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Judgment
ORDER
Per: Anil Kumar B, Member (Technical)
Since common issues and laws are involved in all the applications, they have been taken up together and a common order is passed in these cases.
The Petitions have been filed by the Petitioner /Creditor M/s. J M Financial Asset Reconstruction Company Limited under Section 95 (1) of the Insolvency and Bankruptcy Code, 2016 (I&B Code,2016) read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 (Personal Guarantors Insolvency Rules) against Mrs. Reena Paul, Mr. John Zachariah, Mrs. Annu Mathew, Mr. Mathew John, and Mr. K. G. Paul- Personal Guarantors of the Corporate Debtor M/s. Unitek Power Solutions India Limited, for initiating Insolvency Resolution Process.
The brief facts leading to the present petition are as under: -
The Corporate Debtor, M/s. Unitek Power Solutions India Limited availed credit facilities from the Federal Bank Limited, viz. Cash Credit, Bank Guarantee, Term Loan (IPS). The amount of default is Rs. 38,56,65,007,80/-(Rupees Thirty-Eight Crore Fifty-Six Lakhs and Sixty-Five Thousand and Seven and paisa Eighty Only) as on 31.05.2021. The Corporate Debtor failed to make good its debt obligations and the account was classified as a non-performing asset (NPA) in the books of accounts of the Bank on 31.03.2011 as per the extant guidelines of Reserve Bank of India. The loans availed was secured by way of a charge over certain properties belonging to some of the Guarantors/ Co-obligators. The financial facilities were secured by one of the Guarantors i.e., Mrs. Reena Paul (Respondent) by executing several agreements of guarantee on various occasions.
The Respondents undertook to unconditionally and irrevocably pay the Bank on demand the amount without protest in the event of default by the Corporate Debtor, nevertheless their liability under the guarantee shall not exceed on the whole sum of Rs. 18,00,00,000/-(Rupees Eighteen Crores Only) apart from all other expenses.
Hence, the Creditor stated that the personal guarantors Mrs. Reena Paul, Mr. John Zachariah, Mrs. Annu Mathew, Mr. Mathew John, and Mr. K. G. Paul are liable to pay to the Petitioner herein the default committed by the Corporate Debtor, in accordance with the guarantee agreements dated 20.11.2008, and 27.02.2010 (Mrs. Reena Paul); 15.03.2008, 28.06.2008, 20.11.2008 and 27.02.2010(Mr. John Zachariah); 20.11.2008 and 27.02.2010 (Mrs. Annu Mathew); 15.03.2008, 28.06.2008, 20.11.2008 and 27.02.2010 (Mr. Mathew John); 15.03.2008 and 20.11.2008 and 27.02.2010 (Mr. K. G. Paul).
The submission of the petitioners are that the amount of default is Rs. 38,56,65,007,80/-(Rupees Thirty-Eight Crore Fifty-Six Lakhs and Sixty-Five Thousand and Seven and paisa Eighty Only) as on 31.05.2021. By way of registered assignment Agreement dated 26.03.2013 the financial assets of Corporate Debtor along with all the rights, title, interest and underlying security interests secured by the Corporate Debtor and Guarantors were assigned by the Federal Bank Ltd. to the petitioner under the provisions of Securitizations and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). It is stated that they have filed OA No. 376 of 2013 before the Debts Recovery Tribunal-1, Ernakulam against the Corporate Debtor and the Guarantors, and the said OA is pending. The Creditor had also filed an application under Section 7 of the Code as CP/91/IB/2018 before the National Company Law Tribunal, Chennai Bench, which was allowed by order dated 01.01.2019, admitting the CIRP against Unitek Power Solutions India Limited and the Liquidation process is going on.
It is further stated that the aforesaid order of the NCLT, Chennai Bench was challenged by the Corporate Debtor before the Hon’ble High Court of Kerala filing OP(Civil) No. 268 of 2019, which was dismissed by judgment dated 25.9.2019. Thereafter a Special Leave Petition was filed by the Corporate Debtor as SLP No. 26294/2019 before the Hon’ble Supreme Court, which was also dismissed on 13.11.2019. Subsequently, this Tribunal directed Liquidation of the Company vide order dated 06.12.2019 in MA/ 33/KOB/2019.
The Demand Notices dated 14.02.202 were sent to the Respondents/Personal Guarantors. Since Respondents/Personal Guarantors did not make payment even after receiving the notice, the petitioner has filed the present petitions to initiate Corporate Insolvency Resolution Process under Section 95(1) of the Code read with Rule 7(2) of the Rules.
