TMI Blog2023 (3) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... hout providing an opportunity of hearing to the Corporate Debtor. As evident from the Order dated 03.08.2021, the hearing in the matter was interrupted due to a technical glitch. However, the Adjudicating Authority has proceeded to reserve its judgment on the said date. There are no merit in the Appeal to interfere with the order impugned passed by the Adjudicating Authority - appeal dismissed. - Company Appeal (AT) Insolvency No. 685 of 2021 - - - Dated:- 28-2-2023 - [ Justice Anant Bijay Singh ] Member ( Judicial ) And [ Ms. Shreesha Merla ] Member ( Technical ) For the Appellant : Mr. Diwakar Maheshwari and Mr. Shreyas Edupuganti , Advocates For the Respondents : Mr. Gaurav Mitra , Mr. Kartik Nagarkatti , Ms. Lavanya Pathak and Ms. Prakriti Joshi , Advocates for R-1. Mr. Dhiraj Mhetre, Mr. Sanampreet Singh , Mr. Arpit Choudhary , Ms. Sniti Tevari , Advocates for R - 2 . JUDGMENT Justice Anant Bijay Singh ; The instant Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (for short IBC) has been preferred by the Appellant being aggrieved and dissatisfied by the order dated 16.08.2021 passed by the Adjudicating Authority (National ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Borrower filed CP 190 of 2018 on 21.05.2018 before the Adjudicating Authority. As evident from Annexure 6 of the said CP 190 of 2018, the Principal Borrower had also listed about it committing default in repaying under both the said facilities (i.e., Incremental Debt facility and Rupee Loan Facility-II), for which the Corporate Debtor-APIL has stood as the Corporate Guarantee. iv) During the pendency of the Principal Borrower's CP 190of 2018, the Respondent No. 1 issued Loan Recall and Invocation 05.06.2018 to the Principal Borrower and the Corporate Debtor-APIL: In so far as the Principal Borrower is concerned, the Respondent No. 1 recalled the principal amount of INR 2459.80 crores being the outstanding as on 30.04.2018 under all the four facilities, namely, Rupee Loan-I Facility, Incremental Debt Facility, Rupee Term Loan-II Facility and Working Capital Facility; and In so far as the Corporate Debtor-AIPL is concerned, the Respondent no. 1 invoked both the guarantees under Incremental Debt and Rupee Loan Facility-II and raised a demand for Rs. 480.54 crores being the amount allegedly outstanding. v) After issuing the aforesaid Invocation Notice, the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which CP 141 of 2019 was filed against the Corporate Debtor-APIL) and such claims were admitted full by the IRP. In spite regular request being made by the Corporate Debtor-APIL before the Adjudicating Authority, the Respondent No. 1 did not place on record the said claim forms filed before the IRP of Principal Borrower. ix) Around April/May, 2019, the CoC of the Principal Borrower (which includes the Respondent no. 1) approved the resolution plan received in favour of the Principal Borrower from the Resolution Applicant-Adani Power by 69.08% present and voting. In view thereof, the Resolution Professional of Principal Borrower filed before the Adjudicating Authority I.A. No. 236 of 2019 in CP 190 of 2018 seeking approval of the resolution plan submitted by the Resolution Applicant in favour of Principal Borrower. Thereafter, the Adjudicating Authority approved the resolution plan of Resolution Applicant. In which para 9 of the approval order reflects that a restructured sum of INR 1,100 crores is provided under the resolution plan against the total admitted Secured Financial Creditors claims of INR 3,346.83 crores. Admittedly, INR 3,346.83 crores includes the original def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pleaded in case the petition is admitted, the liability must be restricted to balance amount. The above finding is also contrary to record as it has always been the consistent case of the Corporate Debtor that aforesaid CP ought to be dismissed as the balance amount is neither determined nor disclosed by the Respondent No. 1. In view of the above, the premise on which the impugned order came to be passed is factually incorrect. 5. It is further submitted that the Adjudicating Authority has erred by ignoring its duty to determine the existence of default. The Liability of a Guarantor (such as the Corporate Debtor) depends on the terms of the Guarantee Agreement. It is well-established law that upon the approval of the Resolution Plan, while the liability of the guarantor / surety does not get automatically discharged, the said liability is limited to the extent of the balance recoverable / remaining amount of default. In the above context, the Supreme Court in Lalit Kumar Jain v. Union of India, 2021 SCC Online SC 395 at para 122, has therefore, stated as follows: 122. It is therefore, clear that the sanction of a resolution plan and finality imparted to it by Section 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... binding on the Respondent No. 1, all the obligations of the Principal Borrower under any law or contract stands fully and finally settled. However, the above facts have been ignored by the Adjudicating Authority in the Impugned Order and there has been no finding / adjudication in this regard. 