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2019 (7) TMI 1588

..... virtue of novation in the original Contract as in the light of the Section 133 of the Indian Contract Act, 1872? - HELD THAT:- It is settled position of law that liability of Principal Borrower and surety/ guarantor is joint and several and thus Lender can chose action against principal borrower or surety either separately or jointly. However, in the instant case, as stated supra, that the Petitioner has already filed suit before the Hon’ble Delhi High Court against Principal Borrower and other individual guarantors and also the present Corporate Debtor/ Corporate Guarantor and obtained consent Decree against the Principal Borrower, personal Guarantors and the instant Corporate Debtor. However, consent decree is stated to be under review. The Petitioner has not explained the reasons as to why it has not prosecuted the judgement and Decree it obtained as early as 2015 till now and as to why it has selectively chose only the Corporate Debtor herein leaving other personal Guarantors principal borrower. It is settled position of law that Law of Limitation would apply to proceedings under Code. The Petitioner has filed a suit before the Delhi High Court against the Principal Borro .....

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..... ma Muralidhar as Guarantor and Ms. Sowmya Muralidhar as another Guarantor apart from the instant Corporate Guarantor and invoking provisions of the Code only against the Corporate Debtor is not tenable - Petition dismissed. - C.P. (IB) No. 135/BB/2018 And I.A. 191 of 2019 U/s 7 of the IBC, 2016 Rlw Rule 4 of 186B (AAA) Rules, 2016 - 5-7-2019 - Hon'ble Shri Rajeswara Rao Vittanala, Member (Judicial) And Hon'ble Dr. Ashok Kumar Mishra, Member (Technical) For the Petitioner: Shri Abhijit Atur For the Respondent: Shri Jojo Jose ORDER Rajeswara Rao Vittanala, Member (J) 1. C.P. (IB) No. 135/BB/2018 is filed by M/S. Asia Pragati Capfin Private Limited (formerly known as M/S. Zwirn Pragati Capfin Private Limited) ('Petitioner/ Financial Creditor') under Section 7 of the IBC, 2016, R/ w Rule 4 of the I&B (Application to Adjudicating Authority) Rules, 2016, by inter alia seeking to initiate Corporate Insolvency Resolution Process (CIRP) in respect of M/S. Bangalore Dehydration and Drying Equipment Co. Pvt. Ltd. ('Respondent/ Corporate Guarantor/ Corporate Debtor') on the ground that it has committed default for a total outstanding amount of ₹ 25,81,85,297/- .....

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..... dy mortgaged in favour of the State Bank of India, Bangalore. (4) It is stated that the Corporate Debtor agreed to and furnished corporate guarantee for the Loan availed by M/S. BT & FC Pvt. Ltd. and consequently, entered into a Deed of Guarantee dated 17.03.2008 ('Deed'). The Corporate Debtor, in capacity of the Corporate Guarantor agreed to pay the Financial Creditor in the event of any default in repayment of the Loan, within a period of thirty (30) days of demand. The Financial Creditor disbursed the loan amount to M/S. BT & FC Pvt. Ltd. in instalments on 24.03.2008, 31.03.2008, 16.06.2008 and 17.06.2008. (5) It is also stated that as per the terms of Loan Agreement, the Loan along with interest was to be repaid on or before December, 2010.However, M/S. BT & FC Pvt. Ltd. failed to make payments and honour the Loan Agreement. Therefore, the Financial Creditor was constrained to initiate proceedings both against the principal debtor and the Corporate Debtor before the Hon ble High Court of Delhi, New Delhi for recovery of money and the same was numbered as CS (OS) No. 1030/2012. The Hon ble Court vide its order dated 22.05.2015 decreed the suit in favour of th .....

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..... 05.2015 decreed the claim of Financial Creditor and the same is not challenged by the Corporate Debtor till date. Accordingly, the decree has attained finality. Therefore, there is no necessity and scope for adjudication of the dispute by an arbitrator as sought for by the Corporate Debtor. (8) It is stated that it is settled position of law that the Corporate Debtor ought to have filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 at the first instance before filing their first statement on the substance of the dispute. Since the Corporate Debtor appeared before the Hon'ble High Court of Delhi in CS (OS) No. 1030/2012 and has suffered a decree against it, the Corporate Debtor has waived its right to get the dispute adjudicated by an arbitrator and the Financial Creditor is entitled to take recourse to any other remedy available to it under law. The Corporate Debtor cannot now re-claim or re-agitate his right and belatedly file an application with the intention to prolong the case and deny the Financial Creditor of any relief which it is rightfully entitled to. They have relied upon the judgement rendered in Ramakrishna Theatre Limited, Rep. by Ch .....

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..... n case of any dispute or differences arising, directly, or indirectly, out of or in connection with this Guarantee shall be referred to Arbitration to be conducted by a Sole Arbitrator to be appointed by PCL. The Arbitration proceedings shall be in accordance with the Indian Arbitration Act and Conciliation Act, 1996, as amended from time to time. The Arbitration proceedings shall be conducted in English and the venue of the Arbitration shall be at Delhi. The decision of the Arbitrator shall be final and binding upon the parties and the judgment may be entered thereon, upon the application of either party, by any court having jurisdiction. 3) Therefore, the petition is not maintainable before this Tribunal and the same ought to be referred to Arbitration. The Respondent is absolved of its liability as Guarantor because they were not privy to the variance in the terms as Guarantor in terms of the Loan Agreement. That a Supplementary Term Loan Agreement, dated 11.07.2009, was executed between M/S. BT & FC Pvt. Ltd. and the Petitioner, but the Respondent No. 1, M/s.Bangalore Dehydration & Drying Equipment Co. Pvt. Ltd. was not privy to the said Supplementary Agreement. And in .....

