Anil Dhirajlal Ambani vs State Bank Of India & Anr.

This Application IA No.1773 of 2024 is filed by Mr. Anil Dhirajlal Ambani (“Applicant/Personal Guarantor”), on 16.01.2024 under Section 179 r/w Section 60(5) of the Code a/w Rule 11 of NCLT Rules, 2016. The Applicant has made following prayers:

The Applicant has filed the present Application for setting aside the Report dated 31st May 2021 ("Report") issued by the Resolution Professional Mr. Jitender Kothari ("RP/Respondent No. 2"), under section 99(1) of the IBC alleging such Report being illegal, stale and contrary to the law laid down by the Hon'ble Supreme Court in the case of Dilip Jiwrajka Vs. Union of India (2023) ibclaw.in 147 SC.

The brief facts leading to filing of Company Petition CP(IB) 916(MB) of 2020 are as follows :

a. The Applicant had executed a personal guarantee dated 23^rd September, 2016 in favor of State Bank of India (“SBI/Respondent No. 1”) to secure the credit facility extended by SBI to Reliance Communications Limited in terms of facility agreement dated 29.8.2016. The said credit facility was classified as non-performing assets retrospectively with effect from 26th August 2016.

b. The Respondent No. 1, by its demand notice dated 31^st January 2019 invoked the said Guarantee and called upon the Applicant to pay a sum of Rs. 1384,81,64,562/- within 21 (days) from the date thereof. The Respondent, thereafter, issued a demand notice on 24^th February, 2020 to the Applicant. Thereafter, on or about 12th March 2020, the Respondent filed an Application registered as CP(IB) 916(MB) of 2020 to initiate Insolvency Resolution Process in case of the Applicant Personal Guarantor in terms of Part III of Insolvency & Bankruptcy Code, 2016 (“IBC”) .

Brief facts leading to filing of present application are stated as under :

a. This Tribunal appointed Respondent No. 2 as Resolution Professional vide its Order dated 20.08.2020 to file its Report in terms of Section 99 of IBC after examining the Company Petition 916 of 2020.

b. The RP issued an email dated 22.8.2020 22.45 PM asking the Applicant to provide the information as stated in Annexure 2 of the said email besides also requiring the Applicant to give (a) evidence of electronic transfer of the unpaid amount from the bank account of the debtor; (b) evidence of encashment of a cheque issued by the debtor; or (c) a signed acknowledgment by the creditor accepting receipt of dues. The details sought at Annexure 2 are stated as below :

c. Thereafter, this email was followed by another email dated 25.08.2020 17.08 PM requiring further information i.e. (a) Copy of the order passed by the Hon'ble High Court of England and Wales; (b) Copy of the Petitions and replies filed with Hon'ble High Court of England and Wales.

d. Aggrieved by the initiation of the Insolvency Proceedings, the Applicant filed a Writ Petition (C) 5720 of 2020 before the Hon'ble Delhi High Court and the Hon'ble Delhi High Court passed the following order on 27.08.2020 :

e. The issue before Hon’ble Delhi High Court got settled by Hon’ble Supreme Court decision dated 21.05.2021 in Lalit Kumar Jain vs. Union of India (2021) 9 Supreme Court Cases 321 upholding the validity of notification issued by the Government of India dated 15.11.2019 and dismissing the writ petitions, transferred cases and transfer petitions on this aspect.

f. The Respondent No. 2/RP sent an email dated 21.5.2021 requiring the information/copies of the documents sought in his letters dated 22.8.2020 and 25.8.2020 on or before 28.5.2021 and informing that in case of failure he shall submit the report under section 99 of IBC to this Tribunal based on the information available with him.

g. Respondent No. 1/SBI also sent an email dated 24.5.2021 to the RP/Respondent No. 2 enclosing documents required by RP and also requiring him to submit his report recommending admission or rejection of the Company Petitions to this Tribunal on or before 25.5.2021.

h. On 24.5.2021, the legal counsel of the Applicant also wrote a letter to RP asking him to provide Applicant with appropriate time so as to enable him to submit reply to RP’s Letter after the lockdown is lifted, private offices are permitted to reopen, and staff are permitted to commute and attend private offices, citing the Orders dated 13 April 2021, 29 April 2021 and 12 May 2021 issued by Government of Maharashtra whereby restrictions were imposed till 1^st June, 2021.

j. On 27.05.2021, the RP wrote back stating that “The orders of the Hon'ble

k. The RP filed his Report in terms of Section 99 of the IBC on 31.5.2021 before this Tribunal recommending the admission of the Company Petition to initiate Insolvency Resolution Process in the matter. The RP has stated in the said Report that

l. On 4.6.2021, this Tribunal disposed of IA 1162/2021 filed by RP seeking extension of time for filing his Report u/s 99 of IBC and IA 1202 of 2021 filed by Applicant Personal Guarantor seeking extension of time for providing information as infructuous in view of filing of Report by RP on 31.5.2021.

