TMI Blog2020 (9) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the subsidiary companies, apparently, the successful bidder has bid the acquisition amount based on the value of the assets of the Corporate Debtor which include the investment in the shares of the Applicant companies i.e., the subsidiary companies herein - In case, the Respondent No. 1 bank is allowed to proceed with the sale of the Applicants, there is every chance that it would diminish the value of the Applicants, which would result in diminishing the value of the Corporate Debtor, since the value of the Corporate Debtor includes the value of its shareholding in the Applicant companies. Though it is a settled position of Law that the liabilities of a surety is coextensive with that of principal debtor and further in view of the Law settled by the Hon'ble NCLAT and Hon'ble Supreme Court that a Financial Creditor can proceed to enforce the guarantees against the guarantors. Thus the settled position of Law, that there should not be any restraints on a Financial Creditor to proceed against the Guarantor even after the initiation of CIRP, approval of Resolution Plan or liquidation proceedings being commenced or closed. However, in the instant case, it is not the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case as submitted by the Applicants are as under: a. That this Adjudicating Authority vide its order dated 23.02.2018, admitted the Application filed by the State Bank of India for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor i.e., M/s. IVRCL Limited and appointed Mr. Sutanu Sinha as Interim Resolution Professional. Later, he was confirmed as Resolution Professional for the duration of the CIRP of the Corporate Debtor. b. That Since no resolution plan was approved during the CIRP, the Adjudicating Authority vide its order dated 26.07.2019 read with corrigendum order dated 31.07.2019, passed an order of liquidation under section 33 of the Code and appointed Mr. Sutanu Sinha as the Liquidator of the Corporate Debtor. c. That the Applicant Companies provided corporate guarantees vide guarantee agreements dated 26.12.2013 for the loan facility availed by the Corporate Debtor from the Applicant Companies. That pursuant to the guarantee agreements, the Applicant Companies mortgaged certain properties to the Respondent No. 1 Bank as security to the loan facility availed by the Corporate Debtor. The following are the properti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited to sell the Corporate Debtor as a going concern for ₹ 1654.77 crores. g. That the Respondent No. 1 Bank being a financial creditor of the Corporate Debtor without awaiting the sale of liquidation of the Corporate Debtor as a going concern where the Respondent No. 1 Bank is receiving substantial amounts and scuttling the sale of liquidation of the Corporate Debtor as a going concern as the Corporate Debtor holds 100% shares in the Applicant Companies has arbitrarily and illegally proceeded to issue the demand notice only with an intention to scuttle the liquidation of the Corporate Debtor as a going concern, and unjustly enrich itself by attempting to avail both the remedies, i.e., through the process under the Code and other process as well. h. That the entire liability of the Corporate Debtor in the capacity of the Respondent No. 1 Bank stands extinguished as the entirety of the claim of the Respondent No. 1 Bank qua the Corporate Debtor was verified and admitted by the Liquidator. The liability of the principal debtor/surety qua the borrower, when either of them is admitted into insolvency/liquidation is no longer res-integra. That the claim of a creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d due to the admission of the claim by the Liquidator. The Respondent No. 1 bank ought not to initiate any coercive steps against the Applicant Companies as any of the liability of the Applicant Companies stand discharged with the admission of the claim by the Liquidator. l. That the Respondent No. 1 bank ought to await the sale of the Corporate Debtor as a going concern before attempting to sell the assets of the Applicant by means of issuing the impugned notice as the entire debt of the Corporate Debtor could stand extinguished by the sale of the assets of the Corporate Debtor. m. There is a binding proposal by Gabs Megacorp to acquire the entirety of the Corporate Debtor for ₹ 1654.77 crores and that the Respondent No. 1 bank is set to receive significant amounts out of the sale of the Corporate Debtor to Gabs Megacorp as the Respondent No. 1 bank is a significant financial creditor of the Corporate Debtor. Therefore there is a distinct and clear possibility that the entirety of claim of the Respondent No. 1 bank qua the Corporate Debtor could be cleared by the sale of assets of the Corporate Debtor. n. That the entire debt alleged to be payable to the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets of the Applicants (being subsidiaries of the Corporate Debtor) do not form part of the liquidation estate and inasmuch, the Respondent can take recourse of initiating action against the Applicants under the SARFAESI Act, owing to the settled principles of law read in conjunction with the provisions of the Code and the SARFAESI Act