IDBI Bank Limited vs Mr. Shamik Apparao

Per : V. G. Bisht, Member (Judicial)

The present petition is filed u/s. 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016") r/w. Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 by IDBI Bank Ltd.(hereinafter referred to as “Applicant/Financial Creditor”) for the purpose of initiating insolvency process against Shri Shamik Apparao (hereinafter referred to as the “Respondent/Personal Guarantor/Guarantor”) for recovery of Rs.54,67,08,945.07 /- (Rupees Fifty-Four Crore Sixty Seven Lakhs Eight Thousand Nine Hundred and Forty-Five Rupees Seven Paisa only) together with further interest at contractual rates with effect from 01.08.2020. The Date of Default, as specified in Part-III of the present petition, is 15.05.2019.

The present Application has been filed by IDBI Bank Ltd. bearing CIN L65190MH2004GOI148838 through authorized Representative Shri. Sanjay Nikam having business address at IDBI Tower, WTC Complex, Cuffe Parade, Mumbai City, Maharashtra - 400005.

The Respondent is an Indian resident having present address at Flat no. 121, Samudra Mahal, Dr. A B Road, Worli, Mumbai -400018.

The Respondent is a personal guarantor for Tag Offshore Limited (hereinafter referred to as the “Corporate Debtor”) incorporated on 21.03.2003 having CIN U63090MH2003PLC139657 and having its registered office at Unit no. B 002-Ground Floor, Everest Nivara Infotech Park Plot no. D-3, TTC Industrial Area, Turbhe, MIDC Navi Mumbai, Thane - 400705.

The account of the Corporate Debtor turned NPA on 15.05.2019 and accordingly personal guarantee was invoked by the Applicant on 10.06.2019. The total amount in default is INR 54,67,08,945.07 (Rupees Fifty-Four Crore Sixty-Seven Lakhs Eight Thousand Nine Hundred and Forty-Five Paisa Seven Only) i.e. USS 70,40,551.38 and expenses of Rs. 2,02,71,429.18 together with further interest at contractual rates with effect from 01.08.2020 till the disposal of the present matter. (USD/INR-74.7722 as per RBI Ref. rate dated 31.07.2020).

The Applicant had issued demand notice dated 11.08.2020 in prescribed Form B under section 95 of the Code which was duly delivered to the Respondent on 18.08.2020, however, there was no response from the Respondent to the said demand notice within the stipulated period i.e.14 days from the date of receipt of the said demand notice, hence the Applicant has filed this Petition.

Further, the Applicant had filed IA 1651/2021 for urgent hearing of the main petition filed against the Personal Guarantor of the Corporate Debtor. Since the matter was taken up on 31.01.2022, the said IA was disposed of on 31.01.2022.

Vide order dated 24.07.2023, this bench had appointed Mr. Pardeep Kumar Sethi, as Resolution Professional having Registration No. IBBI/IPA-001/IP-P00711/2017-2018/11265 having his address at Unit No. 1121, Building No. II, 2nd Floor, Solitare Corporate Park, Chakala, Andheri-Kurla Road, Andheri-(E), Mumbai – 400 093 to examine the petition and file his report within 10 days from the date of communication of the said order.

The Resolution Professional has filed an Interlocutory Application being IA No. 4689 of 2023 for submitting report u/s 99(1) of the Code on record. The same was taken on record and the said Interlocutory Application is allowed and disposed of vide order dated 19.10.2023.

The ground(s) for admission of the present application, as recorded in the said RP report, are reproduced in-verbatim as hereinafter:

In view of the aforesaid, I hereby recommend the acceptance of the captioned Application filed by the Financial Creditor under Section 95 of the IBC”

The Respondent has challenged the present Application on the following grounds:

The Respondent has submitted that he was the Promoter Director of a company called Tag Offshore Limited (now in liquidation) ("TOL") till 24.04.2019 when TOL came to be admitted into the Corporate Insolvency Resolution Process ("CIRP") under the provisions of the IB Code by virtue of an order passed by National Company Law Tribunal, Mumbai in Company Petition No. 54/1&8/2019 against TOL. Despite being aware of the same, Applicant Bank has opted to stay outside the liquidation process and rather chose to enforce its security interest. Applicant Bank has received a substantial amount from selling the vessels charged by TOL in Applicant's favour.

In the year 2016, the IDBI Bank Ltd. ("Applicant Bank") granted the said Facility to TOL (now in liquidation) to the extent of USD 10.275 million (equivalent to Rs. 69 crores) in form of Foreign Currency Term Loan ("FCTL") vide 2 separate sanction letters dated 22 June 2016 and 26 October 2016, respectively, (collectively referred to as "the sanction letters").

Pursuant to issuance of the said sanction letters and in accordance with the terms thereof, TOL and its promoters directors executed all requisite documents for creating charge on security/collaterals, issued corporate and personal guarantees for the same and other incidental documents.

At the time when ONGC decided to terminate their existing charter-hire arrangements in order to take advantage of the fallen market prices, TOL had approximately 16 vessels that were in service for charter hire arrangements with ONGC. Therefore, the sudden and arbitrary decision on the part of ONGC - a state-owned public sector entity seriously imperiled TOL's business operations and led to a substantial fall in TOL's operating margins. In view thereof, the management of TOL (including the Petitioners) made multiple representations dated 14 August 2018, 27 August 2018 and 16 October 2018 to ONGC to reverse the terminations and to continue abiding by the terms of the existing arrangements.

