State Bank Of India vs Ramniwas Dhoot

It is stated that the Corporate Debtor had availed certain facilities from consortium of lenders which included Karkataka Bank Ltd., Bank of India, IDBI Bank, Indian Bank, Axis Bank and the Financial Creditor in the Company Petition.

On March 29, 2022, the Corporate Debtor was admitted into CIRP under the Code. The Financial Creditor being the lender was inducted into committee of creditors ("CoC") by the interim resolution professional/resolution professional.

The Resolution Professional had, in the prescribed form, invited expression of interest for resolution/ revival of the Corporate Debtor. The provisions of the Code were amended so as to enable the promoters of MSME to submit a Resolution Plan. I, in my capacity as the promoter of the Corporate Debtor, had submitted a Resolution Plan for the revival of the Corporate Debtor on September 12, 2022.

Under the resolution plan, an amount of Rs. 107.11 Crores was proposed to be paid to the creditors including a separate amount of Rs.8.00 crores for discharge of personal guarantees.

Corporate Debtor is currently undergoing liquidation under the Code.

Although, the Respondent had emerged as the highest bidder, the Resolution Plan proposed by us (being me, Mr. Ajay Dhoot and Aditya Dhoot) came to be rejected by CoC of the Corporate Debtor which included the Financial Creditor and currently the Corporate Debtor and at present the Corporate Debtor is currently undergoing liquidation. The Financial Creditor, as one of the members of the CoC of the Corporate Debtor, was very well aware of the facts, and it is quite surprising to see that the Financial Creditor, despite being very well aware of the facts, went ahead to invoke my personal guarantee.

The Guarantor further stated that he had also submitted a scheme of compromise or arrangement hoping that the same would ultimately satisfy the outstanding claims of all creditors. However, the same also came to be rejected by the CoC of the Corporate Debtor.

Therefore, his advocates through their letter dated May 09, 2024, which was in response to Resolution Professional's letter dated May 03, 2024, had specifically pointed out all the above critical facts and also requested the Resolution Professional to consider all the above facts while preparing the Report to the Hon'ble NCLT. I specifically pointed out that I have failed to understand the mode and manner in which the alleged unpaid amount of Rs.4,05,97,896/- is due and payable by me and stated that the Financial Creditor has failed to provide any legitimate calculation of the amount. Copy of the letter dated May 03, 2024, sent by Resolution Professional is @Annexure-3; pg. 46-48 of the Report and the reply dated May 09, 2024, is at Annexure-5; pg. 55-56 of the report.

In view of certain typographical/inadvertent error in the letter dated May 9, 2024, his advocates vide their email dated June 18, 2024, sent a clarification that there was a typographical/inadvertent error in the reply on my behalf. It was clarified that 'STCI' or 'STCI Finance Ltd., as appearing in the reply to be read as 'State Bank of India' or 'SBI'. A copy of the e-mail dated June 18, 2024, sent to the Resolution Professional is hereto annexed and marked as Exhibit "H".

Despite the above developments, it appears that the Financial Creditor has preferred the Company Petition against me in my capacity as the personal guarantor to the Company as against which my preliminary submissions are as under (without having access to the Company Petition filed by Financial Creditor).

It is stated that without prejudice to my rights and contentions that I have not been served with a copy of the Company Petition, till date, I am making submissions only on the report filed by Resolution Professional. I submit that the Resolution Professional has failed to apply his mind and has acted mechanically in recommending that the Company Petition must be admitted by this Hon'ble Tribunal. There is an apparent violation of sub-sections (6), (7) and (9) of Section 99 of the Code as elaborated hereunder.

Moreover, it is rather surprising to note that the Resolution Professional has failed to mention or accord any reason in support of his recommendation of admission of the petition other than the below at pg. 27 and 28 of the report.

As already stated hereinabove, I humbly submit that as the Company Petition has not been served upon me there has been a blatant violation of the Code and Application to AA Rules and the non-compliance thereto by the Resolution Professional and the Financial Creditor, which is a mandatory provision, under the Code. In view thereof the Company Petition be dismissed.

