AI Structured Summary
Not yet generated for this judgment
Judgment
Ashok Bhushan, J.
This appeal by a Successful Resolution Applicant (SRA) has been filed challenging only the observations in paragraphs 55 to 57 of the impugned judgment dated 25.04.2025 passed by the adjudicating authority (National Company Law Tribunal, Mumbai Bench, Court – V) in I.A. No.4484/2024. The I.A. 4484/2024 filed by the appellant – SRA, has been allowed by the impugned order, however, by allowing the application, certain observations in paragraphs 55 to 57 have been made, aggrieved by which observations, this appeal has been filed.
Brief facts of the case necessary to be noticed for deciding the appeal are:
The corporate debtor, Shivaji Cane Processors Limited an MSME was put to Corporate Insolvency Resolution Process (CIRP), on an application by ASREC (India) Ltd. vide order dated 18.02.2021.
The corporate debtor was sanctioned a consortium loan amounting to Rs.18,20,00,000/- under which the Respondent No. 1 – Shree Warana Sahakari Bank Ltd. has advanced the loan of Rs. 6,20,00,000/- vide sanction letter dated 23.01.2017 and Respondent No. 2 – Kolhapur Urban Co-operative Bank Ltd. haD advanced the loan of Rs. 6,00,00,000/- vide sanction letter dated 11.01.2017.
The corporate debtor to secure the loan of respondents No. 1 & 2 as a security has executed Mortgage Deed, third-party guarantees and guarantees by personal guarantors.
On initiation of CIRP against the corporate debtor, Respondent No. 1 filed a claim under Form-C dated 25.02.2021 (revised on 05.03.2021 for total amount of Rs. 8,94,62,429/-). The respondent No. 2 filed a claim in Form–C dated 25.02.2021 for an amount of Rs.8,65,70,898/-.
Pursuant to invitation of Expression of Interest (EoI), the appellant – Puro Natural Sugars JV a joint venture between three entities submitted their resolution plan.
Committee of Creditors (CoC) was constituted by the Resolution Professional (RP) in which committee, the respondent No. 1 – Shree Warana Sahakari Bank Ltd. was allocated 11.13% vote shares, whereas, Respondent No. 2 – Kolhapur Urban Co-operative Bank Ltd. was allocated 10.84% vote shares. The CoC vide its resolution 27.07.2021 approved the resolution plan submitted by the appellant with 78.03% vote shares. The respondents No. 1 & 2 dissented and were treated as dissenting financial creditors. I.A. No. 2156/2021 filed by the RP for approval of resolution plan.
The adjudicating authority vide its order dated 01.05.2023 rejected the application filed by the RP on the ground that resolution plan seeks to extinguish the personal guarantee and securities without the consent of the dissenting financial creditors.
Aggrieved by the order dated 01.05.2023, the Comp. App. (AT) (Ins.) No. 661-663/2023 was filed in this Tribunal by the appellant, Puro Natural Sugars JV and Comp. App. (AT) (Ins.) No. 651/2023 was filed by the RP and Comp. App. (AT) (Ins.) No. 1005/2023 was filed by the Suspended Director of the corporate debtor challenging the order dated 01.05.2023. This Tribunal vide its judgment and order dated 24.11.2023 allowed all the appeals. Resolution plan submitted by Puro Natural Sugars JV was approved. Challenging the order of this Tribunal dated 24.11.2023, respondents No. 1 & 2 filed an appeal before the Hon’ble Supreme Court. Respondent No. 1 preferred the appeal being Civil Appeal No. 3965–3969/2024 before the Hon’ble Supreme Court. The Hon’ble Supreme Court vide order dated 11.03.2024 dismissed the appeal filed by respondent No. 1.
Resolution plan outlines payment of Rs.22,48,71,434/- in two portions. One portion adjusted towards the debt and balance assigned to an entity nominated by the Resolution Applicant (RA) for an aggregate consideration of Rs.2,00,00,000/- under the resolution plan.
