TMI Blog2019 (10) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... he Financial Creditor can proceed against the guarantor. There is no restriction on the right of Financial Creditor to proceed against guarantor provided if financial creditor had not initiated any action against the Principal Borrower - Therefore, the Financial Creditor is not entitled to file again an Application for the same financial debt on the ground of default against the Guarantor. Whether proceedings cannot be initiated against Corporate Debtor as it is not Corporate Person within the meaning of Section 3 (20) of IBC? - HELD THAT:- It is true, except letter and reply, Corporate Debtor has not filed any authorization or registration given by RBI recognising Corporate Debtor as financial service provider. Therefore, the Corporate Debtor cannot take any protection on the ground that it is NBFC and objects of the Company is also to do financial services - present petition filed by Financial Creditor is not maintainable against Corporate Debtor as Financial Creditor already initiated proceedings against Principal Borrower. Petition dismissed. - CP (1B) No.193/7/HDB/2019 - - - Dated:- 24-10-2019 - Shri RatakondaMurali And Shri Narender Kumar Bhola, JJ. For Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited. The Corporate Debtor executed Deed of Irrecoverable Guarantee in favour of Applicant on 13.12.2013. Except the amounts shown in Exhibit P-3, no other amounts were received either from Principal Borrower or from Corporate Debtor herein. The Applicant / Financial Creditor issued notice to Principal Borrower, the Corporate Debtor, and the Guarantor. The Corporate Debtor, therefore, becomes liable to discharge the debt as Principal Borrower committed default in repaying the loan. Hence the petition. 6. The Applicant / Financial Creditor is relied on Exhibits P-I to P-IO. They are filed along with Form 1. Written communication given by proposed IRP is also filed. The Learned Counsel for Financial Creditor has relied on the following Judgments: 7. i. State Bank of India vs. Sajita Engineering Wo rks and Ors. of Hon 'ble High Court of OHssa reported in AIR 1992 Orissa 237. ii. State Bank of India Vs. M/S Indexport Registered and Ors. of Hon'ble Apex Court based in (1992) 3 s.c.c 159. iii. Ferro Alloys Corporation Ltd., Vs. Rural Electrification Corporation Ltd., held in the Company Appeal (AT) (Insolvency) No. 92 of 2017 before the NATIONAL COMPANY LAW APPELLATE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for adjudication. A copy of the Arbitration Notice addressed by the Petitioner to Respondent is filed herewith as Annexure-4. (a) The filing of present Company petition by the Petitioner by invoking the Special Act (IBC, 2016) against both the companies i.e. M/S. Amrit Jal (b) Ventures Private Limited and Respondent knowing fully well that a Company petition is moved against the Guarantor having taken steps against M/S. Amrit Jal Ventures Private Limited is abuse of process of law. i. It is submitted that the present Company petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 is premature and is not maintainable inter-alia on the following grounds: M/S. Amrit Jal Ventures Private Limited has not defaulted in making any payments due and payable to the Petitioner. The Respondent can be held liable only if there is any debt due to the petitioner. ii. It is averred that the Petitioner has failed to produce any evidence of default as envisaged under Section 7 (3)(a) of the IBC, 2016 which is a fundamental requirement for the maintainability of this petition and on this ground alone this application is liable to be dismissed. Section 7 (3)(a) of the IBC, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 3(17) of the code and 'Financial Service' is defined in Sec. 3(16) of the code. It may be noted that the definition of the 'financial service' in section 3 (16) is not exhaustive and would bring within its scope any other type of Financial service also. 2. The Respondent's Memorandum of Association would show that the main object of the Respondent company is as follows; To carry on the business of Investment / Financial advisory services in all branches of commercial, corporate management, business management, company law, taxation, Investment, portfolio management, power generation, energy savings, insurance, banking, factoring, loan syndication, imports exports, researches developments, quality control, technical know - how, merchant banking, underwriting, secretarial service, financial management, construction and transport . The perusal of the main and incidental and ancillary objects would show that the