In view of the facts and submissions mentioned hereinabove it is humbly prayed that the present proceedings be dismissed against me, and no relief be granted by this Hon'ble Tribunal.

It is submitted that on perusal of the RP Report, Financial Creditors to the Corporate Debtor IDBI Bank have been given to understand that the State Bank of India [SBI], the Financial Creditor in the present case had initiated Personal Insolvency Proceedings against Mr. Ramniwas Dhoot who is one of the personal guarantors to the corporate debtor and also Respondent in the present case. In this respect, SBI had filed an Application before this Hon'ble Tribunal, under Section 95 of the Code, vide this present Company Petition bearing No. 124 (AHM) of 2024.

In one of the hearings held in the subject Company Petition i.e., on 25^th April 2024, RP was appointed, and he was directed to submit his Report under Section 99 of the Code before this Tribunal. Accordingly, on 10th May 2024, RP submitted his Report before this Tribunal vide IA No 848(AHM). In the subsequent hearing i.e., held on 05.06.2024, this Hon'ble Tribunal while taking on record the copy of the RP Report, directed the RP to serve a copy of the said report to all Financial Creditors, Corporate Debtor and Personal Guarantor with a direction that recipient of the Report has to file their reply to the Report before this Tribunal within a week from the date of receipt of notice. Hence, this reply.

It is stated that the question which arises today is that whether the debt is secured by the Personal Guarantee executed by the Respondent which has been answered in affirmative and also not disputed by the Respondent. Therefore, the debt and default are deemed to be admitted and hence this present petition deserves admission and initiation of Personal Insolvency Resolution Process against the Respondent.

It is further submitted that bank statement attached to the Company Petition are computerized ones which do not need any authentication or signature. At the same time the copies of the sanction letter and other loan documents establishes the debt availed by the Corporate Debtor which are outstanding as on date for which the Respondent is responsible for clearing the liability as per the terms of Guarantee Agreement executed by the Respondent.

The Record of Default provided by the Financial Creditor is not generated from the Information Utility registered under the Code.

It is stated that with regard to the record of default, I would like to submits that it is a matter of fact that as of now National e- Governance Services Ltd. (NESL) is the first and only registered IU approved by the IBBI.

It is further submitted that normally the NeSL records prove the authenticity of information on record of default only in the case of Corporate Debtors and not for any individuals. In the case of individuals CIBIL reports are sufficient to authenticate the record of the default or the loans advanced in favor of the individuals.

It is submitted that in the present case debt and default held in the name of corporate debtor has already been admitted by the appropriate Adjudicating Authority. Now, the question to be answered is whether such outstanding debt held in the name of corporate debtor has been guaranteed by the Respondent or not. It is pertinent to note that the Respondent has so far not denied execution of Guarantee Deed in favor of the Applicant. Therefore, as the Deed of Guarantee attached to the Company Petition has not been disputed by the Respondent at any point of time, the subject Company Petition is eligible to be admitted.

It is further stated that it is a matter of fact that if a report is generated from the NeSL Portal it would show records of the Corporate Debtor reflecting default date and outstanding default amount. The date of default is 25.12.2023 as reported in the Company Petition which happens to be expiry date of the notice period as mentioned in the recall cum invocation notice.

It is stated that it is pertinent to note that the Respondent was one of the Directors of the Corporate Debtor which is in liquidation as of date due to failure of the Corporate Insolvency Resolution Process initiated against the Corporate Debtor after admission of debt and default. As such, the Respondent is fully aware of all these developments and submitted the subject reply only to delay the proceedings.

Due verification of the Petition filed by the Financial Creditor has not been done by the Resolution Professional.

It is stated that the Verification by Resolution Professional [RP] at page 16 of the Company Petition is indeed stamped and signed by the RP who has given his consent through Form 'A' at page 271 of the said Company Petition. It is pertinent to note that the RP Mr. Purushottam Behera has been appointed by this Hon'ble Tribunal vide order dated 19.04.2024 following due process of law. The IRP has also deposed through an Affidavit verifying the Petition at page 15 of the Company Petition.

