J.C. Flowers Asset Reconstruction Pvt. Ltd. vs Imagine Habitat Private Limited

ORDER

(IB)-30/ND/2026

“5.

The facts relevant for the purpose of adjudication of the present Petition are laid out below:

a. The Respondent along with principal borrower are a wholly owned subsidiary of RAB Enterprises (India) Private Limited (“RAB”). RAB’s group companies such as the Respondent and the principal borrower availed various loan facilities from IHFL, including:

i.

The principal borrower entered into two loan agreements with IHFL, worth Rs. 70 crore and Rs. 105 crore. The Respondent along with other group companies entered into a Deed of Hypothecation dated 22.03.2019 to hypothecate certain assets by way of first – ranking charge in favour of the lender, as security for the dues payable against the principal borrower’s Rs. 105 crore loan (“Hypothecation Deed”). These assets inter alia included a duplex apartment ‘Unit 5’ at a project named as ‘Sesen’ in Mumbai, Maharashtra (owned by the Respondent), valued by IHFL at Rs. 110 Crores even when the construction was only partly complete (“Sesen property”). A copy of IHFL’s valuation report dated 31.08.2018 for the Sesen property is annexed hereto and marked as Annexure – R1.

ii.

The Respondent also availed two loans from IHFL through a Loan Agreement dated 05.09.2018 for Rs. 60 Crores, as well as for Rs. 80 Crores, in their capacity as a principal borrower. The Sesen property was also mortgaged against the Rs. 80 crore loan, through a mortgage deed dated 16.08.2019.

b. Cl. 1.1 of the aforesaid Loan Agreements defines ‘Borrower’s Dues’ as the outstanding principal amount and other amounts due/payable as per the relevant Loan Agreements and/or any other loan agreements entered into between the borrower and the lender, including any interest, default interest, fees, costs, charges, expenses and other sums whatsoever payable by the Obligor (s) to the lender. The term ‘Obligor(s)’ is defined as a party to the Loan Documents who is either a borrower, hypothecator, guarantor, mortgagor, pledgor and/or any other person providing security to secure the borrower’s obligations towards the Borrower’s Dues. Clause 12 of the Loan Agreements, worded identically, provided numerous ‘Events of Default’ which would give rise to a breach of the Agreements. Clause 12.1.8 is most pertinent for the purposes of the present proceedings. Clause 12.1.8 of the Loan Agreements provided that if any event or circumstance occurred which the Lender (IHFL) believed is likely to have a ‘Material Adverse Effect’, or if any circumstance or event occurred, which in the opinion of Lender would or was likely to prejudicially or adversely affect in any manner, the ability / capacity of the Obligor (s) to perform or comply with their obligations under the Loan Documents to repay the dues, the said event would constitute an ‘Event of Default’. Even though the terms of Clause 12.1.8 were unduly favorably biased for IHFL and left everything to its sole discretion, the Respondent as a principal borrower had no choice but to accede to the terms of the unilateral and one – sided Agreements.

c. Schedule II of the principal borrower’s Rs. 105 crore loan and Respondent’s Rs. 80 crore loan required them to only undertake interest payments from the date of first disbursal, i.e., 05.04.2019 up till 05.11.2021 (first two and a half years of the loan tenure), and the principal payments were required to be made thereafter up till 05.04.2024, i.e., the end of the loan’s tenure. This arrangement provided sufficient comfort to the Respondent, while at the same time causing substantial profits for IHFL through the regular interest payments. A perusal of the Statement of Accounts dated 30.06.2020 and 08.09.2020 for the principal borrower’s Rs. 105 crore loan and the Respondent’s Rs. 80 crore loan would indicate that there was no contravention of the terms of repayment under Schedule II on either the principal borrower or Respondent’s part. Copies of the Statement of Accounts dated 30.06.2020 and 08.09.2020 for the loan worth Rs. 105 crore granted to Bliss House Private Limited are annexed hereto and marked as Annexure – R2 (Colly). Copies of the Statement of Accounts dated 30.06.2020 and 08.09.2020 for the Respondent’s Rs. 80 crore loan are annexed hereto and marked as Annexure – R3 (Colly).

d. Accordingly, as of 08.03.2020, the Respondent as well as the principal borrower had ensured that it had diligently undertaken the interest payments, and consequently, there was no default of the terms of the Loan Agreements. Despite the same, on 09.03.2020, to the Respondent’s shock, IHFL issued the 2020 LRNs for both the principal borrower’s Rs. 105 crore loan and the Respondent’s Rs. 80 crore loan, recalling the loan facilities and called upon the Respondent to repay:

i.

An outstanding amount of Rs. 189,27,34,375/- (Rupees One Hundred Eighty – Nine Crore Twenty – Seven Lakh Thirty – Four Thousand Three Hundred Seventy – Five Only) along with Rs. 83,81,048/- (Rupees Eighty – Three Lakh Eighty – One Thousand Forty - Eight Only) towards TDS within a period of 5 days, in its capacity as an Obligor to the principal borrower’s loan of Rs. 105 crore;

ii.

An outstanding amount of Rs. 140,71,56,250/- (Rupees One Hundred Forty Crores Seventy – One Lakh Fifty – Six Thousand Two Hundred and Fifty only) along with Rs. 65,37,259/-(Rupees Sixty – Five Lakh Thirty – Seven Thousand Two Hundred and Fifty – Nine only), towards TDS within a period of 5 days, with respect to the Respondent’s Rs. 80 crore loan.

It is pertinent to mention that the 2020 LRNs were issued without any prior default notice in relation to the Respondent’s payment obligations under the Loan Agreements.

e. IHFL through the 2020 LRNs alleged that the ‘Event of Default’ had already occurred as a result of ‘Material Adverse Effect’ under the aforesaid Loan Agreements. Pertinently, the 2020 LRNs failed to provide any justification and reasoning or furnish and / or elaborate in any manner upon the alleged ‘Event of Default’, and failed to consider that the principal borrower and Respondent had not defaulted on a single payment till the date of issuance of the 2020 LRNs. Indeed, with respect to the Respondent’s loan as a principal borrower, the Respondent had maintained an impeccable track record of timely interest and TDS payments on the aforesaid loans. There was no cogent evidence or averment in the 2020 LRNs indicating why the Respondent or principal borrower would be unable to undertake the payments under the aforesaid Loan Agreements subsequently. These vague and unsubstantiated 2020 LRNs have subsequently been utilized by IHFL in connivance with parties such as JCF to harass the Respondent and other related entities across multiple ill – founded proceedings and forum shopping across legislations and courts.

f. On 08.04.2020, the principal borrower as well as the Respondent wrote to IHFL objecting to issuance of the 2020 LRNs. Copies of the emails dated 08.04.2020 issued by the Respondent and Bliss House Private Limited are annexed hereto and marked as Annexure – R4 (Colly).

g. Considering the dispute resolution scheme under the Rs. 105 crore loan as well as the Respondent’s Rs. 80 crore loan, arbitral proceedings were initiated by IHFL and finally concluded on 08.05.2021, wherein, the Ld. Sole Arbitrator appointed by IHFL reserved the matter for the purposes of passing awards (“IHFL Arbitration”). After a significant delay of one (1) year, nine (9) months and twenty (20) days, the Ld. Sole Arbitrator proceeded to issue similarly – worded Awards on 28.02.2023. Accordingly, the said Awards were passed with a significant delay and without considering that the 2020 LRNs were issued without any justification or reasoning, and that the 2020 LRNs were in violation of mandatory RBI Circulars and the Hon’ble Supreme Court’s judgment in Small Scale Industrial Manufactures Assn. v. Union of India, (2021) 8 SCC 511, premised solely on post – facto justifications:

i.