The respondents No. 1 & 2 were made their full payment, however, despite receiving the payment under the plan, respondents No. 1 & 2 retained possession of the assets of the guarantors, continued recovery proceedings against the guarantors, and also raised demands upon the corporate debtor.
The appellant filed an I.A. being I.A. No. 4484/2024 in August 2024 directing to respondent No.1 to forthwith implement clauses of the resolution plan and further restrain the respondent for taking any steps of recovery or enforcement of debt. Direction was also sought to refer the matter to IBBI for filing a complaint against the respondents No. 1 & 6 under Section 236 of the Insolvency and Bankruptcy Code, 2016 (for short the Code or the IBC) for the offence of under Section 74(3) of the Code.
In the application, reply was filed by respondent Nos. 1 & 2 opposing the prayers made in the application. The adjudicating authority after hearing the parties by impugned order, allowed the I.A. No. 4484/2024 and held that approved resolution plan validly extinguishes the rights of dissenting financial creditor against the personal guarantors and further the action of the respondents in continuing the recovery against the guarantors is illegal and unsustainable. The adjudicating authority by making said observation in paragraph 58 has allowed the application. In paragraphs 58 & 59 of the judgment, following has been held:
“58.In view of the above findings, the Tribunal concludes that the approved Resolution Plan validly extinguishes the rights of dissenting financial creditors against the personal guarantors. The action of the Respondents in continuing recovery against the guarantors is illegal and unsustainable.
59.The above IA No 4484 of 2024 is allowed and Disposed off.”
The adjudicating authority, however in the same impugned order, made following observations in paragraphs 55 to 57:
“55.It is observed that the as per the letter personal properties of the guarantors located at: Mouje Chikhali, Taluka Shirala; Mouje Shirala, Taluka Shirala; and Mouje Sone, Taluka Walva, District Sangli, were neither mentioned nor secured under the aforesaid mortgage deed. These personal properties were attached by the Bank under Section 156 of the Maharashtra Co-operative Societies Act, 1960, read with Rule 107 of the MCS Rules, pursuant to an award passed under Section 101 of the MCS Act.
56.Therefore, this Tribunal clarifies that only those assets of the erstwhile promoters, directors, and guarantors which were given as guarantee or security for the Corporate Debtor and are specifically addressed in the Resolution Plan shall stand released. The personal properties which were not subjected to any such mortgage or security arrangement in favour of the lenders of the Corporate Debtor shall not be deemed to be released from encumbrance or attachment, and shall remain unaffected by the approval of the Resolution Plan.
57.The liabilities of personal guarantors, being independent, are not extinguished by the approval of the Resolution Plan unless specifically stated. It is further observed that the Resolution Plan does not provide any specification or identification of properties. However, it contains a general clause{(C-13(7)) stating that all encumbrances, security interests, liens and/or attachments (including those under applicable laws) over the assets of the erstwhile promoters, directors and guarantors of the Corporate Debtor, given as guarantee or security, shall be irrevocably released. Accordingly, only such properties which were mortgaged or otherwise charged in favour of the lenders of the Corporate Debtor, and thereby fall within the scope of the Resolution Plan, shall be eligible for such release.”
The appellant aggrieved by the observations made by the adjudicating authority in paragraphs 55 to 57 has made following prayers in the appeal, which is as follows:
“a)This Hon’ble Tribunal may be pleased to allow the present Appeal and set aside the observations in paragraph nos. 55 - 57 of the Impugned Order dated 25th April 2025 passed by the Hon’ble National Company Law Tribunal Bench, in I.A. No. 4484 of 2024 (Ex. A herein) in so far as the restrict the scope of extinguishment of personal guarantees only to assets which were mortgaged against the debts of the Corporate Debtor.
b)Pending the hearing and final disposal of the present Appeal, this Hon’ble Tribunal may be pleased to stay the effect and operation of paragraph nos. 55-57 of the Impugned Order dated 25th April 2025 passed by the Hon’ble National Company Law Tribunal Bench, in I.A. No. 748 of 2023 (Ex. A herein).
c)For such other reliefs as this Hon’ble Tribunal deems fit in the facts of the present matter.
d)For costs.”
