TaxTMI 
TaxTMI 
2026 (2) TMI 539
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....e appellant - SRA, has been allowed by the impugned order, however, by allowing the application, certain observations in paragraphs 55 to 57 have been made, aggrieved by which observations, this appeal has been filed. 2. Brief facts of the case necessary to be noticed for deciding the appeal are: i. The corporate debtor, Shivaji Cane Processors Limited an MSME was put to Corporate Insolvency Resolution Process (CIRP), on an application by ASREC (India) Ltd. vide order dated 18.02.2021. ii. The corporate debtor was sanctioned a consortium loan amounting to Rs. 18,20,00,000/- under which the Respondent No. 1 - Shree Warana Sahakari Bank Ltd. has advanced the loan of Rs. 6,20,00,000/- vide sanction letter dated 23.01.2017 and Respondent No. 2 - Kolhapur Urban Co-operative Bank Ltd. haD advanced the loan of Rs. 6,00,00,000/- vide sanction letter dated 11.01.2017. iii. The corporate debtor to secure the loan of respondents No. 1 & 2 as a security has executed Mortgage Deed, third-party guarantees and guarantees by personal guarantors. iv. On initiation of CIRP against the corporate debtor, Respondent No. 1 filed a claim under Form-C dated 25.02.202....
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....r, despite receiving the payment under the plan, respondents No. 1 & 2 retained possession of the assets of the guarantors, continued recovery proceedings against the guarantors, and also raised demands upon the corporate debtor. xi. The appellant filed an I.A. being I.A. No. 4484/2024 in August 2024 directing to respondent No.1 to forthwith implement clauses of the resolution plan and further restrain the respondent for taking any steps of recovery or enforcement of debt. Direction was also sought to refer the matter to IBBI for filing a complaint against the respondents No. 1 & 6 under Section 236 of the Insolvency and Bankruptcy Code, 2016 (for short the Code or the IBC) for the offence of under Section 74(3) of the Code. xii. In the application, reply was filed by respondent Nos. 1 & 2 opposing the prayers made in the application. The adjudicating authority after hearing the parties by impugned order, allowed the I.A. No. 4484/2024 and held that approved resolution plan validly extinguishes the rights of dissenting financial creditor against the personal guarantors and further the action of the respondents in continuing the recovery against the guarantors is i....
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....properties which were mortgaged or otherwise charged in favour of the lenders of the Corporate Debtor, and thereby fall within the scope of the Resolution Plan, shall be eligible for such release." xiv. The appellant aggrieved by the observations made by the adjudicating authority in paragraphs 55 to 57 has made following prayers in the appeal, which is as follows: "a) This Hon'ble Tribunal may be pleased to allow the present Appeal and set aside the observations in paragraph nos. 55 - 57 of the Impugned Order dated 25th April 2025 passed by the Hon'ble National Company Law Tribunal Bench, in I.A. No. 4484 of 2024 (Ex. A herein) in so far as the restrict the scope of extinguishment of personal guarantees only to assets which were mortgaged against the debts of the Corporate Debtor. b) Pending the hearing and final disposal of the present Appeal, this Hon'ble Tribunal may be pleased to stay the effect and operation of paragraph nos. 55-57 of the Impugned Order dated 25th April 2025 passed by the Hon'ble National Company Law Tribunal Bench, in I.A. No. 748 of 2023 (Ex. A herein). c) For such other reliefs as this Hon'ble Tribunal deems fit in the f....
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....under the mortgage are not included. Clarification issued by the adjudicating authority that only those assets of the erstwhile promoters, directors, and guarantors which were given as guarantee or security for the corporate debtor and are specifically addressed shall stand released. Personal properties which were not subjected to any such mortgage or securities shall not deem to be released from encumbrances or attachment. It is submitted when the entire debt of the respondent Nos. 1 & 2 has been resolved in the insolvency resolution process, bank has no authority or jurisdiction to keep any personal property of the promoters, directors and guarantors. The attachment which is claimed by respondents No. 1 & 2 are attachment for recovering their dues and their dues having already been settled, the attachment cannot continue in law and entire action of the respondent is in breach of resolution plan which is binding on respondents No. 1 & 2 by virtue of Section 31 of the IBC. It is submitted that in spite of the approval of the resolution plan and dismissal of the appeal filed by respondent No. 1 even the assets of the corporate debtor was not released and it was only on after order d....
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....d financial creditors. It is useful to notice Paragraph C-3(II)(g) & (h) which is as follows: "C-3: PROVISION FOR SECURED FINANCIAL CREDITORS OF CORPORATE DEBTOR II. THE TERMS OF PAYMENT OF SECURED FINANCIAL CREDITORS: g. On approval of the Resolution Plan the entire debt of the Secured Financial Creditor will be settled and on assignment of debt at the end of four years there will be no liability remaining. h. Sharing of the secured creditor of the aggregate amount is as follows. Sr. No. Particulars Sharing Ratio (%) Resolution Amount Rs. 1 ASREC Limited 48.55% 123309495 2 Mahindra & Mahindra Financial Services Ltd. 17.71% 44970529 3 Shri Warna Sahakari Bank Ltd. 17.09% 43415371 4 The Kolhapur Urban Co-op Bank Ltd. 16.65% 42296889 Total 100.00% 253992284" 9. Paragraph C-3 (IV) deals with release of release of security on the assets of corporate debtor/other security charged to secure the financial debt. Paragraph C-13 deals with extinguishment of claims/rights/litigation. It is useful to notice sub-Clause (2), (3), (7) & (14), which are as follows: "C-13: ....
