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Judgment
ORDER
The Present Application is filed under section 7 of Insolvency and Bankruptcy Code, 2016 (for brevity ‘IBC, 2016’) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity ‘the Rules’) on 26.10.2018 by Ms. Sarita Joshi, Deputy General Manager, IDBI Bank Limited (for brevity ‘Applicant’), authorised vide Board Resolution dated 20.06.2014, with a prayer to initiate the Corporate Insolvency process against Fivebro International Private Limited (for brevity ‘Corporate Debtor’).
The applicant is a Banking company incorporated and registered under the Companies Act, 1956, bearing corporate identity number L65190MH2004GO1148838 having its registered office at IDBI Tower, W.T.C. Complex, Cuffe Parade MUMBAI 400 005 The applicant is in the Banking business of providing various types of financial facilities including business loans, personal loans, consumer loans, loan against property, home equity loans, term loan etc.
The corporate debtor is a Private limited company, incorporated under the provisions of The Companies Act, 1956 on 24.10.2002, duly registered with Registrar of Companies, Ahmedabad with CIN: U41000GJ2002PTC041470 and having registered office at Bodakdev, Ahmedabad, Gujarat State. The Authorized share capital of the Respondent is Rs. 8,00,00,000/- and paid up share capital of the company is Rs. 42,82,360/-. The corporate debtor is an associate company of M/s. Doshion Water Solution Private Limited being a part of Doshion Group. The corporate debtor is engaged in the business of manufacturing water treatment plant & equipment and trading of water treatment components.
The present application is filed by IDBI Bank Ltd. against corporate debtor who is the corporate Guarantor for securing the financial assistance granted by the applicant to M/s. Doshion Water Solution Private Limited (hereinafter called “the Borrower”) under Bank of Baroda Consortium Finance. In this regard corporate debtor had executed “Corporate Guarantee” dated 27.06.2014 in favour of the applicant Bank.
It is submitted by the applicant that vide letter 27.02.2009 a loan of Rs. 72 crores was sanctioned to the Borrower under Bank of Baroda Consortium finance. Subsequent modification letter dated 09.03.2009 explicitly laid down the terms and conditions, details of secured assets, rate of interest and repayment schedule of the financial facilities and the same were duly accepted by the Borrower.
The Borrower, M/s. Doshion Water Solutions Private Limited had executed loan/facility agreement, undertaking for creation of security, demand promissory note DPN delivery letter and omnibus counter guarantee all dated 29.01.2009 in favour of the applicant Bank. A tripartite agreement dated 14.05.2009 was executed amongst the Borrower, the applicant and M/s. L&T Infrastructure Finance Company for GMR project of International Airport of Delhi. All the aforesaid executed agreements contained terms and conditions agreed between the applicant, the Borrower and the Guarantors for the grant of aforesaid financial assistance.
The applicant further submits that the Borrower had obtained various financial assistance under Consortium finance from various Banks. In the said Consortium finance, Bank of Baroda (BOB) is the lead Bank and Union Bank of India (UBI), Standard Chartered Bank (SCB) are other Consortium member Banks. The IDBI Bank was also member of this consortium. Exposure of Bank of Baroda was maximum in the said Consortium finance, thereby the said Consortium was termed as “BOB Consortium”. Financial assistance sanctioned by the applicant Bank was enhanced from time to time at the request of the Borrower. As the Borrower failed to adhere to the terms and conditions of various loan sanctions, it had proposed a restructuring of financial assistance with enhanced credit limits. Based on the proposal made by the Borrower, the applicant had restructured financial assistance under Bank of Baroda Consortium finance by way of enhanced overall credit limit of Rs. 110.26 crores.
The above restructuring of financial assistance with enhanced limit was accepted in the meeting of the Board of Directors of the Borrower company by way of Board Resolution dated 20.06.2014 and also approved the execution of various documents in favour of Consortium led by BOB along with the applicant.
The applicant had issued restructuring sanction letter dated 26.06.2014 to the Borrower which explicitly mentioned the terms and conditions, details of secured assets, rate of interest, repayment schedule, other specific conditions of the said restructured enhanced facility. The said sanction letter along with all terms and conditions has been duly acknowledged and accepted by the Borrower and Guarantors including the corporate debtor being corporate Guarantor. The said restructured enhanced financial facility was granted against:
1st pari passu charge on the current assets of the Borrower; and Pari passu first charge on immovable properties as described in sanction letter; and Personal guarantee of Mr. Ashit Dhirajlal Doshi, Mr. Rakshit Dhirajlal Doshi, Mrs. Kalpana Ashit Doshi, Mrs. Krupa Sujit Doshi, Mrs. Rupa Nishit Doshi, Mrs. Purvi Rakshit Doshi & Mrs. Pooja Amit Doshi; and On corporate guarantees of M/s. Doshion Pvt. Ltd., M/s. Thomson Nusa Metals Pvt. Ltd. & M/s. Fivebro International Private Limited.
