Aditya Birla Finance Limited vs Sarita Mishra

i.

No judicial adjudication is involved at the stages envisaged in Sections 95 to Section 99 of the IBC;

ii.

The Resolution Professional appointed under Section 97 serves a facilitative role of collating all the facts relevant to the examination of the application for the commencement of the insolvency resolution process which has been preferred under Section 94 or Section 95. The report to be submitted to the adjudicatory authority is recommendatory in nature on whether to accept or reject the application;

iii.

No adjudicatory function of Adjudicating Authority is contemplated at the admission stage. To read in such a requirement at that stage would be to rewrite the statue which is impermissible in the exercise of judicial review;

iv.

The resolution professional may exercise the powers vested under Section 99(4) of the IBC for the purpose of examining the application for insolvency resolution and CP/IB/337/AHM/2020 12 of 17 to seek information on matters relevant to the application in order to facilitate the submission of the report recommending the acceptance or rejection of the application;

v.

There is no violation of natural justice under Section 95 to Section 100 of the IBC as the debtor is not deprived of an opportunity to participate in the process of the examination of the application by the resolution professional;

vi.

No judicial determination takes place until the adjudicating authority decides under Section 100 whether to accept or reject the application. The report of the resolution professional is only recommendatory in nature and hence does not bind the adjudicatory authority when it exercises its jurisdiction under Section 100;

vii.

The adjudicatory authority must observe the principles of natural justice when it exercises jurisdiction under Section 100 to determine whether to accept or reject the application; CP/IB/337/AHM/2020 13 of 17

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 IBC are not unconstitutional as they do not violate Article 14 and Article 21 of the Constitution.

DETAILED REPORT

A. An Overview:

SL. No.	Particulars	Remarks
1.	Section in which application is filed	Section 95 of the IBC
2.	Whether the application filed under Section 95 of the Code is complete	Yes, the application filed by the Creditor under Section 95 of the Code, 2016 is complete
3.	Nature of Transaction between the Applicant and the Corporate Debtor	Various Credit Facilities were provided by the financial creditor to the corporate Debtor for which respondent herein had executed a deed of personal guarantee.
4.	Date of the order of Hon’ble NCLT for appointment of RP	19.01.2024
5.	Date of Communication of order to the RP	24.01.2024
6.	Whether Form B was served on the Debtor required by the Law	Yes
7.	Date of Form B served on the Debtor	The FC issued Form B demand notice Dated 19.01.2023 to last known address of Personal Guarantor on 19.01.2023. However, Demand Notice was returned with a remark “Item Returned Unclaimed”
	Whether Debtor has Questioned/Challenged the application filed by the Creditor	No reply is received from Debtor
9.	Brief details of the issues raised by the Debtor	NA
10.	Date when RP sought Information/Clarifications from the Debtor	25.04.2024
11.	Date when the Debtor provided clarifications	No Clarification received
12.	Date of communication to the Creditor by the RP to inform appointment of the RP	25.04.2024

