JM Financial Credit Solutions Limited vs R.M. Bhuther And Company Limited

This is an application filed by the Applicant- JM Financial Credit Solutions Limited (hereinafter also referred to as “Financial Creditor” or “the Petitioner”), on 19.02.2025 against the Respondent- R.M. Bhuther and Company Limited (hereinafter also referred to as “Corporate Debtor”), under Section 7 of the Insolvency & Bankruptcy Code 2016 (in short, ‘the Code’) r/w Rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, seeking commencement of the Corporate Insolvency Resolution Process (‘CIRP’) of the Corporate Debtor, appointment of Interim Resolution Professional (‘IRP) and declaration of moratorium.

The amount claimed to be in default is INR 332,80,53,230/- (Rupees Three Hundred and Thirty-Two Crores, Eighty Lakhs, Fifty-Three Thousand, Two Hundred and Thirty Only). The date of default is stated to be 17^th August, 2023.

On perusal of Part-I of Form 1, it is seen that the present application is signed by one Ms. Reshma Davane in her capacity as Associate - Loan Risk and Controls. Further, an affidavit in support of the application is affirmed by the above-named signatory, who is authorised by the resolution passed by the Board of Directors of the Applicant Company at its meeting held on October 27, 2023.

A perusal of Part II of the application in Form 1 reveals that the Respondent/Corporate Debtor i.e. RM Bhuther and Company Limited, is a body corporate having its registered office at 104, Bajaj Bhawan, Nariman Point, Mumbai, Maharashtra 400021. The date of incorporation of the Corporate Debtor is 04^th June, 2001. The Authorised Share Capital and the Paid-Up Share Capital of the Corporate Debtor, both, are INR 1,00,00,000/- (Rupees One Crore Only).

On perusal of Part-III of Form 1, it appears that the Applicant has proposed the name of Mr. Gajesh L. Jain to be appointed as the IRP of the Corporate Debtor in the event that the petition gets admitted. The Applicant has also obtained the Written Consent in Form 2 from the proposed IRP above-named, the Certificate of Registration and the Authorisation for Assignment (‘AFA’), the copies of which have been collectively annexed to this application as Annexure-F (Colly). Perusal of AFA shows that the authorisation is valid from 23.08.2024 to 31.12.2025.

A perusal of Part IV of the application vide Form 1 reveals that the amount claimed to be in default is INR 332,80,53,230/- and the date of default is stated to be 17^th August, 2023.

The facts as pleaded by the Applicant in the Application are stated hereinbelow:

a. Deed of Corporate Guarantee dated 16^th December, 2017 for Facility No.01;

b. Deed of Corporate Guarantee dated 21^st September, 2018 for Facility No.02;

c. Deed of Corporate Guarantee dated 09^th December, 2019 for Facility No.03;

d. Deed of Corporate Guarantee dated 02^nd June, 2021 for Facility No.04;

e. Deed of Corporate Guarantee dated 27^th December, 2021 for Facility No.05;

f. Deed of Corporate Guarantee dated 17^th September, 2022 for Facility No.06.

a. Failure in paying instalments in accordance with the Repayment Schedules of Loan Agreements for Facility No. 1 to Facility No. 3 due from January 2023 to March 2023.

b. Failure in paying instalments towards Facility No. 4 due from June 2023 to November 2023.

c. Failure in paying instalments towards Facility No. 6 due from September 2024 onwards.

d. Failure to pay Interest for all the Facilities on the Interest Payment Date as per the respective Loan Agreements since January 2023.

e. Failure to pay Default Interest for all the Facilities levied as per the terms of the Loan Agreements, upon the occurrence of an Event of Default.

f. Failure to deposit adequate amounts of TDS for Financial Years 2019- 2020, 2020-2021 and 2022-2023.

a. Loan accounts of the Borrower were classified as a Non-Performing Asset (‘NPA’) on 01^st May, 2023.

b. Demand Notice dated 24^th May, 2023 u/s 13(2) of the SARFAESI Act, 2002 recalling the entire outstanding amount which on the said date was INR 231,63,05,803/- under all the Loan Agreements, was issued to the Borrower and the Corporate Debtor.