In fact, ONGC's actions had widescale repercussions for the entire industry which prompted the Indian National Shipowners Association ("INSA") too to make their own representation dated 06 October 2017 to ONGC on behalf of its members. Further, INSA also approached the Competition Commission of India ("CCI") by filing Case No. 1 of 2018 seeking necessary directions against ONGC from terminating its arrangements with members of INSA. The Petitioners believe that the proceedings are currently pending with the Hon’ble NCLAT, who vide order dated 17 October 2019 continued the interim order passed by the Competition Commission of India on 15 June 2018, with regard to clause 14.2 of the 'Special Contract Conditions" (SCC).

The adverse change in the business environment was brought about by market forces that were beyond the control of TOL. As a result, in order to sustain its operations at this crucial juncture, TOL sought necessary financial assistance from its lenders, including but not limited to Bank.

TOL had successfully repaid an amount of approximately Rs.16 crores towards the availed facilities till March 2019. However, no further repayment was done by TOL.

Pertinently, the management of TOL (including me) made numerous requests to the lender banks of TOL, including Bank and offered various options such as restructuring of the facility, one time settlement offers, etc. However, despite extensive efforts on the part of the Petitioners and the management of TOL, no financial support was forthcoming.

In April 2019, Company Petition No. 54/1&8/2019 was filed by one of TOL's operational creditors ie. R IH Petroleum Private Limited, before the Mumbai Bench of the National Company Law Tribunal ("Adjudicating Authority") seeking to initiate the Corporate Insolvency Resolution Process against TOL in accordance with Section 9 of the Insolvency and bankruptcy Code, 2016 ("IBC").

By way of its order dated 24 April 2019, the Adjudicating Authority admitted Company Petition No. 54/1&B/2019 as a result of which the CIRP against TOL was initiated under the provisions of the IBC.

As no resolution plan was received and/or approved, Resolution Professional of TOL moved an application under Section 33 of the IBC ("Liquidation Application") before the Adjudicating Authority seeking to initiate liquidation proceedings against TOL. The Liquidation Application was allowed by the Adjudicating Authority vide its order dated 26 September 2019 and the liquidation proceedings came to be initiated against TOL. Presently TOL is under liquidation and the liquidator is in charge of TOL. Pertinently, the Applicant Bank is not part of the Stakeholders committee as it chose to stay outside of the liquidation

Applicant had charged over two vessels ie Tag- 20 & Tag-Navya, Vessel Tag-Navya has been sold by Applicant and sale proceeds thereof may have been adjusted by Bank. Further, Applicant is yet to sell vessel Tag 20. If the same is sold, the substantial amount of the alleged outstanding would be reduced.

The Respondent has further suggested that sale of vessel Tag 20 should substantially reduce the alleged outstanding claimed in the present Application.

Heard learned counsel for Applicant and Respondent and perused the record.

Upon perusal of the documents on record, it is clearly established that the Corporate Debtor has committed defaults in repayment of loan amount granted by the Financial Creditor. Mr. Shamik Apparao, Personal Guarantor to Tag Offshore Limited has also committed default in repayment of loan facility demanded by the Financial Creditor after invocation of Personal Guarantee. The Application filed by the Creditor satisfies the requirement as set out in Section 95 of the Code.

It is well established that the liability of surety is co-extensive with that of the principal debtor. Be that as it may, law on extinguishment of claim against personal guarantor and/or third party on approval of Resolution Plan has been well-settled by Hon’ble Supreme Court in Lalit Kumar Jain vs. Union of India and Ors. [(2021) 9 SCC 321], wherein the Hon’ble Supreme Court has held that approval of resolution plan does not ipso facto discharge a Personal Guarantor (of a Corporate Debtor) of her/ his liability under the contract of guarantee. In paragraph (126) of the said judgement, the Hon’ble Supreme Court held as hereunder:

Considering the above facts and circumstances and upon perusal of the documents on record, the C.P. (IB) 1222/MB/2023 filed under Section 95 of the IBC, 2016 is hereby Admitted and the Insolvency Resolution Process stands initiated against Mr. Shamik Apparao viz. the Respondent herein. We hereby direct as hereinafter:

a. Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed, and

b. The creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt; and

c. The debtor shall not transfer, alienate, encumber, or dispose of any of his assets or his legal rights or beneficial interest therein;

d. The provisions of this section shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

a. details of the order admitting the application;

b. particulars of the resolution professional with whom the claims are to be registered; and

c. the last date for submission of claims.

a. the information disclosed in the application filed by the debtor under Sections 94 or 95, as the case may be, and

b. claims received by the Resolution Professional under Section 102 within 30 days from the date of the notice. The debtor shall prepare a repayment plan under Section 105, in consultation with the Resolution Professional, containing a proposal to the Creditors for restructuring of his debts or affairs.

The repayment plan may authorize or require the Resolution Professional to:

a. carry on the debtor, business or trade on his behalf or in his name: or

b. realise the assets of the debtor; or

c. administers or dispose of any funds of the debtor.

The repayment plan shall include the following, namely;

a. justification for preparation of such repayment plan and reasons based on which the creditors may agree upon the plan;

b. provision for payment of fee to the Resolution Professional;

c. such other matters as may be specified.