We have heard learned Sr. counsel Mr. Krishnendu Dutta along with Mr. Ram Chandra Madan appearing for the appellants. Learned Sr. counsel Mr. Abhijeet Sinha has appeared for respondents No. 1 & 2. Learned counsel Mr. Uday Raj Patwardhan, PCA has appeared for Respondents No. 3, 5 & 6.
Learned counsel for the appellant in support of the appeal submits that resolution plan submitted by the appellant clearly contemplated extinguishment of all encumbrances created including securities of personal guarantors. The dissenting financial creditors who were opposed to extinguishment of securities of personal guarantor had objected to the resolution plan and on their objection, the resolution plan was rejected by the adjudicating authority on 01.05.2023 against which, company appeal was filed in this Tribunal by SRA, RP and suspended directors which appeals were allowed by this Tribunal holding that resolution plan can validly extinguish the third-party securities and securities given by the personal guarantors and the plan was approved. Respondent No. 1 unsuccessfully challenged the said order before the Hon’ble Supreme Court which also dismissed the appeal by respondent No. 1. The resolution plan which specifically provided for extinguishment of all securities including securities given by personal guarantors, it is not open for respondent Nos. 1 & 2 to contend that they shall not release the securities and can proceed against the personal guarantors to realise their dues. Act of respondents No. 1 & 2 after approval of the resolution plan which was affirmed by the Hon’ble Supreme Court to persist with their objection is in clear breach of the resolution plan. It is submitted that all objections which were raised by respondents No. 1 & 2 objecting to the clauses of resolution plan extinguishing personal securities were rejected when this Tribunal allowed the appeal. It is not open for the respondents No. 1 & 2 to raise same objections and object and not release the securities including the securities given by the personal guarantors. The adjudicating authority although allowed the application filed by the SRA but has made observations in paragraphs 55 to 57 which are unsustainable. Observation of the adjudicating authority that personal properties of the guarantors which were neither mentioned nor secured under the mortgage are not included. Clarification issued by the adjudicating authority that only those assets of the erstwhile promoters, directors, and guarantors which were given as guarantee or security for the corporate debtor and are specifically addressed shall stand released. Personal properties which were not subjected to any such mortgage or securities shall not deem to be released from encumbrances or attachment. It is submitted when the entire debt of the respondent Nos. 1 & 2 has been resolved in the insolvency resolution process, bank has no authority or jurisdiction to keep any personal property of the promoters, directors and guarantors. The attachment which is claimed by respondents No. 1 & 2 are attachment for recovering their dues and their dues having already been settled, the attachment cannot continue in law and entire action of the respondent is in breach of resolution plan which is binding on respondents No. 1 & 2 by virtue of Section 31 of the IBC. It is submitted that in spite of the approval of the resolution plan and dismissal of the appeal filed by respondent No. 1 even the assets of the corporate debtor was not released and it was only on after order dated 12.11.2025 passed by this Tribunal that the respondents No. 1 & 2 has released the assets of the corporate debtor. The action of the respondent is wholly contrary to the approved resolution plan and the respondents are liable to be proceeded for prosecution under Section 74 of the IBC.
Learned Sr. counsel Mr. Abhijeet Sinha appearing for the respondents No. 1 & 2 refuting the submissions of the appellant submits that assets of the corporate debtor has already been released. It is submitted that assets of the promoters, guarantors and personal guarantors cannot be included in the plan for resolution of the corporate debtor. The dissenting financial creditors are entitled for third-party securities interest. It is submitted that respondent No. 1 in its claim submitted in Form-C had not included the third-party assets and respondents No. 1 & 2 are entitled to recover their dues from third-party assets which were not part of any securities given by third-party assets. It is submitted that resolution plan seeks assignment of personal guarantees and third-party securities of secured financial creditor for a meagre sum of Rs. 2,00,00,000/-, despite residual debt exceeding Rs.29.48 crores and estimated valuation of personal guarantee and third-party securities being Rs.19.81 crores. It is submitted that appellant is wrongly portraying that it has made adequate payment of consideration for release/extinguishment of securities, personal guarantees and third-party mortgages to dissenting financial creditor. It is submitted that the dissenting creditor cannot be worse of than in liquidation. CIRP proceedings cannot be used for recovery of ex-promoter assets.