The Ld. Sole Arbitrator failed to consider that the justification for invoking the 2020 LRNs were entirely introduced post the issuance of the LRN and was not a part of the 2020 LRNs in any manner whatsoever. The sole justification for the invocation, being the involvement of one of the guarantors in unrelated legal proceedings, was not present in the 2020 LRNs, and was only introduced later through pleadings before the Ld. Sole Arbitrator in the IHFL Arbitration; entirely introduced post the issuance of the LRN and was not a part of the 2020 LRNs in any manner whatsoever. The sole justification for the invocation, being the involvement of one of the guarantors in unrelated legal proceedings, was not present in the 2020 LRNs, and was only introduced later through pleadings before the Ld. Sole Arbitrator in the IHFL Arbitration;

ii.

The Ld. Sole Arbitrator failed to consider that as per RBI Circulars dated 27.03.2020, 17.04.2020 and 23.05.2020 (“RBI Circulars”), all commercial banks and Non – Banking Finance Companies (“NBFCs”) were required to provide a moratorium on instalments due between 01.03.2020 and 31.08.2020. With respect to the RBI Circulars, before the Hon’ble Supreme Court in Small Scale Industrial Manufactures Assn. v. Union of India, (2021) 8 SCC 511, the counsel for the RBI categorically submitted that the Circular dated 27.03.2020 shall be applicable to all banks, NBFCs etc., mandatorily, and the same was recorded by the Hon’ble Supreme Court while disposing of the matter. It is pertinent to note that the Hon’ble Supreme Court did not leave an iota of discretion in the hands of financial institutions, when it came to the application of the RBI Circular. A copy of the RBI Circular dated 27.03.2020 along with the Statement on Developmental and Regulatory Policies is annexed hereto and marked as Annexure – R5. Copies of the RBI Circulars dated 17.04.2020 and 23.05.2020 are annexed hereto and marked as Annexure – R6 (Colly). iii. The Awards, with respect to certain group companies, seems to hold all Obligors to the Loan Agreements jointly and severally liable for the entire sum awarded, without considering that the Obligor’s liability extended only to a small portion of the loans granted by IHFL;

iv.

The Awards are also vitiated by the fact that the same was delivered after an unsubstantiated and inexplicable delay of 1 year, 9 months and 20 days from the date on which the Awards were reserved, meaning that the same is grossly against the public policy of India.

h. Aggrieved by the said Awards rendered by the Ld. Sole Arbitrator in the IHFL Arbitration, the principal borrower as well as the Respondent, preferred petitions under Section 34 of the Arbitration Act before the Hon’ble High Court of Delhi in August 2023, assailing the legality of the aforesaid Awards on the grounds that the same is patently illegal and in contravention of the fundamental arbitration policy of Indian law (collectively referred to as “Section 34 Petitions”). It is submitted that the aforesaid petitions are currently pending adjudication before the Hon’ble High Court of Delhi and are listed next on 27.03.2026. A copy of the Respondent’s Petition under Section 34 of the Arbitration Act, bearing OMP (Comm) No. 362 of 2023, is annexed hereto and marked as Annexure – R7. A copy of the principal borrower, Bliss House Private Limited’s Petition under Section 34 of the Arbitration Act, bearing OMP (Comm) No. 365 of 2023, is annexed hereto and marked as Annexure – R8.”

1.

In consideration of the Lender having lent and advanced and/or agreed to lend and advance the Loan(s) to the Borrower(s) for the purposes and subject to the terms and conditions set out in the Loan Documents, the Hypothecator(s) hereby covenant with the Lender that it/they shall cause the Borrower(s) to pay/repay the Borrower's Dues (as defined in the Loan Agreement(s)) and all other outstanding amount under the Loan Documents to the Lender and that the Hypothecator(s) shall duly observe and perform all the terms and conditions of the Loan Documents, as amended from time to time.”

“ 52. The appellants are claiming that their case is covered by sub-clause (i) of clause (8) of Section 5 IBC. Under sub-clause (i), the amount of any liability in respect of any guarantee of the items referred to in sub-clauses (a) to (h) becomes a financial debt. Therefore, when sub-clause (i) of Section 5(8) is applicable, it is not necessary that the financial creditor actually tenders any amount to the corporate debtor. In this case, the appellants are claiming that the amount of liability covered by sub-clause (i) is in respect of money borrowed by the RCom entities (excluding the corporate debtor) against payment of interest under the facility agreements. There is no dispute that facilities were granted by the appellants to RCom entities. The amount of any liability in respect of any of the guarantees for money borrowed against the payment of interest is a financial debt under Section 5(8) IBC.

53.

"Guarantee" is defined under Section 126 of the Contract Act, which reads thus:

"126. "Contract of guarantee", "surety", "principal debtor"

and "creditor".-- A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the "surety"; the person in respect of whose default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor". A guarantee may be either oral or written." 54. A contract becomes a guarantee when the contract is to perform the promise or discharge the liability of a third person in case of default. Thus, when a person enters into a contract to perform or discharge the liability of a third party, the contract becomes a contract of guarantee.

55.

Section 127 of the Contract Act reads thus:

"127.

Consideration for guarantee. Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee."

56.

Hence, any promise made or anything done for the benefit of principal debtor may be sufficient consideration to the surety for giving guarantee.

Effect of Clause 5(iii) of DoH read with MSTA

Relevance of nomenclature of DoH

57.

If we go by the title, DoH is a document creating hypothecation. In short, hypothecation means the process of using an asset as collateral for a loan. It acts as a protection to the lender when the borrower does not repay the loan.

58.

Only the title of a document cannot be a decisive factor in deciding the nature of the document or the transactions affected by the document. In CCE & Service Tax v. Northern Operating Systems (P) Ltd. 17, in paras 53 to 55, this Court held thus: (SCC pp. 121-22)

"53.

From the above discussion, it is evident, that prior to July 2012, what had to be seen was whether a: (a) person provided service, (b) directly or indirectly, (c) in any manner for recruitment or supply of manpower, (d) temporarily or otherwise. After the amendment, all activities carried out by one person for another, for a consideration, are deemed services, except certain specified excluded categories. One of the excluded category is the provision of service by an employee to the employer in relation to his employment.

54.

One of the cardinal principles of interpretation of documents, is that the nomenclature of any contract, or document, is not decisive of its nature. An overall reading of the document, and its effect, is to be seen by the courts. Thus, in State of Orissa v. Titaghur Paper Mills Co. Ltd. 18 it was held as follows: (SCC p. 371, para 120)

120.

It is true that the nomenclature and description given to a contract is not determinative of the real nature of the document or of the transaction thereunder. These, however, have to be determined from all the terms and clauses of the document and all the rights and results flowing therefrom and not by picking and choosing certain clauses and the ultimate effect or result as the Court did in Orient Paper Mills case.

This principle was reiterated in Prakash Roadlines (P) Ltd. v. Oriental Fire & General Insurance Co. Ltd.

55.

The task of this Court, therefore is to, upon an overall reading of the materials presented by the parties, discern the true nature of the relationship between the seconded employees and the assessee, and the nature of the service provided in that context-by the overseas group company to the assessee." (emphasis in original and supplied)

59.