It is further stated that at this point of time RP's appointment is undisputed as well as I have stated on oath that he has been authorized by the Applicant i.e., the State Bank of India to file this Company Petition U/s 95. The Applicant has also given me the Authorization vide Authority letter dated 02.02.2024 at page 271 of the Company Petition to sign on behalf of the Applicant.

It is stated that, lastly, i would like to submit that the objections raised by the Personal Guarantor are petty and need no such consideration as the debt and default have not been disputed by the Respondent. At the same time, the Deed of Guarantee, which is the basis of filing this Petition, has also not been disputed. Therefore, the RP has been lawfully appointed by this Hon'ble Tribunal and he has also submitted his report recommending admission of the Company Petition.

Therefore, it is stated that it would be in the interest of justice that this Petition be admitted, and Personal Insolvency Resolution Process be imitated against the Respondent as he is liable to pay the debt fallen due in terms of the Deed of Guarantee executed by him.

The Record of default provided by Financial Creditor is not in accordance with the Provision of the Code.

It is stated that The Financial Creditor has annexed CIBIL Reports to show the record of default on behalf of the Respondent. It is surprising that a leading public institution like State Bank of India has failed to bring on record the record of default generated by National e- Governance Service Limited ("NeSL") which is the first and only registered entity with the Insolvency and Bankruptcy Board of India ("IBBI"). Further, to buttress its argument, the Financial Creditor has mentioned that normally NeSL report prove the authenticity of information on record of default only in the case of Corporate Debtor and not for any individuals. It is submitted by Financial Creditor that in case of individuals, CIBIL Reports are sufficient to authenticate the record of default or the loan advanced in favour the individuals. @Para 22.2, pg. 8 of the Rejoinder.

It is stated that CIBIL reports which have been relied upon by the Financial Creditor only shows a negative rating about an individual's profile, who may then find it challenging to borrow loans from the lending institutions. Such report which has been relied upon by the Financial Creditor would not authenticate the information regarding the debt or default.

It is stated that the law governing information utilities are Section 209 to 216 of the of the Insolvency and Bankruptcy Code, 2016 ("Code") and Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017. Information Utility (IU) is a professional organization which is registered under Section 210 of the Code whose function is to gather, assemble, accumulate, validate and disseminate financial information from companies and creditors to facilitate insolvency, liquidation and bankruptcy.

It is also stated that as per Section 215 of the Code, financial creditors are obliged to submit financial information to IUs. Moreover, as per Section 214(2) of the Code read with Regulation 21 of the Insolvency and Bankruptcy Board of India (Information Utilities) Amendment Regulations 2019, an information utility shall expeditiously undertake the process of authentication and verification of information of default as soon as it is received. (2) For the purpose of sub-regulation (1), the information utility shall-

deliver the information of default to the debtor seeking confirmation of the same within the time specified in the Technical Standards; (b) remind the debtor at least three times for confirmation of information of default, in case the debtor does not respond, allow three days each time for the debtor to respond; (c) deliver the information of default or the reminder, as the case may be, to the debtor either by hand, post or electronic means at the postal or e-mail address of the debtor.

It is As at the moment only one entity i.e., NeSL is registered as an Information Utility. Therefore, placing reliance on any such report which is not in accordance with the provisions of the Code should not be considered, as the same does not prove the veracity or accuracy of such information. Moreover, Financial Creditor has failed to bring on record Form D (Record of Default) which is issued by Information Utility showing the record of default.

On bare perusal of the CIBIL Report annexed by the Financial Creditor at Annexure A, Pg. 18-25 of the Petition, indicates that "CIBIL does not accept any responsibility on the accuracy, completeness, and veracity of all such information as provided". Therefore, the CIBIL report annexed by the Financial Creditor cannot be relied upon to show record of default.

It is stated that the Financial Creditor has no locus to respond to the allegation made at issue No.4 of the rejoinder.

