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Judgment
ORDER
The present petition is filed on 12.03.2022 u/s. 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016") r/w. Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 by Solapur Janata Sahakari Bank Limited (“Financial Creditor / Applicant”) for the purpose of initiating insolvency resolution process against Mr. Sudhakar Bhanudas Hande (“Personal Guarantor / Respondent”) for recovery of Principal Amount of INR 5,41,40,285/-, Interest of INR 8,00,72,494/-, amounting to INR 13,42,12,779/- (Indian Rupees Thirteen Crore, forty-two lakh, twelve thousand, seven hundred and seventy-nine only) as on 30.09.2021. The Date of Default, as specified in Part-III of the present petition, is per Property Mortgaged Loan on 31.03.2017.
The Financial Creditor herein submits that Shetkari Sakhar Karkhana (Chandipur) Limited (“Corporate Debtor”) was sanctioned ‘short-term other security’ facilities by the Applicant herein vide Sanction Letter dated 20.08.2015 amounting to INR 6 Crores, subject to the terms and conditions mentioned thereunder. Pursuant to which, the Personal Guarantor viz. Respondent herein was one of the executors of the Personal Guarantee dated 21.09.2015 and executed the Mortgage Deed dated 21.09.2015 in furtherance thereto.
The Financial Creditor submits that, a Company Petition bearing C.P. (IB) No. 1349/IBC/NCLT/MAH/2017 was filed u/s. 9 of the IBC, 2016, and this Tribunal was thereby pleased to initiate Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor herein vide Order dated 14.01.2019. Pursuant thereto, an arbitration award was issued on 11.03.2019 by the Sole Arbitrator viz. Shri U.B. Marathe appointed by the Central Registrar u/s. 84 of The Multi State Cooperative Societies Act, 2002 in the arbitration matter bearing ARB/MAL/377/2018.
Subsequently, the Financial Creditor viz. Applicant herein issued a Demand Notice dated 20.12.2021 in Form-B under Rule 7(1) of the Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, to the Personal Guarantors including the Respondent herein demanding forthwith payments of its dues. However, the Personal Guarantor, per the Financial Creditor herein, has failed to act thereupon. Hence, the present petition.
The Personal Guarantor viz. Respondent herein, via his Reply dated 01.07.2023, has disputed the contentions of the Financial Creditor with regards to the claim amount, maintainability of the petition on grounds of limitation and has disputed the jurisdiction of this tribunal in light of the arbitration award(s) along-with the veracity of the said Personal Guarantee. However, we are of the considered view that the Respondents’ contention(s) are devoid of any merits whatsoever on account of valid invocation of the Personal Guarantee vide Demand Notice dated 20.12.2021 and the subsequent default in relation thereto.
We note that this Bench had appointed the Mr. Madan Bajranglal Vaishnawa, Insolvency Resolution Professional (“RP”) vide Order dated 16.09.2022 in the captioned petition and had thereby directed the Applicant to prepare and file a Report u/s. 99 of the IBC, 2016. The RP via his Report dated 07.06.2023, after due examination of the application, documents filed along with the application, in addition to the requirements as mandated under clauses (1) to (10) of Section 99 of the IBC, 2016, has recommended that insolvency resolution process be initiated against Mr. Sudhakar Bhanudas Hande.”
It is trite in law, that the liability of surety is co-extensive with that of the principal debtor. The proceedings in the present matter were put on hold since the constitutional validity of the Sections 94 to 100 of IBC, 2016, relating to the insolvency of personnel guarantor was pending before the Hon’ble Supreme Court in the matter of Dilip B. Jiwrajka V/s Union of India & Ors. [WP (Civil) No. 1281 of 2021] The Hon’ble Apex Court made the following key observations:
i.No judicial adjudication is involved at the stages envisaged in Sections 95 to Section 99 of the IBC;
ii.The resolution professional appointed under Section 97 serves a facilitative role of collating all the facts relevant to the examination of the application for the commencement of the insolvency resolution process which has been preferred under Section 94 or Section 95. The report to be submitted to the adjudicatory authority is recommendatory in nature on whether to accept or reject the application;
iii.The submission that a hearing should be conducted by the adjudicatory authority for the purpose of determining ‘jurisdictional facts’ at the stage when it appoints a resolution professional under Section 97(5) of the IBC is rejected. No such adjudicatory function is contemplated at that stage. To read in such a requirement at that stage would be to rewrite the statute which is impermissible in the exercise of judicial review;
iv.The resolution professional may exercise the powers vested under Section 99(4) of the IBC for the purpose of examining the application for insolvency resolution and to seek information on matters relevant to the application in order to facilitate the submission of the report recommending the acceptance or rejection of the application;
v.There is no violation of natural justice under Section 95 to Section 100 of the IBC as the debtor is not deprived of an opportunity to participate in the process of the examination of the application by the resolution professional;
vi.No judicial determination takes place until the adjudicating authority decides under Section 100 whether to accept or reject the application. The report of the resolution professional is only recommendatory in nature and hence does not bind the adjudicatory authority when it exercises its jurisdiction under Section 100;
vii.The adjudicatory authority must observe the principles of natural justice when it exercises jurisdiction under Section 100 to determine whether to accept or reject the application;
viii.The purpose of the interim moratorium under Section 96 is to protect the debtor from further legal proceedings; and
ix.The provisions of Section 95 to Section 100 of the IBC are not unconstitutional as they do not violate Article 14 and Article 21 of the Constitution.