Respondent's objects include providing financial services. Copy of the Memorandum of Association of the Respondent is filed as Annexure-5. The Reserve Bank of India has issued a notice to the Respondent company on 17-02-2014 statin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 of Hon'ble NCLT in C.P. No. 1B in case of International Finance Corporation Vs. Punj Liyod Upstream Limited 6. Order Dated 06-12-2018 of NCLAT C.A. no 26/ 19 in case HDFC vs. RHC Holdings Pvt. Ltd. 9. We have heard the Counsel for Financial Creditor and also Counsel for Corporate Debtor. We have gone through the documents filed on both sides. The Learned Counsel for Financial Creditor would contend that the Corporate Debtor gave guarantee for the loan sanctioned to the Principal Borrower M/S Amrit Jal Ventures Private Limited where under the Financial Creditor gave loan of ₹ 4 crores for which Corporate Debtor stood as Guarantor. The Counsel contended that the Principal Borrower M/S Amrit Jal Ventures Private Limited (herein after referred to as borrower) failed to repay the loan as per the Inter Corporate Deposit (ICD) Agreement dated 30.06.2011. Again a revised ICDA was entered into and time was extended till 13.12.2013. 10. The Counsel contended, the Corporate Debtor executed Deed of Guarantee (DOG) referred to as Exhibit P -4. Since borrower committed default, the Financial Creditor issued notice to borrower as well the Guarantor/ the Corporate Debtor to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot included in the definition of Corporate Person . In this connection, the Counsel relied on Section 2 (20) of IBC, 2016 which defines Corporate Person . The counsel contended that the Corporate Person does not include financial service provider. 13. The Counsel also relied on Section 3(17) of IBC, 2016 (herein after referred to as CODE ) which defines financial service provider and also Section 3 (16) which defines financial services. The Counsel contended that Memorandum of Association of the Corporate debtor shows that primary business of the Company is NBFC. The objects of the Corporate Debtor Company is providing financial services. As such it is NBFC and does not fall within the meaning of Corporate Person and the present petition as such is not maintainable. In this connection, the Learned Counsel for Corporate Debtor has relied on the letters received from Reserve Bank of India (RBI) dated 17.02.2014 and reply dated 18.03.2014 shown as Annexures 6 7 respectively to the additional counter filed on behalf of Corporate Debtor. 14. The undisputed fact is that the Corporate Debtor is a Guarantor in respect of the loan given to the Principal Borrower ws Amrit Jal Ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble NCLAT has observed in para 32 33 which is reproduced hereunder:- Para.32. 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 the 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'). Further, though there is a provision to file joint application under Section 7 by the 'Financial Creditors; no application can be filed by the 'Financial Creditors' against two or more Corporate Debtors' on the ground of joint liability (Principal Borrower and one Corporate Guarantor , or Principal Borrower or two Corporate Guarantors or one Corporate Guarantor and other Corporate Guarantor'), till it is sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel that object of the Corporate Debtor is rendering financial services. Therefore, Corporate Debtor is excluded from the definition of Corporate Person . It is true the financial services provider is excluded from the purview of Corporate Person within the meaning of Section 2 (20) of IBC, 2016. Section 3 (16) defines financial services and Section 3 (17) defines financial service provider. The contention of Corporate Debtor is that RBI recognised the Corporate Debtor as NBFC. The Corporate Debtor relied on the copy of the Articles of Association and contended that the object of the Company is to render financial services. The Corporate Debtor relied on the letter date 17.02.2014 addressed by RBI which is shown as Annexure-6 in the additional counter. In this letter addressed to Corporate Debtor, the RBI sought some clarification from the Corporate Debtor. The RBI has observed in part-2 of the letter which is as follows:- 2. On an examination of your financials, it appears that your Company qualifies to be a Non-Banking Financial Company and is accepting deposits in violation of Section 451A of the RBI Act, 1934 . RBI sought some information from the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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