Learned counsel for respondents No. 3, 5 & 6 has also adopted the submissions advanced by learned Sr. counsel Mr. Abhijeet Sinha.
We have considered the submissions of the counsel for the parties and perused the records.
For appreciating the submissions advanced by the counsel for the parties, it is relevant to first notice the certain clauses of resolution plan submitted by the appellant which has ultimately been approved by this Tribunal and challenged to the said approval has also been negated by the Hon’ble Supreme Court by dismissing the appeal filed by the respondent No.
Paragraph C deals with the resolution plan. Paragraph C-3 (II) deals with the terms of payment of secured financial creditors. It is useful to notice Paragraph C-3(II)(g) & (h) which is as follows:
“C-3: PROVISION FOR SECURED FINANCIAL CREDITORS OF CORPORATE DEBTOR
II. THE TERMS OF PAYMENT OF SECURED FINANCIAL CREDITORS:
g. On approval of the Resolution Plan the entire debt of the Secured Financial Creditor will be settled and on assignment of debt at the end of four years there will be no liability remaining.
h. Sharing of the secured creditor of the aggregate amount is as follows.
Sr. Particulars Sharing Resolution No. Ratio (%) Amount Rs.
| 1 | ASREC Limited | 48.55% | 123309495 |
| 2 | Mahindra & Mahindra Financial Services Ltd. | 17.71% | 44970529 |
| 3 | Shri Warna Sahakari Bank Ltd. | 17.09% | 43415371 |
| 4 | The Kolhapur Urban Co-op Bank Ltd. | 16.65% | 42296889 |
| Total | 100.00% | 253992284” |
Paragraph C-3 (IV) deals with release of release of security on the assets of corporate debtor/other security charged to secure the financial debt. Paragraph C-13 deals with extinguishment of claims/rights/litigation. It is useful to notice sub-Clause (2), (3), (7) & (14), which are as follows:
“C-13: EXTINGUISHMENT OF CLAIMS /RIGHTS /LITIGATION:
2.Save and except specifically dealt with under this Resolution Plan, no other payments or settlements (of any kind) shall be made to any other Person in respect of claims filed under the CIRP (including, for the avoidance of doubt, any unverified portion of their claims) and all claims against the Corporate Debtor or Suspended Directors& Guarantors of Corporate Debtor along with any related legal proceedings, including criminal proceedings and other penal proceedings, shall stand irrevocably and unconditionally abated, settled and extinguished in perpetuity.
3.The payment to Persons contemplated in this Resolution Plan shall be the Corporate Debtor's and Resolution Applicant's full and final performance and satisfaction of all its obligations to such Persons and all Claims (including, for the avoidance of doubt, any unverified portion of their Claims) of such Persons against the Corporate Debtor or Suspended Directors& Guarantors of Corporate Debtor and Affiliates shall stand irrevocably and unconditionally settled and extinguished in perpetuity.
7.All encumbrances, security interest, liens and/or attachments (including pursuant to applicable Law) created or exists over the assets of the erstwhile promoters, directors and Guarantors of Corporate Debtor (charged or not charged with the lenders) shall be irrevocably released and all enforcement commenced by any person over any of the assets of the erstwhile promoters, directors and Guarantors of Corporate Debtor charged with the Financial Creditors to secure the debt of Corporate Debtor shall stand released and reversed without the requirement of any further deed or action on part of the Resolution Applicant or the erstwhile promoters, directors and Guarantors of Corporate Debtor.
