Bhavesh Gandhi vs Central Bank of India

Ashok Bhushan, J.

This Appeal has been filed against the order dated 13.06.2022 passed by the Adjudicating Authority (National company Law Tribunal), Ahmedabad, Division Bench, Court No.1 appointing Resolution Professional in an application filed by the Respondent – Central Bank of India under Section 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘I&B Code’). Brief facts of the case necessary to be noticed for deciding this Appeal are:

In this Appeal an order was passed by this Tribunal on 12.08.2022 granting time to the Appellant to file an additional affidavit bringing on record the guarantee given by the Appellant to Central Bank of India as well as the State Bank of India. By an additional affidavit copy of the Guarantee Deed dated 31.03.2015 has been brought on the record. Personal Guarantee was given by the Appellant to the IL&FS Trust Company Ltd., a security trustee for the CDR Lenders. The Borrower was the Corporate Debtor who was extended various financial facilities by the CDR Lenders which included both Central Bank of India and State Bank of India. Schedule-I of the Guarantee Deed contains particulars of CDR Lenders. The Appellant gave personal guarantee by the aforesaid deed to CDR Lenders. As noted above, the State Bank of India has already filed an application under Section95 against the Appellant as a Personal Guarantor in which application - CP (IB) No. 50(AHM)2021 order dated 21.06.2021 has been passed by the Adjudicating Authority directing for commencement of interim moratorium and appointing Mr. Sunil Kumar Agrawal as Resolution Professional.

Shri Shikhil Suri, learned counsel for the Appellant in support of the Appeal challenging the order impugned contends that when Resolution Professional was already appointed in application by the State Bank of India, there can be no second Resolution Professional appointed, as has been done by the impugned order dated 13.06.2022. Learned counsel for the Appellant further contends that by virtue of order dated 21.06.2021 interim moratorium has commenced, hence, application could not have been filed by the Central Bank of India under Section 95 on 12.10.2021. The proceedings initiated by the Central Bank of India under Section95 was required to be stayed by virtue of the interim moratorium. The Adjudicating Authority has committed error in calling for report from the Resolution Professional.

Shri Ravi Raghunath, learned counsel appearing for the Central Bank of India refuting the submissions of learned counsel for the Appellant contends that by the impugned order the Adjudicating Authority has not appointed any new Resolution Professional rather same Resolution Professional i.e. Mr. Sunil Kumar Agrawal was directed to submit the Report. He submitted that after the impugned order, the Bank has already written to Mr. Sunil Kumar Agrawal to file the Report. The Appellant filed the Appeal on the ground that another Resolution Professional has been appointed is wholly misconceived. It is further submitted that the fact that order was passed on application filed by the State Bank of India against the Appellant – Personal Guarantor on 21.06.2021 does not prohibit the Central Bank of India to file another application. The analogy with respect of Section 7 of I&B Code is not applicable in proceedings under Section 95. It is submitted that there is no pleading or ground regarding non-maintainability of application due to interim moratorium.

We have considered the submissions of learned counsel for the parties and perused the record.

The Deed of Guarantee dated 31.03.2015 which has been brought on the record alongwith the Additional Affidavit dated 05.09.2022 indicates that the appellant has given personal guarantee to the IL&FS Trust Company Limited in its capacity as Security Trustee for the CDR Lenders. Alongwith the Guarantee Deed, in Schedule-I particulars of CDR Lenders have been mentioned in which at Serial No. 13 is Central Bank of India and at Serial No. 17 is State Bank of India. The Appellant is thus Personal Guarantor of both the CDR Lenders i.e. Central Bank of India and State Bank of India.

An application under Section 95 was filed by the State Bank of India being CP (IB) No.50(AHM)2021 in which following order was passed on 21.06.2021:

The order which is impugned in the present Appeal dated 13.06.2022 is to the following effect:

Learned counsel for the Bank has submitted that by order impugned dated 13.06.2022 a new Resolution Professional has not been appointed rather the same Resolution Professional Mr. Sunil Kumar Agrawal who was appointed in CP (IB) No. 50(AHM)2021 has been directed to submit the report. In the reply filed on behalf of the Central Bank of India it has been clearly stated that the Bank through their Advocate informed Shri Sunil Kumar Agrawal regarding the order dated 29.06.2022 passed by the Adjudicating Authority directing the Resolution Professional to file report. We proceed on the premise that by the impugned order dated 13.06.2022 no new Resolution Professional has been appointed and the same Resolution Professional who was appointed on the application of State Bank of India has been directed to file report.

The question which has been pressed by learned counsel for the Appellant is that in view of the interim moratorium which was commenced with effect by order dated 21.06.2021 in CP (IB) No. 50(AHM)2021, the application filed by the Central Bank of India ought to have been stayed and not proceeded any further.

Learned counsel for the Respondent has submitted that there are no pleadings as no grounds with regard to interim moratorium enforced by order dated 21.06.2021. Appellant having raised the issue of jurisdiction of the Adjudicating Authority to proceed further with the Section 95 application subsequently filed by the Central Bank of India after enforcement of interim moratorium, which question is a question of law arising out of statutory provisions of the Code, we have permitted the Appellant to raise the submission and we have also permitted learned counsel for the Bank to reply the said submission.

Thus, the question to be answered in present appeal is as to whether when an application is filed against the Personal Guarantor whether another Lender of same transaction can proceed against the Personal Guarantor by filing another application under Section 95 of the I&B Code.

