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TMI Blog2024 (8) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... judicating Authority (National Company Law Tribunal, Ahmedabad Bench-II). In CA(AT)(INS) No. 1204 of 2024, order under challenge is order dated 30.04.2024 passed in CP(IB) No. 360/NCLT/AHM/2020 and in CA(AT)(INS) No. 1205 of 2024, order under challenge is order dated 30.04.2024 passed in CP(IB)No. 361/NCLT/AHM/2020. By the impugned orders, the Adjudicating Authority has admitted the Section 95 petitions filed by Alchemist Asset Reconstruction Company Limited-Financial Creditor and initiated Insolvency Process against both the Appellants-Personal Guarantors (Paresh Parekh and Manish Patel). Aggrieved by the impugned orders, the present appeal has been filed by both the Appellants. 2. Both the Appellants are Personal Guarantors of the Corporate Debtor-Sort India Enviro Solutions Ltd. and Alchemist Asset Reconstruction Company Limited-Financial Creditor having filed applications under Section 95 of IBC against both the Personal Guarantors, it shall be sufficient to refer to the pleadings and facts in CA(AT)(INS) No. 1204 of 2024 for deciding these two Appeals. 3. The brief facts of the case which are relevant to be noticed are as follows:- Sort India Enviro Solutions Ltd. (SIESL)- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Process of the PG under Section 95 of the IBC in CP(IB) No. 360/NCLT/AHM/2020 and CP(IB) No. 361/NCLT/AHM/2020 in which applications, Resolution Professional ('RP' in short) was appointed. The Respondent No.2-RP filed its Report under Section 99 of IBC on 13.10.2021 recommending the admission of the Section 95 applications. The Adjudicating Authority after hearing the parties passed the impugned order on 30.04.2024 admitting the applications and admitted the PG into Insolvency Process. Aggrieved by the impugned order, the present appeal has been preferred. 4. We have heard Shri Atul Singh, Ld. Counsel for the Appellant- Personal Guarantors and Ms. Varsha Banerjeee, Ld. Counsel representing Financial Creditor- Respondent No.1 in both Company Appeals. 5. Making submissions on behalf of the Appellant, the Ld. Counsel submitted that the Adjudicating Authority did not provide sufficient opportunity to the Appellant to present its defence while admitting the Section 95 application. It was submitted that the Ld. Counsel appearing on behalf of the Appellant before the Adjudicating Authority was unable to present the arguments effectively due to technical glitch and connectivity err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement relied upon by the Respondent No.1 to claim debt and default was not only incomplete but also fabricated and morphed. By submitting incomplete and defective Form C under Rule 7(2) of the Insolvency Bankruptcy (Application to Adjudicating Authority for Insolvency Process of Personal Guarantor to Corporate Debtor) Rules, 2019 under Section 95 of IBC, the mandatory provision of disclosing the details/documents that evidence debt and default also stood unmet. 8. Refuting the contentions raised by the Appellant, the Ld. Counsel for Respondent No.1 contended that the impugned order was a wellreasoned order. Denying that the principles of natural justice were violated in any manner, it was submitted that the Adjudicating Authority had passed the impugned order after having duly considered all the issues and contentions raised by the Appellant on the Section 95 petition filed by Respondent No.1. It was also submitted that the Adjudicating Authority, in accordance with the statutory scheme of IBC, had directed the RP to submit a Report under Section 99 of IBC. After examining all materials/documents, the RP had filed a detailed Report demonstrating the existence of debt and defaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant by the Adjudicating Authority. (ii) Whether the invocation of Deed of Guarantee of the PG stood circumscribed by the Put Option Agreement. (iii) Whether the Appellant-PG was entitled to object to the Assignment Agreement between RBL/original lender and Respondent No.1. 14. To answer the first question as to whether the impugned order passed by the Adjudicating Authority without hearing the Appellant stood vitiated on grounds of violation of the principles of natural justice, we would like to first notice the orders of the Adjudicating Authority, passed on 15.04.2024, whereby the matter was reserved for hearing. The order of 15.04.2024 reads as follows: "None present for the Resolution Professional, but Ld. Counsel for applicant was present. It is a old matter and RP had filed report long back and served copy on respondents. Learned Counsel for the respondent who was present online is not visible and not audible when asked to argue the matter. Learned Counsel for the respondent is directed to file written submissions not more than two to three pages today itself. Order is reserved." 