As held in B.K. Muniraju v. State of Karnataka 10, a sentence or a term in a contract does not determine the real nature of the contract. It is true that the courts should not rewrite the contract while making an attempt to interpret it. However, in D.N. Revri¹¹, in para 7, this Court held thus: (D.N. Revri casell, SCC p. 151)

"7.

It must be remembered that a contract is a commercial document between the parties and it must be interpreted in such a manner as to give efficacy to the contract rather than to invalidate it. It would not be right while interpreting a contract, entered into between two lay parties, to apply strict rules of construction which are ordinarily applicable to a conveyance and other formal documents. The meaning of such a contract must be gathered by adopting a common sense approach and it must not be allowed to be thwarted by a narrow, pedantic and legalistic interpretation." (emphasis supplied)

60.

Therefore, the name of the document is not a decisive factor. Only because the title of the document contains the word hypothecation, we cannot conclude that guarantee is not a part of this document.”

“66.

It has been brought out that hon’ble Supreme Court in China Development Bank v. Doha Bank Q.P.S.C. & Ors. [(2024) ibclaw.in 340 SC] : (Civil Appeal No. 7298 of 2022) Para 44-60 has conclusively settled the issue that where a document contains a covenant to pay, coupled with a security enforcement mechanism, the arrangement assumes the character of a contract of guarantee, giving rise to a financial debt under Section 5(8) of the Code. In the said case, Clause 2 of the Deed of Hypothecation (DOH) expressly contained a “covenant to pay”, whereby the Corporate Debtor undertook to repay the secured facilities to the Security Trustee. Further, Clause 5(iii) empowered the Security Trustee to take possession of and enforce the hypothecated assets upon default. Hon’ble Supreme Court held that the Security Trustee was acting on behalf of and for the benefit of the Secured Lenders, and consequently, the Corporate Debtor, Secured Lenders, and Security Trustee were parties to a composite arrangement wherein the Corporate Debtor had undertaken to discharge the liability of the Secured Lenders. Such undertaking was held to be in the nature of a guarantee under Section 126 of the Indian Contract Act, 1872, and therefore constituted a “financial debt” under Section 5(8) of the Code.”

“67.

If we apply the above ratio to the present case, the Deed of Mortgage dated 12.05.2016, contains a clear “Covenant to Pay” (Clause 3), whereby the Corporate Debtor has undertaken to repay the Mortgage Debt in accordance with the financing documents. In addition, thereto, the Mortgage Deed confers upon the Mortgagee the right to enforce the mortgaged properties upon default, and further provides that the Corporate Debtor shall remain personally liable for any deficiency even after enforcement. Similarly, we observe that Deed of Mortgage dated 12.05.2016 in clause D expressly stipulates that: “The Mortgagor and the Mortgagee have agreed that the mortgage and charge on the Mortgaged Properties shall be by way of a legal mortgage in English form by way of a registered mortgage deed being these presents.” Thus, the Deed of Mortgage dated 12.05.2016 qualifies as an English Mortgage under Section 58(e) of the Transfer of Property Act, 1872. Consequently, under of the Deed of Mortgage dated 12.05.2016, the Appellant is entitled to recover the mortgage money directly from the REPPL in the event of default by the Principal Borrower. It is worth noting that Clause 8 Deed of Mortgage dated 12.05.2016 further amplify Mortgagee’s authority to reassign, re-convey, or re-transfer upon repayment, affirming that all essential attributes of an English Mortgage are satisfied. We do not agree to the pleading of the Respondent No on this issue noted earlier.”

“68.

We also take into consideration that this Appellate Tribunal in, Rajeev R. Jain vs Aasan Corporate Solutions Private Limited and another [(2022) ibclaw.in 31 NCLAT] : (2022 SCC Online NCLAT 25), held that where a mortgage deed contains a covenant to pay, it constitutes an English Mortgage under Section 58(e) of the Transfer of Property Act,1872, creating a direct financial liability on the mortgagor and qualifying the creditor as a financial creditor under Section 5(8) of the Code.

“69.

It is noted that SRRPL was sanctioned a Term Loan of Rs. 350 Crores by Yes Bank, of which Rs. 111 Crores was disbursed towards construction and development expenses, including balancing tenant settlement costs for the REPPL’s project “Avenue 54.” Thereby, in a way REPPL directly benefited from such disbursement and thus derived a commercial effect of borrowing. This is substantiated by the Development Agreements executed between the REPPL and Sumer Buildcorp Pvt. Ltd. (“SBPL”), whereby development rights over 50% of the “Avenue 54” project were transferred to the SRRPL in exchange for 1,50,000 sq. ft. of saleable area. Hence, the REPPL is the direct beneficiary of the loan proceeds. Accordingly, the Appellant’s claim arises from a transaction having the commercial effect of borrowing and falls within Sections 5(8)(f), 5(8)(h), and 5(8)(i) of the Code.”

“92.

We consider that a Deed of Mortgage dated 12.05.2016 and Supplementary Deed of Mortgage dated 06.02.2018 executed between the Appellant, SRRPL and REPPL, whereby the REPPL expressly undertook liability for repayment of the Secured Obligations. The Deed of Mortgage dated 12.05.2016 contains a “Covenant to Pay” clause, satisfying the ingredients of an English Mortgage under Section 58 of the Transfer of Property Act, 1882 (“TPA”), rendering the REPPL liable to repay the mortgage debt.”

“15.1

A reading of the aforesaid provisions indicates that a contract of guarantee is an undertaking to perform the promise or discharge the liability of a third person, in case of his default. It is essentially a voluntary act of taking up the burden of a third party, who has received or is about to receive some benefit and has failed to make the payment. The guarantor is called the “surety” and person in default is called the “Principal Debtor”.

"8.

The use of words 'a' and 'such' before National Company Law Tribunal clearly indicates that Section 60(2) was applicable only when a CIRP or Liquidation Proceeding of a Corporate Debtor is pending before NCLT. The object is that when a CIRP or Liquidation application relating to Insolvency Process of a Corporate Guarantor or Personal Guarantor should be filed before the same NCLT. This was to avoid two different NCLT to take up CIRP of Corporate Guarantor. Section 60(2) is applicable only when CIRP or Liquidation Proceeding of a Corporate Debtor is pending, when CIRP or Liquidation Proceeding are not pending with regard to the Corporate Debtor there is no applicability of Section 60(2)."

"33.

Sub-section (4) of Section 60 of the IBC, 2016 states that the NCLT will have all the powers of the DRT as contemplated under Part III of the Code for the purposes of subsection (2). Sub-section (2) deals with a situation where the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor of a corporate debtor is taken up, when CIRP or liquidation proceeding of such a corporate debtor is already pending before NCLT. The object of sub-section (2) is to group together (A) the CIRP or liquidation proceeding of a corporate debtor, and (B) the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor of the very same corporate debtor, so that a single forum may deal with both. This is to ensure that the CIRP of a corporate debtor and the insolvency resolution of the individual guarantors of the very same corporate debtor do not proceed on different tracks, before different fora, leading to conflict of interests, situations or decisions".

"23.

As noted above, the transfer petition bearing No. TA(IBC)- 36 (PB)/2022 was filed before the Adjudicating Authority. It is also a fact that even though this application was filed before the Adjudicating Authority (Bench-IV), it did not take the transfer application into consideration before passing both the Impugned Orders, which is a requirement of law as per section 60(1) and (2) of the IBC. Sub sections (1) and (2) of section 60 lay down a requirement of law, which stipulates and mandates that an application relating to insolvency resolution or or liquidation of corporate guarantor of a corporate debtor shall be filed before 'such' NCLT, where a CIRP or liquidation proceedings of the 'same' corporate debtor is pending. This requirement of law has also been noted in the matter of State Bank of India, Stressed Asset Management Branch (supra) of this Tribunal".

