adopted for the pleadings of the appellant in the second appeal also, we would dispose of both the appeals by a common order. Submissions of the appellants 11. Learned counsel for the Appellants respectfully submits that the Appellant, being a Personal Guarantor to the Corporate Debtor, has invoked the appellate jurisdiction of this Hon'ble Tribunal challenging the Impugned Order dated 22.03.2024 passed in CP (IB) No.361 (ND) 2021. The grievance of the appellant is that the said order has been passed solely on the basis of the Resolution Professional's report which, according to the Appellant, is fundamentally erroneous and misleading. The Resolution Professional (hereinafter "RP") has allegedly ignored crucial documents, figures, statements and acknowledgements furnished by the Appellant, thereby rendering the report factually incorrect and incomplete. Counsel submits that the RP failed to observe and discharge his statutory duties under the Code, in particu....
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....h materially alter the outstanding liability, were ignored by the RP. 15. The Bank issued its demand notice dated 28.10.2020 under Rule 7(1) claiming Rs. 23,37,11,482.86 as payable by the guarantor as on 30.09.2020. Counsel submits that during proceedings, the Bank took a shifting stand by claiming that interest continues to accumulate and thereby sought to deflect from the recorded figure in the demand notice itself. This contradicts the Bank's own acknowledgment of outstanding dues at a particular point of time and reflects an attempt to inflate liability contrary to record. 16. Ld. Counsel further submits that detailed objections were filed to the RP's report wherein, it was specifically pointed out that the RP had wrongly stated that Rs. 85.25 Crores had been paid after OA filing. The objection clarified that payments aggregating Rs. 123.80 Crores had been paid since 12.04.2018, out of which Rs. 37.15 Crores was paid between 12.04.2018 and CIRP commencement on 30.01.2019, and a further Rs. 86.65 Crores was paid post 30.01.2019. The detailed loan repayment tables forming Annexure A-8 were placed before the RP and the Adjudicating Authority, but the same were ignored. 17....
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....w of the above submissions, counsel for the Appellant prays that this Hon'ble Tribunal may set aside the Impugned Order dated 22.03.2024 and direct consideration of all material placed on record demonstrating repayment of debt and absence of default. Submissions of the Respondent No.1 - SBI 23. Ld. Counsel for Respondent No.1 SBI (which is the contesting Respondent) submits that in terms of Clause 19 of the Guarantee Agreement dated 21.04.2011, the Guarantors expressly agreed that any statement of account duly certified by an authorised officer of the Respondent Bank would be conclusive and binding upon them. The contract consciously creates an obligation upon the Guarantors to accept the correctness of such certified statements, and it also recognises that any acknowledgment, admission or part-payment made by the Borrower shall equally bind the Guarantors. 24. He submits that Clause 19 of the Guarantee specifically stipulates that the Borrower would be deemed to act as the duly authorised agent of the Guarantors for purposes of acknowledgement of debt under Sections 18 and 19 of the Limitation Act, 1963, and further provides that in the event the Bank obtains any judgment....
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....t DRT outcomes before rendering findings. 30. Ld. Counsel further places reliance on State Bank of India v. Abhijeet Ferrotech Ltd., Company Appeal (AT) (INS) No. 690 of 2023, wherein this Appellate Tribunal reiterated that even if DRT proceedings remain pending and inconclusive, such pendency cannot be invoked as a ground to hold stall IBC proceedings. 31. It is submitted by Ld. Counsel that although aforesaid matters relate to Section 7 proceedings under IBC, the legal principle applies pari materia to proceedings under Section 95, since there exists no statutory prohibition restricting initiation of insolvency proceedings against personal guarantors pending recovery actions. 32. He submits that the Appellants have on their own disputed calculations before the DRT. However, pendency of such dispute cannot prevent a Financial Creditor from invoking statutory remedies under IBC. The legislative intent is clear; existence of parallel proceedings does not defeat right to initiate insolvency. 33. Ld. Counsel submits that in CIRP proceedings of the Corporate Debtor (M/s Abir Infrastructure Pvt. Ltd.), the claim of the Respondent Bank as secured creditor was admitted at Rs. ....
