Vijayakumari Natarajan vs B. Nirmal Kumar

The present Petition has been filed under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “Code/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 LIC HFL Trustee Private Company Private Limited and Vistra ITCL (India) Limited (hereinafter referred to as “Financial Creditor(s)/FC”) for initiating insolvency resolution process against Mr.B. Nirmal Kumar (hereinafter referred to as “Personal Guarantor /PG”) of JBM Homes Private Limited (hereinafter referred to as “Corporate Debtor/ CD”).

This Tribunal vide order dated 07.09.2020 in IA(IB) 812/2020 admitted the CD into CIRP and subsequently vide order dated 12.09.2023 in IA/IBC/919/(CHE)/2022 into Liquidation.

Part – I of the application shows the details of the LIC HFL Trustee Company Private Limited and Vistra ITCL (India) Limited / Financial Creditor(s). The registered address is located at LICHFL Asset Management Company Limited, Bombay Lite building. 2nd Floor, 45/47 and Veer Nariman Road, Mumbai 400 001 and IL & FS Financial Centre. Plot No. C22, G Block Bandra Kurla Complex, Bandra East Mumbai — 400 051, respectively.

Part-II of the application shows the details of the Personal Guarantor. The PG/ Respondent stood as a personal guarantor in respect of the optionally fully convertible debentures issued by JBM Homes Private Limited. The address of the PG/ Respondent is NO. 47, Bazar Road, Pallavaram, Chennai — 600 043

Part – III of the application shows that the LIC HFL Trustee Private Company Private Limited / FC has given the value of total debt as Rs.98,64,37,800.00/- (Rupees Ninety eight crores sixty four lakh thirty seven thousand and eight hundred only) covering principal amount together with interest as on 07.09.2021 and the Date of default is specified as 27.09.2018.

Part – IV of the Application gives the details of the Resolution Professional and the FC has proposed Ms. Geetha Sridhar as the Insolvency Resolution Professional in respect of the Personal Guarantor/ Respondent.

The Financial Creditor(s), LIC HFL Trustee Private Company Private Limited, submits that they had subscribed to 1,83,90,180 optionally fully convertible debentures (OFCD) of Rs.10/- each to a tune of Rs.18 Crores under securities subscription and securities holder’s agreement dated 23.03.2015 and related supplementary agreements dated 24.03.2018 and 24.07.2018 and the Vistra ITCL (India) Limited is the debenture trustee appointed under debenture trust deed dated 23.3.2015 and the funds raised under OFCDs were to be used for real estate projects at Anakaputhur, Vandalur, and Pammal, to the CD company namely JBM Homes Private Limited.

It is submitted that The Respondent provided an 'on-demand continuing' guarantee, along with 3 other guarantors, to secure the OFCD dues under a guarantee deed dated 27.3.2015 and the OFCDs originally were to be redeemed by the end of 36 months and the same was extended to 26.9.2018 vide first supplemental agreement dated 24.3.2018. 7.3 On 26.09.2018, the CD defaulted in redeeming OFCDs and the Financial Creditor had issued a notice dated 09.12.2019 detailing the defaults and demanded that OFCDs be redeemed at 33% IRR within 30 days of receipt. The CD and the PG/Respondent received the notice on 10.12.2019 and failed to redeem OFCDs within 30 days, consequent to which event of default arose on 10.1.2020. The application filed by Financial Creditor(s) as IBA/812/2020 to initiate CIRP against the CD, was admitted vide order dated 07.09.2021 by this Hon'ble Tribunal.

It is stated that, Financial Creditor(s) claim that the PG/ Respondent are liable to pay a sum of Rs.98,64,37,800.00/- (Rupees Ninety eight crores sixty four lakh thirty seven thousand and eight hundred only) covering principal amount together with interest as on 07.09.2021

Therefore, the FC has issued a demand notice under provisions of IBC in Form B on 01.03.2021 to the Guarantors and subsequently filed this petition for initiation of Insolvency Resolution Proceedings of a Personal Guarantor of JBM Homes Private Limited.