The applicant further states that the Board of Directors of the corporate Guarantor had approved the granting of corporate guarantee against the said restructuring of financial assistance with enhanced limit of the Borrower by the applicant and in this regard a Board Resolution dated 20.06.2014 was resolved by the Board of Directors of the Corporate Debtor. In the said Board Resolution, the execution of various documents in favour of Consortium led by BOB and the applicant Bank had also been approved by the Board of Directors of the corporate debtor for the corporate guarantee against the financial assistance granted to the Borrower by the applicant. Subsequently, personal Guarantors and corporate Guarantors have executed various documents in favour of the applicant and in favour of Consortium member Banks (as the case may be) against the aforesaid restructured overall credit facility granted to the Borrower.
The applicant also states that the corporate debtor had also executed corporate guarantee agreement dated 27.06.2014 in favour of the applicant along with Consortium member Banks and under the said corporate guarantee agreement, the corporate debtor has given corporate guarantee to secure overall credit facilities of all Consortium member Banks amounting to Rs. 408.64 crores (under clause No. 9). Furthermore, as per the said corporate guarantee agreement, the guarantees of Guarantors are irrevocable and unconditional and the corporate debtor had accepted the liability to pay outstanding dues of the Borrower - M/s. Doshion Water Solutions Private Limited on demand or from their corporate moveable and immovable assets.
The applicant further submits that as the Borrower failed to repay overall credit facility granted by the applicant as per the terms and conditions of the restructuring and not even made any efforts towards compliance of restructured terms and conditions, the loan account of the Borrower was classified as NPA (Non-performing Assets) on 30.04.2016. Thereafter, the applicant had issued a recall notice dated 20.09.2016 to the Borrower and had called upon to pay the entire outstanding amount together with accrued interest and liquidated damages. A copy of said recall notice dated 20.09.2016 was sent to all the Guarantors including the corporate debtor, being the corporate Guarantor. Resultantly, the applicant had invoked all personal and corporate guarantees including corporate guarantee of the corporate debtor by letter dated 04.11.2016, but, both – Borrowers and Guarantors have failed to respond to the said notice and neither made any payment not even after receiving the aforesaid recall and guarantee invocation notices.
The applicant further states that as the Borrower continued to neglect the repayment of loan amount, the applicant Bank issued demand notice/statutory notice dated 22.03.2017 under Section 13 (2) of SARFESI Act, 2002 to the Borrower, copy of which was also sent to both personal and corporate guarantors including the corporate debtor. It is further submitted by the applicant that notice issued under Section 13 (2) of SARRFAESI Act, 2002 dated 25.10.2019 was replied by the corporate debtor vide letter dated 04.01.2020. The applicant Bank has already initiated legal recovery proceedings under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 before DRT by filing OA No. 519/2017 on 16.08.2017 against the Borrower and personal Guarantors and corporate Guarantors including the corporate debtor. In the said proceedings, the contesting defendants (M/s. Doshion Water Solutions Private Limited), personal Guarantors and corporate Guarantors therein filed reply wherein the corporate debtor being corporate Guarantor has not disputed any liability of repayment against Consortium member Bank under restructuring package.
The applicant further states that, being corporate Guarantor of the Borrower, the total outstanding amount payable by the Borrower to the applicant Bank as on 01.09.2018 under fund based credit and non-fund based credit facility was Rs. 84,69,71,356.10 (Rupees eighty-four crores sixty-nine lacs seventy-one thousand three hundred fifty-six and paise ten only) together with further interest till date of realisation.
The applicant has submitted copy of the following documents in support of its claim: -
Sl. No. | Particulars |
| 1 | Master details of the corporate debtor |
| 2 | IDBI restructuring sanction letter dated 26.06.2014 and Board Resolution dated 20.06.2014 |
| 3 | Corporate guarantee agreement dated 27.06.2014 |
| 4 | Recall notice dated 20.09.2016 to Borrower |
| 5 | Guarantee invocation notice dated 04.11.2016 |
| 6 | Statutory notice u/s 13 (2) of SARFAESI Act, 2002 dated 22.03.2017 to Borrower. |
The corporate debtor filed affidavit-in-reply raising the following objections:
No Board Resolution or letter of authority has been annexed to the application;
The present Insolvency Proceedings have been initiated beyond the prescribed period of limitation;
The corporate debtor has not mortgaged nor agreed to create any charge over the assets mentioned in the application;
Bank of Baroda filed application against Borrower and CIRP is initiated by NCLT, Mumbai where the applicant has already registered its claim with the IRP of M/s. Doshion Water Solutions Private Limited;
The corporate guarantee relied upon by the applicant was given in anticipation of a debt restructuring arrangement which never materialised;
The corporate guarantee dated 27.06.2014 was issued in favour of IL & FS Trust Company Limited in its capacity as Security Trustee of the Banks and financial institutions;
The applicant has not formally invoked the corporate guarantee nor has it placed any communication to show that the corporate guarantee had been invoked;
The applicant has moved the Hon’ble DRT on similar grounds to obtain attachment before judgement over the corporate debtor’s properties situated at Sanand and such application was rejected vide order dated 06.04.2018;
The corporate debtor company is a going concern and is able to make payments to its own financial creditor.
The applicant filed affidavit rebutting the contentions raised in the reply filed by the corporate debtor inter alia as:
Under “Delegation of Powers” affirmed by Board of Directors of the applicant Bank bestowing various powers on various designated officers to act on behalf of the applicant Bank, DGM is empowered to approve the application and other documents to be filed before Adjudicating Authorities.
