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TMI Blog2024 (5) TMI 1524X X X X Extracts X X X X X X X X Extracts X X X X ..... by name 'Star Panel Boards Limited' which comes to be incorporated as a public Company in 2011 and its name was then changed to Associate Décor Limited ('the Company for short). Later the petitioner was suspended from the Company. Respondents 1 to 3 Banks acting as consortium of Banks enter into term loan agreements with the Company to grant term loan facilities. The loan becomes sticky. The consortium of Banks later began legal proceedings against the Company initiating proceedings under sub-section (2) of Section 13 of the SARFAESI Act by filing original application before the Debt Recovery Tribunal, Bengaluru in O.A. No. 804 of 2017. The 2nd respondent then initiates proceedings under Section 7 of the Insolvency and Bankruptcy Code ('the Code' for short) against the Company and the proceedings under the Code are under progress before the Tribunal. On 11-08-2020, respondent No. 1 issues a notice to the petitioner seeking to invoke the personal guarantee executed by the petitioner collectively on 10-07-2014. Despite the reply of the petitioner, demand notices come to be issued under the Code without replying to the defence of the petitioner to the aforesaid notices. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment in the case of DILIP B. JIWRAJKA (supra) does not delve with regard to maintainability of the petition before the Tribunal. Since maintainability cuts at the root of the matter, the petition cannot be dubbed as premature. It is an admitted fact that the petitioner is no longer a personal guarantor and, therefore, the Tribunal would not get jurisdiction is his submission. 7. The learned senior counsel for the respondents would further submit that his submissions be taken as objections to the petition and that is all that he has to say against the petition. Therefore, though the matter was listed for preliminary hearing, with consent of parties the matter is taken up, and heard for its final disposal. 8. I have given my anxious consideration to the submissions made by the respective learned senior counsel and have perused the material on record. 9. The afore-narrated facts are not in dispute. The petitioner enters the scene as a guarantor executing a deed of guarantee on 10-07-2014. In the deed of guarantee, the name of the petitioner figures at Sl.No.3 and it reads as follows: "THIS DEED OF GUARANTEE made and executed at Bangalore on this the 10th Day of July 2014 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities for a further period of -12- months i.e. up to 09.05.2017 as per detailed in Annexure A attached herewith. Please note that any advance granted to you under the aforesaid credit facilities is repayable on demand and the terms and conditions of the same are subject to change without prior notice at the discretion of the Bank. Please also note that the Bank reserves the right to discontinue the facilities/advances/loans and to withhold/stop any disbursements without giving any notice, In case of non-compliance/breach of any of the terms and conditions stipulated herein and from time to time as also in the relevant documents or any Information/particulars furnished to us found to be incorrect or in case of any development or situation wherein in the opinion of the Bank its interest will be/is likely to be prejudicially affected by such continuation or disbursements. You are also requested to note that the credit facilities sanctioned to you are valid up to 09.05.2017 subject to annual review and in case facilities could not be reviewed on or before due date i.e. 09.05.2017 due to non submission of financial data/ statements like Balance Sheet, CMA forms etc. well before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court in Writ Petition No. 483 of 2023 which may not be germane to be considered at this juncture. The Tribunal on 16-02-2024 passes the following order: "1. This is a Company Petition filed by the Bank of Baroda ("the Financial Creditor") under Section 95 (1) of the I&B Code, 2016 read with Rule 7(2) of the I&B (Application Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, seeking to initiate Insolvency Resolution Process in respect of Mr. Farooq Ali Khan ("the Personal Guarantor") for a default of amount of Rs. 2,58,60,17,543.61/-. 2. It is stated that the Petitioner has separately filed the recovery application being O.A No. 629 of 2021 before the Debt Recovery Tribunal-I Bengaluru and the same is pending. The Personal Guarantor has not paid the outstanding amount and therefore continues to be default till the date of filing of this application. 3. Heard the Ld. Counsel appearing for the Petitioner and Ld. Counsel for the Respondent/Personal Guarantor. 