6. It is further submitted that without prejudice, the liability of the Guarantor, if any, is limited to the balance amount remaining post approval of Resolution Plan, which is neither disclosed nor determined by Respondent No. 1. in the event the Principal Borrower enters CIRP and a Resolution Plan has been approved in its favour, the claim of the creditors against the Guarantee is strictly limited to the balance outstanding, that too in terms of the Guarantee Deed executed between parties. This position in law is succinctly explained by the Hon ble Calcutta High Court in the case of Gouri Shankar Jain v. Punjab National Bank 2019 SCC Online Cal 7288 , has therefore, stated as follows: 26. Such Resolution Plan may be approved by the financial creditor in the meeting of the committee of creditors. Would such an approval mean that, the financial creditor entered into a composition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may deem fit, having regard to all relevant commercial and other considerations. Further, paragraph 3.4.7 of the Resolution Plan states as follows: 3.4.7 Notwithstanding anything contained in this Resolution Plan and without prejudice to Clause 3.4.4, any assignment of the Balance Guaranteed Financial Creditor Debt Assignment or extinguishment or restructuring of any financial liability of the Corporate Debtor will not result in the extinguishment of any claims that the Resolution Applicant and / or any the Financial Creditor may have against Avantha Group and/or its affiliates and/or any Third Party Security Provider under any contractual arrangements and/or as a result of any Credit Enhancements issued by the Avantha Group and/or its affiliates or such Third Party Security Provider. Further, notwithstanding anything contained in this Resolution Plan, it is hereby clarified that all the liabilities of the Corporate Debtor and/or any Third-Party Security Provider in respect of Necessary Bank Guarantees, are not settled, extinguished, disputed or released in any manner whatsoever either on account of the Resolution Plan being approved. In view of the foregoing, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice as the impugned order has been passed by the Adjudicating Authority without providing an opportunity of hearing to the Corporate Debtor. As evident from the Order dated 03.08.2021, the hearing in the matter was interrupted due to a technical glitch. However, the Adjudicating Authority has proceeded to reserve its judgment on the said date. Notwithstanding the above, the Adjudicating Authority has recorded, at paragraph 1 of the Impugned Order, various incorrect facts regarding the procedural history, which has been duly responded to by the Appellant at paragraph 7.16 of the Appeal and, the contents thereof are not repeated here for brevity. 8. The Ld. Counsel for the Respondent No. 1 / Axis Bank during the course of argument and in his Reply along with written submissions/additional written submissions submitted that the Appellant before this Tribunal as also before the Adjudicating Authority are premised on the basis that debt of the Corporate Debtor stands fully discharged pursuant to the Resolution Plan of the Principal Borrower. However, for the following reasons, the said contention is contrary not only to the approved Resolution Plan but also to the Deeds of Guarantee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer being approved. Thus, on the date of the invocation of the Guarantees by Respondent No. 1, the debt of the Corporate Debtor in its capacity as the Guarantor of the Principal Borrower had crystallized. However, despite being aware of the above facts, the Corporate Debtor did not make any claims against the Principal Borrower before the IRP, for any claims, that it may have against the Principal Borrower for the guaranteed debt. Thus, the Corporate Debtor owing to its own failure to make any claims against the Principal Borrower, cannot today dispute its liability and defeat the claims of Respondent No. 1 and the Consortium Lenders. 9. It is further submitted that the Resolution Plan of the Principal Borrower (at page 269 of the Appeal), as approved by the Ld. Adjudicating Authority, under Clause 3.4.7 provides, without any ambiguity, that .any assignment of the Balance Guaranteed Financial Creditor Debt Assignment or extinguishment or restructuring of any financial liability of the Corporate Debtor will not result in the extinguishment of any claims that the Resolution Applicant and/or the Financial Creditors may have against the Avantha group and/or its affiliates and/or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract. In view of the settled position in law, there is absolutely no aversion under the Code to simultaneous proceedings against the Principal Borrower and the Corporate Guarantor. b) Accordingly, since under the Resolution Plan of the Principal Borrower (as also recorded in the order dated 24.06.2019), the Secured Financial Creditors are to receive only 32.84% of the total amounts due and payable to them and especially since the Resolution plan has categorically kept the Deeds of Guarantees executed by the Corporate Debtor outside its purview~ Respondent No. 1 was at complete liberty to file the Section 7 Petition against the Corporate Debtor and the Impugned Order passed by the Ld. Adjudicating Authority deserves no interference. 11. Further submitted that Determination of the existence of default; a) The Appellant has also contended that the impugned order is to be set aside since the Adjudicating Authority has failed to determine the existence of default. It is in this regard su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of forming the COC: Sr. No. Financial Creditors Amount Claimed Amount Admitted Voting Shar4e (In percentage) 1 Axis Bank Limited 5470829057 1,25,91,02,503.43 26.48 2 Bank of India 508604260.42 21,91,02,503.43 4.61 3 State Bank of India 16899284 1,68,99,284.00 0.36 4 UCO Bank 4814296425.3 97,85,191.19 0.21 5 Rural Electrification Limited 5771143007 3,25,00,00,000.00 68.35 Total 16,58,17,72,033.72 4,75,48,89,482.00 100 14. After hearing the parties and going through the pleadings made on behalf of the parties, we ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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