As regards the issue of limitation, the applicant has rebutted that the recall notice was issued on 20.09.2016, the guarantee invocation notice was issued on 04.11.2016 (Statutory Notice under Section 13 (2) of SARFAESI Act was issued on 22.03.2017). The present application was filed on 26.10.2018, thus the present application is within the period of limitation.
As regards the contention raised by the corporate debtor that they have no common directors with the Borrower company resulting into no obligation, the applicant relied on the master data of the corporate debtor as well as details of the directors obtained from office of RoC which revealed that there are common directors between the corporate debtor and the borrower.
As regards the contention that the applicant’s claim is already registered in CIRP of Borrower, the applicant relies on the Corporate Guarantee Agreement dated 27.06.2014 produced on record with respect to the dues admitted in CIRP of the Borrower.
To rebut the objection that corporate guarantee was given against restructuring of loan only which did not materialise, the applicant has placed reliance on the applicant’s restructuring sanction letter dated 26.06.2014 and the corporate debtor’s Board Resolution dated 20.06.2014 placed on record.
To rebut the objection raised by the corporate debtor that guarantee was given to IL & FS Trust and not to the applicant, the applicant relied on sanction letter dated 26.06.2014 and corporate debtor’s Board Resolution dated 20.06.2014. The applicant also relied on Corporate Guarantee Agreement dated 27.06.2014 and registered mortgage deed dated 01.07.2014.
Contention of the corporate debtor that no corporate guarantee was invoked is rebutted by the applicant relying upon the recall notice dated 20.09.2016.
To rebut the objection raised by the corporate debtor that no attachment was granted by DRT, the applicant has stated that it would not have any bearing on obligation of the corporate debtor as DRT has denied attachment as the property in question was already sold before filing OA. On the contrary, the DRT affirmed the obligation of corporate debtor by passing order dated 06.09.2017 to maintain status-quo against all defendants therein, including the corporate debtor and issued show-cause notice dated 8.09.2017.
The applicant filed written submission inter alia stating that:
As per part IV of form – 1, the total debt disbursed is Rs. 110.26 crores and total outstanding amount as on 01.09.2018 is Rs. 83,25,91,862.10 plus unevolved BG/LC of Rs. 1,43,79,494/-.
The date of default being NPA date is 30.04.2016.
The sanction letter dated 24.04.2014 under restructuring was issued by the applicant to the Borrower wherein corporate debtor had duly acknowledged such sanction as corporate Guarantor. The corporate debtor, by Board resolution dated 20.06.2014, had resolved to acknowledge guarantee for credit facilities upto Rs.408.64 crores and further resolved for issuance of requisite deeds of guarantee.
Corporate debtor has executed deed of guarantee dated 27.06.2014 in favour of the security trustee who had acted as an agent on behalf of all Banks/lenders under Consortium funding. Corporate debtor has executed deed of guarantee dated 27.06.2014 in favour of the security trustee who had acted as an agent on behalf of all Banks/lenders under Consortium funding. The trustee had acted by the consent of Borrower and lender in terms of security trustee agreement dated 26.11.2013 as his agent. As per clause No. 7 & 9 of guarantee agreement, such guarantee would be enforced as if present corporate debtor were principal debtor to the lenders. As per clause 8, such guarantee of corporate debtor was continuing irrevocably and enforceable, notwithstanding any dispute between Borrower and lenders. Further clause 18 makes guarantee deed executed by corporate debtor independent and distinct from any other security agreement.
Subsequently, the Borrower and corporate debtor had jointly executed the revival letter dated 07.03.2017 acknowledging the debt.
The applicant has recalled the loan facility by notice dated 20.09.2016, copy of which was also forwarded to corporate debtor and thereafter, the corporate guarantee was invoked on 04.11.2016.
The present petition is filed on 26.10.2018. Thus present petition is within the limitation period by virtue of revival letter.
The present petition is filed by DGM who is authorised to act on behalf of the applicant Bank pursuant to clause No. 2 in clause VI of “delegation of power” pertaining to NCLT matters. The said delegation of power is duly approved by Deputy Managing Director on 18.11.2017 (note sheet at page No. 94 of affidavit in compliance of order dated 16.12.2021). Therefore, the present petition is filed under valid authorisation.
It is settled legal position that application under Section 7 of IBC is not a recovery proceeding. Therefore, in terms of clause 7.5 of inter-se agreement dated 26.11.2013, any lender may take any decision or action on the matters, other than expressly stated in inter se agreement and is not required to take any approval from any other lender. Thus, applicant is not restricted to take independent recourse.
Moreover, as per clause 4 of inter-se-agreement dated 26.11.2013, the rights and obligations of each of lenders are joint and several, meaning in absence of contractual terms, IDBI would not be restricted to take independent recourse.
In terms of above referred clauses and deed of guarantee, the corporate debtor cannot plead novation of contract on alleged contention that Standard Chartered Bank had failed to disburse some part of amount for which there is no evidence placed in their objection.
The corporate debtor filed written submissions inter alia stating that:
The applicant does not have any locus standi to file the instant application;
The guarantee is wrongly invoked by IDBI (who is not a beneficiary) and not in line with the clause No. 20 of guarantee, the guaranteed amount does not become payable.