14.The past payment obligation to secured creditor, unsecured creditors, employees dues, government dues, workmen dues, equity shareholders and/or any type of other liabilities shall stand revised as per this Resolution Plan and these stakeholders would not be eligible to recourse in any form for the past commitment in terms of the value & time.”
The above clauses clearly contemplated that all claims against the corporate debtor, suspended directors and guarantors of corporate debtor along with any related legal proceedings shall stand extinguished and all encumbrances, security interest, or attachments created over the assets of the erstwhile promoters, directors and guarantors of corporate debtor shall be irrevocably released. We repeat Clause (7) again to put emphasis:
“7.All encumbrances, security interest, liens and/or attachments (including pursuant to applicable Law) created or exists over the assets of the erstwhile promoters, directors and Guarantors of Corporate Debtor (charged or not charged with the lenders) shall be irrevocably released and all enforcement commenced by any person over any of the assets of the erstwhile promoters, directors and Guarantors of Corporate Debtor charged with the Financial Creditors to secure the debt of Corporate Debtor shall stand released and reversed without the requirement of any further deed or action on part of the Resolution Applicant or the erstwhile promoters, directors and Guarantors of Corporate Debtor. (Emphasis in bold supplied)”
It is relevant to notice that the resolution plan was initially rejected by the adjudicating authority vide order dated 01.05.2023 and reason for rejection of the resolution plan was that resolution plan extinguishes extinguishment of rights of dissenting creditor to proceed against the personal guarantors. The order of the adjudicating authority dated 01.05.2023 came to be set aside when Comp. App. (AT) (Ins.) No. 661–663/2023 came to be allowed. Judgment of this Tribunal dated 24.11.2023 is brought on the record as Annexure A-4 in the appeal, where this Tribunal after noticing the clauses of the plan regarding securities and personal guarantees given to the financial creditor including dissenting financial creditor approved the said clauses. It is useful to notice paragraph 16 of the judgment of this Tribunal, which is as follows:
“16.The present is a case where CoC deliberated over the issue and on such deliberation and inputs, the Successful Resolution Applicant submitted revised Resolution Plan and the Resolution Plan dealt with security interest and the personal guarantee also. We, thus, answer Question No.(I) holding that Resolution Plan in question has consciously dealt with securities and personal guarantees given to the Financial Creditors including the dissenting Financial Creditors and the said clauses of the Resolution Plan do not contravene any provisions of Section 30, sub-section (2) as well as CIRP Regulations, 2016. The view of the Adjudicating Authority that Resolution Plan is contrary to provisions of Section 30, sub-section (2) is unsustainable and deserved to be set-aside.”
As noted above, against the order of this Tribunal, the appeal was filed in the Hon’ble Supreme Court by respondent No. 1, the dissenting financial creditor which appeal came to be dismissed on 11.03.2024.
The clauses of resolution plan as noted above thus attained finality and cannot be questioned. After the approval of the resolution plan, dismissal of the appeal by the Hon’ble Supreme Court when the respondent No. 1 & 2 dissenting financial creditor did not release the security on the assets of the corporate debtor, personal guarantors and third-party securities, the application was filed by the SRA which has come to be allowed. The adjudicating authority vide its order passed on 25.04.2025 as noted above has already allowed the application i.e., accepting all the prayers made in the application. As noted above, the only limited challenge raised in this appeal is to the observation made in paragraphs 55 to 57 as quoted above. The submission which has been much pressed by the counsel for the respondents No. 1 & 2 is that third-party securities were even not part of claim form i.e., Form-C submitted by respondents No. 1 & 2. Third-party securities which were taken by the bank cannot be said to be subject matter of the appeal.
