IDBI Bank Limited vs Sunil Krishna Khaitan & Anr.

PER: BENCH

The petitioner/ IDBI Bank Limited is FC had advanced loan facilities to respondent no.2/ M/s Khaitan Electricals Ltd. Respondent no.1/ Sunil Krishna Khaitan stood as Personal Guarantor to such loans. Respondent no.2/ M/s Khaitan Electricals Ltd is the principal borrower, who had availed loan facilities from the petitioner/ FC.

This petition is filed by the IDBI Bank Limited (Financial Creditor) under Section 95 of Insolvency of Bankruptcy Code, 2016 (herein after referred as Code) read with Rule 7 (2) of the Insolvency & Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019, claiming an amount of Rs.156,88,17,951.44 (Rupees one hundred fifty six crore eighty eight lacs seventeen thousand nine hundred fifty one and paise forty four only) to be outstanding as on 01.05.2022, and seeking an order for initiation of the Insolvency Resolution Process against respondent no.1/ Sunil Krishna Khaitan, who is the Personal Guarantor of respondent no.2/ M/s Khaitan Electricals Limited.

The gist of the case of the Petitioner is as under:

Respondent no.2/ Corporate Debtor had availed various loan facilities from the petitioner/ FC amounting to Rs.58 crores from the petitioner/ FC vide Sanction Letter dated 21.02.2014 (ANNEXURE-1, page 20), as described under:

The sanction limit was restructured for an aggregate limit (revised) of Rs.61.58 vide Debt Restructuring package under JLF Mechanism as signified vide letter dated 31.12.2014 (page 31, page 31 of the petition). However, at the request of the Corporate Debtor the line of credit was enhanced from Rs.12.00 crores to Rs.13.80 crores vide letter dated 17.01.2015 (ANNEXURE-1, PAGE 42).

In order to secure repayment of the financial assistant, respondent no.1/ Sunil Krishna Khaitan stood as guarantor and had executed Deed of Guarantee for Line of Credit dated 01.03.2014 (ANNEXURE-2, page 44); and Deed of Guarantee for loans dated 31.12.2014 (ANNEXURE-3, page 55). Respondent no.2/ Corporate Debtor had executed Hypothecation Agreement dated 31.12.2014 (ANNEXURE-4, page 68).

The Corporate Debtor had failed to service the interest and pay other charges to the petitioner, on due dates. Due to default in repayment of credit facilities and failure to adhere to the terms and conditions of the Sanction Letter, the Corporate Debtor was classified as Non-Performing Asset (NPA). The petitioner/ FC had issued the following notices:

 Recall Notice dated 21.07.2017/ 25.07.2017 (ANNEXURE-5, page 80) was issued to the Corporate Debtor. Dates of default are enumerated in Annexure-II (page 104).

 Guarantee invocation notice dated 10.08.2017 (ANNEXURE-6, page 112) was issued to respondent no.1/ Guarantor.

 Demand Notice dated 11.12.2107 under section 13(2) of SARFAESI Act, 2002 (ANNEXURE-7, page 116) was issued to the Corporate Debtor demanding a sum of Rs.82,78,80,242.93 as on 01.07.2017.

In the meantime the petition for CIRP initiated by Bank of India against respondent no.2/ M/s Khaitan Electricals Limited vide order dated 28.11.2018 (ANNEXURE-8, page 127) in CP (IB) No.326/7/HDB/2018. The petitioner herein/ IDBI Bank Ltd has submitted its claim in Form-C dated 11.12.2018 (ANNEXURE-9, page 135) to the IRP. Bank of India has filed IA No.460 of 2019 in CP (IB) No.326/7/HDB/2018, for liquidation of respondent no.2 herein, which has been allowed by this Tribunal vide order dated 23.08.2019 (ANNEXURE-10, page 147).

Respondent no.2/ Personal Guarantor had addressed letter dated 25.09.2019 (ANNEXURE-11, page 152) to the petitioner stating that the allegations of ‘wilful defaulter’ are baseless and requesting them to drop proceedings as such.

The petitioner issued Demand Notice dated 21.05.2022 (ANNEXURE 13, page 173) under section 7(1) of the I&B Code, 2016 to respondent no.1 for Rs.156,88,17,951.44 (Rupees one hundred fifty six crore eighty eight lacs seventeen thousand nine hundred fifty one and paise forty four only) as on 01.05.2022. Said notice is acknowledged by the addressee/ respondent no.1 herein vide his signature dated 25.05.2022 on Speed Post Slip (ANNEXURE 14, page 179).

On presentation of the petition, this Tribunal on 23.09.2022 has issued notice to the respondent and declared vide order dated 09.01.2023 that interim moratorium under section 96 of the I&B Code, 2016 come into operation as soon as application under section 94 or 95 is filed. By the said order dated 09.01.2023 Shri Rajesh Kumar Agarwal has been appointed as Resolution Professional, who was directed to file report within 10 days of his appointment, in terms of Section 99 of the I&B Code. The Resolution Professional has filed Report vide IA (IBC) No.251 of 2023, on 02.02.2023, which was taken on record vide order dated 09.02.2023, recommending admission of the petition filed under Section 95 of the Code. The grounds for admission of the petition recorded in the report are:

 The application satisfies requirements of section 95 of the I&B Code, 2016.

 Resolution Professional has not received any evidence of repayment of debt under section 95 of the I&B Code, 2016, notwithstanding his e-mail dated 11.01.2023 and letter (ANNEXURES-D and E, Page 25 and 29 of the Report)

 No information is received under section 99(2) of I&B Code, 2016 from respondent no.1.

 No documents/ information received to evidence that the Personal Guarantee Agreement executed by the Personal Guarantor was cancelled.

