STCI Finance Limited vs Bohra Industries Limited

Per: Shri Deep Chandra Joshi, Judicial Member

This application has been filed under Section 60(5) of the IBC, 2016 read with Rule 11 of the NCLT Rules, 2016 on behalf of the Applicant namely, Bohra Industries Limited seeking appropriate directions against STCI Finance Limited (‘Financial Creditor’/’Respondent No.1’) for issuance of No Dues Certificate in terms of the Resolution Plan as approved by this Adjudicating Authority vide order dated 13.10.2021 and also for restraining the Respondent No. 1 from filing/ continuing complaints under Section 138/141 of Negotiable Instruments Act, 1881.

It has been submitted that the main petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’/‘Code’) was filed by the Financial Creditor seeking Corporate Insolvency Resolution Process(‘CIRP’) which came to be admitted by this Adjudicating Authority vide order dated 07.08.2019. Thereafter, the Committee of Creditors (‘CoC’) in its meeting dated 06.10.2020 approved the Resolution Plan submitted by a consortium led by Shri Krishna Agarwal which was subsequently approved by this Adjudicating Authority on 13.10.2021.

It is pertinent to mention that pursuant to withdrawal of claim by Respondent No. 1 from the CIRP on 15.09.2020, the Resolution Plan was approved by this Adjudicating Authority without reserving any right/ entitlement in favor of Respondent No. 1; thereby resulting the extinguishment of its debt/ claim as per the law laid down by the Hon’ble Supreme Court in Ghanshyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company in Civil Appeal No. 8129 of 2019.

It is submitted that approved Resolution Plan contained provision for issuance of No Dues Certificate by the Respondent No. 1 to the Applicant which the Respondent No. 1 is denying till date without any reason. Besides, the Respondent No. 1 also indulging in depositing various cheques (that had been tendered by Corporate Debtor as a part of the loan repayment facility to the Respondent No. 1 prior to the CIRP) with the bank and filing and/or continuing with countless legal actions that arising out of the dishonor of such cheques.

Thereafter, the Respondent No. 1 filed its reply vide Dairy No. 2794/2022 dated 19.09.2022 stating as below:

The Applicant/Corporate Debtor has also filed some additional documents vide diary No. 2746/ 2022 dated 14.09.2022.Moreover, the Applicant has preferred the written submissions vide Diary No. 277/2023 dated 01.02.2023 whereby it is stated that in the Resolution Plan, the Respondent No. 1/Financial Creditor shall issue no dues certificate in favour of the Corporate Debtor and release charge on assets of Corporate Debtor, if any. It was also contended that is not in dispute that Financial Creditor/ Respondent No. 1 has presented the said cheques for encashment even after 07.08.2019, i.e. the date of admission of Section 7 petition and commencement of moratorium; even after 15.09.2020 i.e. date when Financial Creditor withdrew its claim against the Corporate Debtor and even after 13.10.2021 i.e. the date of approval of Resolution Plan by this Adjudicatory Authority.

The Respondent No. 1 has also preferred written submissions vide Diary No. 294/2023 dated 02.02.2023 wherein it has reiterated some of the points mentioned in the reply which are not being reproduced again for the sake of brevity.

The Applicant in the present IA is seeking two sets of relief. First to direct the Respondent No. 1 to issue no due certificate in view of its relinquishing the claim vide letter dated 15.09.2020 as per the provisions of Resolution Plan as approved by this Adjudicating Authority vide order dated 13.10.2021 and second to issue directions to the Respondent No. 1 restraining it from filing any legal actions including the complaints under Section 138/141 of Negotiable Instruments Act, 1881 for the recovery of any amount or portion thereof which is covered by the communication dated 15.09.2020.

Brief facts of the present case are that an application under Section 7 Code filed by the Financial Creditor namely STCI Finance Limited against the applicant was admitted vide order dated 07.08.2019 by this Adjudicating Authority. Pursuant to the order dated 07.08.2019 the Corporate Insolvency Resolution Process of the Applicant was commenced and CoC was constituted. The State Bank of India (having 74.12% of voting rights) and STCI Finance Limited (having 25.85% of voting rights) were the members of the CoC.

The Financial Creditor vide email communication dated 15.09.2020 preferred to the RP, withdrew its claim from the CIRP. The Applicant submits that consequent to the abandonment of its claim by Finaical Creditor/Respondent No. 1, it is ceased to be a Creditor of the Corporate Debtor in accordance with the general law of contracts and in terms of the definition of Financial Creditor under Section Section 4(7) and 4(8) of the IBC, 2016.

The CoC in its meeting dated 06.10.2020 approved the Resolution Plan submitted by a Consortium led by Sri. Krishna Agarwal. The said Resolution Plan was approved by this Adjudicating Authority vide its order dated 13.10.2021. It is further stated by the Applicant that in view of specific waiver of claim made by the Financial Creditor/Respondent No. 1, the Resolution Plan inter-alia, provided for write-off of its claim against the Applicant/Corporate Debtor and issuance of No Due Certificate by Respondent No. 1/Financial Creditor.

Since the Respondent No. 1/Financial Creditor has withdrawn its claim from CIRP of the Corporate Debtor, it shall not be eligible to claim any amount from Corporate Debtor and shall write off such amount due from Corporate Debtor’s book of accounts.