Learned counsel for the respondent in the additional affidavit filed has given details of property description referred to in Form-C. It is contended that several assets of the personal guarantors which were not referred in Form-C although referred in Comp. App. (AT) (Ins.) Nos. 661–663/2023 and Comp. App. (AT) (Ins.) No. 1003/2025 where attachment under Section 101 of the Maharashtra Cooperative Societies Act, 1960 and cannot be subject matter of the CIRP process. The submission of the respondents No. 1 & 2 is that those third-party assets which have been attached by respondents No. 1 & 2 under Section 101 of the Maharashtra Cooperative Societies Act, 1960 are not part of the CIRP and can be retained by the respondents No. 1 & 2 for realisation of its debts from the assets of the personal guarantors and the third-party guarantors. It is submitted that several assets which are attached under Section 101 of the Maharashtra Cooperative Societies Act, 1960 were not part of the claim form, hence the bank respondents No. 1 & 2 can still proceed to recover its dues.
We already noticed the provisions of resolution plan specially paragraph C-13 which dealt with extinguishment of claims/rights/litigation. Clause (7) which we have noticed above which clearly provided all encumbrances, security interest, liens and/or attachments (including pursuant to applicable law) created or exists over the assets of the erstwhile promoters, directors and guarantors of Corporate Debtor shall be irrevocably released and all enforcement commenced by any person over any of the assets of the erstwhile promoters, directors and guarantors of corporate debtor charged with the financial creditors to secure the debt of corporate debtor shall stand released. The above clause is couched in a very wide term which not only release all encumbrances, security interest in the asset of erstwhile promoters, directors and guarantors of the corporate debtor but also releases all attachments.
Learned counsel for the respondent has relied on Section 101 of the Maharashtra Cooperative Societies Act, 1960 which provides as follows:
“101. [Recovery of certain sums and arrears due to
certain societies as arrears of land revenue.] [This marginal note was substituted by Maharashtra Act No. 16 of 2013 dated 13-8-2013, Section 64(c), (w.e.f. 14-2-2013).]
- [(1) Notwithstanding anything contained in sections 91, 93 and 98, on an application made by a resource society undertaking the financing of crop and seasonal finance as defined under the Bombay Agricultural Debtors Relief Act, 1947, [or advancing loans for other agricultural purposes repayable during a period of not less than eighteen months and not more than five years] [Sub-section (i) was substituted for the original by Maharashtra 27 of 1969, Section 17(a).] for the recovery of arrears of any sum advanced by it to any of its members on account of the financing of crop or seasonal finance [or for other agricultural purposes as aforesaid] [This portion was deemed to have been inserted on 1st July 1971 by Maharashtra 44 of 1973, Section 3(b).] or by a crop-protection society for the recovery of the arrears of the initial cost or of any contribution for obtaining services required for crop-protection society or for the recovery of the arrears of the initial cost or of any contribution for obtaining services required for crop protection which may be due from its members or other owners of lands included in the proposal (who may have refused to become members) or by a lift irrigation society for the recovery of arrears of any subscription due from its members for obtaining services required for providing water supply to them, [or by a Tulaka or Block level village artisans multipurpose society advancing loans and arranging, for cash credit facilities for artisans for the recovery of arrears of its dues,] [This portion was inserted by Maharashtra 36 of 1975, Section 8.] [or [[***] [This portion was Inserted by Maharashtra 20 of 1986, Section 52(a).], or by a co-operative dairy society advancing loans for the recovery of arrears of any, sum advanced by it to any of its-members or by an urban co-operative bank for the recovery of arrears of its dues, [or any sum advanced by the District Central Co-operative Bank to its individual members or by non-agricultural co-operative credit society for the recovery of the arrears, of its dues] [These words were inserted by Maharashtra Act No. 16 of 2013 dated 13-8-2013, Section 64(a)(ii), (w.e.f. 14-2-2013).] or by salary-earners co-operative society for the recovery of arrears of its dues, or by a fisheries co-operative society for the recovery of arrears of its dues,] [or by any such society or class of societies, as the state Government may from time to time, notify in the Official Gazette, for the recovery of any sum advanced to, or any subscription or any other amount due from, the members of the society or class of societies so not notified;] [This portion was substituted by Maharashtra 31 of 1990, Section 2.] and [on the society concerned furnishing a statement of accounts and any other documents as may be prescribed] [These words were substituted for the words 'on the society concerned furnishing a statement of accounts' by Maharashtra Act No. 16 of 2013 dated 13-8-2013, Section 64(a)(iii), (w.e.f. 14-2-2013).] in respect of the arrears, [the Registrar may, after making the inquiry in such manner as may be prescribed, grant a certificate for the recovery of the amount stated therein to be due as arrears. The application for grant of such certificate shall be made in such form and by following such procedure, accompanied by such fees and documents as may be prescribed] [This portion was substituted by Maharashtra 20 of 2006, Section 2(9), w.e.f. 10-5-2006.]