In light of the afore-stated observations, it is accordingly hereby ordered.
ORDER
We have heard the learned counsel for both the parties and perused the documents on record.
In terms of the above, the C.P. (IB)/347/MB/2022 filed under Section 95 of the IBC, 2016 is hereby Admitted and the Insolvency Resolution Process stands initiated against Mr. Sudhakar Bhanudas Hande viz. the Respondent herein. We hereby direct as hereinafter:
I. Initiate Insolvency Resolution Process against the Respondent/Personal Guarantor and moratorium in relation to all the debts is declared, from today i.e. date of admission of the application, and shall cease to have effect at the end of the period of 180 days, or this Tribunal passes order on the repayment plan under Section 114 whichever is earlier as provided under Sec 101 of 1BC, 2016. During the moratorium period,
a. Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed, and
b. The creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt; and
c. The debtor shall not transfer, alienate, encumber, or dispose of any of his assets or his legal rights or beneficial interest therein:
d. The provisions of this section shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
II. The Resolution Professional viz. Madan Bajranglal Vaishnawa, Insolvency Resolution Professional, having Registration No. IBBI/IPA-001/IP-P02011/2020-21/13052, having address at 341/704 Kalpataru Chs Limited ,Srishti Sector 3 Mira Road E ,Near Surya Shopping Centre ,Thane, Maharashtra-401107 [Mob: 9004686180 | E-Mail: [email protected]] is directed to cause a public notice published on behalf of the Adjudicating Authority within 7 days of passing this Order on the website of the NCLT Mumbai Bench, inviting claims from all Creditors, within 21 days of such issue The notice under Sub Section (1) of Section 102(2) shall include: -
a. details of the order admitting the application;
b. particulars of the resolution professional with whom the claims are to be registered; and
c. the last date for submission of claims.
III. The publication of notice shall be made in two newspapers, one in English and other in Vernacular, which have wide circulation in the State where the Corporate Debtor and Personal Guarantor resides. The Resolution Professional shall furnish two spare copies of the notice to the Registry for the record.
IV. The Resolution Professional, in exercise of the powers conferred under Section 104, shall prepare a list of creditors on the basis of:
a. the information disclosed in the application filed by the debtor under Sections 94 or 95. as the case may be, and
b. claims received by the Resolution Professional under Section 102 within 30 days from the date of the notice. The debtor shall prepare a repayment plan under Section 105, in consultation with the Resolution Professional, containing a proposal to the Creditors for restructuring of his debts or affairs.
The repayment plan may authorize or require the Resolution Professional to:
a. carry on the debtor, business or trade on his behalf or in his name: or
b. realise the assets of the debtor; or
c. administers or dispose of any funds of the debtor.
The repayment plan shall include the following, namely;
a. justification for preparation of such repayment plan and reasons based on which the creditors may agree upon the plan;
b. provision for payment of fee to the Resolution Professional;
c. such other matters as may be specified.
V. The Resolution Professional shall submit the repayment plan along with his report on the plan to this Authority within a period of 21 days from the last date of submission of claims, as provided under Section 106.
VI. In case the Resolution Professional recommends that a meeting of the creditors is not required to be called, he shall record the reasons thereof. If the Resolution Professional is of the opinion that a meeting of the creditors should be summoned, he shall specify the details as provided under Section 106(3) of IBC, 2016. The date of meeting should not be less than 14 days or more than 28 days from the date of submission of the Report under sub- section (1) of Section 106 of IBC, 2016, for which at least 14 days’ notice to the creditors (as per the list prepared) shall be issued by all modes. Such notice must contain the details as provided under the provisions of Section 107 of IBC, 2016.
VII. The meeting of the creditors shall be conducted in accordance with Sections 108, 109, 110 & 111 of IBC, 2016. The Resolution Professional shall prepare a report of the meeting of the creditors on repayment plan with all details as provided under Section 112 of IBC, 2016 and submit the same to this Tribunal, copies of which shall be provided to the Debtor and the Creditors. It is made clear that the Resolution Professional shall perform his functions and duties in compliance with the Code of Conduct provided under Section 208 of IBC, 2016.
VIII. The Resolution Professional shall submit his periodic reports before this Tribunal, every 30 days.
IX. The Applicant is directed to deposit INR 2,00,000/- (Indian Rupees Two lakhs) to the bank account of the Resolution Professional within one week, towards his fees. This shall be subjected to the rules and regulations under the provisions of the Insolvency and Bankruptcy Code, 2016.
X. The Registry is directed to communicate a copy of order, report and application within seven working days and upload the same on the website immediately after the pronouncement of order.