m. The Applicant filed a Writ Petition (Civil) 519 of 2022 before Hon’ble Supreme Court challenging the constitutional vires of certain provisions of Part III of the IBC, which was tagged with Special Leave petition (Civil) No. 16464 of 2021 filed against the order of Hon’ble Bombay High Court by one Mr. Surendra Jiwarajka. In that matter, the Hon’ble Supreme Court directed the Resolution Professional not to proceed with filing of the report. All these matters came to be finally decided in terms of judgement dated 9.11.2023 passed in the case of Dilip Jiwarjka vs. Union of India (2023) ibclaw.in 147 SC.

n. The Applicant has claimed that he was provided the RP’s report on 14.12.2023.

It is case of the Applicant that the RP has acted in undue haste manner denying fair and proper opportunity to the Applicant to provide the required information, after having opted to seek information from him. The Applicant has also alleged that the RP’s has exceeded the mandate of IBC in seeking unrelated information demonstrating bias on his part in so far as he sought information, which he ought not to have, and denying the fair opportunity for provision of required information during the period of COVID-19 induced restrictions.

The RP has denied existence of any bias on his part in discharge of his duties as Resolution Professional and has submitted that he had given mandatory 7 days time to the Applicant for providing the required information. It was submitted that RP’s conduct can not be faulted simply because he ensured strict adherence to the timelines provided in the IBC for furnishing of Report u/s 99 of the IBC. It was further contended that no prejudice is caused to the Applicant even if the Applicant was restrained on account of COVID restriction as the Applicant has not demonstrated till now that he has something more to say so as to have bearing on the Report furnished by the RP.

SBI has supported the case of the RP and reminded this Tribunal that this matter is languishing since long and the Applicant has been indulging into delay tactics so as not to allow this Tribunal to proceed further to pass appropriate orders in terms of Section 100 of the IBC.

Heard the Learned Counsel for the parties. The Counsel for Applicant, RP and SBI have placed reliance in case of Dilip Jiwarajka (Supra) to buttress their arguments.

Section 98 of the IBC deals with replacement of Resolution Professional and reads as under :

Section 99 of the IBC deals with the Report of RP and reads as under :

Section 98 of the IBC clearly empowers a debtor to apply to the Adjudicating Authority for the replacement of the resolution professional, if he is of such opinion. The Hon’ble NCLAT in the case of Mr. Vinay Rai vs. Technology Development Board

In case of Mr. Ravi Ajit Kulkarni v. State bank of India, (2021) ibclaw.in 396

In view of this decision, this Tribunal is required to examine only whether the opinion formed by the Applicant Personal Guarantor is founded on rational basis and objective consideration.

Before we proceed further, it is pertinent to refer the case of S. Parthasarathi vs. State of Andhra Pradesh (1974) 3 Supreme Court Cases 459, wherein it was held that :

In the present case, the Resolution Professional had sought voluminous information vide his first email dated 22.08.2020 and thereafter also sought some information vide email dated 25.08.2020 in relation to the proceedings before foreign jurisdiction. The RP was appointed by this Tribunal on 20.08.2020 and he was communicated of his appointment by SBI on 21.8.2020, however, before expiry of 10 days, the Hon’ble Delhi High Court stayed the proceedings vide Order dated 27.08.2020, which came to be vacated only on 21.05.2021. The RP issued his Report on 31.05.2021 after requiring the Applicant vide email dated 21.05.2021 to share the information/documents sought vide email dated 22.08.2020 and 25.08.2020. It is pertinent to refer to decision of Hon’ble NCLAT Chennai Bench in case of Comandur Parthasarathy v. Lalit Kumar Dangi (2025) ibclaw.in 436 NCLAT, wherein it has been held that the use of the word ‘may’ in Section 99(4) means that powers conferred on Resolution Professional are absolutely discretionary, however, once RP has issued a notice, Section 99(4) will be no more directory in nature and becomes mandatory. In view of this decision, the Respondent No. 1/SBI asking RP to submit his Report by 25.5.2021 was totally uncalled for as the RP having exercised his discretion to seek information/documents from the Applicant was duty bound to wait till 28.5.2021 for those information.