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....and extinguished and all encumbrances, security interest, or attachments created over the assets of the erstwhile promoters, directors and guarantors of corporate debtor shall be irrevocably released. We repeat Clause (7) again to put emphasis: "7. All encumbrances, security interest, liens and/or attachments (including pursuant to applicable Law) created or exists over the assets of the erstwhile promoters, directors and Guarantors of Corporate Debtor (charged or not charged with the lenders) shall be irrevocably released and all enforcement commenced by any person over any of the assets of the erstwhile promoters, directors and Guarantors of Corporate Debtor charged with the Financial Creditors to secure the debt of Corporate Debtor shall stand released and reversed without the requirement of any further deed or action on part of the Resolution Applicant or the erstwhile promoters, directors and Guarantors of Corporate Debtor. (Emphasis in bold supplied)" 11. It is relevant to notice that the resolution plan was initially rejected by the adjudicating authority vide order dated 01.05.2023 and reason for rejection of the resolution plan was that resolution plan extin....
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....h has been much pressed by the counsel for the respondents No. 1 & 2 is that third-party securities were even not part of claim form i.e., Form-C submitted by respondents No. 1 & 2. Third-party securities which were taken by the bank cannot be said to be subject matter of the appeal. 14. Learned counsel for the respondent in the additional affidavit filed has given details of property description referred to in Form-C. It is contended that several assets of the personal guarantors which were not referred in Form-C although referred in Comp. App. (AT) (Ins.) Nos. 661-663/2023 and Comp. App. (AT) (Ins.) No. 1003/2025 where attachment under Section 101 of the Maharashtra Cooperative Societies Act, 1960 and cannot be subject matter of the CIRP process. The submission of the respondents No. 1 & 2 is that those third-party assets which have been attached by respondents No. 1 & 2 under Section 101 of the Maharashtra Cooperative Societies Act, 1960 are not part of the CIRP and can be retained by the respondents No. 1 & 2 for realisation of its debts from the assets of the personal guarantors and the third-party guarantors. It is submitted that several assets which are attached under Sec....
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....he recovery of the arrears of the initial cost or of any contribution for obtaining services required for crop protection which may be due from its members or other owners of lands included in the proposal (who may have refused to become members) or by a lift irrigation society for the recovery of arrears of any subscription due from its members for obtaining services required for providing water supply to them, [or by a Tulaka or Block level village artisans multipurpose society advancing loans and arranging, for cash credit facilities for artisans for the recovery of arrears of its dues,] [This portion was inserted by Maharashtra 36 of 1975, Section 8.] [or [[***] [This portion was Inserted by Maharashtra 20 of 1986, Section 52(a).], or by a co-operative dairy society advancing loans for the recovery of arrears of any, sum advanced by it to any of its-members or by an urban co-operative bank for the recovery of arrears of its dues, [or any sum advanced by the District Central Co- operative Bank to its individual members or by non-agricultural co-operative credit society for the recovery of the arrears, of its dues] [These words were inserted by Maharashtra Act No. 16 of 2013 date....
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...., w.e.f. 10-5- 2005.], grant a certificate for the recovery of the amount stated therein to be due as arrears and such a certificate shall be deemed to have been issued as if on an application made by the society concerned. (3) A certificate granted by the Registrar under sub- section (1) or (2) shall be final and a conclusive proof of the arrears stated to be due therein, and the same shall be recoverable according to the law for the time being in force [as arrears of land revenue. A revision shall lie against such order or grant of certificate, in the manner laid down under section 154 and such certificate shall not be liable to be questioned in any court] [These words were substituted for the words 'for the recovery of land revenue' by Maharashtra Act No. 16 of 2013 dated 13-8-2013, Section 64(b), (w.e.f. 14-2-2013).]. (4) It shall be lawful for the Collector and the Registrar to take precautionary measures authorised by sections 140 to 144 of the [Bombay Land Revenue Code, 1879] [See now the Maharashtra Land Revenue Code, 1966 (Maharashtra XLI of 1966).] or any law or provision corresponding thereto for the time being in force, until the arrears due to....
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....f the promoters to recover its dues. The action of respondents No. 1 & 2 is clearly contrary to the whole IBC proceedings and need to be deprecated. 19. Now coming to the observations made by the adjudicating authority in paragraphs 55 to 57, the adjudicating authority committed error in observing that liabilities of personal guarantors being independent are not extinguished by approval of the resolution plan unless it is created. Adjudicating authority has further observed that resolution plan does not provide any specification or identification of the properties although general Clause C-13(7) has been noted. Clause C-13(7) is a clause which extinguishes all encumbrances of the personal guarantors and promoters. It is not open for the adjudicating authority to observe that personal properties of the guarantors which were attached under Maharashtra Cooperative Societies Act, 1960, pursuant to award has to be kept out. The enforcement action under Maharashtra Cooperative Societies Act, 1960 by the respondents No. 1 & 2 to recover its dues and attachment pursuant thereof shall stand released by virtue of Clause C-13(7) and it is not open for the respondents No. 1 & 2 to continue ....