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2019 (10) TMI 1434 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Debtor is Non-Banking Financial Company (NBFC) or not - Financial Service Provider to be included in the definition of 'Corporate Person' or not - Financial Creditors - existence of debt and dispute or not - HELD THAT - The undisputed fact is that the Corporate Debtor is a Guarantor in respect of the loan given to the Principal Borrower ws Amrit Jal Ventures Private Limited. The Financial creditor already filed a petition under Section 7 of IBC against Principal Borrower which was admitted. The fact that petition was filed against Borrower is not in dispute and CIRP started against the Principal Borrower. It is also not in dispute that the Financial Creditor filed a claim before IRP/RP appointed for the Principal Borrower - The question whether Financial Creditor can file a separate petition against the guarantor for the same financial debt which was stated to have been committed default by the Principal Borrower. The Financial Creditor can proceed against the guarantor. There is no restriction on the right of Financial Creditor to proceed against guarantor provided if financial creditor had not initiated any action against the Principal Borrower - Therefore, the Financial Creditor is not entitled to file again an Application for the same financial debt on the ground of default against the Guarantor. Whether proceedings cannot be initiated against Corporate Debtor as it is not Corporate Person within the meaning of Section 3 (20) of IBC? - HELD THAT - It is true, except letter and reply, Corporate Debtor has not filed any authorization or registration given by RBI recognising Corporate Debtor as financial service provider. Therefore, the Corporate Debtor cannot take any protection on the ground that it is NBFC and objects of the Company is also to do financial services - present petition filed by Financial Creditor is not maintainable against Corporate Debtor as Financial Creditor already initiated proceedings against Principal Borrower. Petition dismissed.
Issues Involved:
1. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. 2. Alleged suppression of material facts by the petitioner. 3. Existence of an arbitration clause and pre-existing disputes. 4. Status of the Corporate Debtor as a Non-Banking Financial Company (NBFC) and its implications. 5. Liability of the Corporate Debtor as a guarantor. Issue-wise Detailed Analysis: 1. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016: The petition was filed by the Financial Creditor under Section 7 of the IBC, 2016, against the Corporate Debtor to initiate the Corporate Insolvency Resolution Process (CIRP). The Corporate Debtor argued that the petition is not maintainable as the Financial Creditor had already initiated CIRP against the Principal Borrower, M/S Amrit Jal Ventures Private Limited, which was admitted. The tribunal referenced the decision of the Hon'ble NCLAT in Dr. Vishnu Kumar Agarwal vs. M/S Piramal Enterprises Limited, which stated that once a petition is admitted against one debtor (Principal Borrower or Corporate Guarantor), a second petition for the same claim cannot be admitted against another debtor. Thus, the petition against the Corporate Debtor was deemed not maintainable. 2. Alleged suppression of material facts by the petitioner: The Corporate Debtor contended that the petitioner had suppressed material facts, including correspondence indicating pre-existing disputes with the Principal Borrower. The petitioner did not disclose replies from M/S Amrit Jal Ventures Private Limited and the Corporate Debtor, which suggested disputes regarding the dues. The tribunal noted this argument but did not base its final decision solely on this ground. 3. Existence of an arbitration clause and pre-existing disputes: The Corporate Debtor argued that the agreements between the parties contained an arbitration clause, and disputes should be referred to arbitration. The tribunal acknowledged the existence of the arbitration clause but focused on the maintainability of the CIRP petition under Section 7 of the IBC, given the prior initiation of CIRP against the Principal Borrower. 4. Status of the Corporate Debtor as a Non-Banking Financial Company (NBFC) and its implications: The Corporate Debtor claimed it was an NBFC and thus excluded from the definition of "Corporate Person" under Section 3(7) of the IBC. The tribunal examined the Memorandum of Association and letters from the Reserve Bank of India (RBI) indicating that the Corporate Debtor was treated as an NBFC. However, the tribunal found that the Corporate Debtor did not provide sufficient evidence of registration or authorization from the RBI as an NBFC. Therefore, the tribunal did not accept the argument that the Corporate Debtor was excluded from the IBC's purview based on its NBFC status. 5. Liability of the Corporate Debtor as a guarantor: The Financial Creditor argued that the Corporate Debtor, as a guarantor, was liable for the debt of the Principal Borrower under Section 128 of the Indian Contract Act, 1872. The tribunal acknowledged the co-extensive liability of the guarantor but emphasized that a second petition for the same debt could not be admitted once CIRP was initiated against the Principal Borrower. Therefore, the tribunal concluded that the present petition against the Corporate Debtor was not maintainable. Conclusion: The tribunal rejected the petition filed by the Financial Creditor against the Corporate Debtor, emphasizing that once CIRP was initiated against the Principal Borrower, a second petition for the same debt could not be admitted against the guarantor. The tribunal clarified that the petitioner's right to approach other forums was not prejudiced by this rejection.
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