Invocation of guarantee by applicant is in violation of clause 4 of the Security Trust Agreement dated 26.11.2013;
The Guarantor stands completely discharged on account of the failure to finance the guaranteed amount – the minimum required for restructuring agreement to materialise.
The corporate debtor merely filed following judgements without placing any arguments whether the same are applicable or support their case.
| Sr. No. | Authority |
| 01 | AIR 1934 Cal699 (Prabodh Kumar Das v. Gillanders Arbuthnot) |
| 02 | AIR 1981 AIR 215 (Union of India v. Narayanasetti Jugadeshwararao & Ors. |
| 03 | 1963 RLW 430 (Ram Narain v. Ltd. Col. Hari Singh) |
| 04 | [1861-73] All ER Ext 1634 (Westhead & Ors. v. Spronson & Anr. |
| 05 | [1874-80] All ER Rep. Ext.1799 (Morell v. Cowan |
| 06 | [2017]82 taxman.com 396 (NCLAT) State Bank of India, Colombo v. Wester Regrigeration (P) Ltd. |
| 07 | [2017]86 taxmann.com 81 (NCLAT) (Palogix Infrastructure P. Ltd. v. ICICI Bank |
| 08 | [2018]98 taxmann.com 213 (SC) (BK Educational Services P. Ltd. v. Parag Gupta & Associates) |
| 09 | [2020] 118 taxmann.com 48 (NCLAT) (Bijay Kumar Agarwal v. State Bank of India |
| 10 | [2020] 117 taxmann.com 478 (NCLT-Hyd.) (State Bank of India v. Athena Energy Ventures (P) Ltd. |
| 11 | [2020] 116 taxmann.com 967 (NCLT-Allahabad) (Indiabulls Housing Finance Ltd. v. EMM VEE Infrastructure (I) P. Ltd. |
| 12 | [2020]115 taxmann.com 356 (NCLT-Hyd.) SEW Infrastructure Ltd. v. Mahendra Investment |
| 13 | [2019] 101 TAXMANN.COM 464 (NCLAT) Dr. Vishnu Kumar Agarwalv. Piramal Enterprises Ltd. |
In compliance of order dated 21.08.2019, the applicant filed additional affidavit to submit the details on record with respect to valuation of mortgaged assets and to place on record “acknowledgement of debt” by the corporate debtor. The applicant has further stated that M/s. Doshion Water Solutions Private Limited as well as all personal Guarantors and corporate Guarantors including the corporate debtor has acknowledged the debt towards “Bank of Baroda Consortium” of which the applicant Bank is also a member. The applicant has filed a copy of revival letter dated 07.03.2017 marked as Annexure D1. The applicant has also furnished a copy of relevant page from “Delegation of Power” issued by the Board of Directors of the applicant Bank.
During the course of hearing, on 16.12.2021, objection was raised by the corporate debtor with respect to the authority of the person who has filed the present application on behalf of the applicant Bank. On directions by the Bench, the applicant filed affidavit inter alia submitting copy of the following documents to prove the authority of the person filing this application.
“Delegation of Power” – Operational Matters (effective from 23.11.2017), extracts from the minutes of meeting of Board of Directors dated 14.08.2017 duly certified by company secretary of the applicant; Applicant Bank’s internal office note dated 07.11.2017;
Inter-se-agreement dated 26.11.2013;
Security Trustee agreement dated 26.11.2013.
Heard the submissions and perused the documents on record. This is an application filed under Section 7 of the IB Code by the Financial Creditor, IDBI Bank Limited against corporate Guarantor of the Borrower to whom loan was disbursed by the applicant under Consortium funding, namely, M/s. Doshion Water Solution Private Limited (the Borrower) under the Bank of Baroda Consortium finance. As per part IV of form – 1, the total debt disbursed by the applicant is Rs. 110.26 crores and total outstanding amount as on 01.09.2018 was Rs. 83,25,91,862.10 plus unevolved BG/LC of Rs. 1,43,79,494/-. On perusal of the record it appears that on 24.04.2014 the sanction letter under restructuring was issued by the applicant to the Borrower wherein corporate debtor had duly acknowledged such sanction as corporate Guarantor. The corporate debtor, by Board resolution dated 20.06.2014, had resolved to acknowledge guarantee for credit facilities upto Rs.408.64 crores and further resolved for issuance of requisite deeds of guarantee. Corporate debtor had executed deed of guarantee dated 27.06.2014 in favour of the security trustee who had acted as an agent on behalf of all Banks/lenders under Consortium funding. The trustee had acted by the consent of Borrower and lender in terms of security trustee agreement dated 26.11.2013 as his agent. Relevant portion/clauses of the Deed of Guarantee dated 27.6.2014 is reproduced below:
“1.If at any time default shall be made by the Borrower in payment of the principal sum (not exceeding Rs. 408.64 crores) together with interest, costs, charges, expenses and/or other moneys for the time being due to the BOB Consortium in respect of or under the abovementioned credit facilities or any one of them the Guarantor shall forthwith on demand pay to the BOB Consortium the whole of such principal sum (not exceeding Rs. 408.64 crores) together with interest, costs, charges, expenses and/or other money as may be due to the BOB Consortium in respect of the above mentioned credit facilities and shall indemnify and keep indemnified the BOB Consortium against all losses of the said principal sum, interest or other money due and all costs, charges, expenses whatsoever which the BOB Consortium may incur by reason of any default on the part of the Borrower.