15. On reading the above order, there is no ambiguity that the Ld. Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the contention of the Appellant that there was violation of the principles of natural justice by the Adjudicating Authority. 18. We are of the considered view that remanding the matter back to the Adjudicating Authority would be a time-consuming process and frustrate the time-lines set under IBC. At the same time to allay the sentiments expressed by the Appellant that they were precluded from agitating their cause effectively before the Adjudicating Authority, we have given them sufficient opportunity to present their case in an elaborate manner before us. We have also taken particular care to consider the additional points raised in the additional affidavit for the satisfaction of the Appellant. 19. Now coming to the other two questions outlined above, we find both these issues to be inextricably intertwined and therefore wish to consider them conjointly after outlining the main provisions contained in the Term Loan Agreement, Assignment Agreement, Deed of Guarantee and the Put Option Agreement. 20. At this stage, we wish to go to the root of the matter and look into the Term Loan Agreement of 28.11.2015 which was entered between the Corporate Debtor and the RBL/Original L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l other rights of the Assignor in relation to such Security Interests, pledges and/or guarantees. The Assignor shall transfer/deliver or cause to be transferred/ delivered or hold for and on behalf of the Assignee, all such original/photocopied (whichever is available) documents, deeds and/or writings, including but not limited to the Financing Documents, and produce the same promptly upon any request by the Assignee." ( Emphasis supplied ) Clearly this Assignment Agreement was purely between the assignor and the assignee and was flowing out from Clause 14 supra of the Term Loan Agreement. 22. Next, we proceed to look into the Deed of Guarantee which was executed by the PG with the Original Lender on 28.11.2015 and 17.10.2016 which clearly preceded the Assignment Agreement. Paras 2 and 14 of the Deed of Guarantee are relevant which clearly state that the borrower shall forthwith on demand, without any demur or protest, irrevocably and unconditionally pay to Bank the whole of such guaranteed sum. In other words, the guarantee was irrevocable and unconditional on demand. The relevant clauses 2 and 14 are as reproduced below: "2. If at any time default shall be made by the Bor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antor/s to pay the Guaranteed Sum together with Interest as well as costs charges and expenses and/or other monies for the time being due to Bank in respect of the Loan or under the Loan Agreement, or any of them without requiring Bank to realise from the Borrower the amount due to Bank in respect of the Loan and/or requiring Bank to enforce any remedies or securities available to Bank." ( Emphasis supplied ) 24. More significantly, we focus on Clauses 31 and 32 of the Deed of Guarantee which clearly stipulate that the Lender shall have the power to assign the Deed of Guarantee but denies any such right to the Borrower. The relevant clauses are as reproduced below: " 31. The Guarantor/s shall not assign or transfer any of their rights and/or obligations under this Deed. No delay in exercising or omission to exercise any right, power or remedy accruing/available to Bank upon any default or otherwise hereunder or any other security documents/letters of guarantee shall impair or prejudice any such right, power or remedy or shall be construed to be a waiver thereof or any acquiescence therein and any single or partial exercise or any right, power or remedy hereunder shall not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsistence of the Facility Agreement on the occurrence of a Put Event, the Bank shall be entitled to exercise the Put Option be delivering the Put Option Notice to Put Option Party. (b) The delivery of the Put Option Notice shall constitute a binding agreement and obligation of Put Option to purchase or cause the purchase of the Pledged Securities." 