c. the Financial Creditor attempted to take peaceful possession of the properties mortgaged in its favour by the Borrower but faced resistance and thus, it could not take possession of the same.

d. the Financial Creditor (through its Advocates) issued an Event of Default Notice dated 29^th September, 2023 to the Borrower and Corporate Debtor inter alia setting out in detail all the defaults committed by the Borrower and the Corporate Debtor and calling upon them to pay the total outstanding amount under the Facility Documents, i.e., INR 2,48,97,64,270/- being the outstanding amount as of 28^th September, 2023.

e. The Financial Creditor filed an Application under Section 14 of the SARFAESI Act, 2002 in relation to properties mortgaged in its favour by inter alia the Borrower.

As stated in Part V of the Application, the Financial Creditor has relied upon the following documents which are attached to this application in order to prove the existence of Financial debt and the amount in default:

Loan Agreement dated 14 August 2018.

Deed of corporate guarantee dated 21 September 2018 by the Corporate Debtor.

Letters dated 1 September 2020, 5 September 2020 and 1 December 2020 issued by the Financial Creditor to the Borrower for the extension of time for the repayment period of this Facility.

Loan Agreement dated 28 November 2019.

Deed of corporate guarantee dated 9 December 2019 by the Corporate Debtor.

Letters dated 1 September 2020, 5 September 2020 and 1 December 2020 issued by the Financial Creditor to the Bonower for the extension of time for the repayment period of this Facility.

Loan Agreement dated 29 May 2021.

Deed of corporate guarantee dated 2 June 2021 by the Corporate Debtor.

Loan Agreement dated 27 December 2021.

Deed of corporate guarantee dated 27 December 2021 by the Corporate Debtor.

Loan Agreement dated 29 August 2022.

Deed of corporate guarantee dated 17 September 2022 by the Corporate Debtor.

In response to the order dated 02.07.2025 Applicant has filed an Additional Affidavit, which is dated 04.07.2025, annexing therewith an authenticated copy of the Ledger Account of the Borrower as maintained by the Financial Creditor, running from the Page Nos. 3 to 23.

Reply Affidavit dated 23^rd April, 2025 was filed and affirmed by one Mr. Harishkumar Bhattad, the Director who is an authorised signatory of the Corporate Debtor. The contents of the aforesaid Affidavit are briefly stated below:

The Petitioner has failed to annex crucial documents such as the Loan Agreements dated 16.12.2017 and 27.12.2021. Since two Loan Agreements have not been annexed, the Petitioner has failed to establish the debt and the default as well. Accordingly, the Petition is liable to be dismissed in limine.

The Petition is barred by Res Judicata as the Petitioner had filed a Company Petition No. 86 of 2024 dated 25.01.2024 on the same cause of action, which came to be dismissed by this Tribunal vide Order dated 30.07.2024. Therefore, the Petitioner cannot now file another Company Petition which is directly and substantially similar to the earlier Company Petition which has been already disposed off by this Tribunal.

The Petitioner has suppressed that Company Petition No. 781 of 2021 filed by it against the Respondent. The Petitioner has also suppressed an Order dated 21.01.2022 passed by this Tribunal which recorded that the entire due amount as claimed in the aforesaid petition had been paid by the Respondent. Vide the said Order, the aforementioned Company Petition was dismissed as withdrawn on account of the settlement arrived between the parties.

If Petitioner continues to assert its claim as set out in the present Company Petition ignoring the suppressed Order dated 21.01.2022 in CP No. 781 of 2021, then the limitation to file the present petition would commence on May 2018 and therefore, the present petition is barred by limitation. This is further evidenced by the fact that the default interest was charged from May, 2018 itself goes to show as per their own case, the alleged default occurred in 2018. The Petitioner sanctioned further loan facilities only to cure the alleged default which occurred in the year 2018 and now cannot take advantage of its own wrong.

Even though the Petitioner invoked the guarantee against the Respondent in March 2021, it continued to disburse further loans to the Principal Borrower at the same time.

