TMI Blog2023 (5) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... t No.1 has to be deemed to be lender and is thus entitle to exercise all rights which were vested in the lender. Section 5 is an enabling provision to empower the Asset Reconstruction Company to acquire financial assets in the manner provided in Sub-section (1). The Assignment Agreement dated 18.01.2021 was in accordance with Section 5(1)(b) i.e. by entering agreement with State Bank of India. Sub-section (2) of Section 5 contains a deeming clause. Sub-section (2) provides that Asset Reconstruction Company on such acquisition be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company. When the legislature uses the deeming fiction it is always for purpose and object. Hon ble Supreme Court had occasion to consider provision of Section 43 of the Indian Contract Act, 1872 which contains the deeming provision and on fulfilling the ingredients as provided in the statute, legal fiction will come into play, irrespective whether the transaction was in fact intended or even anticipated to be so - Hon ble Supreme Court in Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited vs. Axis Bank Ltd. Ors. [ 2020 (2) TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the observation made in the judgment upholding the view of the Adjudicating Authority that document was unregistered hence the Resolution Professional rightly ignored the claim, does not lend any support to the case of the Appellant in the present case - The present is a case of an Asset Reconstruction Company where for acquisition of asset by an Asset Reconstruction Company an particular manner and procedure is prescribed and when asset is acquired as per provisions of Section 5 of SARFAESI Act, deeming section will come into play. Application under Section 7 having admitted against the Principal Borrower, it was not open for the Respondent No.1 to file application against the Corporate Guarantor since two simultaneous proceedings under Section 7 cannot be proceeded with - HELD THAT:- In the case of Dr. Vishnu Kumar Agarwal vs. Piramal Enterprises Ltd. [ 2019 (2) TMI 316 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] it was held that though there is a provision to file joint application under Section 7 by the 'Financial Creditors', no application can be filed by the 'Financial Creditor' against two or more 'Corporate Debtors' on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. has been admitted. Brief facts of the case necessary to be noticed for deciding this Appeal are: i. State Bank of India sanctioned various credit facilities in favour of Action Ispat and Power Private Limited (Principal Borrower). In the year 2013, Master Restructuring Agreement was executed between the State Bank of India and several other Banks with the Principal Borrower. The Corporate Debtor M/s Nikhil Footwear Pvt. Ltd. executed a Deed of Guarantee on 30.09.2013 in favour of SBICAP Trustee Company Ltd. Another Master Restructuring Agreement was executed on 29.06.2016. ii. Company Petition CP (IB) No.1096 of 2018 was filed by the State Bank of India against the Principal Borrower which was admitted on 23.03.2022. iii. The State Bank of India entered into an agreement on 18.01.2021 with Respondent No.1 assigning debt owned by the Principal Borrower. iv. Respondent No.1 filed Company Petition (IB)/106/PB/2022. Notice was issued. Corporate Debtor appeared and filed its reply to Section 7 application. Rejoinder affidavit was also filed by the Financial Creditor. v. The Adjudicating Authority after hearing both the parties, by the impugned order dated 28.02.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout any basis. The liability of the Corporate Guarantor is co-extensive with the Principal Borrower. The Financial Creditor is fully entitled to initiate Section 7 proceedings both against the Principal Borrower and the Corporate Guarantor. The Deed of Guarantee executed by the Corporate Debtor provides that the Guarantor shall pay to the Lenders the principal amount along with interest in case of default by Action Ispat. Pursuant to the Assignment Agreement, the MCA has also modified the charge of the Corporate Debtor in favour of the Respondent No.1, which were earlier registered in favour of SBICAP. Learned Adjudicating Authority has rightly initiated proceedings under Section 7 against the Corporate Debtor. 4. We have considered the submissions of learned counsel for the parties and perused the record. 5. The Assignment Agreement dated 18.01.2021 was entered between the State Bank of India as Assignor and Respondent No.1 as Assignee. The Assignment Agreement provides that Assignee is a securitization and asset reconstruction company registered in pursuant to Section 3 of the SARFAESI Act, 2002. The State Bank of India by the Assignment Agreement has assigned the loan t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial institution under sub-section (1) in favour of the asset reconstruction company acquiring financial assets for the purposes of asset reconstruction or securitisation shall be exempted from stamp duty in accordance with the provisions of section 8F of the Indian Stamp Act, 1899 (2 of 1899): Provided that the provisions of this sub-section shall not apply where the acquisition of the financial assets by the asset reconstruction company is for the purposes other than asset reconstruction or securitisation.] (2) If the bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the 1[asset reconstruction company], such 1[asset reconstruction company] shall, on such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets. 2[(2A) If the bank or financial institution is holding any right, title or interest upon any tangible asset or intangible asset to secure payment of any unpaid portion of the purchase price of such asset or an obligation incurred or credit otherwise provided to enable the borrower to acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imagination to boggle when it comes to the inevitable corollaries of that state of affairs. These observations have been followed time out of number by the decisions of this Court. (See, for example, M. Venugopal v. Divisional Manager, LIC: (1994) 2 SCC 323 at page 329). *** *** *** 94. Although a deeming provision is to deem what is not there in reality, thereby requiring the subject-matter to be treated as if it were real, yet several authorities and judgments show that a deeming fiction can also be used to put beyond doubt a particular construction that might otherwise be uncertain. Thus, Stroud's Judicial Dictionary of Words and Phrases (7th Edition, 2008), defines deemed as follows: Deemed - as used in statutory definitions to extend the denotation of the defined term to things it would not in ordinary parlance denote , is often a convenient device for reducing the verbiage or an enactment, but that does not mean that wherever it is used it has that effect; to deem means simply to judge or reach a conclusion about something, and the words deem and deemed when used in a statute thus simply state the effect or meaning which some matter or things ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on v. McMillan : 1954 SLT 109 (Scot)) 16. Whether the word deemed when used in a statute established a conclusive or a rebuttable presumption depended upon the context (see St. Leon Village Consolidated School District v. Ronceray: (1960) 23 DLR (2d) 32 (Can)). . I regard its primary function as to bring in something which would otherwise be excluded. (Per Viscount Simonds in Barclays Bank Ltd. v. IRC: 1961 AC 509 at AC p. 523.) Deems means is of opinion or considers or decides and there is no implication of steps to be taken before the opinion is formed or the decision is taken. [See R. v. Brixton Prison (Governor), ex p Soblen: (1963) 2 QB 243 at QB p. 315.] 22.3. On a conspectus of the principles so enunciated, it is clear that although the word deemed is employed for different purposes in different contexts but one of its principal purpose, in essence, is to deem what may or may not be in reality, thereby requiring the subject-matter to be treated as if real. Applying the principles to the provision at hand i.e., Section 43 of the Code, it could reasonably be concluded that any transaction that answers to the descriptions cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution and non- ARC is erroneous. What appears from Paragraph 12 of the Impugned Order is that the Resolution Professional claimed before the Adjudicating Authority that the Applicant is a non-financial institution. Learned Counsel for the Appellant claimed that along with written-submissions filed on 23rd July, 2020 before the Adjudicating Authority vide Annexure A9 Page 300. The Appellant had filed copy of the NBFC Certificate as has now been filed in the Appeal at Page 92. Considering the document of Appellant being NBFC, the observations of the Adjudicating Authority in this regard may have to be ignored where it accepted submission made by the Resolution Professional that the Appellant is non- financial institution and non-ARC. The Resolution Professional is now no more claiming that Appellant is non-financial institution. 11. A perusal of the above observation indicate that although the application was held to be NBFC, however, there was no case that applicant was Asset Reconstruction Company. Assignment in the above case was not in favour of any Asset Reconstruction Company. Hence, the observation made in the judgment upholding the view of the Adjudicating Authority th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, the Section 7 proceeding has already been initiated against another Guarantor i.e. Micro Stock Holding Pvt. Ltd., which order is still subsisting. We, thus, are of the view that argument of the Appellant that application under Section 7 by Respondent No.1 Assignee of the State Bank of India was not maintainable, cannot be accepted. 14. Now, we come to last submission of learned counsel for the Appellant that application under Section 7 having admitted against the Principal Borrower, it was not open for the Respondent No.1 to file application against the Corporate Guarantor since two simultaneous proceedings under Section 7 cannot be proceeded with. Learned counsel for the Appellant has placed reliance on judgment of this Tribunal in 2019 SCC OnLine NCLAT 542, Dr. Vishnu Kumar Agarwal vs. Piramal Enterprises Ltd. , where in Para 32 following observations have been made by this Tribunal: 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 same set of claim application un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act Act. As a consequence of such default, the status of the guarantor metamorphoses into a debtor or a corporate debtor if it happens to be a corporate person, within the meaning of Section 3(8) of the Code. For, as aforesaid, expression default has also been defined in Section 3(12) of the Code to mean nonpayment of debt when whole or any part or instalment of the amount of debt has become due or payable and is not paid by the debtor or the corporate debtor, as the case may be. 16. The scheme of I B Code, in view of law laid down by the Hon ble Supreme Court in Laxmi Pat Surana vs. Union of India Anr. , we are not persuaded to follow judgment of this Tribunal in Dr. Vishnu Kumar Agarwal (Supra). 17. It is further relevant to notice that no submission have been advanced regarding debt or default. Debt and default by the Corporate Debtor is an admitted fact which has not been questioned or contested. The Adjudicating Authority having returned the finding that there exist financial debt and default, no error has been committed by the Adjudicating Authority in admitting Section 7 application. We, thus, do not find any error in the impugned order admitting Section 7 appli ..... 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