For answering the above question, we need to look into the provision of I&B Code. Section 95 provides for application by creditor to commence insolvency resolution process. In the present case, the State Bank of India filed CP (IB) No. 50(AHM)2021 in which resolution process commenced by order dated 21.06.2021. Interim moratorium is provided in Section 96, which is to the following effect:

As noted above, by order dated 21.06.2021, interim moratorium was commenced from the date of application. Section 96(1)(a) provides that an interim-moratorium shall commence on the date of the application in relation to all the debts. Further, Section 96(1)(b) provides that during the moratorium period (i) any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and (ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt. The use of expression ‘creditors of the debtor’ obviously refers to other creditors of the debtor apart from the creditor on whose application interim moratorium has commenced. In the present case, the date on which application was filed by the Central Bank of India under Section 95 is 12.04.2021 i.e. after the commencement of the interim moratorium, as noted in the order dated 21.06.2021. The interim moratorium under Section 96 (1)(b)(ii) creates a prohibition on the creditors of the debtor from initiating any legal action in respect of any debt. The use of expression ‘any debt’ also clearly indicate that debt on basis of which moratorium has commenced is not contemplated by the expression ‘any debt’. With regard to all debts of debtor i.e. Personal Guarantor in the present case, no proceeding can be initiated by virtue of Section 96(1)(b). The application filed by the Central Bank of India on 12.10.2021, thus, was clearly hit by Section 96(1)(b)(ii) and the Adjudicating Authority could not have proceeded with the said application and appointed the Resolution Professional. The order dated 13.06.2022 impugned in this Appeal is clearly unsustainable.

Our above view is further fortified by the scheme of Code under Chapter-III. After admission of application under Section 100, moratorium commences in relation to all the debts under Section 101 and thereafter public notice is issued and claims from creditors are invited under Section 102. Section 103 provides for registering of claims by creditors. Section 104 provides for preparation list of creditors and thereafter repayment plan is contemplated under Section 105. Thus, when an insolvency resolution process commences against the Personal Guarantor all creditors of the Personal Guarantor are taken care of in the proceedings under Chapter-III. The scheme of Code does not contemplate manifold applications against same Personal Guarantor by different lenders. Multiplicity of applications against same Personal Guarantor is not contemplated under Chapter III. When the insolvency resolution process commences against a Personal Guarantor, claims of all creditors are taken care of under the scheme of the Code.

One of the submission which has been raised by learned counsel for the Bank is that there is no benefit in the limitation for filing an application by any other creditors under Section 95 whereas when a moratorium is enforced with regard to a Corporate Debtor as well as with regard to an individual and partnership firm, there are express provision for giving benefit of limitation for the period during which moratorium is enforced but there being no such provision for the Personal Guarantors and the creditors like Central Bank of India shall suffer if they are not permitted to file their Section 7 application. Learned counsel for the Bank has referred to Section 60 and Section 179 of the Code, which are to the following effect:

Section 60 Sub-section (1) provides that 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. Reliance is placed on Sub-Section (6) of Section 60 and counsel for the Bank submitted that the said benefit extended by Sub-Section (6) of Section 60 is only available to the Corporate Person and shall not be extended to the Personal Guarantors. Sub-Section (6) of Section 60 has to be read in conjunction with Section 60 Sub-Section (1). When Section 60 Sub-Section (1) refers to corporate persons including corporate debtor and personal guarantors, proceedings in which the benefit of Section 60 Sub-Section (6) has to be extended are insolvency resolution proceedings against the Personal Guarantors also. Submission of learned counsel for the Bank that benefit of Section (60) Sub-Section (6) shall not be extended to the creditors of the Personal Guarantors cannot be accepted. In view of the above, creditors of the Personal Guarantors who are unable to file an application due to enforcement of moratorium under Section 96 can very well avail the benefit of period during which moratorium continues, hence, due to interim moratorium enforced by Section 96, the creditors like Central Bank of India and other creditors are in no manner prejudiced. If they have not filed any application during moratorium period, they have every right to file application and for computation of the period of limitation, period during which moratorium is in place is to be excluded.

Section 179 of the Code deals with individuals and partnership firms where similar provision has been made under Section 179 Sub-Section (3) giving benefit in computing the limitation for a suit or application in which period during which moratorium is in place is to be excluded.

Learned counsel for the Appellant has also submitted that with regard to another Personal Guarantor Mr. Nikhil Gandhi an application under Section 95 was filed by Central Bank of India on which C.P. (IB) No. 94(AHM)2022 was registered, an order was passed on 08.04.2022, which is to the following effect:

It is submitted that subsequently it was brought to the notice of the Court that against the Personal Guarantor – Mr. Nikhil Gandhi moratorium has already commenced on 21.06.2021 and the Adjudicating Authority adjourned the matter sine die with liberty to the applicant to revive the application on the basis of outcome of the proceedings already commenced. Following order was passed on 10.06.2022:

It is case of the Appellant that both Mr. Bhavesh Gandhi (Appellant in present appeal) and Mr. Nikhil Gandhi are Personal Guarantors of the same Corporate Debtor and in the similar situation with Mr. Nikhil Gandhi when it was pointed out to the Adjudicating Authority that interim moratorium has been commenced by order dated 21.06.2021, proceedings were adjourned sine die. The order passed by the Adjudicating Authority in the case of Mr. Nikhil Gandhi dated 10.06.2022 clearly contemplate that the Adjudicating Authority is well aware of the fact that interim moratorium having commenced against same Personal Guarantor, no fresh proceedings can be initiated.

In view of the foregoing discussion, we are of the view that in view of the commencement of interim moratorium as per order dated 21.06.2021, as noticed above, the application filed by the Central Bank of India under Section 95 on 12.10.2021 could not have been proceeded with by passing the order dated 13.06.2022. In view of the foregoing discussion, order dated 13.06.2022 is set aside. Appeal is allowed. However, liberty is reserved to the Central Bank of India to proceed with the application if an occasion so arises.