"4.

In order to appreciate the expression, 'pending', we may refer to Section 5(11)of the IBC, 2016, i.e., the definition of 'initiation date'. In terms of the definition, the 'initiation date' means the date on which a Financial Creditor, Corporate Applicant or Operational Creditor, as the case may be, makes an application to the Adjudicating Authority for initiating Corporate Insolvency Resolution Process [or the Prepackaged Insolvency Resolution Process], as the case may be."

"30.

"In initio" means in the beginning. The dictionary meaning of "initiation" is cause to begin. Whereas some statutes provide for grant of sanction before a prosecution is initiated, some others postulate grant of sanction before a cognizance is taken by court. However, meaning of the word may vary from case to case. In its wider sense, the prosecution means a proceeding by way of indictment or information, and is not necessarily confined to prosecution for an offence."

"10.

The expression "initiate any proceedings for contempt" is not defined in the Act. Words and Phrases (Permanent Edition) defines "initiate" to mean an introductory step or action, a first move; beginning; start, and "to initiate" as meaning to commence. Black's Law Dictionary (6th Edn.) defines "initiate" to mean commence; start; originate; introduce; inchoate. In Section 20, the word "initiate" qualifies "any proceedings for contempt". It is not the initiation of just any proceedings; the proceedings initiated have to be proceedings for contempt."

"5)

Where the Adjudicating Authority is satisfied that-

(a)

a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or

(b)

default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application:

Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of subsection (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.

(6)

The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section(5)."

"20.

We do not accept this contention. It cannot be denied that on July 28, 1952 the date of the commencement of the impugned Act the case of the appellant was pending before the learned Presidency Magistrate. On that day the prosecution had closed its case and the appellant had not yet been called upon to enter upon his defence. The examination of the appellant under Section 342 of the Code of Criminal Procedure took place after that date. The appellant filed his written statement on the August 14, 1952 and the addresses by the prosecution as well as the defence continued right up to September 26, 1952. The word "pending" is thus defined in Stroud's Judicial Dictionary, 3rd Edn. Vol. III, p. 2141:

"Pending.-(1) A legal proceeding is 'pending' as soon as commenced and until it is concluded i.e. so long as the court having original cognizance of it can make an order on the matters in issue, or to be dealt with, therein."

Similar are the observations of Jessel, M.R. In re Clagett's Estate, Fordham v. Clagett [[L.R.] 20 Ch. D. 637, 653]:

"What is the meaning of the word 'pending'? In my opinion, it includes every insolvency in which any proceeding can by any possibility be taken. That I think is the meaning of the word 'pending'.... A cause is said to be pending in a court of justice when any proceeding can be taken in it. That is the test."

“The Petitioner is represented by Ld. Counsel Mr. Angad Varma through video conferencing mode.

Registry raised an objection for numbering and filing of the Petition before this Bench of the Tribunal on the ground that the Respondent/Corporate Debtor in the present case the corporate guarantor is having registered office situated in Bengaluru and therefore how this Petition could be maintainable before NCLT Chennai.

The Financial Creditor/Applicant states that the Corporate Debtor in the present case is corporate guarantor to M/s. Ozone Projects Private Ltd having registered office following the jurisdiction of NCLT Chennal Bench. Case against Ozone Projects Private Ltd. (Corporate Debtor) is pending adjudicating before NCLT Chennal In main CP/(IB)49/2023. Therefore in terms of Section 60(1) and 60(2) since the case against the Corporate Debtor/Ozone Projects is pending before NCLT Chennai the case of the corporate guarantor will also lye before NCLT Chennai Bench.

Section 60(2) is reproduced below:

"without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or [liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor] shall be filed before such National Company Law Tribunal.

In view of the above, the objection of the Registry is overruled. Registry is directed to number the Section-7 Petition and list it for hearing on next available date."

35.

This aspect has been argued to the contrary by the learned counsel for the Appellant, submitting that, even assuming for the time being that there was an order passed on 17.04.2023 by the learned NCLT on a judicial side holding the proceedings to be maintainable before the learned NCLT Chennai, and that he has not filed any counter/reply before the learned NCLT, specifically raising the question of jurisdiction, then too there cannot be any bar against him from agitating the question of jurisdiction before the Appellate Tribunal and for the aforesaid purpose he makes reference to the Judgment of the Hon'ble Apex Court, where it has been laid down that the question of jurisdiction, could be agitated at any stage or at any point of time and even at the stage of an appeal. This contention seems to be quite laudable, but it would be a question to be considered as to whether, it could have been considered when the Appellant himself has acceded to the question and had not raised any objection, against order dated 17.04.2023, but has rather voluntarily participated in the proceedings and have invited the order to be rendered on merits on admission of the application under Section 7 of the I & B Code, 2016. The Judgment as relied by the learned counsel for the Appellant, is that as reported in 2020 120 taxman.com 178 (Calcutta) in the matter of Atin Arora v. Oriental Bank of Commerce, where the single judge of the Calcutta High Court in Para 31 has observed that in the light of the provisions contained under Section 21 of the Code Civil Procedure, the question of jurisdiction could be agitated at any stage of time and Section 21 of Cr. P.C. which may not have any application in the proceedings under I & B Code, 2016. The relevant para is extracted hereunder: -

"31.

Thus, the contention of the opposite party that the objection as to the territorial jurisdiction of the Tribunal should have been raised at the first instance and that such objection was waived by nonappearance of the opposite party does not impress the court. The place of suing in case of suits filed under the Civil Procedure Code, 1908 is based on the provisions of sections 15 to 20 thereof and the plaintiff has to file the suit in accordance with the said sections and can also choose the place of suing. Under such circumstances, section 21 of the Code provides that the question with regard to territorial jurisdiction or pecuniary jurisdiction being technical questions, should be raised at the first instance. In my opinion, when the jurisdiction of the National Company Law Tribunal has been prescribed under section 60(1) of the Code and the National Company Law Tribunal within whose jurisdiction the registered office of the company is situated is to have exclusive jurisdiction over the proceedings under the Code, section 21 of the Code of Civil Procedure will not have any application."

36.

In furtherance thereto his argument, he has further made reference to a judgment which has laid down almost a similar principle, that, since the question of jurisdiction, both pecuniary or territorial, goes to the roots of the competence of the Tribunal deciding the matter, it could be raised at any stage of time, even in the absence of the pleading raised in opposition to the effect. He supports his contention stating that there would be no legal bar as such for him to raise the issue of territorial jurisdiction, even before this Appellate Tribunal. The principles as laid down by the said judgment of Atin Arora (Supra) may not be akin in nature under the facts and circumstances of the instant Company Appeal, where despite of being conscious of the question of jurisdiction being raised, and also despite being conscious of there being a judicial order passed by the Tribunal on 17.04.2023 deciding the question of jurisdiction, not challenging it, and still choosing not to file any objection raising a question of territorial jurisdiction particularly, when it becomes a subject matter of consideration based upon the determination of facts and law, the Appellant cannot place this instant Company Appeal on a common pedestal as that of the Judgment relied by the Appellant in the matters as rendered, Atin Arora (Supra). The Appellant has relied on yet other authority, as rendered, by the Hon'ble Apex Court as reported in (2007) 1 SCC 732 Arunkumar v. Union Bank of India, where the Appellant has made reference to para 84 of the said judgment, as extracted hereunder.