It is stated that the at Paragraph 12 of the Additional Affidavit has alleged that there is non- application of mind by the Resolution Professional while preparing the report u/s 99 of the Code. However, it appears that the Financial Creditor has misconstrued this allegation that Respondent is contesting the appointment of Resolution Professional which was appointed by this Hon'ble Tribunal.

Vide the Additional Affidavit has pointed out the non-application of mind by the Resolution Professional and mechanical approach while preparing the report u/s 99 of the Code recommending the admission of the Petition u/s 95 of the Code against Respondent.

It is stated that the Financial Creditor had no locus to respond to the allegation made by the Respondent against the Resolution Professional. In fact, for the sake of brevity and for clarification, it was the Resolution Professional who was supposed to point out these non-compliances while examining the Petition which have been raised by the Respondent in the Additional Affidavit. It is therefore submitted that the Resolution Professional has clearly failed in discharging his duties as prescribed under the Code read with Regulations (amended from time to time).

The Resolution Professional has brushed aside such glaring non-compliances and without applying his mind, and also without providing any explanation as mandated u/s 99(9) of the Code recommended the admission of the application filed by the Financial Creditor.

Further, the Resolution Professional u/s 99 of the Code has to collate the information, facts and material for initiation of insolvency proceedings and the Resolution Professional has without calling for the same mechanically prepared the Report u/s 99 of the Code recommending the admission of the Petition.

It is stated that the admission of debt of the financial creditor against the corporate debtor cannot be construed as admission of debt against the respondent.

In the Additional Affidavit had mentioned that the bank statement produced by the Financial Creditor does not meet the pre-requirement of the printout in accordance with the Bankers Books Evidence Act, 1891 and also that the Financial Creditor authorised officer has not given a further certificate in accordance with Section 2-A (c) and hence the bank statement produced is defective and cannot be relied upon by the Financial Creditor. @Refer to Para 10, Pg. 4 of the Additional Affidavit filed by the Personal Guarantor.

It is stated that the Financial Creditor has countered this allegation to say that the copy of the extract of the Statement of accounts as per Bankers' Book of Evidence Act, 1981 have been duly stamped and signed by the Resolution Professional in presence of the Financial Creditor which were maintained in their custody.

Further, if the total debt against the Respondent has been admitted by this Hon'ble Tribunal while admitting the Company Petition filed against the Corporate Debtor as stated by you at Paragraph 21.2 @ Pg.7 of the Rejoinder, then in that scenario the Financial Creditor should not have filed separate proceeding against the Respondent for the same debt.

IRP has recommended to accept the application for the reason as stated in the report dated 03.06.2024. ii. The Respondent/Personal Guarantor has admitted to have executed the Guarantee Agreement on 16.02.2021 in favour of Applicant Bank/Financial Creditor. Hence, the Petition is very much maintainable.

The Applicant has demanded the amount outstanding from the Respondent initially vide Recall Notice dated 22.12.2023 and Demand Notice 02.02.2024.

Resolution Professional report states that no evidence was placed before him by the Respondent/Personal Guarantor having paid the amount demanded by the Applicant/FC.

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 IBC, 2016. During the moratorium period,

Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed, and

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.

II. The Resolution Professional viz Mr. Purusottam Behera, having registration no. IBBI/IPA-002/IP-N00940/2019-2020/12993, office at Raheja Centre, 7th Floor, Nariman Point, Mumbai, Maharashtra, 400021 (e-mail id [email protected]) who was appointed when the Section 97 application was allowed vide Order dated 25.04.2024, 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 Ahmedabad Bench, inviting claims from all Creditors, within 21 days of such issue The notice under Sub Section (1) of Section 102(2) shall include: -

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 the 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.

V. 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.

VI. 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 based on which the creditors may agree upon the plan;

Provision for payment of fee to the Resolution Professional;

Such other matters as may be specified.

VII. 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.

VIII. 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 meeting should not be less than 14 day 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.

IX. 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.

X. The Resolution Professional shall submit his periodic reports before this Tribunal, every 30 days.

XI. 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.