[Explanation I] [This Explanation was renumbered as Explanation i by Maharashtra Act No. 16 of 2013 dated 13-8-2013, Section 64(a)(iv), (w.e.f. 14-2-2013).]. - For the purposes of this sub-section, the expression 'other agricultural purposes' includes dairy, pisciculture and poultry.]
[***] [Deleted 'Explanation II - For the purposes of this sub-section the expression 'maintenance and service charges' means such charges as are specified in the by-laws of the concerned co-operative housing society.' by Maharashtra Act No. 23 of 2019, dated 23.7.2019.]
(2)Where the Registrar is satisfied that [the concerned society has failed to take action under the foregoing sub-section in respect of any amount due as arrears,] [This portion was substituted for the original by Maharashtra 27 of 1969, Section 17(b).] the Registrar may, of his motion, after making such inquiries [as may be prescribed] [These words were substituted for the words 'as he deems fit' by Maharashtra 20 of 2006, Section 2(b), w.e.f. 10-5-2005.], grant a certificate for the recovery of the amount stated therein to be due as arrears and such a certificate shall be deemed to have been issued as if on an application made by the society concerned.
(3)A certificate granted by the Registrar under sub-section (1) or (2) shall be final and a conclusive proof of the arrears stated to be due therein, and the same shall be recoverable according to the law for the time being in force [as arrears of land revenue. A revision shall lie against such order or grant of certificate, in the manner laid down under section 154 and such certificate shall not be liable to be questioned in any court] [These words were substituted for the words 'for the recovery of land revenue' by Maharashtra Act No. 16 of 2013 dated 13-8-2013, Section 64(b), (w.e.f. 14-2-2013).].
(4)It shall be lawful for the Collector and the Registrar to take precautionary measures authorised by sections 140 to 144 of the [Bombay Land Revenue Code, 1879] [See now the Maharashtra Land Revenue Code, 1966 (Maharashtra XLI of 1966).] or any law or provision corresponding thereto for the time being in force, until the arrears due to [the concerned society] [These words were substituted for the words 'the resource society' by 27 of 1969, Section 17(c).], together with interest and any incidental charges incurred in the recovery of such arrears, are paid, or security for payment of such arrears is furnished to the satisfaction of the Registrar.”
Section 101 is the provision of recovery of certain sums and arrears due to certain societies as arrears of land revenue. When the enforcement action has been initiated by respondent Nos. 1 & 2 for recovery and any asset has been attached the said attachment is only with recovery of dues of the respondents No. 1 & 2 consequent to the financial credit extended to the corporate debtor. When entire debt of respondents No. 1 & 2 has been resolved by approval of the resolution plan in the CIRP of the corporate debtor, it is not open for respondents No. 1 & 2 to submit that it will keep the assets attached under Section 101 of the Maharashtra Cooperative Societies Act, 1960, for recovering its dues. When resolution plan is approved and all debt of the respondents No. 1 & 2 which was filed as a claim in CIRP has been resolved and dealt with in the plan, the submission on behalf of the respondents No. 1 & 2 that is has still some amount due to be recovered is fallacious and contrary of the scheme of the IBC. We thus do not find any substance in the submission of learned counsel appearing on behalf of respondents No. 1 & 2 that respondents No. 1 & 2 can keep third-party securities and securities of personal guarantors and promoters which were not covered by any mortgage and which were under attachment to recover the dues of respondent Nos. 1 & 2.