On 30.07.2021, since the applicant has suggested the name of an Insolvency Professional in the petitions, this Tribunal directed the Petitioner to file this petition through the said Insolvency Professional within 10 days. However, on 18.08.2021 the learned counsel for the Petitioner stated that he is not filing the petition through the said Insolvency Professional and that this Tribunal can appoint a Resolution Professional from the IBBI list. Later, the learned counsel for Petitioner has filed a memo on 27.09.2021 suggesting the name of a Bankruptcy Trustee, viz: Mrs. Sujata Chattopadhyay (Reg No./IBBI/IPA-003/IP-N00044/2017-18/10353). But it is seen that the name of the aforesaid person is not available in the names of IRP’s approved by IBBI for NCLT-Kochi Bench for the period 01.07.2021 to 31.12.2021. Therefore, this Tribunal decided to appoint a Resolution Professional from the IBBI list, to which the learned counsel for Petitioners have not objected to. On 27.09.2021 the Respondents filed counter in CP(IBC)/13/KOB/2021, CP(IBC)/15/KOB/2021 and CP(IBC)/19/KOB/2021.
Counter by Respondents/ Personal Guarantors
They have contended that the application itself is defective and is liable to be dismissed at the very threshold for the fact that it proceeds to realise an amount of Rs. 38,56,65,007/- when the guarantees in itself is limited to a sum of Rs 18,00,00,000/-, and that the CIRP against personal guarantors once invoked cannot be limited to a sum as above. It is not a case where the petitioner has no remedy to recover the outstanding dues from the respondent, but that remedy of CIRP against personal guarantors is not maintainable against the respondent.
The learned counsel appearing for the Personal Guarantors/ Respondents argued that the petitioners suppressed the fact that the Creditor has filed OA No. 376 of 2013 before the Debts Recovery Tribunal-1, Ernakulam against the Corporate Debtor and that the Guarantors (including Mr. John Zachariah) and the said OA is pending.
The learned counsel for the Respondents further argued that the affidavit dated 25.09.2020 cannot be taken as an acknowledgment of liability of Corporate Debtor for the fact that CIRP against them had already commenced vide order dated 01.01.2019. It is further stated that the provisions of the Insolvency and Bankruptcy Code do not provide for initiation of insolvency proceedings limited to a certain amount of money.
The respondents also submitted that as on the date of initiation of CIRP, Mr. John Zachariah is a suspended director and has no authority to represent the company or the other guarantors. The acknowledgment given by Mr. John Zachariah could at best be coined as an acknowledgment of Mr. John Zachariah and not an acknowledgment on behalf of the company and guarantors.
To fortify the argument, the learned counsel for the Respondents/ Personal Guarantors referred to an order of Hon'ble NCLAT in Dr. Vishnu Kumar Agarwal v. Piramal Enterprises Ltd, 2019 SCC OnLine NCLAT 542, (Piramal), wherein it was held that once a claim filed by a creditor under Section 7 of the Code is admitted as against the corporate debtor or the personal guarantor as the case may be, no proceedings for the same set of claims may be initiated against the other. The respondent submits that the aforesaid decision is in the light of the fact that a co-extensive liability against the guarantors would give the applicant a hand in unjustly enriching himself.
Report by Resolution Professional under Section 99 of IBC, 2016
On presentation of the application by the Applicant/Financial Creditor, this Tribunal vide order dated 06th October 2021 appointed Mr. CA Francis Mathew, as Resolution Professional directing him to file a report under Section 99 of Insolvency and Bankruptcy Code, 2016. The Resolution Professional has filed a report recommending the admission of the application filed under Section 95 of IBC, 2016. The grounds for admission of the application as per the Report are as follows: -
The repayment of debt has not been proved by the guarantor/Legal Heirs in response to the letter issued dated 05.11.2021 by the resolution Professional.
The principal borrower M/s Unitek Power Solutions India Ltd is a defaulter and currently the Corporate Debtor is under liquidation and no proceeds has distributed under Liquidation to set off the liabilities.
The ledger statements of JM Financials show an outstanding amount of Rs. 2,84,756.68/- under facility 1, Rs.60,80,684.45/- under facility 2, and Rs. 37,92,99,566.67/- under facility 3 total amounted to Rs. 38,56,65,007.80/-as on 31.05.2021 and guarantors has not proved the repayment of the above debt for which they had guaranteed.
As per MCA records charge is created in the name of the company.
•The guarantor has executed the agreement of guarantee for Rs.18,00,00,000/-apart from all interest, banking and other charges, costs, and expenses above referred to on various dates and latest on 27.02.2010.