26. It is the case of the Appellant that PG can be approached to make payment only after the bank has exhausted all its possible claims against borrower. It is contended by the Appellant the Put Option agreement comes into force when any default occurs under facility agreement. Submitting that Put Option means the obligation of the Put Option Party to buy the Pledged Securities on the happening of the put event, it has been contended by the Appellant that in terms of this Agreement when the borrower defaults under the loan agreement, then the lender was required to approach Agnus Capital LLP which is put option party to discharge its obligation of borrower. It is also vehemently contended that Assignment Agreement is not acceptable to the Appellant as neither the Corporate Debtor nor the Personal Guarantor were party to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f debt repayment. It is an admitted fact that the Corporate Debtor did not discharge the debt. It is a settled position in law that under Section 128 of the 'Indian Contract Act', the liability of the surety is coextensive with that of principal debtor unless it is otherwise provided by the contract. This legal precept has been laid down by the Hon'ble Supreme Court in the matter of Maharashtra State Electricity Board, Bombay Vs. Official Liquidator, High Court, Ernakulam and Anr. (1982) 3 SCC 358. In the present case, once the principal borrower failed to discharge the debt, the liability of the guarantor got triggered on the invocation of guarantee. By virtue of this Deed of Guarantee, the PG was therefore mandatorily obliged to honour its guarantee. 30. However, the question which requires to be answered as outlined at Sl no (ii) at para 12 supra before us is whether the invocation of Deed of Guarantee of the PG stood circumscribed by the Put Option Agreement and whether until non-exercise of the Put Option Agreement by the lender, the surety stood absolved of its liability. Keeping in view that the Deed of Guarantee was an unconditional and irrevocable guarantee in terms of Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may acquire financial assets of any bank or financial institution- (a) .... (b) by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and conditions as may be agreed upon between them. ..... (2) If the bank or financial institution is a lender in relation to any financial assets acquired under sub- section (1) by the asset reconstruction company, such 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. 34. Section 5(1) begins with the non-obstante clause and is an enabling provision empowering an Asset Reconstruction Company to acquire financial assets in the manner provided therein. The present Assignment Agreement between the original lender/RBL and Respondent No.1 which being an asset reconstruction company fell within the ambit of Section 5(1)(b). Section 5(2) further contains a deeming clause which provides that an Asset Reconstruction Company on such acquisition of financial assets from the original lender will be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iced in the Report of the RP as well as by the Adjudicating Authority. 37. The above contentions of the Appellant have been vehemently denied by Respondent No.1 and emphatically asserted that the Appellant was a defaulter from whom an amount of Rs. 32.92 cr was due and payable as on the date of filing of personal insolvency proceedings. Without satisfying financial debt of Rs.32.92 crore, the Appellant has tried to raise frivolous plea of fraudulent bank statements and defective Form C to deny the legal rights and remedies of Respondent No.1. An attempt has also been made by the Appellant to mislead the Adjudicating Authority by adverting to the receipt of certain payment from Agnus so as to wriggle out of the personal insolvency proceedings. 38. When we look at the Report of the RP recommending the Section 95 application to the Adjudicating Authority, we find that the RP has gone through a maze of documents before finalising its recommendation. The RP also provided fair and reasonable opportunity to the Appellant to prove the repayment of debt which had been claimed by Respondent No.1 as unpaid. The RP submitted its Report as placed at pages 346-356 of the Appeal Paper Book ('AP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We must add here that the question of limitation was not pressed by the Appellant before us. 40. As regards the issue of defective Form C raised by the Appellant, we notice that the RP has observed that the Insolvency Petition has been filed in the requisite form in terms of Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantor to Corporate Debtors) Rules, 2019, supported by requisite fee and documents. Form C is the statutory form in which an application is required to be submitted by a creditor who institutes an application for the initiation of the insolvency resolution process. This Form includes particulars of the applicant, particulars of the guarantor, particulars of the debt and particulars of the insolvency professional and enables furnishing of such information as lies within the knowledge of the creditor. When we see the Form C furnished by the Respondent No. 1 as placed at pages 317-324 of the APB, we find that all these details have been duly filled up. As regards the contention that fabricated and morphed bank statements were submitted by the Respondent No. 1 which bordered on fraud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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