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.... of Sec 95 petition, or whether the alleged repayments extinguished the debt, thereby removing the jurisdictional foundation for admission. Resolution of this issue requires a careful examination of factual events, documentary record, contractual terms, statutory interpretation, procedural obligations of the Resolution Professional, rights of guarantors, and binding judicial precedent. 41. The Appellants assert that, following the filing of OA No.303/2018 before the DRT on 12.04.2018, the Corporate Debtor and the Corporate Guarantors remitted Rs. 123.80 crores between 07.09.2018 and 28.10.2019, besides maintaining a 100% cash margin of Rs. 20 crores. To substantiate these payments, they rely on auditor certifications and a letter issued by SBI dated 19.02.2024 acknowledging receipt of amounts. They submit that the Resolution Professional (RP) failed to verify repayment figures and mechanically accepted the Bank's statements, leading to erroneous conclusions in the Section 99 report dated 13.06.2022. They also contend that computation of outstanding debt is already pending before the DRT in IA No.2251/2019 filed in OA No.303/2018, and therefore insolvency proceedings should not h....
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....lementation vide orders dated 30.11.2021, 09.11.2022, and 18.01.2023. Under the approved plan, SBI was allocated Rs. 13,80,00,000/-. Thus, based on CIRP records, a balance loan of Rs. 5,28,69,464/- remained unpaid by the Corporate Debtor/ Personal Guarantors of CD. This amount excluded contractual interest which continued accruing till the date of payment. Neither the admitted claim amount nor the approved Resolution Plan was challenged before any forum by the CD or the Personal Guarantors. Under Section 31 of the Code, an approved plan binds all stakeholders, and unless it expressly provides for discharge of guarantors, their liability continues for unpaid balances. Consequently, the admitted unpaid portion remains legally recoverable from personal guarantors unless discharged in law. 44. We first evaluate whether the repayment figures relied on by the Appellants establish discharge. The key issue is not merely whether repayments were made, but whether such repayments exhausted contractual liability. When repayment entries exist alongside continuing ledger debits, it must be shown that the repayments matched or exceeded principal and contractual interest components. The acknowl....
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....Deed clearly states that the Bank's certified statement of account is binding and final against the guarantors. Therefore, the Appellants' self-prepared calculations cannot replace or override the Bank's certified figures. For deciding whether debt remained, the Bank's certified statement has to be accepted. 48. There is no evidence that the Bank accepted the Appellants' method of computation or acknowledged the debt as discharged. No documents like No- Dues Certificate, settlement agreement, accord and satisfaction, waiver, novation, or judicial order which extinguish the liability of the Borrower/Guarantor have been placed on record. The law requires affirmative proof of settlement to extinguish guarantor liability. Mere deposits, without demonstrated exhaustion of contractual interest burden and principal balance, cannot constitute full discharge. 49. We now consider the admitted debt figures during CIRP and its legal consequences. The admission of debt at Rs. 19,08,69,464/- constituted a determination binding upon the parties, and allocation of only Rs. 13,80,00,000/- in the approved Resolution Plan signifies that a residual portion remained. Under Section 31 of the Code ....
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....n Mr. G. Sundaravadivelu vs Indian Overseas Bank is extracted below: "96. It is pointed out that the pendency of proceedings before the 'Debt Recovery Tribunal', is not a bar, for the 'Financial Creditor', to initiate an action against the 'Corporate Debtor'. That apart, an 'Adjudicating Authority', need not wait for the decision of 'Debt Recovery Tribunal', while rendering its findings." 53. The Appellants also placed reliance on the pendency of Section 19 proceedings before the DRT to argue that the Section 95 proceedings should be deferred. In this regard, reference may be made to decision of this Tribunal in State Bank of India v. Abhijeet Ferrotech Ltd., (supra) where the Tribunal examined a question as to whether an application under the IBC could be rejected solely on the ground that DRT proceedings were pending and that the DRT had passed certain orders. The Tribunal held that proceedings under Section 19 which were still inconclusive could not prevent admission of proceedings under the IBC, and that such pendency was not a ground to hold an insolvency application as barred. Thus, pendency of Section 19 proceedings before the DRT cannot, by itself, bar considera....
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.... 55. It is clear from the aforesaid Judgments that pendency of a proceeding in DRT is not a bar for initiation of CIRP process under Section 7. Section 7 in case of companies is similar to Section 95 for the Personal Guarantors to the corporates and pari materia the same principle applies for the Personal Guarantors. 56. We next address the allegation of non-receipt of notice. The record contains evidence that notices were issued by the Resolution Professional, including notices requiring disclosure of payments. More importantly, the Appellants replied to the notice of the RP; thereafter filed their objections with NCLT; and finally submitted their written statements on 21.02.2024 before the Adjudicating Authority. Their participation in proceedings before the Adjudicating Authority demonstrates knowledge of proceedings. Even assuming some defect in service, procedural irregularity without prejudice is not a ground to set aside admission, where debt and default are established. 57. As regards the allegation that the RP failed to verify payments, we note that Section 99 mandates preparation of a report by the RP, but Section 100 places the ultimate duty upon the Adjudicatin....