Whilst the negotiations were pending with the prospective developers to develop Phase II of the Development Project, the Petitioner sought to invoke the Deeds of Corporate Guarantee through Demand Notices dated 10^th August, 2023. On 06^th November 2023, the Respondent replied to the Petitioner’s Demand Notices invoking the Deeds of Corporate Guarantee, pointing out that the Petitioner only invoked the Deeds of Corporate Guarantee with the intent of pressurising and arm-twisting the Principal Borrower to close negotiations with a developer of its choice and on terms that were commercially unviable to the Principal Borrower.

The Respondent states and submits that as per the Development Control and Promotion Regulations, 2034 (‘DCPR’), the stakeholders in Phase II of the Project including the Petitioner are aware that the total turnover of Phase II is INR 5,000 crores and the revenue expected to be generated is INR 3,000 crores. In these circumstances, it is stated the Project is extremely lucrative and the claims of the Petitioner are miniscule in comparison to the entire revenue potential of Phase II. The value of Phase II of the Project has increased substantially since the DCPR has been implemented. However, the Petitioner is hand in gloves with certain developers and is not permitting the Phase II of the Project to proceed and to allow the repayment of alleged dues. The Petitioner has thus chosen to file the present Company Petition with a fraudulent and malicious intent and for a purpose other than insolvency resolution of the Corporate Debtor, which is evident from the facts narrated herein.

The Respondent submits that in the earlier Section 7 petition, it was the case of the Petitioner that the purported default committed in repayment of interest and/or default interest is within the period of 25.03.2020 to 25.03.2021. Thus, the present petition is also barred by Section 10A of the Code if the correct date of purported default in the earlier company petition is considered.

Rejoinder: The Applicant-Financial Creditor has filed its rejoinder on affidavit sworn by Mr. Nilesh Singh on 06^th June, 2025. The contents of the said rejoinder are recapitulated hereinbelow:

We have heard the Learned Counsel for the Petitioner and the Learned Counsel for the Corporate Debtor. We have perused the pleadings of the parties as well as the documents and material available on record.

Perusal of records indicate that HEM Bhattad AOP (“the Principal Borrower”) is an association of persons which was formed in order to develop certain parcels of land situated at Sewri, Mumbai. The Principal Borrower thereafter decided to develop the aforesaid parcels of land in phases. The Principal Borrower constructed the first phase of the project known as “Celestia Spaces”. In view of the successful development of Phase I, the Principal Borrower approached Mr. Vishal Kampani, the Managing Director of the Petitioner, sometime in 2017, with an intent to finance and jointly develop the balance portions of land in Phase II of the Development Project. After discussions between the Principal Borrower and the Petitioner, it was agreed that they would jointly develop the balance portions of land with the Petitioner funding the Principal Borrower and the proposed developer will be introduced by the Petitioner.

Accordingly, the Financial Creditor had entered into six Loan Agreements and sanctioned six Loan Facilities aggregating to INR 288.20 crores to the Principal Borrower (i.e. M/s. HEM Bhattad, an Association of Persons (‘AOP’) acting through its members which includes the Corporate Debtor). Out of the total sanctioned amount, a sum of INR 288,16,11,075/- was disbursed by the Financial Creditor to the Borrower. The details of the sanctioned loan facilities are as under:

Further, in terms of the respective Loan Agreements, the Loan Facilities together with all the outstanding thereunder were required to be secured, inter-alia, by an unconditional and irrevocable corporate guarantee. Accordingly, the Corporate Debtor executed the following guarantees in favour of the Financial Creditor for securing the respective facilities:

a. Deed of Corporate Guarantee dated 16^th December, 2017 for Facility No.01;

b. Deed of Corporate Guarantee dated 21^st September, 2018 for Facility No.02;

c. Deed of Corporate Guarantee dated 09^th December, 2019 for Facility No.03;

d. Deed of Corporate Guarantee dated 02^nd June, 2021 for Facility No.04;

e. Deed of Corporate Guarantee dated 27^th December, 2021 for Facility No.05; and

f. Deed of Corporate Guarantee dated 17^th September, 2022 for Facility No.06.