4. During the hearing, the Ld. Counsel for the Personal Guarantor raised objection regarding the limitation and stated that the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or proceeding pending in respect of any debt shall be deemed to have been stayed; and b. the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt. 11. The Resolution Professional is directed to serve a copy of his report on the Personal Guarantor. List the case for further consideration on 20.03.2024. Sd/- Sd/- (MANOJ KUMAR DUBEY) (K. BISWAL) MEMBER (TECHNICAL) MEMBER (JUDICIAL)" It is this order that has driven the petitioner to this Court. 10. Whether the proceedings against the petitioner could be maintainable or otherwise is the question that needs consideration. This issue need not detain this Court for long or delve deep into the matter. This Court in a judgment rendered on 06-03-2024 in the case of M/s MANYATA REALLTY v. REGISTRAR, NATIONAL COMPANY LAW TRIBUNAL [W.P.No.26977 of 2023 & connected cases] has held as follows: ".... .... ... 8. I have given my anxious consideration to the submissions made by the respective learned counsel and perused the material on record. In furtherance whereof, the only issue that falls for consideration is, "Whether a petition against a partnership firm or its Directors is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, 2013. The Code nowhere brings in a partnership firm or directors who are individuals of the said partnership firm under the ambit of the Code. 11. Part III of the Code deals with 'Insolvency resolution and bankruptcy for individuals and partnership firms'. For partnership firms and individuals the Adjudicating Authority is the Debts Recovery Tribunal and the Appellate Authority is the Debts Recovery Appellate Tribunal. Part III runs from Section 78 to Section 187 in the Code. Therefore, the entire part deals with insolvency resolution and bankruptcy for individuals and partnership firms. The petitioners in one of the petitions is a partnership firm and the other are individuals i.e., the Directors of the partnership firm. The jurisdiction against the said firm or individuals is clearly before the Debts Recovery Tribunal. 12. Certain amendments are brought in by the Government of India to the Code in terms of a notification dated 15-11-2019. The notification reads as follows: "THE GAZETTE OF INDIA: EXTRAORDINARY [PART-II SEC. 3(ii) MINISTRY OF CORPORATE AFFAIRS NOTIFICATION New Delhi, the 15th November, 2019 S.O. 4126(E). - In exercise of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership debt owed to him for initiating an insolvency resolution process against- (a) any one or more partners of the firm; or (b) the firm. (3) Where an application has been made against one partner in a firm, any other application against another partner in the same firm shall be presented in or transferred to the Adjudicating Authority in which the first mentioned application is pending for adjudication and such Adjudicating Authority may give such directions for consolidating the proceedings under the applications as it thinks just. (4) An application under sub-section (1) shall be accompanied with details and documents relating to- (a) the debts owed by the debtor to the creditor or creditors submitting the application for insolvency resolution process as on the date of application; (b) the failure by the debtor to pay the debt within a period of fourteen days of the service of the notice of demand; and (c) relevant evidence of such default or non-repayment of debt. (5) The creditor shall also provide a copy of the application made under sub-section (1) to the debtor. (6) The application referred to in sub-section (1) shall be in such form and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, to nominate a resolution professional for the insolvency resolution process. (4) The Board shall nominate a resolution professional within ten days of receiving the direction issued by the Adjudicating Authority under sub-section (3). (5) The Adjudicating Authority shall by order appoint the resolution professional recommended under sub-section (2) or as nominated by the Board under sub-section (4). (6) A resolution professional appointed by the Adjudicating Authority under sub-section (5) shall be provided a copy of the application for insolvency resolution process." The effect of filing of a petition under Sections 94 or 95 of the Code is the immediate kicking in of Section 96 of the Code. Section 96 supra has some serious consequences. The moment a petition is filed under Section 95 of the Code, interim moratorium is axiomatic. Interim moratorium places any corporate debtor in a state of stillness, as found in 96(1)(b) of the Code. Section 96(2) of the Code mandates that when an application is made under Section 95, it shall operate against all the partners of the firm as on the date of the application. Yet another axiomatic consequence of a petition being reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions of the learned senior counsel is to be accepted, then it would be diluting the concept of jurisdiction itself, which dilution this Court would never even attempt to make. Therefore, if the petition is not fileable before the Tribunal, it cannot be allowed to be proceeded up to the stage of whether it is entertainable. A non-fileable petition has dire consequences, let alone its entertainment. Therefore, such proceedings which are on the face of it, de hors jurisdiction must be nipped in the bud and should never be allowed to germinate any further. 