Pursuant to the order dated 18.10.2021 passed by this Adjudicating Authority and in terms of the Resolution Plan approved thereby, the Applicant approached the Respondent No. 1/Financial Creditor for issuance of No Dues Certificate. Despite several communications with issuance of No Due Certificate was denied by the Respondent No. 1/Financial Creditor. Hence, the applicant filed present application.

It is also stated by the Applicant/ Corporate Debtor that CoC in its meeting dated 30.09.2019 resolved that a new Bank account in the name of the company be opened with SBI Udaipur Branch by RP and SBI will release amount lying in subsidy Collection Account at New Delhi into new bank Account to be opened and maintained by the RP for CIRP purpose.

The Respondent No. 1 was Member present in the said meeting and as such very well knew that any of the aforesaid Post-Dated Cheques (‘PDC’) have ceased and the PDCs which got already deposited and also those are lying with Respondent No. 1 if chosen to be deposited with the Bank shall stands dishonoured due to such change of Bank Account. Further, despite above, the Respondent No. 1 has been continuously depositing all the PDCs and upon dishonouring of the said cheques, the Respondent No. 1/Financial Creditor is issuing a legal notice and also filing multiple Complaint under Section 138 read with 141 of the Negotiable Instruments Act, 1881 against the Corporate Debtor as well as the Petitioners in various Courts in Mumbai.

The learned counsel for the Respondent submitted that vide letter dated 15.09.2020, the Respondent STCI withdrew its claim from the CIRP of the Applicant/Corporate Debtor to pursue its claim in the CIRP of BPPL, the Corporate Guarantor of the Applicant/Corporate Debtor. In view of the judgment passed by the Hon’ble NCLAT in the matter of Dr. Vishnu Kumar Agarwal Vs. M/s. Piramal Enterprises Limited in Company Appeal No. 346 and 347 of 2018 holding that for the same set of debt; a claim can't be filed by the same financial creditor in two separate CIRPs, the Respondent STCI withdrew its claim from the CIRP of BIL and chosen to file its claim in the CIRP of Guarantor BPPL.

The loan availed from the Financial Creditor/STCI has been secured by corporate and personal guarantees and securities provided by others including BPPL. Dues in respect of loan availed by Corporate Debtor in its capacity as the principal borrower are still unpaid and the Respondent No. 1/STCI is pursuing its claim and entitlements against the personal guarantors, corporate guarantor and other liable parties. Under the provisions of Section 141 of the Negotiable Instruments Act, 1881, if the person committing an offence under Section 138 is a Company, every person who at the time the offence was committed, was in charge of and was responsible to, the company for the conduct of the business of the company, and any director, manager, secretary or other officer of the company with whose consent or connivance the offence was committed for the offence is attributable to any neglect on his part, are also guilty of offence and liable to be proceeded against and punished.

Hon'ble Supreme Court in its judgment dated 19.01.2021 in the matter of Manish Kumar Vs. Union of India (supra) while upholding the Constitutional validity of Section 32A of the IBC has confirmed the continued liability of persons who were responsible to the corporate debtor for the conduct of its business at the time of commission of offence, for such an offence, regardless of the fact that the Corporate Debtor's liability has ceased. For maintaining the prosecution under Section 138/141 of the Negotiable Instruments Act, 1881 arraigning of a company as an accused is imperative as per law.

In Laxmi Pat Surana Vs. Union of India, (2021) 8 SCC 481, the Hon'ble Supreme Court has said that it is well settled that IBC is a complete Code and in view of the provision of Section 238 of the IBC, the provisions of the Code will prevail notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The Code is beneficiary legislation intended to put the Corporate Debtor back on its feet and is not merely money recovery legislation. The CIRP is not intended to be adversarial to the Corporate Debtor but is intended at protecting the interest of the Corporate Debtor.

In SBI Vs. V. Ramakrishnan, (2018) 17 SCC 394, the Hon’ble Supreme Court held that the object of the Code is not to allow personal guarantors such as Directors who are in management of the companies to escape from an independent and co-existent liability to pay off the entire outstanding debt.

In Vijay Kumar Jain Vs. Standard Chartered Bank (2019) 20 SCC 495; Essar Steel India Limited Committee of Creditors Vs. Satish Kumar Gupta, (2020) 8 SCC 531, the Hon’ble Supreme Court held that the sanction of a resolution plan and finality imparted to it by Section 31 does not per se operate as a discharge of the guarantor’s liability, much would depend on the terms of the guarantee itself. Thus, the Court said that approval of a resolution plan does not ipso facto absolve the surety/guarantor of his or her liability, which arises out of an independent contract of guarantee. To what extent, the liability of a guarantor can be pressed into service would depend on the terms of the guarantee/contract, itself.

In view of the above discussions, the main contention of the applicant for issuance of NOC cannot be accepted as Resolution Plan of Corporate Debtor/BIL would not ipso facto discharge the guarantor of the said Corporate Debtor.

Moreover, since the Financial Creditor/ Respondent No. 1 had earlier withdrawn from the CIRP of the Corporate Debtor, therefore, we hereby direct that the Post Dated Cheques which are in possession of the Financial Creditor/ Respondent No. 1 shall be returned to the Corporate Debtor immediately. We do not wish to comment in the matter pertaining to the pending Complaints filed against the Corporate Debtor by the Financial Creditor/ Respondent No. 1 under Section 138 read with Section 143 of the Negotiable Instrument Act, 1881.