2.The Guarantor agrees and confirms that the interest shall be charged on the outstanding in the account/s opened in respect of the abovementioned credit facilities at such rate/s as may be determined by the BOB Consortium from time to time. Interest may be calculated respectively on the daily balance of such account/s and be debited thereto on the last working day of the month or quarter according to the practice of the BOB Consortium. The BOB Consortium shall also be entitled to charge at its own discretion such enhanced rates of interest on the account/s either on the entire outstanding or on a portion thereof as it may fix for any irregularity and for such period as the irregularity continues or for such time as the BOB Consortium deems it necessary regard being had to the nature of the irregularity and the charging of such enhanced rate of interest shall be without prejudice to the BOB Consortium’s other rights and remedies.
3.The BOB Consortium shall have the fullest liberty without affecting this guarantee to vary the amounts of the individual limits of the abovementioned credit facilities as may be agreed upon from time to time between the BOB Consortium and the Borrower subject to the aggregate thereof not exceeding the principal sum and/or to the aggregate thereof not exceeding the principal sun and/or to postpone for any time or from time to time enforce or forbear to enforce any remedies or securities available to the BOB Consortium AND the Guarantor shall not be released by aby exercise by the BOB Consortium of its liberty with reference to the matters aforesaid or any of them or by reason of time being given to the Borrower or of any other forbearance act or omission on the art of the BOB Consortium or any other indulgence by the BOB Consortium to the Borrower or by any other indulgence by the BOB Consortium to the Borrower or by any other matters or things whatsoever which under the law relating to the sureties would but for this provision have effect of so releasing the Guarantor.
4.As the above mentioned credit facilities have been further secured by hypothecation and/or pledge of the Borrower’s movable properties and/or mortgage of the Borrower’s immovable properties by way of first charge under separate security documents executed by the Borrower with the BOB Consortium/security trustee which security documents would contain stipulations as to insurance assignment and delivery of insurance policies to BOB Consortium/security trustee the margin of insurance policies to BOB Consortium/security trustee the margin of value of properties to be maintained and the periodical furnishing of different statements to the BOB Consortium and other matters the Guarantor agrees that failure in requiring or obtaining such security or in the observance or performance of any of the stipulations or terms of the said security documents and no default of the BOB Consortium in requiring or enforcing the observance or performance of any of the said stipulations or terms effect of releasing or discharging or in any manner affecting the liability of the Guarantor under these presents.
5.The BOB Consortium shall be at liberty to take in addition to the subsisting securities any other securities for the abovementioned credit facilities or any of them or any part thereof and to release or forbear to enforce all or any of the remedies upon or under such securities and any collateral security or securities now held by the BOB Consortium and that no such release or forbearance as aforesaid shall have the effect of releasing or discharging or in any manner affecting the liability of the Guarantor under this guarantee and that the Guarantor shall have no right to the benefit of the said security and/or any other security that may be held by the BOB Consortium until the claims of the BOB Consortium against the Borrower in respect of the abovementioned facilities and of all (if any) other claims of the BOB Consortium against the Borrower on any other account whatsoever shall have been fully satisfied and then in so far only as such security shall not have been exhausted for the purpose of realising the amount of the BOB Consortium’s claim and ratably only with other Guarantor or other persons (if any) entitled to the benefit of such securities respectively.
6.The guarantee herein contained shall be enforceable against the Guarantor notwithstanding this security aforesaid or any of them or any other collateral securities that the BOB Consortium may have obtained or may obtain from the Borrower or any other person shall at the time when proceedings are taken against the Guarantor hereunder the outstanding and/or not enforced and/or remain unrealised.
7.In order to give effect to the guarantee herein contained the BOB Consortium shall be entitled to act as if the Guarantor were principal debtors to the BOB Consortium for all payments guaranteed by them as aforesaid to the BOB Consortium.
8.The guarantee herein contained is a continuing one for all amounts advanced by the BOB Consortium to the Borrower in respect of or under the abovementioned credit facilities as also for all interest, costs, and other money which may from time to tome become due and remain unpaid to the BOB Consortium there under and shall not be determined or in any way be affected by any account/s opened or to be opened by the BOB Consortium becoming nil or coming into credit at any time from time to time or by reason of the said accounts being opened in respect of fresh facilities being granted within the overall limit sanctioned to the Borrower.
9.Notwithstanding the BOB Consortium’s rights under any security which the BOB Consortium may have obtained or may obtain the Bank shall have fullest liberty to call upon the Guarantor to pay the principal sum not exceeding Rs. 408.64 crores, together with interest as well as costs, (as between advocate and client) charges and expenses, and/or other money for the time being due to the BOB Consortium in respect of or under the abovementioned credit facilities or any of them without requiring the BOB Consortium to realise from the Borrower the amount due to the BOB Consortium in respect of the abovementioned credit facilities and/or requiring the BOB Consortium to enforce any remedies or securities available to the BOB Consortium.
