TMI Blog2020 (11) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... would arise. It would be a matter of adjustment when the Creditor receives debt due from the Borrower/Guarantor in the respective CIRP that the same should be taken note of and adjusted in the other CIRP. This can be conveniently done, more so when IRP/RP in both the CIRP is same. Insolvency and Bankruptcy Board of India may have to lay down regulations to guide IRP/RPs in this regard. The law as laid down by the Hon ble High Courts for the respective jurisdictions, and law as laid down by the Hon ble Supreme Court for the whole country is binding - reliance can be placed in the case of STATE BANK OF INDIA VERSUS V. RAMAKRISHNAN AND ANR. [ 2018 (8) TMI 837 - SUPREME COURT] where it was held that The object of the Code is not to allow such guarantors to escape from an independent and coextensive liability to pay off the entire outstanding debt, which is why Section 14 is not applied to them. Appeal allowed - decided in favor of appellant. - Company Appeal (AT) (Ins) No.633 of 2020 - - - Dated:- 24-11-2020 - [Justice A.I.S. Cheema] Member (Judicial) And [V.P. Singh] Member (Technical) For the Appellant : Mr. V.M. Kannan, Mr. Sambit Panja and Mr. Sanjay Kapur, Advoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on filed claiming that the Application was arising out of very same transaction and very same common Loan Agreement dated 30th March, 2011 as amended by first Amendment Agreement dated 31st March, 2015 followed by second Amendment Agreement dated 1st September, 2016 and thus the Application filed by the Appellant against Respondent was duplicating the claim which was not permissible. The Respondent relied on the Judgement of this Appellate Tribunal in the case of Vishnu Kumar Agarwal vs. Piramal Enterprise Ltd. CA (AT) (Ins.) No. 346 347 of 2018 dated 8th January, 2019 where it is held that once the petition under Section 7 of IBC is filed against Principal Debtor/Co- Guarantor and CIRP has been initiated, the Financial Creditor cannot file another Application on the very same set of claim. 4. The Adjudicating Authority heard the parties and referred to observations of this Tribunal in the matter of Piramal . Keeping Judgement in the matter of Piramal in view, the Adjudicating Authority raised question that when Application under Section 7 had been admitted against the Principal Borrower whether the present Application by the same Financial Creditor could be admitted agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not disputed the execution of the documents between the parties and the fact that Athena Chattisgarh Power Ltd. is the Principal Borrower and the quantum of amounts outstanding or that they are in default. The filing of the two Applications is also not in dispute as well as the fact that the CIRP has already been initiated against the Principal Borrower. 8. The learned Counsel for Appellant argued that under Section 128 of the Indian Contract Act, 1872, liability of the Principal Borrower and the Guarantor is co-extensive and the Creditor is entitled to proceed against either or both and no sequence is required to be followed. Referring to Section 5(8)(a), (h) and (i) of IBC, it is argued that IBC treats the Principal Borrower and Guarantor similarly. Reliance is placed on Section 60(2) of IBC to submit that simultaneous Application could be filed against the Borrower as well as Guarantor and that the same could also be maintained. The learned Counsel argued that Judgement in the matter of Piramal was relating to not Principal Borrower and Guarantor but filing of two separate proceedings against two Guarantors. Thus, according to him, the Judgement did not apply. It is argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s claims against surety have to be reduced to the extent of claims lodged against the Principal Debtor. It is argued that for same amount, there cannot be two CIRP proceedings, one against Borrower and the other against the surety. The Counsel relied on Judgement in the matter of Piramal . The learned Counsel referred to Halsburys Laws of England 4th Edition Para 159 at Page 87 where it is observed that it was necessary for the Creditor before proceeding against surety to request the Principal Debtor to pay or sue him although solvent, unless this was expressly stipulated. Reference is made to The Law of Insolvency by Ian F Fletcher where it is mentioned that where Creditor has already initiated action against Principal Debtor, the liability of surety is reduced to the amount for which Creditor s debt has been admitted. Based on this, it is argued that the amount claimed against the Borrower and the Respondent being same, the Application against Respondent could not be maintained. It is argued that the Appeal deserves to be dismissed. 