B. Summary:

SL. No.	Report under Section 99 of IBC	Remarks
1.	Particulars of the Applicant/Financial Creditor	Adity Birla Finance limited Room No. 401, Camac Square, 4th floor , 24 Camac Street Kolkata -700016
2.	Particulars of Corporate Debtor under CIRP	Ariyant Logistics Private limited. No CIRP is initiated against the Corporate Debtor.
3.	Details of personal guarantee given to Applicant by personal guarantor.	Sarita Mishra, N-8, Purvanchal Company-Op, Hatira Ghuni, Near Halabudotolla Jhil Bagan, Rajarhar, Gopalpur (M) North 24 paraganas, kolkata-59
4.	Date of invocation of personal guarantee by financial creditor.	19.01.2021
6.	Date of filing Petition under Section 94/95 of IBC.	The Financial Creditor issued Demand Notice dated 19.01.2023 in Form B under Rule 7(1) of the IBBI (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019 to the guarantors of the Corporate Debtor at their last known address which was returned back stating addressee absent. It may kindly be noted that the guarantor has not intimated any change of address to the Financial Creditor. It is submitted that the Hon’ble Supreme Court has interpreted the term “Served” in the case of Madan & Co vs- Wazir Jaivir Chand with reference to Section 27 of General Clauses Act, 1897 in situations where letters have not been able to be delivered, and has held that in such situations, a more reasonable effective, equitable and practical interpretation ought be to read the word “served” as “sent by post”, correctly and properly addressed and the word “receipt” as the tender of the letter by the postal peon at the address mentioned in the letter. Therefore, the Form B Demand Notice is deemed to have been served. The Respondent has failed to pay the outstanding dues after the said notice. Thus, to seek remedy, the Applicant/Financial Creditor has been left with no other option and to file this instant application to initiate Insolvency Resolution Process under Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.
		The creditor, Aditya Birla Finance Limited duly submitted the aforesaid complete application on 18/11/2024.
7.	Amount in default by Corporate Debtor to the Applicant at the time of commencement of CIRP.	Not Applicable as no CIRP has been initiated against Corporate Debtor.
8.	Amount provided in the Resolution plan, if any, against the claim of the applicant.	Not Applicable as no CIRP has been initiated against Corporate Debtor
9.	Balance due from personal guarantor.	It may kindly be noted that the liability of the Corporate Debtor and the Guarantor is co-extensive. The outstanding sums due and payable by the Corporate Debtor along with the guarantors including the Respondent herein to the Financial Creditor amounts to a sum of Rs.2,25,27,97,209.39/-(Rupees Two Crore twenty five lakhs twenty seven thousand two hundred nine and thirty nine paise only as on 24.03.2021
10.	Net worth of Personal Guarantor as on date of the report.	Not attached
11.	Copies of past years balance sheet Corporate Debtor.	Statement of account maintained by Aditya Birla Finance Limited showing the details of deposits made or credits received in the
		ordinary course of business in respect of the debt of the Corporate Debtor is annexed herewith and marked as annexure-J
12.	Details of actions taken by Applicant or any other Financial Creditor against Personal Guarantor under any other Act in respect of destowed by Corporate Debtor.	After the account was declared as NPA, the Financial Creditor/Applicant initiated SARFAESI proceedings and as such in due course and process of law issued a notice under Section 13(2) of the SARFAESI Act, 2002 upon the borrower company as well as the personal guarantor herein on 07.06.2021. However, in spite of receipt of the said 13(2) Notice, the personal guarantor herein has failed and neglected to repay the amount as sought for in the said 13(2) Notice.

i)

Recommendations are as under:

Recommendations a) Based on the gathered facts averted by (Admit/Reject) the Financial Creditor in the petition U/S 95 of IBC, 2016 as well as information obtained from the website of IBBI and public domain , the undersigned Resolution Professional is of the view that the petition satisfies all the requirements as set out under section 95 and Section 99 of the IBC 2016 .

b)

Accordingly , in the opinion of the undersigned Resolution Professional , the petition made by Adity Birla Finance Limited , the Financial Creditor , before the Hon'ble National Company Law Tribunal , Kolkata to initiate the Insolvency Resolution Process against Sarita Mishra, the Personal Guarantor of Ariyant Logistic Private Limited Under Section 95 of the Insolvency and Bankruptcy Code, 2016 is recommended for admission .

c)

The order dtd . 19.01.2024 was received on 24.01.2024 whereby RP was directed to make a recommendation for acceptance or rejection of the petition vide IA No. CP ( IB ) 67 / KB / 2023 within the stipulated period in terms of the provision of Section 97 of IBC , 2016.

Analysis and Finding

“Section 60: Adjudicating Authority for corporate persons.

*60. (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate persons located.

(2)

Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or [liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor] shall be filed before such National Company Law Tribunal.

