2019 (2) TMI 316 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

Initiation of ‘Corporate Insolvency Resolution Process’ against the two ‘Corporate Guarantors’ - ‘Principal Borrower’ is not a ‘Corporate Debtor’ or ‘Corporate Person’ - Section 7 of the ‘I&B Code’ - initiation of the process against two ‘Corporate Guarantors’ simultaneously for the same set of debt and default.

Held that:- From clause (h) of Section 5 (8) of the ‘I&B Code’, it is clear that counter-indemnity obligation in respect of a guarantee comes within the meaning of ‘financial debt’ and, therefore, there is no dispute that ‘M/s. Piramal Enterprises Ltd.’ is a ‘Financial Creditor’ of both ‘Sunrise Naturopathy and Resorts Pvt. Ltd.’- (Corporate Guarantor No.1) and Sunsystem Institute of Information Technology Pvt. Ltd. (Corporate Guarantor No.2).

In ‘Ram Bahadur Thakur vs. Sabu Jain Limited [1979 (5) TMI 117 - HIGH COURT OF DELHI], the Hon’ble High Court of Delhi relying on the decision of Hon’ble Supreme Court in ‘Kesoram Mills Case [1965 (11) TMI 41 - SUPREME COURT], held that under the ‘deed of guarantee’ the liability of the company to pay debt arose when the borrower defaulted in making payments and the creditor sent a demand/notice invoking the guarantee.

Thus, it is not necessary to initiate ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’ before initiating ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Guarantors’. Without initiating any ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’, it is always open to the ‘Financial Creditor’ to initiate ‘Corporate Insolvency Resolution Process’ under Section 7 against the ‘Corporate Guarantors’, as the creditor is also the ‘Financial Creditor’ qua ‘Corporate Guarantor’.

Initiation of the process against two ‘Corporate Guarantors’ simultaneously for the same set of debt and default - Held that:- A ‘Financial Creditor’ has been defined under sub-section (7) of Section 5 means any person to whom a financial debt is owed and ‘financial debt’ is defined in sub-section (8) of Section 5 as a debt which is disbursed against the consideration for the time value of money.

Admittedly, for same set of debt, claim cannot be filed by same ‘Financial Creditor’ in two separate ‘Corporate Insolvency Resolution Processes’. If same claim cannot be claimed from ‘Resolution Professionals’ of separate ‘Corporate Insolvency Resolution Processes’, for same claim amount and default, two applications under Section 7 cannot be admitted simultaneously. Once for same claim the ‘Corporate Insolvency Resolution Process’ is initiated against one of the ‘Corporate Debtor’ after such initiation, the ‘Financial Creditor’ cannot trigger ‘Corporate Insolvency Resolution Process’ against the other ‘Corporate Debtor(s)’, for the same claim amount (debt).

There is no bar in the ‘I&B Code’ for filing simultaneously two applications under Section 7 against the ‘Principal Borrower’ as well as the Corporate Guarantor(s) or against both the ‘Guarantors’. However, once for same set of claim application under Section 7 filed by the Financial Creditor is admitted against one of the ‘Corporate Debtor’ (Principal Borrower or Corporate Guarantor(s)), second application by the same Financial Creditor for same set of claim and default cannot be admitted against the other ‘Corporate Debtor’ (the Corporate Guarantor(s) or the Principal Borrower).

The initiation of the ‘Corporate Insolvency Resolution Process’ initiated under Section 7 of the ‘I&B Code’ against ‘Sunsystem Institute of Information Technology Pvt. Ltd.’- (Corporate Guarantor No.2) by impugned order dated 24th May, 2018, is upheld - further, the impugned order dated 31st May, 2018 initiating ‘Corporate Insolvency Resolution Process’ under Section 7 against the ‘Sunrise Naturopathy and Resorts Pvt. Ltd.’- (Corporate Guarantor No. 1) for same very claim/debt is not permissible and the application under Section 7 was not maintainable.

Application disposed off.