PG/ Respondent filed his counter in this company petition CP(IBC)/262/2021 dated 10.01.2022. The PG/ Respondent appeared on 04.02.2025 through his Counsel Mr. Avinash Krishnan Ravi.

The PG/ Respondent seek dismissal of the application due to the absence of material particulars required under Section 95 of IBC.

It was submitted by the PG/ Respondent that the key details such as the nature of the transaction, amounts paid, amounts due, and the date of default are missing, making it impossible for him to file a comprehensive counter.

It was further contended that the application is barred by limitation. Relying on Supreme Court judgments in, B.K. Educational Services Pvt. Ltd. v. Paras Gupta & Associates, AIR 2018 SC 5601; Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank Ltd, (2019) 9 SCC 158; Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd, (2019) IO SCC 572; Jignesh Shah and Anr. v. Union of India, 2019 SCC Online 125425; Babulal Vardharji Gurjarv Veer Gurjar Aluminium Industries Pvt. Ltd, Civil Appeal No. 6347 of 2019, etc, it is argued that the limitation period under Section 7 of the Code is three years from the date of default. The Share Subscription cum Debenture Subscription and Share Holder’s Agreement dated 23.03.2015 required approvals within 60 days, which were not obtained, making 25.05.2015 the date of default. Since the application was filed only on 24.09.2021, it is time-barred. It is emphasized that in IBC matters, the cause of action does not continue over time.

Additionally, it was submitted that the limitation period for the PG/ Respondent is independent of the CD. As the PG/ Respondent have not acknowledged any debt since May 2015, the limitation expired in May 2018. The C.D’s CIRP admission does not extend the PG/ Respondent’s limitation, and acknowledgment by the CD does not bind the PG/ Respondent.

Lastly, the respondent also objects the appointment of Ms. Geeta Sridhar as Resolution Professional, arguing it violates IBBI regulations, since she was involved in the CIRP of the CD, making her ineligible to act for the PG/ Respondent.

In light of above contentions, the respondent PG pray for dismissal of the company petition.

The Financial Creditor(s) further submits in the rejoinder that unlike corporate insolvency resolution, PG/ Respondent insolvency proceedings do not involve hearings before admitting or rejecting an application. Since the case was at the stage of confirming the resolution professional, the PG/ Respondent’s objections are premature and should be disregarded.

It was submitted that the PG/ Respondent raises three main objections such as insufficient details of debt and default, the application being barred by limitation, and the resolution professional’s alleged disqualification. The Financial Creditor(s) refute these claims, stating that the application contains all required details, including transaction history and default information, as prescribed by the Code.

It was further asserted that, regarding limitation, the claim was within the prescribed period. While the PG/ Respondent argue that the default dates back to 2015, the Financial Creditor(s) clarify that the event of default occurred on 27.09.2018 when debentures were not redeemed. The SSSHA agreement and supplemental agreements extended the timeline, and the cause of action arose only in 2018. Additionally, C.D’s financial statements and settlement proposals acknowledge the debt, binding the PG/ Respondent under the guarantee deed. Furthermore, Supreme Court orders extended limitation periods due to COVID-19, making the application filed in 2021 timely.

Furthermore, the Financial Creditor(s) also rejects the objection against the proposed resolution professional, Ms. Geetha Sridhar. They clarify that she has not acted as the resolution professional for the CD but merely assisted in administrative tasks. She is an independent practitioner and has no financial interest in the matter and regulations do not bar her appointment, and her name appears separately in the official list of professionals.

The Financial Creditor(s) also assert that the PG/ Respondent was raising baseless objections as a delay tactic. The debt is admitted, and the insolvency process should not be stalled based on meritless claims.

This Tribunal vide order dated 21.03.2022 appointed Ms. Vijayakumari Varadarajan, with Reg.No. IBBI/1PA-001/IP-P00972/2017-2018/11602, E-mail ID: natarajviji@gmail.com , as the Resolution Professional and ordered to examine whether the Company Petition is as set out in Section 97(6) of IBC, 2016 and recommend on acceptance or rejection of application.

