2021 (1) TMI 1157 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - loan were provided to Corporate Debtor along with Doshi Holdings Pvt. Ltd. (Doshi) as Co-borrower under three different Loan-cum-Pledge Agreements with the subsequent addendums - Financial Creditors - invocation of pledged shares amounts to recovery of amounts or not - two separate Applications can be filed simultaneously under Section 7 or not - HELD THAT - Since the debt and default is admitted by the Corporate Debtor the Bench would examine the admissibility of the Petition based on the outcome regarding the two issues mentioned by the Corporate Debtor i.e. Premier Limited against the Petitioner. This Bench notes that invocation of pledged shares does not amount to said monies recovered - it is clear that it is a step which has to be followed with the enforcement of security whereby the shares are transferred into the Pledgee s account. Only after this the Pledgee i.e. in this case the Petitioner would be in a position to choose to sell or to hold on to the shares as per its discretion. Therefore this Bench finds that the contention of the Corporate Debtor that since the Pledge was invoked on 02.07.2020 it amounts to the value of debt being reduced to the extent of the existing price of the shares in the stock markets on 02.07.2020 which is about 2.06 crores in this case as not tenable. It is entirely at the discretion of Pledgee which is the Petitioner to sell the shares in case the Pledger makes the default. However in the event the pledgee does not exercise the discretion no blame can be put on the pledgee. It is therefore clear that the Pledgee has the discretion to decide if he wants to sell the pledged security when to sell it and how much to sell it. The Pledger cannot dictate terms to the Pledgee on how to exercise his right. Two separate Applications can be filed simultaneously under Section 7 or not - HELD THAT - As per the Judgment of Piramal 2019 (2) TMI 316 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI two separate Applications can be filed simultaneously under Section 7 against Premier Limited as well as Doshi Holdings Private Limited who is Coborrower. However under Section 7 if the claim against Premier Limited (Corporate debtor herein) is Admitted then for the same set of loans arising under the same loan documents the same debt/ claim against Doshi will not be permissible in terms of the NCLAT Judgment of Dr. Vishnu Kumar Agarwal Vs. Piramal Enterprises Limited 2019 (2) TMI 316 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI . This Bench on perusal of the documents filed by the Financial Creditor is of the view that the Corporate Debtor defaulted in repaying the loan availed. The existence of debt and default is reasonably established by the Petitioner as a major constituent for admission of a Petition under Section 7 of the Code. Therefore the Petition under sub-section (2) of Section 7 is taken as complete - Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Default in payment and initiation of Corporate Insolvency Resolution Process (CIRP).
2. Invocation of pledged shares and its impact on the outstanding debt.
3. Simultaneous filing of applications under Section 7 of the Insolvency and Bankruptcy Code against multiple parties for the same debt.

Detailed Analysis:

Default in Payment and Initiation of CIRP:
The Petitioner, Anand Rathi Global Finance Limited, sought to initiate the Corporate Insolvency Resolution Process (CIRP) against Premier Limited (Corporate Debtor) under Section 7 of the Insolvency and Bankruptcy Code (the Code), alleging a default in payment of ?8,35,25,398/-. The Petitioner, a Non-Banking Financial Company, had extended loans totaling ?6 crore to the Corporate Debtor under three different Loan cum Pledge Agreements. The Corporate Debtor admitted its default in payment of the debt, which included the principal amount and interest as per the Loan Agreements.

Invocation of Pledged Shares and Its Impact on the Outstanding Debt:
The Corporate Debtor contended that the Petitioner delayed invoking the pledge of 53,01,000 shares, which led to a significant reduction in their value. The shares were pledged by Doshi Holdings Private Limited (Doshi), a co-borrower, to secure the repayment of the loans. The Corporate Debtor argued that if the Petitioner had invoked the pledge timely, the outstanding debt could have been satisfied. However, the Tribunal noted that the invocation of pledged shares does not equate to the recovery of the debt. The Petitioner has the discretion to decide when and how to sell the pledged shares. The Tribunal cited Regulation 79(8) of the SEBI (Depositories and Participants) Regulations, 2018, and relevant case law to support this position. Therefore, the delay in invoking the pledge did not reduce the outstanding debt, and the Petitioner was not at fault for not selling the shares immediately after the default.

Simultaneous Filing of Applications Under Section 7:
The Corporate Debtor argued that the Petitioner could not maintain simultaneous applications under Section 7 of the Code against both Premier Limited and Doshi Holdings Private Limited for the same debt. The Tribunal referred to the judgment in Dr. Vishnu Kumar Agarwal vs. Piramal Enterprises Limited, which allows filing multiple applications but restricts the admission of claims against multiple parties for the same debt once one application is admitted. The Tribunal clarified that since the separate petition against Doshi Holdings had not been decided, there was no bar in admitting the present petition against Premier Limited. Therefore, the petition against Premier Limited was admitted, and the Tribunal imposed a moratorium as per Section 14 of the Code.

Conclusion:
The Tribunal admitted the petition filed by Anand Rathi Global Finance Limited against Premier Limited under Section 7 of the Insolvency and Bankruptcy Code. The Tribunal rejected the Corporate Debtor's arguments regarding the delay in invoking the pledge and the simultaneous filing of applications. The Tribunal appointed an Interim Resolution Professional and imposed a moratorium on the Corporate Debtor's assets and proceedings.