As discussed in the facts narrated in Para 7(iv) of this Order, the Principal Borrower committed defaults in repayment of instalments and interest due in respect of various loan facilities due to which the loan accounts of the Principal Borrower were classified as a Non-Performing Asset on 01.05.2023. Thereafter, the Financial Creditor issued a Demand Notice dated 24.05.2023, u/s 13(2) of the SARFAESI Act, 2002 recalling the entire outstanding loan as on the said date amounting to INR 231,63,05,803/-under all the Loan Agreements. However, since the default by the Principal Borrower persisted, the Financial Creditor was constrained to invoke the Corporate Guarantees furnished by the Corporate Debtor.

Accordingly, in terms of the Loan Agreements and the Corporate Guarantees, by an email dated 10.08.2023, the Financial Creditor issued a Letter dated 10^th August, 2023 to the Corporate Debtor enclosing six notices of demand dated 10.08.2023 with respect to each respective facility, calling upon the Corporate Debtor to forthwith and in any event not later than seven days, make payment of unpaid outstanding amounts under the Loan Agreements aggregating to INR 242,82,00,969/- accrued as on the date preceding the date of the said notice, in accordance with the terms of the Guarantees executed by the Corporate Debtor. The break-up of INR 242,82,00,969/-was given by the Applicant in the aforesaid letter, the details of which are given in the table below:

On 06^th November, 2023, the Corporate Debtor had replied to the Letter dated 10.08.2023 along with the Notices of Demand enclosed therewith. In the said reply, the Corporate Debtor denied its liability and inter-alia, stated that the invocation of guarantee was motivated by mala fides for the reasons stated therein.

In view of the foregoing facts, we are of the considered view that in the instant case, the execution and invocation of the six corporate guarantees, which are referred to in the table hereinabove, are not in dispute. Further, the Respondent/Corporate Debtor has not produced any evidence to show that the guarantees were discharged or that the debt was paid in full. Thus, the existence of debt and default stand proven on record.

The Hon’ble National Company Law Appellate Tribunal, New Delhi (‘NCLAT’) in the case of Pooja Ramesh Singh v. State Bank of India (vide Judgment dated 28.04.2023 in Company Appeal (AT) (Insolvency) No.329 of 2023) has, inter-alia, held as follows:

1. In the instant case, we refer to Clause 3 of the Deed of Corporate Guarantee, copies of which are annexed to the application at Annexure ‘J’, which states as follows:

Thus, we find that all the six Corporate Guarantees referred to in the table above are the demand guarantees and as those guarantees were invoked on 10.08.2023, the amounts due therein became payable on 17.08.2023 i.e. within seven days of invocation. Since the aforesaid guarantees were not honoured by the Respondent, in our considered view, the Applicant has rightly taken 17.08.2023 as the date of default. Also, since the present application has been filed on 19.02.2025, which is within three years from the aforesaid date of default, the present application is held to be filed within limitation period, as prescribed under Article 137 of the Schedule to the Limitation Act, 1963.

Learned Counsel for the Respondent contends that the present application is barred by the principle of res judicata, on the ground that the corporate guarantee had been invoked in 2021 and a petition filed pursuant thereto had been settled. In response, the Applicant, in its rejoinder, has clarified that Company Petition No. 781 of 2021 (“2021 Petition”) was filed against the Respondent only in respect of outstanding interest under the Loan Agreements and Guarantees for Facility Nos. 01 to 03 for the period March 2021 to May 2021, together with default interest up to May 2021 and TDS amounts deducted by the Corporate Debtor from September 2020 to January 2021. The Applicant further states that the Notice of Demand forming the basis of the 2021 Petition was issued on 21.03.2021, with the date of first default mentioned therein as 31.03.2021; whereas, in the present matter, the Notice of Demand was issued on 10.08.2023, with the date of default recorded as 17.08.2023. We note that these facts, as set out in the rejoinder affidavit, have not been controverted by the Respondent by way of sur-rejoinder. The records of the 2021 Petition also substantiate that the date of default therein was 31.03.2021. Further, it is evident from the record that vide Order dated 21.01.2022, CP(IB) No. 781(MB)/2021 was dismissed as withdrawn in view of an amicable settlement arrived between the parties. Subsequently, the Principal Borrower again committed defaults in repayment, as a result of which all six loan accounts were classified as NPAs by the Financial Creditor on 01.05.2023. The continued default led to invocation of all six Corporate Guarantees vide Notices of Demand dated 10.08.2023, which form the very foundation of the present application under Section 7 of the Code. Given that the cause of action in the present petition is distinct from that in the 2021 Petition, and in any event, since the earlier petition was not adjudicated on merits, we are of the considered view that the present application is maintainable and is not barred by the principle of res judicata. The plea of res judicata raised by the Respondent is, therefore, rejected.