"84.

From the above decisions, it is clear that existence of "jurisdictional fact" is sine qua non for the exercise of power. If the jurisdictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of "jurisdictional fact", it can decide the "fact in issue" or "adjudicatory fact". A wrong decision on "fact in issue" or on "adjudicatory fact" would not make the decision of the authority without jurisdiction оr vulnerable provided essential or fundamental fact as to existence of jurisdiction is present."

37.

That was a case where the question of territorial jurisdiction was not even agitated by the opposite side to the proceedings at any point of time in the proceedings and it was being raised for the first time before the superior forum. It was under those facts and circumstances Hon'ble Apex Court opined that, since the jurisdiction goes to the root of the issue it could be permitted to be agitated at any point of time. But that may not be the same for case at hand, because here the Appellant had contested the issue, there is a judicial order determining the question of jurisdiction, which has not been challenged, and there is no pleading on merits of the jurisdiction. When the question of territorial jurisdiction falls to be a question of consideration under facts and law and yet the matter has been determined on its merit and that too upon contest, which was given by the Appellant, it has to be construed that he has waived of his right to file any objection to it, on any of the fact of the proceedings.

38.

We are of the view, so far as the instant Company Appeal is concerned, the question of competence to decide the controversy based upon the lack of territorial jurisdiction may not be attracted, as lack of territorial jurisdiction would mean lack of competence to decide, due to the subject being placed outside the territorial jurisdiction of the Court or the Tribunal. It is no one's case that judicially the Tribunal at Chennai didn't have jurisdiction to decide the subject; actually, it did have the jurisdiction to decide on the subject. The issue of restriction of territorial jurisdiction in this case is being agitated based on the implications of Section 60(1) of I & B Code and the exception carved out due to Section 60(2). Basically, the question in context of territorial jurisdiction which falls for consideration is because of exception provided by Section 60(2). That means both the Tribunals would have concurrent territorial jurisdiction but which one is to be involved for subsequent proceedings would be subject to the exception provided by Section 60(2), where the restriction of jurisdiction on account of the location of Registered office of the Corporate Debtor as provided under Section 60(1) of I & B Code, 2016, determining place of suing will stand overridden due to existence and pendency of an earlier CIRP proceeding. In other words it could be said that a bar of territorial jurisdiction provided under Section 60(1) is not absolute and is rather concurrent in nature, due to the provisions of Section 60(2). Hence, none of the authorities relied by the Appellant on the issue of territorial jurisdiction would apply, because this would be a case where both the Tribunals under law would be having concurrent territorial jurisdiction, which would be a question to be raised at the earliest possible opportunity, which was not done by the the Appellant. The issue of concurrent territorial jurisdiction has not been the bone of contentions in any of the authorities, cited by him.”

“47.

At the very outset, it is contended that the issue stands settled in view of BRS Ventures Investments Ltd. (supra). The primary contention hinges on section 60(2), IBC which reads thus:

60. Adjudicating authority for corporate persons –

****

(2)

Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor shall be filed before such National Company Law Tribunal.

****

48.

Thus, it is contended that section 60(2), IBC enables the adjudicating authority, being the NCLT, before which the application of the principal debtor is pending, to adjudicate the application of the corporate or personal guarantor as well.

49.

Learned senior counsel supporting the proposition of simultaneous proceedings would primarily argue that under the common law principles as well as under section 128 the Indian Contract Act, 1872, the liability of the surety or the guarantor is co-extensive with that of the principal debtor. Reliance is placed on Bank of Bihar Ltd. v. Damodar Prasad & Anr., State Bank of India v. Indexport Registered and Ors., Industrial Investment Bank v. Bishwanath Jhunjhunwala and State Bank of India v. V. Ramakrishnan.

XXX

77.

The reasoning against simultaneous proceedings, at first blush, would seem simple: one debt, one proceeding. However, this reasoning was considered and negatived by this Court in BRS Ventures (supra), which held as under:

28.

Sub-section (2) of Section 60 contemplates separate or simultaneous insolvency proceedings against the corporate debtor and guarantor. Therefore, sub-section (3) of Section 60 provides that if CIRP in respect of the corporate guarantor is pending before an adjudicating authority and if the CIRP against the corporate debtor is pending before another adjudicating authority, CIRP proceedings against the corporate guarantor must be transferred to the adjudicating authority before whom CIRP in respect of the corporate debtor is pending. Thus, consistent with the basic principles of the Contract Act that the liability of the principal borrower and surety is coextensive, the IBC permits separate or simultaneous proceedings to be initiated under Section 7 by a financial creditor against the corporate debtor and the corporate guarantor.

78.

Thus, the question, whether simultaneous proceedings against the corporate debtor and/or the guarantor(s) can be maintained or not, is no longer res integra. All the arguments that have been canvassed before us, including the interpretation of sub-section (8) of section 5 and sub-section (2) of section 60 of the IBC, as well as regulation 8 of the 2016 Regulations read with Schedule-I, Form C, have been considered by the coordinate bench in BRS Ventures Investments Ltd. (supra). 79. The appeals could be disposed of on this finding itself. However, there is something more that lies ahead. The aggrieved parties urge us to go beyond merely restating the law and applying it to the dispute at hand, asserting that this by itself would be inadequate. What they call upon us is to lay down further modalities and restrictions governing the process. We consider these submissions hereafter.”

“2.1 Loan Amount

In consideration of the terms and conditions stated in the Loan Documents, the Lender agrees to lend to the Borrower(s) and the Borrower(s) agree to borrow, the Loan amount mentioned in Schedule I hereunder. Further, upon the fulfillment by the Borrower(s) of all conditions precedent as required / provided by the Lender and only upon receipt of the request from the Borrower(s), the Lender may disburse the Loan to the Borrower(s). The Loan may be disbursed in full or in such tranches as mentioned in the request for disbursal of the Loan amount by the Borrower(s) or as deemed fit by the Lender or as may be mutually agreed upon by and between the Borrower(s) and the Lender and in the case of Loan being disbursed in tranches, then each request for disbursement shall have to comply with the above requirements and the amount to be disbursed should be clearly mentioned. The entire Loan shall be disbursed only upon the request of the Borrower(s), in such tranches as deemed fit by the Lender and to the satisfaction of the Lender after deductions (if any) shall be paid/disbursed to the Borrower(s) and/or the lender(s) of the Borrower(s), on and behalf of the Borrower(s). Subject to the provision of the Loan Documents, the Tenure of the Loan (or part thereof) shall be as mentioned in Schedule-I of this Agreement. The Obligor(s) shall be jointly and severally liable to pay the Borrower's Dues to the Lender.