It is relevant to notice that the respondents No. 1 & 2 who are dissenting financial creditor has been in very beginning after approval of the resolution plan has been objected for extinguishing of their securities against the personal guarantors and promoters which objections were overruled and did not find favour and the issues have already been finalized between the parties vide judgment of this Tribunal dated 24.11.2023 in Comp. App. (AT) (Ins.) No. 661-663/2023 which order has been affirmed by the Hon’ble Supreme Court. It is not open for the respondents No. 1 & 2 to raise the same submissions again and again to contend that it is entitled to retain third-parties securities and assets of the promoters to recover its dues. The action of respondents No. 1 & 2 is clearly contrary to the whole IBC proceedings and need to be deprecated.
Now coming to the observations made by the adjudicating authority in paragraphs 55 to 57, the adjudicating authority committed error in observing that liabilities of personal guarantors being independent are not extinguished by approval of the resolution plan unless it is created. Adjudicating authority has further observed that resolution plan does not provide any specification or identification of the properties although general Clause C-13(7) has been noted. Clause C-13(7) is a clause which extinguishes all encumbrances of the personal guarantors and promoters. It is not open for the adjudicating authority to observe that personal properties of the guarantors which were attached under Maharashtra Cooperative Societies Act, 1960, pursuant to award has to be kept out. The enforcement action under Maharashtra Cooperative Societies Act, 1960 by the respondents No. 1 & 2 to recover its dues and attachment pursuant thereof shall stand released by virtue of Clause C-13(7) and it is not open for the respondents No. 1 & 2 to continue their recovery enforcement action relying on the attachments made. The respondents No. 1 & 2 cannot rely on any attachment prior to in the CIRP process and claimed that those attachments shall continue to entitle it to recovery its dues.
The submission of the counsel for the respondents No. 1 & 2 that meagre amount of Rs. 2,00,00,000/- was offered in the resolution plan for securities under personal guarantee of promoters and guarantors whereas the value of the securities of the dissenting creditors was much more. When amount was indicated in the plan of Rs.2,00,00,000/- for towards assignment of all residual debts of the secured creditors which has been approved by the CoC with requisite vote shares, it is not open for the dissenting financial creditor to contend about amount being meagre or inadequate. It is not open for the dissenting financial creditor to contend that amount paid under the plan towards their personal securities and guarantees inadequate or meagre.
We do not find any substance in the submission of counsel for respondents No. 1 & 2 to contend that in spite of the resolution plan having been approved with the clauses as noted above the respondents No. 1 & 2 can continue with their enforcement action against their third-party guarantees and assets of the promoters and guarantors. Adjudicating authority by the impugned order has allowed the application all prayers in the application as noted above has to be treated to have been allowed. When one of the prayers in the application was to restrain the respondents No. 1 & 2 from taking any steps of recovery or enforcement for the debt which was due and payable by corporate debtor and prayed for direction to respondents No. 1 & 2 to act in any manner in contravention of the resolution plan, the respondents are clearly bound by order passed by the adjudicating authority.
We may also notice that one of the prayers made in I.A. i.e., prayer (a) was to refer the matter to IBBI for filing a complaint against respondents No. 1 & 2 under Section 236 of the Code for offence under Section 74(3) of the Code. The said prayer has already been allowed.
In view of the aforesaid discussions and conclusions, we allow the appeal in following manner:
Prayers made in appeal for setting aside the observations made in paragraphs 55 to 57 are allowed. Paragraphs 55 to 57 is deleted from the impugned order. Rest of the order shall remain unaffected.
That in event, the respondents do not release the entire assets of the promoters, personal guarantors and third-parties, the adjudicating authority shall forward the copy of the order to the IBBI, within 30 days from today. The adjudicating authority shall forward the copy of the order for IBBI to consider for initiating prosecution against the respondent in accordance with Section 74(3) of the IBC.
Parties shall bear their own costs.