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Judgment
ORDER
Per : Justice V. G. Bisht
Brief facts:
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 Indian Bank, applying through Mr. Ashok Kumar Golechha (“hereinafter referred to as Applicant/Financial Creditor”) for the purpose of initiating insolvency process against Mr. Padma Bhushan Tiwari (“hereinafter referred to as Personal Guarantor”) for recovery of Rs. 12,47,87,180.40/- (Rupees Twelve Crores Forty Seven Lakhs Eighty Seven Thousand One Hundred and Eighty Rupees only) as on 31.03.2022. The Date of Default, as specified in Part-III of the present petition, is 18.10.2018.
The Applicant, Indian Bank, bearing Pan no. AAACI1607G has its registered office at Indian, Bank, Stressed Asset Management-Vertical, 73, 7th Floor, Mittal Chambers, Nariman Point, Mumbai – 4000021. The present Application has been filed through Resolution Professional Mr. Ashok Kumar Golechha having Registration number IBBI/IPA-002/IP-N000932/2019-2020/12973 for initiating insolvency resolution process against Mr. Padma Bhushan Tiwari. Mr. Ashok Kumar Golechha has been appointed as Resolution Professional vide order dated 21.08.2023 to examine the petition and file his report within 10 days from the date of communication of the said order.
The Corporate Debtor, viz., Sonachi Industries Limited bears CIN U24119MH2006PLC163851 and has its registered address at A-38, 2nd Floor, Raj Industrial Complex, Military Road, Off-Marol Maroshi Road Andheri (East) Mumbai – 400059.
The Personal Guarantor has his address at D-601, Ashok Avenue, 6th Floor, Military Road, Marol, Andheri (East), Mumbai 400072, E-mail : [email protected].
As per the details available on the website of the Ministry of Corporate Affairs as on 22.03.2022, the Personal Guarantor has held directorship in Corporate Debtor since 2006. However, pursuant to the order dated 02.05.2018 and order dated 28.02.2019, the Corporate Debtor has been undergoing Liquidation under the IBC, and hence the powers of the Personal Guarantor as a director have been suspended.
The Corporate Debtor had approached the financial creditor (then Allahabad Bank) for providing CC and ILC/ FLC loan facilities. The Creditor vide sanction letter bearing Ref No. ZO/MUM/ADV/AndheriE/SIL/840 dated 26.11.2015 sanctioned CC and ILC/ FLC to the tune of 15 crores. In addition to the above the Corporate Debtor approached the financial creditor for providing Term Loan for purchase of car. The Creditor vide sanction letter bearing Ref No. AB/Andheri East/Adv/15 dated 11.05.2016 sanctioned a term loan of Rs 10,84,823/-. The aforesaid loans were secured by way of personal guarantee of the guarantor vide Guarantee Agreement dated 31.12.2015.
Upon violation of terms of sanction and occurrence of events of default, the account was classified as Non-Performing asset ("NPA") on 15/02/2018. Consequently, demand notice under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 ("SARFAESI Act") dated 28/02/2018 was Issued upon the Corporate Debtors and its guarantors recalling entire loan amount due.
Further, a notice dated 18/09/2018 was issued upon the personal guarantors invoking their personal guarantees and demanding repayment of the loan amount in default.
Meanwhile, due to defaults in repayment of the outstanding amount of an operational creditor, Company Petition no. 1479/I&BC/2017 was filed under section 9 of the IBC seeking initiation of Corporate Insolvency Resolution Process ("CIRP") in respect of the Corporate Debtor. The said petition was admitted by this Hon'ble Tribunal vide its order dated 02/05/2018.
During the CIRP, one resolution plan was received from the promoter director Mrs. Jyoti Bhushan Tiwari alongwith M/s Comfab Technologies Pvt. Ltd. However, the committee of creditor in their commercial wisdom resolved to liquidate the corporate debtor. The Tribunal vide order dated 28/02/2019 allowed the liquidation application and appointed Mr. Kshitiz Gupta as the Liquidator of the Corporate debtor.