78. Application.

This Part shall apply to matters relating to fresh start, insolvency and bankruptcy of individuals and partnership firms where the amount of the default is not less than one thousand rupees: Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one lakh rupees.

79. Definitions.

In this Part, unless the context otherwise requires, -

(1)

Adjudicating Authority means the Debt Recovery Tribunal constituted under subsection (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institution Act, 1993 (51 of 1993)

Section 179 of the Code reads as under:

(1)

Subject to the provisions of section 60, the Adjudicating Authority, in relation to insolvency matters of individuals and firms shall be the Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides or carries on business or personally works for gain and can entertain an application under this Code regarding such person.

(2)

The Debt Recovery Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain or dispose of—

(a)

any suit or proceeding by or against the individual debtor;

(b)

any claim made by or against the individual debtor;

(c)

any question of priorities or any other question whether of law or facts, arising out of or in relation to insolvency and bankruptcy of the individual debtor or firm under this Code.

(3)

Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application in the name and on behalf of a debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.

Judicial precedents

Madras High Court

NCLAT – Mahinder Jajodia case

“10.

Sub-Section 1 of Section 60 provides that Adjudicating Authority in relation to Insolvency or Liquidation for Corporate Debtor including Corporate Guarantor or Personal Guarantor shall be the NCLT having territorial jurisdiction over the place where the Registered Office of the Corporate Person is located. The substantive provision for an Adjudicating Authority is Section 60, sub-Section (1), when a particular case is not covered under Section 60(2) the Application as referred to in sub-section (1) of Section 60 can be very well filed in the NCLT having territorial jurisdiction over the place where the Registered Office of corporate Person is located.”

Lalit Jain – Hon’ble Supreme Court

Hon’ble Supreme court in Lalit Kumar Jain v. Union of India has categorically held as under : - “There is sufficient indication in the Code-by Section 2(e), Section 5(22),Section 60 and Section 179 indicating that personal guarantors, though forming part of the larger grouping of individuals, were to be,in view of their intrinsic connection with corporate debtors, dealt with differently, through the same adjudicatory process and by thesame forum (though not insolvency provisions) as such corporate debtors”.

79.

Be that as it may, in view of the detailed foregoing qualitative discussions, this ‘Tribunal’, keeping in mind the respective contentions advanced on either side, and considering the facts and circumstances of the instant case, in a conspectus manner, comes to a resultant conclusion that the ‘Adjudicating Authority’/‘Tribunal’, has ‘jurisdiction’, to ‘entertain’/‘initiate’, the ‘Insolvency Proceedings’ of the ‘Personal Guarantors’, even when ‘no Corporate Insolvency Resolution Process’ proceedings, is ‘pending’, against the ‘Corporate Debtor’, and in any event, the ‘Corporate Insolvency Resolution Process’ proceedings, is pending, and continued to be pending, against the ‘Corporate Debtor’.

The National Company Law Tribunal shall be the vested with all the powers of the Debt Recovery Tribunal as contemplated under part (III) in this code, for the purpose of Sub- section (2). Thus it is recognized by the legislature that for Part-III , the Adjudicating authority shall be Debt Recovery Tribunal unless the context otherwise requires. This context has then been clearly laid bare in Section 60(4) above, that in such a context i.e. where the CIRP/liquidation is proceeding before a National company Law tribunal, the NCLT shall have powers of the DRT.

(5)

Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of -

(a)

any application or proceeding by or against the corporate debtor or corporate person;

(b)

any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and

(c)

any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code It is clear that NCLT shall have jurisdiction on the matters arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor. In other words if any matter is not related to the insolvency or liquidation proceedings of the corporate debtor or corporate person under this code, NCLT shall not have jurisdiction. With this conjoint reading of various provisions of law as also after having distinguished various judgements brought out above, we hold that since no application for insolvency has been filed against the Corporate Debtor in the instant case, this petition is not maintainable before us, but may be maintainable at other fora.