•Acknowledgment of debt by Mr John Zachariah in his individual capacity and in the capacity of court-appointed receiver of the estate owned by the members of the family as part of the proposed onetime settlement loner dated 03/0872020 and based on the Affidavit given by Mr. John Zachariah for settlement of dues on 09.07.2018.
FINDINGS
We have heard the learned counsel for the Petitioners and the learned counsel for the Respondents/Personal Guarantors in which they are appearing and have perused the whole case records including the documents appended thereto.
Ongoing through the averments in the IBA, the reply of some of the Respondents as also the report of Resolution Professional narrated above, we are of the considered opinion that this is a fit case for admission and proceed against the Personal Guarantors/ Respondents and initiate Corporate Insolvency Resolution Process against them. Therefore, we admit CP(IBC)/13/KOB/2021, CP(IBC)/15/KOB/2021, CP(IBC)/16/KOB/2021, CP(IBC)/17/KOB/2021, and CP(IBC)/19/KOB/2021 filed under the provisions of Section 95 of IBC, 2016 and Section 100 of the IBC, 2016 and initiate Insolvency Resolution Process against the Respondents/ Personal Guarantors and moratorium in relation to all the debts is declared, from today i.e. date of admission of the application and shall cease to have effect at the end of the period of 180 days, or this Tribunal passes order on the repayment plan under Section 114 whichever is earlier as provided under Sec 101 of IBC, 2016. During the moratorium period;
Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed;
The creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt; and
The debtor shall not transfer, alienate, encumber, or dispose of any of his assets or his legal rights or beneficial interest therein;
The provisions of this section shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
The Resolution Professional viz., Mr. Francis Mathew, an Insolvency Resolution Professional having Registration No: IBBI/IPA-001/IP-P00995/2017-2018/11642, residing at 38/1614, Kannanthodath Lane, Edappally, Kochi, Ernakulam, Kerala 682 024, who was appointed when the Section 97 application was allowed vide Order dated 06.10.2021, is directed to cause a public notice published on behalf of the Adjudicating Authority within 7 days of passing of this Order on the website of the NCLT Kochi Bench, inviting claims from all Creditors, within 21 days of such issue. The notice under Sub-Section (1) of Section 102(2) shall include: -
details of the order admitting the application;
particulars of the resolution professional with whom the claims are to be registered; and
the last date for submission of claims.
The publication of notice shall be made in two newspapers, one in English and other in Vernacular which have wide circulation in the State where the Corporate Debtor and Personal Guarantor resides. The Resolution Professional shall furnish two spare copies of the notice to the Registry for the record.
The Resolution Professional in exercise of the powers conferred under Section 104 shall prepare a list of creditors on the basis of
the information disclosed in the application filed by the debtor under Sections 94 or 95, as the case may be; and
claims received by the Resolution Professional under Section 102 within 30 days from the date of the notice.
The debtor shall prepare a repayment plan under Section 105, in consultation with the Resolution Professional, containing a proposal to the Creditors for restructuring of his debts or affairs. The repayment plan may authorize or require the Resolution Professional to: -
carry on the debtor’s business or trade on his behalf or in his name; or
realise the assets of the debtor; or
administer or dispose of any funds of the debtor.
The repayment plan shall include the following, namely; -
justification for preparation of such repayment plan and reasons on the basis of which the creditors may agree upon the plan;
provision for payment of fee to the Resolution Professional;
such other matters as may be specified.
The Resolution Professional shall submit the repayment plan along with his report on the plan to this Authority within a period of 21 days from the last date of submission of claims, as provided under Section 106.
In case the Resolution Professional recommends that a meeting of the creditors is not required to be called, he shall record the reasons therefor. If the Resolution Professional is of the opinion that a meeting of the creditors should be summoned, he shall specify the details as provided under Section 106(3) of IBC, 2016. The date of the meeting should not be less than 14 days or more than 28 days from the date of submission of the Report under Sub- Section (1) of Section 106 of IBC, 2016, for which at least 14 days' notice to the creditors [as per the list prepared] shall be issued by all modes. Such notice must contain the details as provided under the provisions of Section 107 of IBC, 2016.
The meeting of the creditors shall be conducted in accordance with Sections 108, 109, 110 & 111 of IBC, 2016. The Resolution Professional shall prepare a report of the meeting of the creditors on a repayment plan with all details as provided under Section 112 of IBC, 2016 and submit the same to this Tribunal, copies of which shall be provided to the Debtor and the Creditors. It is made clear that the Resolution Professional shall perform his functions and duties in compliance with the Code of Conduct provided under Section 208 of IBC, 2016.
The Resolution Professional shall submit his periodic reports before this Tribunal, as per rules.