It is pertinent to note that RP was asked time by the Applicant vide his counsel’s mail dated 24^th May, 2021 and 27^th May, 2021 citing the circumstances arsing from COVID-19 pandemic causing restricted moveability and working of the persons across India and also apprising the Applicant about an Order dated 12.05.2021 issued by Maharashtra Government extending the restrictions till 1.6.2021. as well the Order dated passed by Hon’ble Supreme Court in Suo Moto Writ Petition extending the time lines for suits/litigation under Limitation Act till 15.7.2021. However, the RP proceeded to finalise his Report u/s 99 of IB Code.

The learned Counsel for the Applicant relied upon the decision in case of V. S. Palanivel v. P. Sriram 2024 SCC Online SC 2413 wherein the Hon’ble Supreme

Further, in case of GPR Power Solutions Private Limited (2021) 17 Supreme Court Cases 312, the Hon’ble Supreme Court condoned the delay in filing of claim by a creditor in view of Orders passed by Court in Suo Motu Writ Petition (Civil) No. 3 of 2020. Reliance was also placed on decision of Hon’ble Bombay High Court in case of Shri S. B. Jadhav v. The State of Maharashtra W.P. (ST) No. 92298 of 2020 and decision of Hon’ble Delhi High Court in case of Urban Improvement Co. Pvt. Ltd. v. National Faceless Assessment Centre Delhi W.P. © 6131/2021 & CM Appl. 19413/2021 wherein decision taken by authorities in terms of show cause notice, which could not be responded on account of COVID-19 pandemic were set aside. These decisions clearly support the case of the Applicant that RP ought to have given fair opportunity to provide the information/documents to him in view of Covid 19 Pandemic induced restrictions, once he had exercised his option to call for information/documents from the Applicant, and ought to have heeded to the request of the applicant to provide some more time even if not beyond 1^st June, 2021/15^th July 2021 in terms of Order of Maharashtra Government and Hon’ble Supreme Court’s Order in Suo Moto Writ Petition. Instead, we note that the RP didn’t even wait for adjudication of his application pending before this Tribunal seeking relaxation of 10 days timeline and a cross application of the Applicant before this Tribunal requiring more time in view of COVID-19 pandemic restrictions. These facts clearly lead us to a conclusion that though the time of strict 7 days was allowed but such strict adherence in the facts and circumstances of the case resulted into denial of proper and fair opportunity to the Applicant in adducing the information/documents called by the Applicant vide his email dated 22.8.2020.

Learned Counsel for the RP argued that the principal of natural justice does not have application where no prejudice is caused to the applicant, and in this case, since the applicant has nothing more to submit to RP and he could do so before this Tribunal as well during course of hearing u/s 100 of IBC, the Applicant’s argument on ground of denial of opportunity ought to be rejected. We have given due consideration to this argument of the learned Counsel for RP. It is pertinent to refer to the decision in case Sree Metaliks Ltd. & Ors. v. The Union of India & Ors [2017] ibclaw.in 03 HC, the absence of following the principle of natural justice under Section 7 of the IBC was challenged before the Calcutta High Court. In this case, the petitioner argued that when a petition is filed under section 7 of the IBC, the corporate debtor is not provided with a reasonable opportunity of hearing. The Court observed, “Where a statute is silent on the right of hearing and it does not in express terms, oust the principles of natural justice, the same can and should be read into.” The Court decided that pursuant to section 424 of the CA, 2013, the Adjudicating Authority is bound to provide a “reasonable opportunity of hearing” to the corporate debtor when it receives an application filed under section 7 of the IBC. Accordingly, we are of considered view that RP, having exercised option to seek information/documents from the Applicant, was duty bound to extend reasonable opportunity to the Applicant, hence, in the absence of same, the Report of the Resolution Professional deserve to be sent back for fresh consideration after providing an opportunity of 7 days in providing the information/documents called for by mail dated 22.8.2020.

Having said so, it is pertinent to examine whether the opinion formed by the Applicant is founded on rationale and objective considerations. We have held in the preceding para that RP acted in haste manner to discharge his duties under section 99 of the IBC and ought to have given due consideration to the ground realities arising from COVID-19 pandemic. It was argued before us that there exists real likelihood of a bias arising from RP requiring information vide email dated 25.8.2020 which are not connected to the matter in the Company Petition, accordingly, the facts of the case can clearly lead to reasonable apprehension" in the mind of a reasonable man fully cognizant of the facts.

