Bhumika Nilay R. Shah vs Prawincharan Prafulcharan Dwary & Ors.

JUSTICE YOGESH KHANNA, OFFICIATING CHAIRPERSON

These three Company Appeals (AT)(Ins) No.702, 703 and 704/2026 are filed against an impugned order dated 05.02.2026 passed by the Ld. NCLT, Ahmedabad in IAs No.612, 613 and 614/2025 in C(IB) No.178/2024, 179/2024 and 177/2024. The Ld. NCLT has allowed the IA’s under Section 114 of the Code, filed by the Respondent(s) RP seeking discharge and it held the liability of appellants is not limited as per the Deed of Guarantee dated 12.06.2014 and it is alleged the said finding is perverse, contrary to the documents on record, lack wisdom of CoC.

The learned counsel for the appellant referred to the Deed of Guarantee dated 12.06.2014 signed by the appellants in favour of the consortium of Banks, to ITS para 24 to say their liability is restricted only to an extent of market value of their properties mortgaged. Para 24 of the Deed of Guarantee is as under: -

Further reference was made to an Arrangement Letter dated 31.05.2014 issued prior to the Deed of Guarantee dated 12.06.2014 and it record as under: -

And to an Inter Creditor Agreement dated 12.06.2014 with other banks which notes: -

Further reference was also made to a sanction letter dated 5^th March, 2014 issued by the Bank of India which records as follows: -

Further reference is made to the sanction letter dated 31.03.2014 issued by the SBI which records as under: -

Lastly the reference was made to the Transaction Audit Report and it notes:-

Thus it is the submission made by the learned counsel for the appellants the above documents do reveal the liability of appellants was only limited to the market value of the properties they have mortgaged with the Bank and nothing beyond it, however, the impugned order has made them personally liable to the entire dues of the borrowers.

Heard.

Admittedly, earlier the same issues were raised by the appellants in Company Appeal (AT)(Ins) No.1997/2024, 1956/2024 and 1997/2024 and the following order was passed by this Tribunal: -

In the light of above now we need to examine the impugned order. In the impugned order admittedly the issue of limited liability was framed for determination i.e. in para 12(iii) as under: -

It was answered by the Ld. NCLT as under: -

It is the grievance of the learned counsel for the appellant the Deed of Guarantee is misread by the Ld. NCLT. However, when confronted with the fact if they had challenged the judgement dated 3^rd August, 2021 passed by the Ld. DRT wherein their liability was crystalized as they have been jointly and severally liable with the borrowers to the extent of the liability/debt due to the borrowers, the reply was in negative. Further the appellants never challenged the claims lodged before the Resolution Professional by the Banks against these appellants. Now after sleeping over the judgement dated 3^rd August, 2021 of the Ld. DRT and also upon failure to challenge the claims filed against them before the Resolution Professional, they all have come up to challenge the impugned order passed in IAs No. 612 to 614/2025, filed on 23.04.2025 by the Resolution Professional of the appellants viz the personal guarantors of M/s Archon Engicon Ltd under Section 114 of the Code read with Rule 11 of NCLT Rules, 2016 wherein the Resolution Professional requested for the discharge of the Resolution Professional and to pass appropriate directions/orders under Section 114 of the Code.

We have also gone through the following paras of the Deed of Guarantee dated 12.06.2014 as under:

Thus the crux of the matter is besides the mortgage of these properties, did the appellants agree to be the guarantors to the entire loan taken by the borrowers.

The Ld. Adjudicating Authority after considering Clause 24 along with Clauses 1, 6 and 9 of the Deed of Guarantee, held Clause 24 pertains to the security arrangement and does not restrict the primary contractual liability undertaken under Clauses 1, 6 and 9. The said clauses impose liability upon the guarantors for the principal amount together with interest, costs and charges. The Ld. Adjudicating Authority further recorded the contractual clauses are required to be read harmoniously and Clause 24 cannot be construed so as to override the express liability contained in the earlier clauses and that the Ld. Adjudicating Authority cannot be employed to rewrite a commercial contract or override express liability clauses. The Ld. Authority also examined the alleged conflict between Clause 24 and Clauses 1, 6 and 9 and passed the impugned order. Thus, the contention viz the findings are without reason is factually incorrect.

In any case the liability of the Appellants had already been adjudicated by the Ld. DRT vide order dated 03.08.2021 in O.A. No. 83/2017 for Rs 1,49,26,12,243/-, wherein the validity of the Deed of Guarantee was upheld and the guarantors were held jointly and severally liable for the entire dues. The said order had attained finality and was never challenged by the Appellants, therefore, now the Appellants cannot seek to re-agitate the extent of their liability in collateral proceedings under Section 114 of the Code.

The arguments raised by Appellants is they have been proceeded ex-parte in the DRT proceedings and were not given opportunity to be heard and thus the order passed by DRT is perverse. The entire submissions of Appellant is wrong and incorrect, since the order dated 03.08.2021 duly records at Para 11 of the order as under:

This makes it clear the Appellants had duly participated in the DRT proceedings, presented their case and filed written statements and now they cannot allege they were unrepresented and could not challenge DRT order dated 03.08.2021. The Appellants thus, had participated in the DRT proceedings and had not disputed execution of the Guarantee Deed.

It is important to note the repayment plan was considered over several meetings of the CoC, and the Appellants were given repeated opportunities to improve and enhance the plan. In the 3rd CoC meeting dated 13.12.2024, queries were raised and the RP requested enhancement of the plan. Further, in the 4th meeting dated 21.12.2024, the enhanced plan was considered and further improvement was sought; thereafter, the final modified plan was placed before the creditors which stands for an amount of Rs. 1.60 crores each, totalling to Rs. 3.20 crores. It is important to note the CoC in the meetings had also discussed about feasibility and viability of the repayment plan.

Eventually when the final modified repayment plan dated 04.01.2025 was put up for voting then it didn’t receive requisite 66% voting share in favour of the Repayment Plan and was accordingly rejected. The Appellants therefore, after the plan had failed to obtain the requisite statutory approval, cannot seek to invalidate the entire process on the basis of an objection which does not demonstrate any prejudice or any finding in the impugned order that the statutory process was vitiated.

Section 114 contemplates consideration of the repayment plan on the basis of the report of the meeting of creditors and does not confer jurisdiction upon the Ld. Adjudicating Authority to substitute its own commercial view where the statutory majority has not been achieved. The Ld. Authority expressly held in the absence of approval under Section 111, the Adjudicating Authority cannot independently approve the plan.

It is important to note the final Repayment Plan(s) of Rs.1.60 Crore & Rs.2.75 Crore against the admitted claims of Rs.1221,55,30,202 submitted by the Personal Guarantors failed to secure the requisite affirmative voting share of 66%, conducted pursuant to the 5th CoC meeting dated 02.01.2025. It is to be noted only 21.35% (IDBI) of the voting share voted in favour, 20.14% {BoB 14.03% & UBI 6.11%) of the voting share voted against while 42.16% (SBI) abstained and 15.91% (BOI) absent. Hence, the repayment plan didn’t receive 66% requisite voting share and accordingly the plan was rejected.

In view of the aforesaid facts and submissions made hereinabove, we find the present Appeals being devoid of merit and contrary to the statutory scheme of the Insolvency and Bankruptcy Code. The decision of the CoC in rejecting the repayment plan is binding in law. In these circumstances, the appeals deserve to be dismissed in its entirety and the impugned order be upheld.

The appeals are accordingly dismissed and the impugned order is upheld.

Pending applications, if any, are disposed of.