UV Asset Reconstruction Company Ltd. vs Manmohan Kumar Khanduja

Per: Justice Rakesh Kumar Jain (Oral)

06.08.2024: This order shall dispose of three appeals bearing Company Appeal (AT) (Ins) No. 1049 of 2022 titled as ‘UV Asset Reconstruction Company Ltd. Vs. Manmohan Kumar Khanduja’ (hereinafter referred to as the first appeal), Company Appeal (AT) (Ins) No. 1050 of 2022 titled as ‘UV Asset Reconstruction Company Ltd. Vs. Neera Khanduja’ (hereinafter referred to as the second appeal) and Company Appeal (AT) (Ins) No. 1051 of 2022 titled as ‘UV Asset Reconstruction Company Ltd. vs. Rohitash Khanduja’ (hereinafter referred to as the third appeal). As all these appeals have arisen from a common order dated 13.07.2022 passed by the National Company Law Tribunal, Cuttack Bench by which CP (IB) No. 58/CB/2021 filed in the first appeal, CP (IB) No. 57/CB/2021 filed in the second appeal and CP (IB) No. 66/CB/2021 filed in the third appeal by the State Bank of India under Section 95 of IBC, 2016 (in short ‘Code’) R/w Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for personal guarantors to Corporate Debtors) Rule 2019, have been dismissed.

Initially, all the three appeals were filed by the State Bank of India. However, during the pendency of these appeals I.A. No. 4330, 4331 of 2023 & 4329 of 2023 were filed by the present appellant, namely, UV Asset Reconstruction Company Ltd. for its substitution as appellant in place of the State Bank of India on the ground of the assignment. These applications were allowed by this Court vide its order dated 24.11.2023 and UV Asset Reconstruction Company Ltd. was substituted as the appellant in place of the State Bank of India.

The brief facts of the case are that the Corporate Debtor (BSR Diagnostic Limited) availed a term loan of Rs.33,75,00.000/- from the Axis Bank Limited in the year 2011. Since, the Corporate Debtor failed to repay the loan, the Financial Creditor, namely, Axis Bank filed CP No. 1283/I&BP/NCLT/MAH/2017 under Section 7 of the Code. The said application was admitted on 29.09.2017 and the CIRP commenced.

The Corporate Debtor secured a loan of Rs. 50 crores from the State Bank of India vide loan agreement dated 25.03.2013. It availed further enhanced loan from the said bank and the respondents in all the three appeals gave personal guarantee, executed the deeds of guarantee on 25.03.2013, supplementary deed on 15.04.2015 and for the enhanced loan, executed supplementary deed of guarantee on 15.04.2015 and 29.06.2015.

In this case, the resolution plan submitted by M/s Tricounty Premier Hearing Services was approved by the Adjudicating Authority on 22.01.2019. As per the resolution plan, the total dues of the Financial Creditor were settled at Rs. 45 crores which were to be paid in the following tranches:

However, the SRA paid some amount but the entire amount was not paid, therefore, the CoC recommended liquidation of the Corporate Debtor pursuant to which an application bearing MA No. 32/CTB/2020 was filed by the Financial Creditor (State Bank of India) on 17.09.2019 on the ground that the resolution applicant failed to make the payment as per the resolution plan.

While this application was pending, the SBI filed applications bearing CP (IB) No. 58/CB/2021, CP (IB) No. 57/CB/2021 and CP (IB) No. 66/CB/2021 under Section 95 of the IBC against all the three personal guarantors on 25.10.2021. Two applications i.e. CP (IB) No. 58/CB/2021, CP (IB) No. 57/CB/2021 were admitted on 03.02.2022 and RP was appointed and application CP (IB) No. 66/CB/2021 was admitted on 21.12.2021 and RP was appointed.

When the CIRP proceedings against the Personal Guarantors were initiated, the liquidation order was passed in MA No. 32/CTB/2020 in respect of the Corporate Debtor on 09.03.2022.

The Tribunal thereafter while dealing with all the three applications filed by the SBI against the Personal Guarantors in which order of admission was passed on 03.02.2022 and 21.12.2021, dismissed all the three applications vide impugned order dated 13.07.2022 on the ground that on the date of filing of the application on 25.10.2021 there was no legally enforceable debt against the respondents because the resolution plan was approved and had not been set aside.

Counsel for the appellant has submitted that the Ld. Tribunal has not appreciated Clause 3 and 19 of the approved resolution plan in which it was categorically provided that the liability of the personal guarantors shall be extinguished on payment of the amount stated under Clause 8.3 of the resolution plan.

It is further submitted that since there is no compliance of Clause 8.3 of the resolution plan as the entire amount has not been paid, therefore, the liability of Personal Guarantor has not been extinguished as on the date of filing of the application on 25.10.2021 and the same situation is continued till today.

It is further submitted that since the payment has not been made by the Corporate Debtor in terms of the approved resolution plan, therefore, the right of the Financial Creditor, vis-a-vis, the personal guarantors has not extinguished.

No one has put in appearance on behalf of the respondent i.e. personal guarantors in all the three cases from the last two dates.

We have heard counsel for the appellant and perused the record with his able assistance.

The only issue involved in this case is as to whether the appellant had no locus standi to maintain the application filed under Section 95 on 25.10.2021 if the SRA has not adhered to Clause 8.3 (ii) of the approved resolution plan submitted in respect of the Corporate Debtor?

In order to appreciate the submissions made by counsel for the appellant we need not to narrate the facts again for the sake of brevity but it would be suffice to say that it was categorically provided in Clause 8.3(ii) of the approved resolution plan that the liability of the personal guarantor shall be extinguished only on the payment of the amount stated in Clause 8.3 (ii) (a) of the approved resolution plan which has not been complied with because some payments have been made and not the entire payment of Rs. 45 crores mentioned in the said clause. Therefore, even if the liquidation order was passed on 09.03.2022 which is subsequent to the filing of the application dated 25.10.2021, it makes no difference to the Appellant for proceeding against the personal guarantors for the purpose of recovery of the amount of loan for which they stood as guarantors.

Thus, in view of the above, the order passed by the Tribunal is found to be patently erroneous in so far as it has recorded its finding in respect of point 3 decided in the said appeal. No other point has been raised. In view of the aforesaid discussion, the appeal succeeds and the order is set aside.

As a result thereof, all the applications, namely, CP (IB) No. 58/CB/2021, CP (IB) No. 57/CB/2021 and CP (IB) No. 66/CB/2021 are hereby restored and the matter is remanded back to the Ld. Tribunal to decide the same in accordance with law. The parties are directed to appear before the Tribunal on 03.09.2024.