10.The guarantee herein contained shall not be or in any way prejudiced by any absorption of or by BOB Consortium or by any amalgamation thereof or therewith but shall ensure and be available for and by the absorbing or amalgamated BOB Consortium o concern.
11.The guarantee shall be irrevocable and enforceable against the Guarantor/s notwithstanding any dispute between the BOB Consortium and the Borrower.
12.The Guarantor affirms, confirms and declares that any balance confirmation and/or acknowledgement of debt and/or admission of liability given or promise or part payment made by the Borrower or the authorised agent of the Borrower to the BOB Consortium shall be deemed to have been made and/or given by or on behalf of the Guarantor himself/herself and shall be binding upon each other.
13.The Guarantor shall forthwith on demand made by the BOB Consortium deposit with the BOB Consortium such sum or security or further sum or security as the BOB Consortium may time to time specify as security for the due fulfilment of their obligations under this guarantee and any security so deposited with the BOB Consortium may be sold by the BOB Consortium after giving to the Guarantor a reasonable notice of sale and the said sum or the proceeds of sale of the securities may be appropriated by the BOB Consortium in or towards satisfaction of the said obligations and any liability arising out of non-fulfilment thereof by the Guarantor.
14.The Guarantor hereby agrees that notwithstanding any variation made in the terms of the said agreement of loan and/or any of the said security documents inter alia including variation in the rate of interest, extension of the date for payment of the instalments, if any, or any composition made between the BOB Consortium and the Borrower to give time to or not sue the Borrower, or the BOB Consortium parting with any of the securities given by the Borrower, the Guarantor shall not be released or discharged of their obligation under this guarantee provided that in the event of any such variation or composition or agreement the liability of the Guarantor shall notwithstanding anything herein contained be deemed to have accrued and the Guarantor shall be deemed to have become liable hereunder on the date/s on which the Borrower shall become liable to any of the said security documents as a result of such variation or composition or agreement.
15.The Guarantor hereby agrees and confirms that the BOB Consortium shall be entitled to adjust, appropriate or set off all money held by the BOB Consortium to the credit of or for the benefit of the Guarantor on any account or otherwise howsoever towards the discharge and satisfaction of the liability of the Guarantor under these presents.
16.The Guarantor agrees notwithstanding the BOB Consortium for any reason whatsoever losing and/or parting with any of the securities given by the Borrower, the Guarantor shall not be released or discharged of their obligations under this guarantee and in the event of the BOB Consortium so losing or parting with the security the Guarantor shall be deemed to have consented to or acquiesced in the same.
17.The Guarantor agrees that if the Borrower being an individual becomes an insolvent or being a company enters into liquidation or winding up (whether compulsory or voluntary) or if the management of the undertaking of the Borrower is taken over under any law or if the Borrower and/or the undertaking of the Borrower is nationalised under any law or make any arrangement or composition with creditors the BOB Consortium may (notwithstanding payment to the BOB Consortium by the Guarantor or any other person of the whole or any part of the amount hereby secured) rank as creditor and prove against the estate of the Borrower for the full amount of the BOB Consortium’s claims against the Borrower or agree to accept and composition in respect thereof and the BOB Consortium may receive and retain the whole of the dividends, composition or other payments thereon to the exclusion of all the rights of the Guarantor in completion with the BOB Consortium until all the BOB Consortium claims are fully satisfied and the Guarantor will not by paying off the amounts payable by them or any part thereof otherwise prove of claim against the estate of the Borrower until the whole of the BOB Consortium’s claims against the Borrower have been satisfied and the Bank may enforce and recover payments from the Guarantor of the full amount payable by the Guarantor notwithstanding any such proof or composition as aforesaid. On the happening of any of the aforesaid events, the Guarantor shall forthwith inform the BOB Consortium in writing of the same.
18.The guarantee hereby given are independent and distinct from any security that the BOB Consortium has taken or may take in any manner whatsoever whether it be by way of hypothecation, pledge and/or mortgage and/or any other charge over goods, movables or other assets and/or any property, movable or immovable, and that the Guarantor has not given this guarantee upon any undertaking, faith or belief that the BOB Consortium has taken and/or may hereafter take any or other such security and that notwithstanding the provisions of sections 140 and 141 of the Indian Contract Act, 1872 or other section of that Act or any other law, the Guarantor will not claim to be discharged to any extent because of the BOB Consortium failure to take any or other such security or in requiring or obtaining any or other such security or losing for any reason whatsoever including reasons attributable to its default and negligence benefit of any or other such security that have been or could have been taken.
19.The Guarantor agrees that any admission or acknowledgement in writing signed by the Borrower of the liability or indebtness of the Borrower or otherwise in relation to the abovementioned credit facilities and or any part payment as may be made by the Borrower towards the principal sum hereby guaranteed or any judgement award or order obtained by the BOB Consortium against the Borrower shall be binding on the Guarantor and the Guarantor accept the correctness of any statement of account that may be served on the Borrower which is duly certified by any officer of the BOB Consortium and the same shall be binding and conclusive as against the Guarantor also and the Guarantor further agree that in the event of the Borrower making an acknowledgement or making a payment, the Borrower shall in addition to his personal capacity be deemed to act as the Guarantor duly authorised agent in that behalf for the purposes of sections 18 and 19 of the Limitation Act of 1963.