2.2 Security

The Borrower(s) hereby undertake to forthwith provide/create, and/or shall cause the Obligor(s) to forthwith provide/create the Security and execute the Security Documents in favour of the Lender as set out below and/or in Schedule I hereunder read with the other corresponding schedule(s) hereto and/or any other Security to be created in the future, if the Lender so desires, to secure, to the satisfaction of the Lender, all the obligations of the Obligor(s) under the Loan Documents including the Borrower's Dues together with costs, charges, liquidated damages, expenses and all other moneys whatsoever, due and payable, or which may hereafter be payable by the Obligor(s) to the Lender under the Loan Documents. The Borrower(s) shall, and/or shall cause the Obligor(s) to, take/obtain a written no objection certificate ("NOC") from the Lender prior to, inter alia, any application(s), agreement(s), document(s) and/or contract(s) for/of/relating to, inter alia, sale, conveyance, transfer, lease, possession, sub-lease, rent, assignment, development, charge, third-party rights/interests, allotment and/or encumbrance of the Security (and/or any portion/unit thereof). Unless otherwise mentioned in this Agreement and/or unless the Lender otherwise agrees in writing, the Borrower(s) further undertake that it/they shall, and shall cause the Obligor(s) to, forthwith execute the Security Documents and create the first-ranking mortgage/charge/pledge/hypothecation (in a mode/manner acceptable to the Lender) over the Security exclusively in favour of the Lender before or at the time of entering into this Agreement. Any failure/delay in execution of the Security Documents and creation of mortgage/charge/pledge/hypothecation over the Security as aforesaid shall be considered as an Event of Default under the Loan Documents.”

“(iii)

The Borrower(s) confirm and undertake that the Pledged/Charged Shares, as more particularly described in the Schedule IV hereunder and which are to be/are pledged/charged in favour of the Lender, are the absolute property of the Pledgor(s) and that the same are and shall be free from all encumbrances and claims (except for any pledge/charge/claim of the Lender) at all times till all the obligations of the Obligor(s) under the Loan Documents have been complied with to the satisfaction of the Lender including payment/repayment of Borrower's Dues to the Lender by the Obligor(s) and all requisite consents, regulatory or otherwise, and procedural formalities for pledging the Pledged/Charged Shares are obtained and complied with.”

2.2.4 Hypothecation

The Borrower(s) shall cause the Hypothecator(s) and the Hypothecator(s) shall agree, to the satisfaction of the Lender, to hypothecate, encumber, charge, pledge and/or assign (by way of Security) the Hypothecated Asset(s) exclusively in favour of the Lender. The Borrower(s) shall cause the Hypothecator(s) to promptly. submit with the Lender (if so requested by the Lender) all the original documents of the Hypothecated Asset(s) duly endorsing the lien/hypothecation in favour of the Lender. The Obligor(s) shall forthwith deposit or shall cause to be deposited the Receivables directly in an escrow account(s) (and to no other account) as may be stipulated/agreed by the Lender and shall forthwith execute escrow agreement(s) in a form satisfactory to the Lender with respect to deposit of the Receivables into the escrow account(s) and transfer of amounts into the Lender's specified bank account(s) on the Due Date(s). The Receivables shall be utilized/transferred in a manner as approved/instructed by the Lender in writing from time to time. It is hereby clarified that in case of shortfall in the escrow account(s), payment default(s) by the Obligor(s) and/or occurrence of an Event of Default, the Obligor(s) is/shall be under an obligation to pay from any source so as to pay the amount(s) payable in accordance with the Loan Documents to the Lender. The Obligor(s) undertake to forthwith issue irrevocable instructions (in a format acceptable to the Lender) to all the concerned persons for deposit of the Receivables only in the escrow account(s) and obtain confirmations in this regard (and forthwith provide a copy thereof to the Lender) from all such person(s). The Obligor(s) shall not give any instruction(s) to the escrow agent(s) and the escrow agent(s) shall not in any circumstance act on any instruction(s) of the Obligor(s). The Borrower(s) undertake to, and the Borrower(s) shall cause the other Obligor(s) to, irrevocably appoint the Lender as its attorney by execution of a Power of Attorney for collection of Receivables (in the form and substance satisfactory to the Lender) in favour of the Lender for, inter alia, collection of the Receivables from all the concerned persons. The Borrower(s) further agree that such power(s) would be power(s) coupled with interest and therefore irrevocable.”

3. REPAYMENT

3.1 Repayment of Loan

3.1.1

The Borrower(s) shall repay the entire Loan to the Lender in such manner as agreed by the Lender and as per the payment/ repayment schedule ("Payment/ Repayment Schedule") provided in Schedule I hereunder or as per any revised Payment/Repayment Schedule specified by the Lender from time to time.

3.1.2

The Borrower(s) may repay/pay the installments and other monies in respect of the Loan through any one of the following modes post-dated cheques ("PDC method") / the Electronic Clearing System (Debit Clearing) as notified by the ("RBI ECS method")/ by directly paying amounts when due to the Lender ("Direct Payment method") / by any other method, and as has been agreed upon between the Borrower(s) and the Lender. The Lender may, in its sole discretion, require the Borrower(s) to adopt or switch to any alternative mode of payment and the Borrower(s) shall comply with such request, without any demur or delay. Notwithstanding anything to the contrary, all payment/amounts shall be deemed to have been received by the Lender under the Loan Documents only when such payments/amounts are actually credited in the Lender's bank account. If the Borrower(s) cancel or revoke (or attempt to cancel or revoke) such mandates without the prior consent of the Lender, such acts of the Borrower(s) shall be entitled to initiate appropriate criminal proceedings against the Borrower(s) without prejudice to the Lender's other rights under the provisions of the Negotiable Instruments Act, 1881. The Borrower(s) shall pay cheque dishonor charges and miscellaneous payment charges to the Lender as specified by the Lender for the first and subsequent representations. Submission of post-dated cheques by the Borrower(s) to the Lender shall be deemed to be an unconditional and irrevocable authority given by the Borrower(s) to the Lender to present them for payment on or after the dates indicated on such cheques. The Borrower(s) shall ensure that each of such cheques is honoured on first presentation.”

“73.

In cases where the application was rejected, reliance was chiefly placed on Vishnu Kumar Agarwal (supra). The relevant portion from such decision reads thus:

32.

There is no bar in the 'I&B Code' for filing simultaneously two applications under Section 7 against the 'Principal Borrower' as well as the 'Corporate Guarantor(s)' or against both the 'Guarantors'. However, once for same set of claim application under Section 7 filed by the 'Financial Creditor' is admitted against one of the 'Corporate Debtor' ('Principal Borrower' or 'Corporate Guarantor(s)'), second application by the same 'Financial Creditor' for same set of claim and default cannot be admitted against the other 'Corporate Debtor' (the 'Corporate Guarantor(s)' or the 'Principal Borrower'). Further, though there is a provision to file joint application under Section 7 by the 'Financial Creditors', no application can be filed by the 'Financial Creditor' against two or more 'Corporate Debtors' on the ground of joint liability ('Principal Borrower' and one 'Corporate Guarantor', or 'Principal Borrower' or two 'Corporate Guarantors' or one 'Corporate Guarantor' and other 'Corporate Guarantor'), till it is shown that the 'Corporate Debtors' combinedly are joint venture company.

74.

It was, thus, held that once an application stood admitted, either against the principal borrower or the guarantor, no further application could be maintained against the guarantor or co-guarantor or principal borrower. Following this, the impugned orders too, were passed by the respective tribunals, rejecting the initiation of CIRP.

75.

An appeal was carried to this Court from Vishnu Kumar Agarwal (supra); however, the parties having reached a settlement, the appeal47 stood disposed of without expression of any opinion on the merits thereof.

76.

Conversely, the impugned order(s) allowing CIRP to be initiated simultaneously placed reliance on a judgment of the NCLAT in Athena Energy Ventures (supra). NCLAT in Athena Energy Ventures (supra) preferred not to follow Vishnu Kumar Agarwal (supra) for the reason as under:

19.