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..... ebtor/ Corporate Guarantor') under Section 8 of the Arbitration and Conciliation Act, 1996 by inter alia seeking to pass an Order referring the parties to Arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, in view of the Arbitration Clause in the Deed of Guarantee etc. 4. The State Bank of India has intervened in the present proceedings and filed its Objection dated 13.03.2019, by inter alia contending as follows: (1) It is stated that the M/S. BT & FC Pvt. Ltd., referred herein as "Said Company" has availed the loan from State Bank of India, Peenya Insustrial Estate Branch, Bangalore to meet its financial needs. The said Company has become chronic defaulter in repayment of the loan availed by the said company, accordingly, the loan has categorized as NPA and the bank has initiated recovery proceedings before the DRT, Bangalore, in O.A. No.277/2012, subsequently recovery certificate is also issued vide bearing No.8736, for a sum of ₹ 2,50, 14,350/-(Rupees Two Crores Fifty Lakhs Fourteen Thousand Three Hundred Fifty Only) against the said Company. (2) It is stated that, in terms of final order dated 31.12.2014 passed by the Debt Recove .....

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..... perused the pleadings of both the parties and the extant provision of the Code and the law on the issue. 6. Shri Abhijit Atur, learned Counsel for the Petitioner, while reiterating various averments made in the Company Petition and also reply filed in I.A. No. 19 lof 2019, has further submitted that debt and default in question is not in dispute and the Corporate Guarantor is liable to pay . He has relied upon the following judgements: a. M/S. Ramakrishna Theatre Limited vs. M/S. General Investments and Commercial Corporation Limited ILR 2003 KAR 3463. b. M/S. Ferro Alloys Corporation Ltd. vs. M/S. Rural Electrification Corporation Limited in National Company Law Appellate Tribunal, New Delhi, Company Appeal (AT) (Insolvency) No.92 of 2017. 7. Shri Joje Jose, learned counsel for Respondent, while reiterating the various averments made in the Statement of Objection, as briefly stated supra, has further submitted that instant case is barred by laches and limitation and he is relying upon the Judgement passed by Hon ble Supreme Court of India in B.K.Educational Services Private Limited Vs. Parag Gupta and Associates Civil Appeal No. 23988 of 2017. He has also disputed that the judgem .....

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..... rules to adjudicate any issue by judiciary like principles of natural justice , principles of double jeopardy etc. and Acts like Indian Evidence Act, CPC, Limitation Act, 1963, Arbitration and Conciliation Act, 1996 etc. are general applicable to every branch of law including IBC unless those are specifically barred by Act. 10. The issues raised in the instant case, whether the Corporate Debtor is discharged by virtue of novation in the original Contract as in the light of the Section 133 of the Indian Contract Act, 1872, Similarly, either this Adjudicating Authority or IRP/RP cannot devolves on the finality of the judgment and decree passed by the Hon ble High Court of Delhi, as mentioned supra and the Review Petition pending before it. 11. As stated supra, the State Bank of India has already initiated proceedings under the "SARFAESI Act", 2002 and public notice or sole immovable property of Respondent, through Auctions was given on 22.11.2013, by reserve price of schedule property was fixed at ₹ 21,25,00,000/- Aggrieved by that, the Corporate Debtor has field a Writ Petition No.58444/2017 before the Hon ble High Court of Karnataka and obtained an interim order dat .....

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..... e issue interalia decided passed by the Hon ble NCLAT dated 08.01.2019, in Company Appeal (AT) (Insolvency) No.92 of 2017, which is relied upon, in the matter of Ferro Alloys Corporation Ltd. Vs. Rural Electrification Corporation Ltd, is whether the Financial Creditor/ Lender can initiate CIRP only against the Guarantor/ Surety without initiating any proceedings against the Principal Borrower. Therefore, the Hon ble Court, has inter alia held that it is a right of the Financial Creditor to choose either principal borrower or principal guarantor. However, the issue whether tow proceedings can be initiated separately against Principal Borrower and Guarantor/ Surety is kept open as there is only case was stated to have filed against Guarantor. However, in the instant case, as stated supra. The Petitioner has filed a suit before the Delhi High Court against the Principal Borrower. Personal Guarantors as well as the present Corporate Debtor. Therefore, initiating proceedings under the Code against the Corporate Debtor amounts to parallel proceedings against the principle of double jeopardy. Admittedly, cause of action both in the Suit before Hon ble High court and in the present case is .....

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..... an application for review under Section 114 R/ w Order XLVII Rule 1 of the Code of Civil Procedure, 1908 filed by the Defendant Nos. 1 and 2 i.e., Principal Borrower and Mr. M. V. Muralidhar, Managing Director & Guarantor by seeking review of the order in question. They have merely contended that the judgement became final having no appeal filed against the order in question. It is also to be noted there cannot be appeal against consent Decree. Another question to be considered is whether the judgment and decree passed in the said CS(OS)No. 1030 of 2012 is final or not and whether it is enforceable or not is to be decided by the Hon'ble High Court in the pending Review. This Adjudicating Authority cannot interfere with powers of the Hon'ble High Court Delhi', and it is for the case of High Court of Delhi to take a view in pending Review, wherein, admittedly the question of referring to the matter to arbitration is raised. 15. Therefore, the Adjudicating is of the considered opinion that the instant Company petition suffers parallel proceedings as suit was filed against the Principal Borrower and Guarantors namely Mr. M.V. Murlidhar as Managing Director and Guaranto .....

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