It is pertinent to refer to Dilip Jiwarajka (Supra), wherein the Hon’ble Supreme held that “66. The resolution professional cannot decide that issue in the absence of an opportunity to the debtor to furnish an explanation and to produce material evidencing the payment of the debt. Likewise, sub-section (4) of Section 99 empowers the resolution professional, in the course of carrying out an examination of an application to seek further information or explanation in connection with the application from the debtor or the creditor. The expression “in connection with the application” indicates that Parliament has not contemplated a roving enquiry by the resolution professional but an enquiry for the purpose of making the ultimate recommendation in the report on the nature of the application itself. The resolution professional, after carrying out the process which is evidenced in sub-sections (2) and (4), in particular, is then required to make an ascertainment in terms of sub-section (6). It is thereafter that the resolution professional would submit a report either recommending the acceptance or rejection of the application together with the reasons in support of the report.” It further elucidated that “67. …………… Though, the ultimate report of the resolution professional has only a recommendatory value, the legislature has ensured that the recommendation is made after taking into account the information or, as the case may be, the explanation that is furnished by the debtor. Thus, it cannot be said that there is any element of bias in a report submitted by an RP who is nominated by the creditor. In the decision in Ravi Ajit Kulkarni v. State Bank of India¹⁸, it has been emphasized that under Section 98 of the IBC, the debtor retains the option to replace the RP appointed under Section 97 by filing an appropriate application with the adjudicating authority.the Role of Resolution is to collate facts as a facilitator.” It further states that “81. The resolution professional in exercise of their duty under Section 99 may not embark on a roving enquiry into the affairs of the debtor or personal guarantor, as the case may be. The information sought by the resolution professional from the debtor, the creditor, or third parties must be relevant to the examination of the application of IRP. In this process, the debtor would inevitably be furnished with a fair opportunity by the resolution professional………..”

The decision in Dilip Jiwarajka clearly emphasises that the Resolution Professional can not indulge into a roving inquiry and can only seek information/documents which are strictly relevant to the examination of the application. In the present case, the information/documents sought vide email dated 25.8.2020 are clearly not connected to the examination of the application under this Petition, as that application only seeks determination of existence of debt and default therein on part of the Personal Guarantor in connection with the Guarantee executed by him to secure the debt owed by a Corporate Debtor and those information squarely falls under the domain of roving inquiry. This can certainly cause a reasonable apprehension in the mind of a reasonable man as to the intent of the Resolution Professional qua the Personal Guarantor. Accordingly, we are of considered view that the opinion of the Applicant Debtor is founded on a reasonable consideration and can not said to be farce or bald.

If we look at the Scheme under Chapter III relating to Personal Insolvency of Guarantors, the said scheme is different from the scheme contemplated for resolution of Corporate Debtor. In the case of Personal Insolvency Resolution Process, Section 105(1) of IBC provides that the debtor shall prepare, in consultation with the resolution professional, a repayment plan containing a proposal to the creditors for restructuring of his debts or affairs, while in Corporate Insolvency Resolution Process, the suspended Board has no role in the consideration of Resolution Plans. Since, the debtor is required to be in consultation with the Resolution Professional and it is their mutual co-ordination which can ensure the successful resolution of personal insolvency, the statute had vested express right in the debtor as well to seek replacement of Resolution Professional, which is absent in case of Corporate Insolvency Resolution Process, where only Creditors are vested with such right. Though, we do not find any negligence or explicit bias on part of the Resolution Professional in this case, however, we are of considered view since the Insolvency Resolution Process after commencement has to be run in close co-ordination of Debtor and Resolution Professional, it is imperative that the incumbent Resolution Professional gives way to a new Insolvency Professional so that the process of Insolvency Resolution can be expedited. Accordingly, we discharge the Respondent No. 2/RP from his duties as Resolution Professional in this matter with immediate effect. However, the Respondent No. 1 shall settle his account in relation to fees and expenses incurred by him so far. Needless to say, these expenses shall be borne by the Applicant herein, who shall reimburse these expenses to the Respondent No. 1 within 15 days from the date of communication of the fees & expenses of Respondent No. 2 by Respondent No. 1, since the existing Resolution Professional is being replaced at the behest of the Applicant Debtor.

In view of aforesaid, we appoint Mr. Prashant Jain having registration no. IBBI/IPA-001/IP-P01368/2018-2019/12131, Address: A501, Shanti Heights, Plot No. 2,3,9B/10 ,Sector 11, Koparkharine,Thane ,Navi Mumbai,Maharashtra ,400709, email Id : [email protected]; Ph. : 9322743902 as the Resolution Professional in the matter and direct him to file his report in terms of Section 99 of IBC. The Respondent No. 1 shall fix the fees of newly appointed Resolution Professional and the cost of Insolvency Resolution Process, including newly appointed RP’s fees shall be dealt with in accordance with the provisions of the IBC. However, the Respondent No. 1 shall make available the amount, as required by newly appointed RP, to fund the Insolvency Resolution Process.

In view of aforesaid, IA 1773 of 2024 is allowed and disposed of.