Vide Gazette Notification dated March 4, 2020 Allahabad Bank amalgamated into Indian Bank with effect from 1st day of April 2020. Consequently, all branches of Allahabad Bank started to function as branches of Indian Bank from April 1, 2020. Therefore, for the purpose of this application, considering that all the facilities were granted and disbursed by Allahabad Bank prior to the amalgamation, these facilities are considered to have been granted and disbursed by Indian Bank.
A demand notice dated 22.03.2022 (hereinafter referred to as “IBC Demand Notice”) was issued by the Indian Bank upon the Personal Guarantor under the provisions of the IBC, read with the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. No reply to the said IBC demand notice was received by the Indian Bank neither the Personal Guarantor complied with the requisitions/ demand put forth in the said IBC demand notice.
Hence, since the Personal Guarantor has not repaid the Default amount within fourteen days of receipt of the IBC demand notice, the present company petition is being filed by the Applicant on behalf of Indian Bank seeking initiation of insolvency resolution process against the personal guarantor u/s 95 of the Code r/w rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019.
The Resolution Professional has filed an Interlocutory Application being IA No. 4474 of 2023 for submitting the Report on record. The same was taken on record and accordingly the IA 4474/2023 was disposed of as allowed.
The ground(s) for admission of the present application, as recorded in the said RP report, are reproduced in-verbatim as hereinafter:
Sr.n Requiremen Submission of the Compliance with o. ts under resolution the requirements
S.99 of the Professional under Section 99 IBC of IBC
1.S.99 (1) The Copy of the order YES The of the Hon’ble NCLT The present report resolution dated 21st August, 2023 is being filed by the professional was uploaded at the Resolution shall NCLT website and Professional within examine the received by the RP only 10 days of the application on 15th September, receipt of the order referred to in 2023. Accordingly, the by the Resolution section 94 or Resolution examined Professional. section 95, as the Application under the case may Section 95 of IBC, be, within along with the ten days of documents annexed his thereto and based on appointment same has prepared the , and submit report under S. 99 a report to within 10 days of the receipt of the order by Adjudicating the RP. Authority recommendi ng for approval or rejection of the application.
2.S. 99(2) The Resolution YES Professional had sent Where the The Resolution intimation under application Professional had S.99(2) of IBC to the has been filed sent intimation to Personal Guarantor under section rd the Personal through email on 23 95, the th Guarantor Mr. August, 2023 and 16 resolution Padma Bhushan September, 2023 and professional th Tiwari, requiring speed post on 18 September, 2023, to to prove the may require prove repayment of the repayment of the the debtor to debt as mentioned in debt claimed.
prove the captioned repayment of The respondent Application. The copy the debt Mr. Padma of the Intimation sent claimed as Bhushan Tiwari to the Respondent unpaid by vide email dated through email and the creditor 18th Spetember, speed post (Annexure II by 2023 has confirmed colly).
that all documents
furnishing -The Respondent vide are in possession of
evidence email dated 18th Liquidator of electronic September, 2023 has appointed by of transfer of replied that all honourable NCLT the unpaid documents are in including Bank amount from possession of Statement, the bank Liquidator appointed Payment receipt account of by Honourable NCLT from the sales of the the debtor; including Bank assets etc. of Statement, Payment Sonachi Industries
evidence Receipt from the Sales Ltd and other of of the assets etc. of income during the encashment Sonachi Industries Ltd. process of of a cheque and other income Liquidation. We issued by the during the process of have suspended as debtor; or Liquidation. We have Directors in May suspended as Directors 2018. So we do not
a signed in May 2018. So we do have any details to acknowledg not have any details to submit. You may ment by the submit. You may contact honourable creditor contact honourable liquidator.
accepting liquidator. (Annexure V)
receipt of dues.