It is further seen that the Applicant had filed yet another petition against the Corporate Debtor vide CP(IB) No. 86(MB)/2024 (‘2024 Petition’) before this Tribunal which was listed before Court No. IV. The aforesaid petition was dismissed vide Order dated 30.07.2024, the relevant extracts of which are reproduced hereinbelow:

In view of the aforesaid Order, we find that the petition was defective as the deeds of guarantees which were annexed to that petition were unsigned by the guarantors and those deeds did not enclose the name of the Corporate Debtor either. Therefore, the Ld. Counsel for the Petitioner therein sought to withdraw the said petition with liberty to file a fresh company petition after rectifying the defects as noted hereinabove. Here again, we see that there was no adjudication on merits of the case. Therefore, the plea of res judicata is again rejected. It has also been seen that with respect to the above petition, learned Counsel appearing on behalf of the Applicant sought to withdraw the said petition with liberty to file afresh after rectifying the defects and in view of the same, the withdrawal was allowed. It is apparent that there was neither any adjudication nor anything on record to suggest that by allowing the withdrawal, the Bench had intended to bring finality to the aforesaid petition and therefore, the Applicant is justified in making the fresh application based on complete documents. Moreover, the 2024 Petition was filed with respect to the outstanding as on 22.01.2024 amounting to INR 266.25 crores approximately and whereas the present petition has been filed with respect to the outstanding amount of INR 332.80 crores as on 17.02.2025 and as a result, the Principal Borrower has committed further default with respect to not only the principal amount in respect of Loan Facility No. 06 and continuing default in respect of all other loan facilities but also in respect of the interest accrued on all facilities between 22.01.2024 and 17.02.2025, for which the guarantor is also liable as per the deeds of guarantee executed, and even if we consider the said amount of interest and default with respect of the same, the threshold of rupees one crore is easily crossed. As such, the plea of the Respondent qua the maintainability of this petition is not sustainable.

The plea in regard to the default committed by the Corporate Debtor during the period covered by Section 10A of the Code is also not sustainable as even after excluding the said amount, the debt and the default is much higher than the threshold of Rs. 1 crore as prescribed u/s 4 of the Code.

The Respondent has opposed the application contending that, since default interest was levied from May 2018, the period of limitation ought to be reckoned from that date. This contention is misconceived. As already held hereinabove, the limitation period in the present case shall run from 17.08.2023, and cannot be retrospectively advanced to May 2018 merely on account of the levy of default interest from that month. Even if the computation from May 2018 is excluded, the principal amount of the loan facilities, in respect of which the corporate guarantees have been invoked, far exceeds the statutory threshold of Rupees One Crore prescribed u/s 4 of the Code for initiation of CIRP against the Corporate Debtor. Consequently, this objection is untenable and cannot enure to the benefit of the Corporate Debtor. Further, it is trite to say that the Adjudicating Authority need not ascertain the exact amount of default as the same is the duty of the RP while verifying and collating the claims.

The issue raised by the Respondent that the petition is liable to be dismissed in limine as the Petitioner has failed to annex crucial documents such as the Loan Agreements dated 16.12.2017 and 27.12.2021, is not sustainable as the aforesaid Loan Agreements have been brought on record by the Applicant by way of the Affidavit-in-Rejoinder dated 06.06.2025.

