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2019 (7) TMI 1588 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - whether the Corporate Debtor is discharged by virtue of novation in the original Contract as in the light of the Section 133 of the Indian Contract Act 1872? - HELD THAT - It is settled position of law that liability of Principal Borrower and surety/ guarantor is joint and several and thus Lender can chose action against principal borrower or surety either separately or jointly. However in the instant case as stated supra that the Petitioner has already filed suit before the Hon ble Delhi High Court against Principal Borrower and other individual guarantors and also the present Corporate Debtor/ Corporate Guarantor and obtained consent Decree against the Principal Borrower personal Guarantors and the instant Corporate Debtor. However consent decree is stated to be under review. The Petitioner has not explained the reasons as to why it has not prosecuted the judgement and Decree it obtained as early as 2015 till now and as to why it has selectively chose only the Corporate Debtor herein leaving other personal Guarantors principal borrower. It is settled position of law that Law of Limitation would apply to proceedings under Code. The Petitioner has filed a suit before the Delhi High Court against the Principal Borrower. Personal Guarantors as well as the present Corporate Debtor. Therefore initiating proceedings under the Code against the Corporate Debtor amounts to parallel proceedings against the principle of double jeopardy. Admittedly cause of action both in the Suit before Hon ble High court and in the present case is on set of documents. The Adjudicating Authority cannot interfere with powers of the Hon ble High Court Delhi and it is for the Hon ble High Court of Delhi to take a decisions on review pending wherein among other grounds the issue of referring the matter to the Arbitration is also raised. As per Section 3 (12) default means non-payment of debt when whole or any pa.rt or instalment of the amount of debt has become due and payable and is not (paid) by the Debtor or the Corporate Debtor as the case may be; and as per Section 3(11) debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt . In the instant case where the debt in question has become due against principal borrower as well as Personal Guarantors and the Corporate together. Therefore they have filed suit before the Hon ble High court and with consent of parties the Hon ble High court of Delhi passed order dated 22.05.2015 06.08.2015 in CS(OS)No. 1030 of 2012. Therefore whether the Debt as payable as per the order of Hon ble High court of Delhi is payable or not depends on decision of Hon ble Court in pending Review. Admittedly the petitioner has filed suit against M/S. BT FC Private Limited and Mr. M.V. Muralidhar who is Managing Director personal Guarantor along with his family members apart representing M/S. Bangalore Dehydration Drying Equipment Co. Pvt. Ltd. which also stood Guarantor. Therefore leaving the principal Borrower its personnel guarantors choosing to invoke provisions of the Code only against Corporate Debtor as if it is only remedy available to it to recover its outstanding arnount is not all tenable and the same is against principle of natural justice. The Adjudicating is of the considered opinion that the instant Company petition suffers parallel proceedings as suit was filed against the Principal Borrower and Guarantors namely Mr. M.V. Murlidhar as Managing Director and Guarantor Mrs. Padma Muralidhar as Guarantor and Ms. Sowmya Muralidhar as another Guarantor apart from the instant Corporate Guarantor and invoking provisions of the Code only against the Corporate Debtor is not tenable - Petition dismissed.
Issues Involved:
1. Maintainability of the Company Petition against only the Corporate Guarantor. 2. Debt and default under Section 7 of the IBC, 2016. 3. Limitation period under Article 137 of the Limitation Act. 4. Arbitration clause in the Deed of Guarantee. 5. Parallel proceedings and the principle of double jeopardy. Issue-wise Detailed Analysis: 1. Maintainability of the Company Petition against only the Corporate Guarantor: The tribunal examined whether the petition can be maintained against the Corporate Guarantor alone, leaving out the Principal Borrower. It was noted that the Financial Creditor had already filed a suit before the Hon’ble Delhi High Court against the Principal Borrower, personal guarantors, and the Corporate Guarantor, resulting in a consent decree. The tribunal emphasized that liability of the Principal Borrower and surety/guarantor is joint and several, allowing the lender to choose action against either. However, initiating proceedings under the IBC against the Corporate Guarantor alone, while the decree is under review, amounts to parallel proceedings and violates the principle of double jeopardy. 2. Debt and Default under Section 7 of the IBC, 2016: The tribunal considered whether the debt and default criteria under Section 7 of the IBC were met. The Financial Creditor had obtained a decree from the Delhi High Court, which was under review. The tribunal highlighted that the debt’s enforceability depends on the outcome of the review. The Financial Creditor had not taken steps to execute the decree and had selectively chosen to invoke the IBC against the Corporate Guarantor, which was deemed untenable and against natural justice. 3. Limitation Period under Article 137 of the Limitation Act: The Corporate Debtor contended that the application was barred by limitation, as the default occurred during the financial year 2009-10, and the decree was dated 22.05.2015. The tribunal acknowledged that the law of limitation applies to proceedings under the IBC and noted that the Financial Creditor had not explained the delay in prosecuting the decree obtained in 2015. The tribunal found the petition barred by laches and limitation. 4. Arbitration Clause in the Deed of Guarantee: The Corporate Debtor argued that the Deed of Guarantee contained an arbitration clause, requiring disputes to be referred to arbitration. The tribunal noted that the Corporate Debtor had not raised the issue of arbitration before the Delhi High Court and had waived its right to arbitration by not filing an application under Section 8 of the Arbitration and Conciliation Act, 1996. The tribunal held that the Financial Creditor was entitled to initiate CIRP without referring the matter to arbitration. 5. Parallel Proceedings and the Principle of Double Jeopardy: The tribunal emphasized that the Financial Creditor had already filed a suit against the Principal Borrower and personal guarantors, resulting in a consent decree. Initiating CIRP against the Corporate Guarantor alone, while the decree was under review, amounted to parallel proceedings and violated the principle of double jeopardy. The tribunal held that the petition was not maintainable and dismissed it, allowing the Financial Creditor to pursue other civil remedies. Conclusion: The tribunal dismissed the Company Petition and the associated application, emphasizing that the Financial Creditor should pursue the pending review and other civil remedies. The order was made without prejudice to the Financial Creditor's rights in the pending case before the Hon’ble High Court of Delhi and other courts. No order as to costs was made.
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