20.The Guarantor agrees that the loans hereby guaranteed shall be payable to the BOB Consortium on the BOB Consortium serving the Guarantor with a notice requiring payment of the amount and such notice shall be deemed to have been served on the Guarantor either by actual delivery thereof to the Guarantor or by dispatch thereof by Registered Post or certificate of posting to the Guarantor address herein given or any other address in India to which, the Guarantor may by written intimation given to the BOB Consortium request the communication addressed to the Guarantor be dispatched. Any notice dispatched by the BOB Consortium by registered posting to the address to which it is required to be dispatched under this clause shall be deemed to have been duly served on the Guarantor four days after the date of posting thereof and shall be sufficient if signed by any officer of the BOB Consortium and in proving such service it shall be sufficient if it is established that the envelope containing such notice, communication or demand was properly addressed and put into the post.
21.The Guarantor hereby understands that as a pre-condition relating to grant of the loans/advances/other non-fund based credit facilities to said Borrower and furnishing of guarantee in relation thereto, the said Banks requires our consent for the credit facilities granted to be granted by the said Banks for disclosure of information and date relating to us, any credit facilities availed of by us, obligations assumed by us, in relation thereto and default, if any, committed in discharge thereof. We hereby agree and give consent for the disclosure by the said Banks of all or any such,
(a)Information and date relating to us.
(b)The information or data relating to our obligations in any credit facilities granted or to be granted by the said Banks and guaranteed by us, as a Guarantor, and
(c)Default, if any committed by us, in discharge of our such obligation, as the said Banks may deem appropriate and necessary to disclose and furnish to Credit Information Bureau (India) Limited and any other agency authorised in this behalf by RBI.
We, declare that the information and data furnished by us to the said Banks are true and correct.
We further undertake that:
(a)The Credit Information Bureau (India) Limited and any other agency so authorised may use, process the said information and data disclosed by the said Banks in the manner as deemed fit by them, and
(b)The Credit Information Bureau (India) Limited and any other agency so authorised may furnish for consideration, the processed information and data or products thereof prepared by them to Banks/financial institutions and other credit Guarantors or registered users, as may be specified by the Reserve Bank in this behalf.
22.The Guarantor is further aware that the BOB Consortium may also be required to provide information regarding the said credit facilities and/or Guarantor’s details to third parties, pursuant to the provisions of the Right to Information Act or such other similar Acts. Such disclosure made by the BOB Consortium to this parties shall not be objected to or challenged by Guarantor.
23.The Guarantor also confirms the rights of the BOB Consortium to securitise, assign and transfer the said credit facilities or any of them granted to the Borrower (either with or without the underlying securities created by Borrower/Guarantor in favour of the BOB Consortium) and the Guarantor hereby confirms that the guarantee/s executed by Guarantor shall also be assignable/transferable to any Bank/s and/or financial institution/s and/or Securitisation Company or special purpose vehicle (SPV) or third parties without giving any notice to Guarantor and on such terms and conditions as the BOB Consortium may deem fit at Guarantor’s costs and expenses. While doing so, the BOB Consortium may either reserve the right to collect the dues and/or to proceed against Guarantor/Borrower on behalf of the purchaser/s assignee/s or transferee/s. In the event of the BOB Consortium assigning, securitising, transferring as above, the BOB Consortium/assignee may if it so desire and at its sole discretion appoint a trustee or a company or a SPV for the benefit of such purchasers/assigners and may transfer/assign the securities and the security/loan documents executed by the Borrower/Guarantor in favour of such trustee/company/SPV for holding the same on behalf and for the benefit of the assignees/purchasers/ investors and such trustee/company/SPV may raise funds for such purchase on the strength of the assigned securities, Borrower’s and Guarantor’s obligations by issuing pass through/pay through certificates, bonds or other instruments to the investors on such terms and conditions they may deem fit. While entering into such transactions mentioned above, the said Banks may if they so desire reserve their rights for repurchase of the said credit facilities and the securities transferred and may give option to the purchaser/assignee/investors to reassign the assigned facilities and the security to the BOB Consortium on such terms and conditions the BOB Consortium may deem fit.
THE SCHEDULE ABOVE REFERRED TO
PARTICULARS OF LENDERS
1)Bank of Baroda, body corporate constituted under the Banking Companies (Acquisition & Transfer of Undertaking) Act, 1970 and having its head office at Baroda House, PB No. 506, Mandvi, Baroda 390 006, in the state of Gujarat, India and having corporate financial services branch at 1 Floor, Bank of Baroda Towers, Near Law Garden, Ellisbridge, Ahmedabad 380 006 (hereinafter called BOB which expression shall, unless it be repugnant to the subject or context thereof, include its successors and assigns);
2)Union Bank of India, body corporate constituted under the Banking Companies (Acquisition & Transfer of Undertaking) Act, 1970 and having its central office at 239, Vidhan Bhavan Marg, Nariman Point, Mumbai 400 021 and having an industrial finance branch at C.U. Shah Chambers, Ashram Road, Ahmedabad (hereinafter called UBI which expression shall, unless it be repugnant to the subject or context thereof, include its successors and assigns);
3)Standard Chartered Bank incorporated in England with limited liability by Royal Charter, 1853 Reference number ZC 18 having its principal office in England at 1 Basinghall Avenue, London, EC2V SOD acting through its branch office inter alia in India at Abhijeet II, Ground Floor, Near Mithakali Six Roads, Ahmedabad 380 006 (hereinafter referred to as the Bank which expression shall, unless it be repugnant to the subject or context thereof, include its successors and assigns);
AND
4)IDBI Bank Limited, a company incorporated and registered under Companies Act, 1956 (1 of 1956) and a Banking company within the meaning of Section 5 (c) of the Banking Regulation Act, 1949 (10 of 1949) and having its registered office at IDBI Tower, WTC complex, Cuffe Parade, Mumbai 400 005 and a branch office at IDBI Complex, Near Lal Bungalow, Off. C.G. Road, Ahmedabad 380 006 (hereinafter called IDBI which expression shall, unless it be repugnant to the subject or context thereof, include its successors and assigns);
IN WITNESS WHEREOF the Guarantor has executed these presents on the day and year first hereinabove written.”