During the course of oral arguments, Ld. Counsel for the Respondent has contended that the guarantee is exhausted once it is invoked and subsequent invocations cannot revive a guarantee which is already exhausted. Before we deal with the aforesaid contention, we wish to observe that the Respondent has not raised the aforesaid contention/objection in its reply. However, as the aforesaid contention is purely a submission on a point of law, in the interest of justice, we deem it appropriate to deal with it in our order.

In law, a “continuing guarantee” u/s 129 of the Indian Contract Act, 1872 remains in force until it is revoked or until the obligation is satisfied in full. The Hon’ble National Company Law Appellate Tribunal, New Delhi (‘NCLAT’) in IDBI Bank Ltd. v. ARM Infra & Utilities Pvt. Ltd. (2025 SCC OnLine NCLAT 1124) had framed issues, one of which was as follows: “Whether multiple invocations to continuing guarantees is permissible?”. In answering the above issue, Hon’ble NCLAT gave a detailed judgment, the relevant extracts of which are reproduced as under:

Clause 5 of the Deed of Corporate Guarantee is reproduced hereinbelow:

Therefore, in view of Clause 5 of the Corporate Guarantee Deed (supra), we conclude that the corporate guarantees executed by the Corporate Debtor in favour of the Financial Creditor are continuing in nature and can be invoked in parts. We are also of the view that the ratio of the Hon’ble NCLAT in IDBI Bank v. ARM Infra & Utilities Pvt. Ltd. (supra), as relied upon by the Ld. Counsel for the Applicant, is directly applicable to the present case. Thus, the argument of the Ld. Counsel for the Corporate Debtor-that the guarantee can be that the guarantee is exhausted once it is invoked-cannot be sustained in facts as well as in law.

The Respondent has alleged mala fides on the part of the Applicant, contending in its reply that the Applicant is acting in concert with certain developers with the ulterior motive of retaining control over Phase II of the Development Project owing to its substantial commercial value. It is alleged that the Applicant is deliberately obstructing the commencement of Phase II so as to prevent repayment of the alleged dues, and is adopting dilatory tactics by refusing to issue even a conditional No Objection Certificate to facilitate negotiations with prospective developers. According to the Respondent, the objective behind such conduct is to ensure that the valuable Phase II becomes the subject matter of insolvency proceedings, thereby rendering it unavailable for development by the Principal Borrower.

The Hon’ble Supreme Court in M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr. (vide Judgment dated August 31, 2017 in Civil Appeal Nos. 8337-8338 of 2017) has inter-alia, held as follows:

In the instant case, since the Applicant has been able to establish from the records that the financial debt is due and payable by the Respondent, the disputes raised by the Respondent qua the debt, which have been discussed in the foregoing paragraph, cannot be considered in view of the law laid down by the Hon’ble Apex Court in Innoventive Industries Ltd (supra). Accordingly, we reject the imputation of oblique motives, ascribing mala fides or any extraneous consideration, as alleged by the Respondent against the Applicant in invoking the Corporate Guarantees, as irrelevant.

In view of the foregoing findings and discussion, we are satisfied that the Corporate Debtor has defaulted in repayment of financial debt to the Applicant and such default is well over the minimum threshold of Rs. 1 crore, as prescribed u/s 4 of the Code. We are also satisfied that the application filed u/s 7 of the Code is complete and there are no disciplinary proceedings pending against the proposed resolution professional. Therefore, applying the law laid down by the Hon’ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank (supra), we are of the firm view that the instant application deserves to be admitted u/s 7(5)(a) of the Code. Accordingly, we pass the following orders:

a. The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor 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 Corporate Debtor 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 Corporate Debtor 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 Corporate Debtor;

e. The provisions of sub-section (1) shall however, not apply to such transactions, agreements as may be notified by the Central Government in consultation with any financial sector regulator and to a surety in a contract of guarantee to the Corporate Debtor.