without needing to wait for the liquidation process. The Guarantor and the Corporate Debtor are liable at the same time and, the Respondent need not wait for the liquidation process to conclude. It is true that the Corporate Debtor owes significant amount of dues to the Respondent. The mere fact that the Corporate Debtor is under liquidation does not eliminate the Guarantor's liability. It was held by the Hon'ble Supreme Court in the case of Maharashtra State Electricity Board, Bombay vs. Official Liquidator, High Court, Ernakulam and Ors. that: The fact that the Company in liquidation i.e. the principal debtor has gone into liquidation also would not have any effect on the liability of the Bank i.e. the guarantor. Under Section 128 of the Indian Contract Act, the liability of the surety is co-extensive with that of the principal debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on September 6, 2019, the Hon'ble NCLAT passed the following direction: The liquidator will not sell or transfer or alienate moveable or immoveable property of the Corporate Debtor nor create any third-party encumbrance on the same, without prior approval of this Appellate Tribunal. III. That the Hon'ble NCLAT vide its order dated 29.05.2020, dismissed the appeal and permitted Respondent No. 3 to proceed with the sale of the Corporate Debtor as a going concern. In view of the aforesaid, at present there is no fetter on the sale of the Corporate Debtor as a going concern. The process of the sale of the Corporate Debtor as a going concern to the successful bidder viz. Gabs Megacorp Limited ('Sale') is at an advanced stage. IV. That there is no requirement to seek any approval from this Adjudicating Authority to conclude the Sale and that the Liquidator is conducting the Sale strictly in compliance with the provisions of the Code. Further, there is no requirement in law for the Liquidator to bring on record any information, as sought for by the Applicants. The interim prayers sought by the Applicants against the Liquidator have no causal connection wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged some of its Assets respectively, against the loan obtained by the Corporate Debtor. 7.4. That Andhra Bank/Respondent No. 1 Bank being one of the Financial Creditor, without awaiting sale of liquidation assets and scuttling the liquidation of Corporate Debtor as going concern, the R1 Bank herein is contemplating to proceed against the properties offered by the Applicants as collateral security by issuing a Demand Notice dated 18.12.2019, followed by Possession Notice dated 11.03.2020. 8. Basing on the above facts, the points for consideration before this Adjudicating Authority are as under: a. Whether the instant Application filed by the Applicant companies is maintainable under provisions of IB Code, 2016 or not? b. Whether the Respondent No. 1 bank can initiate the proceedings under SARFAESI Act, 2002 and sell the assets of the Applicant companies which are subsidiaries (while three are 100% subsidiaries and one being 66%) of the Corporate Debtor, which may eventually result in diminishing the value of the Corporate Debtor or not? 9. The instant Application is being filed under Section 60(5) of the Code, 2016, which reads as under:- 60(5) Notwithstandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e., the subsidiary companies herein. 14. In case, the Respondent No. 1 bank is allowed to proceed with the sale of the Applicants, there is every chance that it would diminish the value of the Applicants, which would result in diminishing the value of the Corporate Debtor, since the value of the Corporate Debtor includes the value of its shareholding in the Applicant companies. 15. The Hon'ble Supreme Court in the matter of Swiss Ribbons Pvt. Ltd. vs. Union Of India has held as under:- ... .... The Preamble of the Code states as follows:-- --An Act to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time- bound manner for maximization of value of assets of such persons, to promote entrepreneur ship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto. 11. As is discernible, the Preamble gives an insight into what is sought to be achieved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sirable to notice the object of the T B Code', object of 'Resolution' and what is expected from the 'Committee of Creditors', as summarized below: - 1. The objective of the 'I B Code' As evident from the long title of the 'I B Code', it is for reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons to promote entrepreneur ship, availability of credit, and balance the interests all stakeholders. The recent Ordinance explicitly aims to promote resolution over liquidation. 2. The objective of the 'I B Code' is Resolution. The Purpose of Resolution is for maximisation of value of assets of the 'Corporate Debtor' and thereby for all creditors. It is not maximisation of value for a 'stakeholder' or 'a set of stakeholders' such as Creditors and to promote entrepreneurs hip, availability of credit and balance the interests. The first order objective is resolution . The second order objective is maximisation of value of assets of the 'Corporate Debtor and the third order objective is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