S. 99(3) YES YES Where the The debt for Applicant/Creditor which an has vide email dated 4th application September, 2023 has been filed confirmed that the by a creditor creditor has registered is registered its claim with the with the Information utility information (NeSL)
| utility, the debtor shall not be entitled to dispute the validity of such debt. | |||
| 4. | S. 99(4) For the purposes of examining an application, the resolution professional may seek such further information or explanation in connection with the application as may be required from the debtor or the creditor or any other person who, in the opinion of the resolution professional, may provide such information. | The Resolution Professional also sent an email to the Applicant on 21st August, 2023 and 16th September, 2023 to sought further information. Copy is enclosed as (Annexure III) | YES The Resolution Professional has sought information from the applicant regarding repayment vide email dated 21st August, 2023 and 16th September, 2023. The Applicant vide email dated 4th September, 2023 have confirmed that the bank has not received any payment from Corporate Debtor/ Personal Guarantor. |
| 5. | S. 99(5) The person from whom information | The Applicant and the Respondent have provided the required information to the | YES The Applicant and the Respondent have provided the |
| or explanation is sought under sub-section (4) shall furnish such information or explanation within seven days of receipt of the request. | Resolution Professional within 7 days of receipt of the email. | requisite information within 7 days of receipt of the request. | |
| 6. | S. 99(6) The resolution professional shall examine the application and ascertain that - (a) the application satisfies the requirements set out in section 94 or 95; (b) the applicant has provided information and given explanation sought by the resolution professional under sub-section (4). | (a) The Resolution Professional has examined the Application and ascertained that, the application satisfies the requirements set out in S.95 of the IBC. (b) The Applicant has provided information via email dated 4th September, 2023 as sought by the Resolution Professional. | YES The Resolution Professional has examined the Application and ascertained that the application satisfies the requirements set out in S.95 of the IBC. The Applicant provided the requisite information sought by the Resolution Professional under Section 99(4) of IBC. |
| 7. | S. 99(7) | Upon examination of | YES |
the Application and After The Resolution annexures there to by examination Professional the Resolution of the recommends that Professional, it is application the Application recommended that the under sub- may be accepted. Application may be section (6), accepted. he may recommend acceptance or rejection of the application in his report.
8.S. 99(8) The Application has NOT not been filed under APPLICABLE Where the S.94 of IBC. resolution professional finds that the debtor is eligible for a fresh start under Chapter II, the resolution professional shall submit a report recommendi ng that the application by the debtor under section 94 be treated as an application under section 81 by the Adjudicating Authority.
9.S. 99(9) The resolution YES professional examined The the Application, Based on the resolution supporting documents reasons recorded in professional thereto and the replies the application and shall record received from the the present report, the reasons Applicant and the the Resolution for Respondent and record Professional recommendi the reasons for recommends for the ng the acceptance of the acceptance of the application: application. acceptance or
rejection of a) The Personal the Guarantor has application executed the in the report Deed of under sub- Guarantee in section (7). favor of the Applicant.
The Corporate Debtor and Personal Guarantors have defaulted in repayment of the debt,
c)The Bank has issued the notice u/s 13(2) SARFAESI Act, 2002.
d)Demand Notice is issued to PG dated 22.03.2022.
e)The email dated 4th September, 2023 confirms that the Personal Guarantor/Cor porate Debtor has not made any repayment to the Applicant.
f)The Respondent vide email dated 18.09.2023 have also stated that all documents are in possession of Liquidator appointed by honorable NCLT including Bank Statement, Payment receipt from the Sales of the assets etc. of Sonachi Industries Ltd. and other income during the process of Liquidation. We have suspended as Directors in May 2018. So we do not have any details to submit. You may contact honorable liquidator.
g)The Applicant has furnished the relevant evidence in the application of such default and non-payment of the debt.
10.S. 99(10) The Resolution YES Professional shall The The Resolution provide a copy of the resolution Professional hereby report to the Applicant professional undertakes to and Personal shall give a provide a copy of Guarantor. copy of the the report to the report under Applicant and to sub-section Personal (7) Guarantor/Respo ndent. The copy of to the debtor the email service of or the the Report of the creditor, as Resolution the case may Professional under be. Section 99 of IBC, 2016 is attached as Annexure VI.