The Resolution Professional further stated in his report that he did not receive any confirmation regarding payment from respondent no.1 till the date of filing of the Report. Since the Personal Guarantor has not responded to the Demand Notice served by the petitioner, it is presumed that Personal Guarantor has admitted to the debt and non-existence of dispute.

The petitioner has filed Record of Financial Information- Form-C showing details of debt, from National E-Governance Services Limited (NeSL) (ANNEXURE-15, page 180 of the petition), which is registered with the Information Utility.

In the light of the aforesaid factual matrix, the point that arises for our consideration is:

 Can Insolvency Resolution Process be ordered against the Personal Guarantor, respondent no.1 herein, vis. Sunil Krishna Khaitan?

We have heard the Shri Dishit Bhattacharjee, learned counsel for the petitioner and perused the material on record.

 Can Insolvency Resolution Process be ordered against the Personal Guarantor, respondent no.1 herein, vis. Sunil Krishna Khaitan?

The record reveals that despite granting sufficient opportunity to the Personal Guarantor, no counter is filed. Vide order dated 21.03.2023, the Tribunal has set the respondents ex parte.

Admittedly, the 1^st Respondent/ Personal Guarantor has neither disposed of his liabilities nor denied the default in repayment of debt as claimed by the petitioner in this petition. It is stated that, as per the petition, the outstanding debt payable by the Corporate Debtor is Rs.156,88,17,951.44 (Rupees one hundred fifty six crore eighty eight lacs seventeen thousand nine hundred fifty one and paise forty four only). Apparently, no request has been made to the Resolution Professional for issuance of instructions for conducting negotiations between the Personal Guarantor and the Financial Creditor and for arriving at the repayment plan. Per contra, the respondents are set ex parte as stated above. In this backdrop the Resolution Professional recommended for admission of the petition in terms of provisions of the Code.

It is to be stated that when the debt in respect of the claim of the Financial Creditor is not in dispute it goes without saying that the default on the part of the debtor is ex facie apparent. Hence the Tribunal finds no reason to reject this petition.

The petition i.e. CP (IB) No. 282/95/HDB/2022 filed under the provisions of Section 95 of IBC, 2016 is hereby admitted.

Consequently, the Insolvency Resolution Process is hereby initiated against the Personal Guarantor Shri Sunil Krishna Khaitan and moratorium is declared, which begins with effect from the date of admission of the petition and shall cease to have effect at the end of the period of 180 days, as provided under Section 101 of IBC, 2016. During the moratorium period --

Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed;

The creditors shall not initiate any legal action or legal proceedings in respect of any debt;

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

These provisions shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

The Financial Creditor/Petitioner herein had proposed an RP. However, his AFA is found to have been expired. Therefore, the Tribunal appoints Shri GORANTLA MADHAVAIAH from the panel of RPs maintained for NCLT, Hyderabad. His detailed are: e-mail : madhav_cwa[at]yahoo[dot]co[dot]in Address : PLOT NO. 201,GAYATRI NAGAR, BORABANDA UNION BANK OF INDIA LANE Hyderabad, Telangana ,500018. His IBBI No. : ^{IBBI/IPA-003/ICAI-N-00357/2021-2022/13762} His AFA is valid upto : 28.08.2023.

Shri GORANTLA MADHAVAIAH shall file Form-2 within three days from the date of this order.

The Resolution Professional is directed to cause public notice published on behalf of the Adjudicating Authority within seven days of uploading of this order on the website of NCLT, Hyderabad, inviting claims from all creditors, who shall register their claims as provided under Section 103 of the Code within 21 days of such issuance.

The notice shall contain the necessary information as provided under Section 102 (2) of IBC, 2016. The publication of notice shall be made in newspapers, one in English and other in Telugu, having wide circulation in the State where the debtor resides. The Resolution Professional shall furnish two spare copies of the notice to the Registry. One shall be placed on our website by the Registry and the other shall be affixed in the premises of this Adjudicating Authority.

The Resolution Professional in exercise of the powers conferred under 104 of the I&B Code, 2016 shall prepare a list of creditors within 30 days from the date of the notice. The debtor shall prepare, in consultation with the resolution professional, a repayment plan containing a proposal to the creditors for restructuring of debts or affairs as provided under Section 105 of the I&B Code, 2016 which shall include the provisions for payment of fee to the Resolution Professional. The Resolution Professional shall submit the repayment plan along with his report on the plan to this Adjudicating Authority within a period of 21 days from the last date of submission of claims as provided under Section 106 of the I&B Code, 2016.

In case the Resolution Professional recommends that a meeting of the creditors is not required to be summoned, he shall record the reasons thereof. If the Resolution Professional is of the opinion that the meeting of creditors should be summoned, he shall specify the details as provided under Section 106 (3) of the I&B Code, 2016. The date of meeting shall not be less than fourteen days or more than 28 days from the date of submission of the Report under Sub-Section (1) of Section 106 of the I&B Code, 2016, for which at least 14 days’ notice to the creditors (as per the list prepared) shall be issued by all modes. Such notice must contain the details as provided under the provisions of Section 107.

The meeting of the creditors shall be conducted in accordance with the provisions sections 109, 110 and 111 of the I&B Code, 2016. The Resolution Professional shall prepare a report of the meeting of the creditors on repayment plan with all details as provided under Section 112 of the I&B Code, 2016 and submit the same to the Authority, copies of which shall be provided to the guarantor and the creditors. It is made clear that the Resolution Professional shall perform his functions and duties in compliance with the Code of Conduct provided under Section 208 of IBC, 2016.

The Financial Creditor is directed to communicate this order to the Resolution Professional appointed in this case immediately.