11. Having heard Counsel for both sides and having gone through the record, it appears appropriate for us to first refer to Judgement in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, having shown the same debt payable by Guarantor No.2 which had already been initiated against Corporate Guarantor No.2. It was observed in para 31 that admittedly (?) for same set of debt claim cannot be filed by same Financial Creditor in two separate CIRPs and so two applications can not be admitted simultaneously. With such observation, finding is recorded in para 32 which paragraph we have reproduced above. The result was that, in Piramal, although Financial Creditor took pains to secure same amount by ensuring that two Corporate Guarantors are there (which is not prohibited by law) the Corporate Guarantor No. 1 simply walked away only because, CIRP had already been initiated against Corporate Guarantor No. 2. Thus Guarantor No. 1 escaped payment (which has not been found to be the object of IBC See Para 25 of Judgment in the matter of V. Ramakrishna (Supra.)). 12. Considering the issues which were before this Tribunal when matter of Piramal was decided, it is clear that the Issue No.2 was relating to question whether CIRP can be initiated against two Corporate Guarantors simultaneously for same set of debt and default. The issue was not whether Application can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Bank of India versus V. Ramakrishnan Anr. (which was pronounced on 14th August, 2018 three days before the above Notification) ((2018) 17 SCC 394) discussed Section 60(2) and (3) as they stood before this amendment was enforced. We will refer to the above Judgement in the matter of Ramakrishnan later. At present, we have referred to the above provision which had come on the statute book when Act 26 of 2018 was enforced and the Judgement in the matter of Piramal which was passed on 8th January, 2019 did not notice the above amendment. If the above provisions of Section 60(2) and (3) are kept in view, it can be said that IBC has no aversion to simultaneously proceeding against the Corporate Debtor and Corporate Guarantor. If two Applications can be filed, for the same amount against Principal Borrower and Guarantor keeping in view the above provisions, the Applications can also be maintained. It is for such reason that Sub-Section (3) of Section 60 provides that if insolvency resolution process or liquidation or bankruptcy proceedings of a Corporate Guarantor or Personal Guarantor as the case may be of the Corporate Debtor is pending in any Court or Tribunal, it shall stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Creditor receives debt due from the Borrower/Guarantor in the respective CIRP that the same should be taken note of and adjusted in the other CIRP. This can be conveniently done, more so when IRP/RP in both the CIRP is same. Insolvency and Bankruptcy Board of India may have to lay down regulations to guide IRP/RPs in this regard. 17. The Hon ble Supreme Court in the matter of V. Ramakrishnan dealt with Section 60(2) and (3) of IBC in Paragraphs 24 and 25 of the Judgement, Hon ble Supreme Court observed as under:- 24. The scheme of Sections 60(2) and (3) is thus clear the moment there is a proceeding against the corporate debtor pending under the 2016 Code, any bankruptcy proceeding against the individual personal guarantor will, if already initiated before the proceeding against the corporate debtor, be transferred to the National Company Law Tribunal or, if initiated after such proceedings had been commenced against the corporate debtor, be filed only in the National Company Law Tribunal. However, the Tribunal is to decide such proceedings only in accordance with the Presidency-Towns Insolvency Act, 1909 or the Provincial Insolvency Act, 1920, as the case may be. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above para 24 of the Judgement in the matter of Ramakrishnan can be conveniently read keeping in view the substituted provisions as per Act 26 of 2018. In place of Personal Guarantor, one can read Corporate Guarantor and with suitable changes, scheme of Section 60(2) and (3) can be appreciated from that angle also. The issue involved in the matter of Ramakrishnan was whether Section 14 of IBC will provide for a moratorium for the limited period mentioned in the Code, on admission of an insolvency petition would the same apply to Personal Guarantor of a Corporate Debtor. The issue was answered in negative by the Hon ble Supreme Court. The Hon ble Supreme Court in such context made observations as above in Paragraphs 24 and 25 of the Judgement. 19. It is clear that in the matter of guarantee, CIRP can proceed against Principal Borrower as well as Guarantor. The law as laid down by the Hon ble High Courts for the respective jurisdictions, and law as laid down by the Hon ble Supreme Court for the whole country is binding. In the matter of Piramal, the Bench of this Appellate Tribunal interpreted the law. Ordinarily, we would respect and adopt the interpretation but for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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