Vide order dated 15.01.2024, the Respondent was given last opportunity to file Affidavit in Reply. However, the Respondent has not placed the same on record. Hence the present Company Petition is proceeded ex-parte.
Findings:
Heard learned counsel for the Applicant and perused the record.
On perusal of Deed of guarantee dated 31.12.2015, we find that the Respondent had stood guarantor for a sum of Rs. 15 Crores with interest on any part thereof on such amount.
Since the amount due from the Corporate Debtor in relation to loan amount of Rs. 15 Crores is recoverable from the Guarantor whose liability is co-extensive, we have no hesitation to hold that the Respondent is liable to be admitted to the bankruptcy process in terms of Section 100 (2) of the Code.
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. Padma Bhushan Tiwari, Personal Guarantor to Sonachi Industries 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 trite in law 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:
“126.For the foregoing reasons, it is held that the impugned notification is legal and valid. It is also held that approval of a resolution plan relating to a corporate debtor does not operate so as to discharge the liabilities of personal guarantors (to corporate debtors). The writ petitions, transferred cases and transfer petitions are accordingly dismissed in the above terms, without order on costs.”
Considering the above facts and circumstances and upon perusal of the documents on record, the C.P. (IB)/795/MB/2022 filed under Section 95 of the IBC, 2016 is hereby Admitted and the Insolvency Resolution Process stands initiated against Mr. Padma Bhushan Tiwari viz. the Respondent herein. We hereby direct as hereinafter:
I. Initiate Insolvency Resolution Process against the Respondent/Personal Guarantor and moratorium in relation to all the debts is declared, from today i.e. date of admission of the application, and shall cease to have effect at the end of the period of 180 days, or this Tribunal passes order on the repayment plan under Section 114 whichever is earlier as provided under Section 101 of IBC, 2016. During the moratorium period,
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.
II. The Resolution Professional viz. Mr. Ashok Kumar Golechha Insolvency Resolution Professional, having Registration No. IBBI/IPA-002/IP-N000932/2019-2020/12973, having registered address at B 703/704, River Park CHS Limited, Dattani Park Road, Thakur Village, Kandivali, East, Mumbai – 400 101[E-Mail: [email protected], Mobile no.: +919674117201] is directed to cause a public notice published on behalf of the Adjudicating Authority within 7 days of passing this Order on the website of the NCLT Mumbai Bench, inviting claims from all Creditors, within 21 days of such issue. The notice under Sub Section (1) of Section 102(2) shall include: -
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.
III. The publication of notice shall be made in two newspapers, one in English and other in Vernacular, which have wide circulation in the State where the Corporate Debtor and Personal Guarantor resides. The Resolution Professional shall furnish two spare copies of the notice to the Registry for the record.
IV. The Resolution Professional, in exercise of the powers conferred under Section 104, shall prepare a list of creditors on the basis of:
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.
V. The Resolution Professional shall submit the repayment plan along with his report on the plan to this Authority within a period of 21 days from the last date of submission of claims, as provided under Section 106.
VI. In case the Resolution Professional recommends that a meeting of the creditors is not required to be called, he shall record the reasons thereof. If the Resolution Professional is of the opinion that a meeting of the creditors should be summoned, he shall specify the details as provided under Section 106(3) of IBC, 2016. The date of meeting should not be less than 14 days or more than 28 days from the date of submission of the Report under sub- section (1) of Section 106 of IBC, 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 of IBC, 2016.
VII. The meeting of the creditors shall be conducted in accordance with Sections 108, 109, 110 & 111 of IBC, 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 IBC, 2016 and submit the same to this Tribunal, copies of which shall be provided to the Debtor 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.
VIII. The Resolution Professional shall submit his periodic reports before this Tribunal, every 30 days.
IX. The Applicant is directed to deposit INR 2,00,000/-(Indian Rupees Two lakhs) to the bank account of the Resolution Professional within one week, towards his fees. This shall be subjected to the rules and regulations under the provisions of the Insolvency and Bankruptcy Code, 2016.
X. The Registry is directed to communicate a copy of order, report and application within seven working days and upload the same on the website immediately after the pronouncement of order.