17. Learned senior counsel Sri S. Basavaraj representing the respondent/Company has again strenuously contended that the agreements entered into between the petitioners and the would clearly indicate that it is tacit guarantee that they have stood for. Merely because they are a partnership firm, the jurisdiction of the Tribunal cannot be taken away. The submission is again unacceptable, on a plain reading of the agreement. The relevant clauses of the agreement reads as follows: ".... .... .... V. NOW THIS AGREEMENT WITNESSES AS FOLLOWS: 1) The Parties hereto agree that out of the amount of Rs. 183,50,00,000/= ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Owners proving such compliance of the condition precedent to the Second Party by furnishing documentary evidence of the same. 5) In the event of failure on the part of the Owner in complying with the conditions precedent in terms of clause 2 above before 31st March 2013, then in such event, the Second Party shall become entitled to seek repayment of the amounts treated as Interest bearing refundable deposits under this agreement forthwith without any further delay and the Owner shall be liable to repay forthwith to the Developer, the entire sum of Rs. 40,00,00,000/- (Rupees Forty Crores only) alongwith interest due and payable as on that day; 6) This Agreement shall be read in conjointly with the Memorandum of Understanding dated 23.12.2009 and Joint Development Agreements dated 29/10/2010, 31/3/2011 & 26/8/2010 and save and except what has been agreed herein, all the other terms and conditions of the Memorandum of Understanding dated 23.12.2009 and Joint Development Agreements dated 29/10/2010, 31/3/2011 & 26/8/2010 shall continue to be binding: IN WITNESS WHEREOF, the PARTIES have executed this AGREEMENT in the presence of the Witnesses attesting hereunder: &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment considered in the aforesaid judgment. Therefore, if the petitioner is no longer a personal guarantor, proceedings before the Tribunal against him, depicting him to be a personal guarantor would not be maintainable. 12. The learned senior counsel for the 1st respondent has placed heavy reliance upon the judgment of the Apex Court in DILIP B. JIWRAJKA to buttress his submission that the proceeding before the Tribunal is automatic. The learned senior would place reliance on the following paragraph: ".... .... ... V. Conclusion: 86. We summarise the conclusion of this judgment below: (i) No judicial adjudication is involved at the stages envisaged in sections 95 to 99 of the Insolvency and Bankruptcy Code; (ii) The resolution professional appointed under section 97 serves a facilitative role of collating all the facts relevant to the examination of the application for the commencement of the insolvency resolution process which has been preferred under section 94 or section 95. The report to be submitted to the adjudicatory authority is recommendatory in nature on whether to accept or reject the application; (iii) The submission that a hearing should be condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal proceedings. Therefore, the provisions i.e., Sections 95 to 100 of the Code were held to be not unconstitutional in a challenge to the constitutional validity. There can be no qualm about the principles laid down by the Apex Court as to the issue whether the petition would even be maintainable before the Tribunal. The Apex Court was not considering a petition that was not maintainable before the Tribunal, as only under two circumstances this Court has considered whether the proceedings before the Tribunal would be maintainable. Non-maintainability of it would cut at the root of the matter. 13. The judgment in the case of DILIP B. JIWRAJKA or the judgment in the cases of (i) STATE BANK OF INDIA v. V. RAMAKRISHNAN[(2018) 17 SCC 394], and (ii) BANK OF BIHAR LIMITED v. DAMODAR PRASAD [AIR 1969 SC 297] would not become applicable to the facts of the case. A caveat - This Court has considered maintainability of a petition before the Tribunal and not before any other fora. Proceedings before any other fora is not the scope of the present petition. 14. For the aforesaid reasons, the following: O R D E R (i) Writ Petition is allowed and the order dated 16-02-2024 passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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