It is clear that in the matter of guarantee, CIRP can proceed against Principal Borrower as well as Guarantor. The law as laid down by the Hon'ble High Courts for the respective jurisdictions, and law as laid down by the Hon'ble Supreme Court for the whole country is binding. In the matter of Piramal, the Bench of this Appellate Tribunal "interpreted" the law. Ordinarily, we would respect and adopt the interpretation but for the reasons discussed above, we are unable to interpret the law in the manner it was interpreted in the matter of Piramal. For such reasons, we are unable to uphold the Judgement as passed by the Adjudicating Authority.

77.

The reasoning against simultaneous proceedings, at first blush, would seem simple: one debt, one proceeding. However, this reasoning was considered and negatived by this Court in BRS Ventures (supra), which held as under:

28.

Sub-section (2) of Section 60 contemplates separate or simultaneous insolvency proceedings against the corporate debtor and guarantor. Therefore, sub-section (3) of Section 60 provides that if CIRP in respect of the corporate guarantor is pending before an adjudicating authority and if the CIRP against the corporate debtor is pending before another adjudicating authority, CIRP proceedings against the corporate guarantor must be transferred to the adjudicating authority before whom CIRP in respect of the corporate debtor is pending. Thus, consistent with the basic principles of the Contract Act that the liability of the principal borrower and surety is coextensive, the IBC permits separate or simultaneous proceedings to be initiated under Section 7 by a financial creditor against the corporate debtor and the corporate guarantor.

78.

Thus, the question, whether simultaneous proceedings against the corporate debtor and/or the guarantor(s) can be maintained or not, is no longer res integra. All the arguments that have been canvassed before us, including the interpretation of sub-section (8) of section 5 and sub-section (2) of section 60 of the IBC, as well as regulation 8 of the 2016 Regulations read with Schedule-I, Form C, have been considered by the coordinate bench in BRS Ventures Investments Ltd. (supra).

79.

The appeals could be disposed of on this finding itself. However, there is something more that lies ahead. The aggrieved parties urge us to go beyond merely restating the law and applying it to the dispute at hand, asserting that this by itself would be inadequate. What they call upon us is to lay down further modalities and restrictions governing the process. We consider these submissions hereafter.”

“31.

In law, the status of the guarantor, who is a corporate person, metamorphoses into corporate debtor, the moment principal borrower (regardless of not being a corporate person) commits default in payment of debt which had become due and payable. Thus, action under Section 7 IBC could be legitimately invoked even against a (corporate) guarantor being a corporate debtor. The definition of "corporate guarantor" in Section 5(5-A) IBC needs to be so understood.

32.

A priori, we find no substance in the argument advanced before us that since the loan was offered to a proprietary firm (not a corporate person), action under Section 7 IBC cannot be initiated against the corporate person even though it had offered guarantee in respect of that transaction. Whereas, upon default committed by the principal borrower, the liability of the company (corporate person), being the guarantor, instantly triggers the right of the financial creditor to proceed against the corporate person (being a corporate debtor). Hence, the first question stands answered against the appellant.

23.

Apparently, the financial facilities availed by the CD before us viz. Bliss House Private Limited and Bliss Abode Private Limited qua which CP (IB)-474/ND/2025 was filed could be availed by following the same process. Thus, the issue involved in the present petition is exactly identical to the one involved in CP (IB)- 474/ND/2025. The said petition could be admitted in terms of the order dated 15.12.2025, relevant excerpt of the order reads thus:-

"14.

As far as the plea regarding the financial facility is concerned, even the CD has not disputed the same. The only plea raised by CD is that for first sixty months it was liable to pay the interest only and it was only after expiry of such period, the liability to repay the principal amount could arise. However, it is not the case of the CD that even after expiry of sixty months, it offered any schedule to repay the amount of debt. Apparently, the CD failed to repay the outstanding amount of debt in terms of the Recall Notice, on 14.03.2020 as also in terms of the Demand Notice, on 18.09.2020. Besides, the default continued during the pendency of Arbitral Proceedings from 29.06.2020 till 28.02.2023. It is not so that the liability of the CD to pay the amount of debt occurred only after the Award dated 28.02.2023. The CD had admittedly availed the financial facility from the FC and had not honoured the Recall Notice. The Recall Notice was issued on 09.03.2020 by the Petitioner, recalling the entire loan facility. The CD failed to make the payment in terms of the Recall Notice and the outstanding amount remained over due for a period of more than 90 days. Thus, the account of the CD could be declared as NPA on 09.06.2020. In the Recall Notice dated 09.03.2020 (Annexure P-11), the FC could specifically allege that the default had already occurred. The schedule to the Recall Notice contains the details of the outstanding amount of debt. It is the case of the CD itself that for a period of sixty months it was liable to pay only interest and not the principal amount. Thus, apparently it did not repay the principal amount and committed default. 15. The liability to pay the amount of debt and default committed by the CD is not founded on the Arbitral Award along, but is with reference to Loan Agreement and liability to repay the amount of debt, defaulted to be paid. The schedule 1 to Recall Notice reads thus:-

16.

As far as the Arbitral Award dated 28.02.2023 is concerned, in view of the judgment of the Hon'ble Supreme Court in Dena Bank vs. C. Shivakumar Reddy and Anr. (Civil Appeal No. 1659 of 2020 the same can be relied upon to deal with the issue of limitation. In the said judgment, the Hon'ble Supreme Court ruled that a decree and/or final adjudication would give rise to a fresh period of limitation. Paras 25, 130 and 131 reads thus:-

"25.

Another question which arises for the consideration of this Court is, whether a final judgment and decree of the DRT in favour of the Financial Creditor, or the issuance of a Certificate of Recovery in favour of the Financial Creditor, would give rise to a fresh cause of action to the Financial Creditor to initiate proceedings under Section 7 of the IBC within three years from the date of the final judgment and decree, and/or within three years from the date of issuance of the Certificate of Recovery. XXX

130.

In effect, this Court speaking through Nariman J., approved the proposition that an application under Section 7 or 9 of the IBC may be time barred, even though some other recovery proceedings might have been instituted earlier, well within the period of limitation, in respect of the same debt. However, it would have been a different matter, if the applicant had approached the Adjudicating Authority after obtaining a final order and/or decree in the recovery proceedings, if the decree remained unsatisfied. This Court held that a decree and/or final adjudication would give rise to a fresh period of limitation for initiation of the Corporate Insolvency Resolution Process.

131.

It is true that the finding of Patna High Court in Ferro Alloys Corporation Limited v. Rajhans Steel Limited (supra) was rendered in the context of Section 434(1)(b) of the Companies Act 1956, which provided that a company would be deemed to be unable to pay its debts if execution or other process issued on a decree or order of any Court or Tribunal in favour of a creditor of the company was returned unsatisfied in whole or in part."

17.

Apparently, the present petition has been filed within three years of the Arbitral Award. The said judgment of the Hon'ble Supreme Court Dena Bank vs. C. Shivakumar Reddy and Anr. (Civil Appeal No. 1659 of 2020) also provides that in terms of the provisions of Section 238 of IBC, 2016, the present proceedings would continue notwithstanding anything in consistent thereto. Para 84 of the judgment reads thus:-

"84.

IBC has overriding effect over other laws. Section 238 of the IBC provides that the provisions of the IBC shall have effect, notwithstanding anything inconsistent therewith contained in any other law, for the time being in force, or any other instrument, having effect by virtue of such law."

18.