Resolution Professional submitted her Report dated 31.03.2022 before this Tribunal with following submissions.

It is stated that the report is filed in compliance with Section 99 of the Code. It is apparent that the report filed is regard to initiation of Insolvency Resolution Process against the PG/ Respondent, Mr. B Nirmal Kumar.

Observation of the Report filed under Section 99 of the Code is as follows,

Compliance under Section 95 of IBC

The Resolution Professional in her report recommended to initiate Insolvency Resolution Process against the PG/ Respondent and the relevant portion is extracted below,

Heard the submissions made by the Learned Counsel for the Financial Creditor and RP in person and perused the report submitted by the RP.

The RP in her report has observed that the Financial Creditor(s) satisfies the requirement as set out in Section 95 of IBC, 2016. She has accordingly recommended for admission of the present application.

Personal Guarantee Agreement dated 27.03.2015, shows that the PG/Respondent is one of the Guarantors to the Corporate Debtor, JBM Homes Private Limited. The PG/Respondent along with other three Personal Guarantors has given guarantee to a tune of Rs.98,64,37,800/-(Rupees ninety eight crores sixty four lakh thirty seven thousand and eight hundred only) including interest and other penalties (referred as outstanding amount).

It is observed that upon considering the submissions of the parties and reviewing the provisions of the Limitation Act, 1963, and the relevant sections of the Companies Act, 2013, the limitation period for the claim in question is three years from the date the cause of action arose. Here, the securities subscription and securities holder’s agreement was dated 23.03.2015 and related supplementary agreements were dated 24.03.2018 and 24.07.2018 respectively. Thus, under the guarantee deed, the optionally fully convertible shares which were originally to be redeemed by 36 months from 27.03.2015 was extended to 26.09.2018. As such, the cause of action arose only on 2018 and the application was filed on 29.09.2021.

Furthermore, in accordance with the Supreme Court’s order in Suo Motu Writ Petition (C) No. 3/2020, dated 23.03.2020, which extended the limitation period for all judicial and quasi-judicial proceedings due to the disruptions caused by the COVID-19 pandemic, the limitation period for this matter is also effectively suspended from 15.03.2020 to 28.02.2022. This suspension applies to proceedings including those before this Tribunal. Therefore, this application is not barred by limitation, as it falls within the extended period provided by the Supreme Court, making the application filed in 29.09.2021 timely. From this inference, it is evident that the bar of limitation does not apply here. Therefore, no significant delay is attributable to the applicant that would warrant the dismissal of the application on the grounds of limitation.

Copy of Demand Notice issued to the CD and its Guarantors in Form B under IBC, 2016, dated 01.03.2021, which is as Annexure M of the petition highlights the total outstanding debt as Rs.98,64,37,800/- as on 26.09.2018 and the date of default as 27.09.2018.

It is noted that U/S. 128 of the Indian Contract Act, 1872, when a default is committed, the Principal Borrower and Surety are jointly and severally liable to Creditor and the Creditor has the right to recover its dues from either of them or from both of them simultaneously. Section 128 of the Indian Contract Act, 1872 is reproduced hereunder:

The Respondent is the Personal Guarantor of the Corporate Debtor for the optionally fully convertible debentures subscribed by the FC. The Corporate Debtor and Personal Guarantor failed to redeem the debt due, even after the issuance of Demand Notice. The liability of the personal guarantor is co-extensive with the corporate debtor, as expressly provided under section 128 of the Indian contract act 1872, as the personal guarantor’s liability is through an independent contract. The RP has also recommended for initiation of Insolvency Resolution Process against the PG/Respondent.

In light of the afore-stated observations, the present petition CP(IB)262/2021 is allowed. The Insolvency Resolution Process stands initiated against Mr.B.Nirmal Kumar viz. the Personal Guarantor/Respondent in this petition. Further we hereby direct as follows;

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.

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.

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.

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. administer or dispose of any funds of the debtor.

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.

Accordingly the report of the RP is taken on record and the Company Petition CP(IB)262/2021 stands admitted.