As per clause No. 7 & 9 of guarantee agreement, such guarantee would be enforced as if corporate debtor was principal debtor to the lenders. As per clause 8, such guarantee of corporate debtor was continuing and such guarantee of corporate debtor is irrevocable and enforceable notwithstanding any dispute between Borrower and lenders. Further clause 18 makes guarantee deed executed by corporate debtor independent and distinct from any other security agreement. Subsequently, the Borrower and corporate debtor had executed the revival letter dated 07.03.2017 acknowledging the debt. As per said revival letter, the corporate debtor had acknowledged the entire outstanding debts in terms of section 18 of Limitation Act. The applicant has recalled the loan facility by notice dated 20.09.2016 and the copy of which was also forwarded to corporate debtor. Thereafter, the corporate guarantee was invoked on 04.11.2016. The present application is filed by DGM who is authorised to act on behalf of the applicant Bank pursuant to clause No. 2 in clause VI of “delegation of power” pertaining to NCLT matters. Perused the documents on record. The said delegation of power is duly approved by Deputy Managing Director on 18.11.2017, to approve further delegation of power. Therefore, the present application is filed under valid authorisation. It is settled legal position that application under Section 7 of IBC is not a recovery proceeding. Therefore, in terms of clause 7.5 of inter-se agreement dated 26.11.2013, any lender is at liberty to take any decision or action on any other matter and is not required to take any approval from any other lender, the applicant would not be restricted to take independent recourse. As per clause 4 of inter-se-agreement dated 26.11.2013, the rights and obligations of each lender are joint and several thereby meaning in absence of contractual obligation by any other lender, the applicant would not be restricted to take independent recourse.
As per Part IV, Form I, the date of default being NPA date is 30.04.2016 and application is filed on 26.10.2018, which is within the period of limitation and not barred by law.
The registered office of the corporate debtor is situated in Ahmedabad, Gujarat State and, therefore, this Tribunal has jurisdiction to entertain and try this application.
On perusal of the record we have noticed that the creditor Bank annexed all the documents executed by the principal Borrowers as well as this corporate debtor in capacity of corporate guarantor reflecting that the principal Borrower and this corporate debtor failed to repay the debt to the creditor Bank, specifically this applicant.
Further, the corporate debtor executed the documents binding itself for liability of the principal Borrower or as Guarantor to repay the debt of borrower jointly and severally, leaving no doubt that default has occurred and application is fit for admission.
The present application is complete in terms of Section 7 (5) of the Code. The applicant is entitled to claim its dues, establishing the default in payment of the financial debt beyond doubt. In light of the above facts and records the present application is admitted and CIRP is ordered to be initiated against corporate debtor.
The applicant has proposed the name of Mr. Ramchandra Dallaram Choudhary as Insolvency Resolution Professional, who is be and hereby appointed as IRP of corporate debtor having registration number IBBI/IPA-001/IP-P-00157/2017-18/10326 having office at 9-B, Vardan Tower, Near Vimal House, Lakhudi Circle, Navrangpura, Ahmedabad 380 014, subject to the condition that no disciplinary proceedings are pending against him. Specific consent of the IRP in Form 2 along with disclosures as required under IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 is filed which is on record.
We direct the Financial Creditor to deposit a sum of Rs. 2.00 lacs (Rupees two lacs only) with the Interim Resolution Professional, namely Mr. R.D. Choudhary to meet out the expenses for performing functions assigned to him in accordance with regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The needful shall be done within one week from the date of receipt of this order by the Financial Creditor. The amount however be subject to adjustment by the Committee of Creditors, as accounted for by Interim Resolution Professional, and shall be paid back to the Financial Creditor.
As a consequence of the application being admitted in terms of Section 7(5) of IBC, 2016, moratorium as envisaged under the provisions of Section 14(1), shall follow in relation to the Corporate debtor, prohibiting as per proviso (a) to (d) of the Code. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(4) of the Code shall come in force.
A copy of the order shall be communicated to the Applicant, Corporate Debtor and IRP above named, by the Registry. In addition, a copy of the order shall also be forwarded to IBBI for its records. Applicant is also directed to provide a copy of the complete paper book to the IRP. A copy of this order be also sent to the ROC for updating the Master Data. ROC shall send compliance report to the Registrar, NCLT.