Apparently, even after the Arbitral Award, the CD has not made the payment of amount of debt. Filling of appeal by it to challenge the Award is in a way admission of default. In terms of the provisions of Section 7(3) of IBC, 2016, the FC should along with the application furnish record of the default recorded with IU (Information Utility) and should provide the name of RP. The application satisfies both the requirements. The name of the proposed IP has been given in Part-III of the application. The Part-III reads thus:-

19.

The Form 2 furnished by the IP has been placed on record as enclosure to the application. In the said Form, the IP has declared that no disciplinary proceedings are pending against him. Thus, the requirements of Section 7 (3) and (5) (a) of IBC, 2016 are satisfied. In the wake, we are left with no option but to admit the present petition and initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Ordered accordingly."

24.

Additionally, during the course of hearing the Ld. Counsel for the CD could also espouse that the default could be constituted in terms of clause 12.1 and 12.2 of the Loan Agreement. As can be seen from clause 12.1.8 of the Agreement, any event or circumstances which the lender could believe as an event of material adverse or prejudicial effect in any manner on the ability of the obligor(s) to perform or comply with its / their obligation under the Loan Agreement could constitute event of default. The Clause 12.2 indicates that the failure of repayment of amount of debt on the same being recalled could also constitute default. The Clause 12.1 and 12.2 of the Agreement reads thus:-

25.

It was the matter of satisfaction of the creditor to form an opinion regarding occurrence of the circumstances mentioned in Clause 12.1 of the Loan Agreement for the purpose of issuance of Recall Notice. As has been analysed in aforementioned order dated 15.12.2025, the Arbitral Award had the ramification of extension of the period of the limitation. The issue raised by the Respondents by way of their reply is covered by the judgment of the Hon'ble Supreme Court in Dena Bank vs. C. Shivakumar Reddy and Anr. (Civil Appeal No. 1659 of 2020). We are bound by the view taken by the Hon'ble Supreme Court in the said judgment referred to in para 17 of aforementioned order dated 15.12.2025.

26.

In the totality of the facts and circumstances, we are of the view that the present petition deserved to be admitted. Ordered Accordingly. Sapan Mohan Garg, IP whose name is proposed by the Applicant is appointed as IRP and e-mail [email protected].

27.

In light of the above facts and circumstances, it is, hereby ordered thus:-

i.

As a consequence of the Application C.P. (IB) 585/ND/ 2025 being admitted in terms of Section 7 of the Code, moratorium as envisaged under the provisions of Section 14(1) of the Code, shall follow in relation to the Respondent/(CD) as per clauses (a) to (d) of Section 14(1) of the Code. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(3) of the Code shall come into force.

ii.

In pursuance of Section 13 (2) of the Code, we direct the IRP or the RP, as the case may be to make a public announcement immediately with regard to the admission of this application under Section 7 of the Code. The expression immediately' means within three days as clarified by Explanation to Regulation 6 (1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

iii.

During the CIRP period, the management of the Respondent/CD shall vest in the IRP or the RP, as the case may be, in terms of Section 17 of the IBC. The officers and managers of the Respondent/CD shall provide all documents in their possession and furnish every information in their knowledge to the IRP within one week from the date of receipt of this Order, in default of which coercive steps will follow. There shall be no future opportunities in this regard.

iv.

The IRP is expected to take full charge of the Respondent/CD's assets and documents without any delay whatsoever. He is also free to take police assistance in this regard, and this Court hereby directs the Police Authorities to render all assistance as may be required by the IRP in this regard.

v.

The IRP or the RP, as the case may be shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIRP in respect of the Respondent/Corporate Debtor.

vi.

The Applicant is directed to deposit Rs.2,00,000/- (Two Lakh only) with the IRP to meet the immediate expenses. The amount, however, will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Applicant.

vii.

In terms of Section 7(7) of the Code, the Registry/Court Officer is hereby directed to communicate a copy of the order to the Applicant/FC, the Respondent/CD, the IRP and the Registrar of Companies, NCR, New Delhi, by Speed Post and by email, at the earliest but not later than seven days from today. The Registrar of Companies shall update his website by updating the status of the Respondent/CD and specific mention regarding admission of this petition must be notified.

viii.

The Registry/Court Officer is further directed to send a copy of this order to the Insolvency and Bankruptcy Board of India for their record.”

“Section 238: Provisions of this Code to override other laws.

238.

The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”

"25.

Another question which arises for the consideration of this Court is, whether a final judgment and decree of the DRT in favour of the Financial Creditor, or the issuance of a Certificate of Recovery in favour of the Financial Creditor, would give rise to a fresh cause of action to the Financial Creditor to initiate proceedings under Section 7 of the IBC within three years from the date of the final judgment and decree, and/or within three years from the date of issuance of the Certificate of Recovery. XXXX

130.

In effect, this Court speaking through Nariman J., approved the proposition that an application under Section 7 or 9 of the IBC may be time barred, even though some other recovery proceedings might have been instituted earlier, well within the period of limitation, in respect of the same debt. However, it would have been a different matter, if the applicant had approached the Adjudicating Authority after obtaining a final order and/or decree in the recovery proceedings, if the decree remained unsatisfied. This Court held that a decree and/or final adjudication would give rise to a fresh period of limitation for initiation of the Corporate Insolvency Resolution Process.

131.

It is true that the finding of Patna High Court in Ferro Alloys Corporation Limited v. Rajhans Steel Limited (supra) was rendered in the context of Section 434(1)(b) of the Companies Act 1956, which provided that a company would be deemed to be unable to pay its debts if execution or other process issued on a decree or order of any Court or Tribunal in favour of a creditor of the company was returned unsatisfied in whole or in part."

"84.

IBC has overriding effect over other laws. Section 238 of the IBC provides that the provisions of the IBC shall have effect, notwithstanding anything inconsistent therewith contained in any other law, for the time being in force, or any other instrument, having effect by virtue of such law."

“70.

A perusal of the judgment of this Court in Dena Bank would reveal that this Court considered all the relevant provisions of the IBC and the earlier judgments of this Court. As already discussed hereinabove, we do not find any inconsistency in the judgment of this Court in Dena Bank with the earlier judgments of this Court on which reliance is placed by Shri Viswanathan. We find that the contention that the judgment of this Court in Dena Bank being per incuriam to the statutory provisions and earlier judgments of this Court, is wholly unsustainable.

71.

We have already hereinabove, done the exercise of considering the relevant provisions of the IBC afresh and come to a conclusion that a liability in respect of a claim arising out of a recovery certificate would be a "financial debt" within the meaning of clause (8) of Section 5 IBC and a holder of the recovery certificate would be a "financial creditor" within the meaning of clause (7) of Section 5 IBC. We have also held that a person would be entitled to initiate CIRP within a period of three years from the date on which the recovery certificate is issued. We are of the considered view that the view taken by the two-Judge Bench of this Court in Dena Bank is correct in law and we affirm the same.”

“(a)

The institution of suits or continuation of pending suits or proceedings against the Respondent including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b)

Transferring, encumbering, alienating or disposing of by the Respondent any of its assets or any legal right or beneficial interest therein;

(c)

Any action to foreclose, recover or enforce any security interest created by the Respondent in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(d)

The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Respondent.”

“Shall take charge of the CIRP of the Corporate Debtors with immediate effect and would take steps as mandated under the IBC specifically under Section 15, 17, 18, 20 and 21 of IBC, 2016 read with extend provisions of IBBI (Insolvency Resolution of Corporate Persons) Regulations, 2016.”