2021 (3) TMI 1044 - Tri - IBC

Maintainability of application - initiation of CIRP against Corporate Debtor and Corporate Guarantor - Corporate Debtor has committed default in paying the financial debt - pre-existing dispute or not - Declaration of principal borrower's loan account to be NPA - Allegation that Financial Creditor did not comply the provision of Section 215 of the IBC, 2016 - Maintainability of application under Section 7 of IBC, 2016 against the guarantors for selfsame debt and its default, once the principal borrower is admitted in CIRP - Proper authorization of officer who had filed this application on behalf of bank - HELD THAT - In this case, there is no dispute about following relevant facts (i) Financial debt is more than ₹ 1 lakh due and payable by these Corporate Debtors upon invocation of their guarantees by the bank, (ii) Corporate Guarantors committed default in paying the same and (iii) debt is not time barred. Declaration of principal borrower's loan account to be NPA - HELD THAT - A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be - the defence raised by the corporate guarantor about non-observing guideline issued by RBI by the Financial Creditor cannot be the defence to be considered in this proceedings - It is not recovery proceedings, hence, rejected. Allegation that Financial Creditor did not comply the provision of Section 215 of the IBC, 2016 - HELD THAT - Section 215 of IBC, 2016 states the procedure of submitting financial statements of the debtor to Information Utility Service Provers. However, atleast till date, it is not necessary for the Financial Creditor to file certificate of default issued by Information Utility for initiating CIRP of the Corporate Debtor - Financial Creditor can prove the facts i.e. debt is due and payable and its defaults by way of other evidence also. In above case, there is overwhelming evidence to establish both facts. Even otherwise both facts are not in dispute - this defence rejected. Maintainability of application under Section 7 of IBC, 2016 against the guarantors for selfsame debt and its default, once the principal borrower is admitted in CIRP - HELD THAT - Upon reading of entire order of Hon'ble NCLAT in case of State Bank of India. Vs. Athena Energy Ventures Pvt. Ltd. 2020 (11) TMI 800 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI , it is clear that Hon'ble NCLAT has considered its earlier order and amendment made in Section 60(2)(3) of IBC, 2016 so also the decision of Hon'ble Supreme Court in the case of State Bank of India vs V. Ramakrishnan and Another 2018 (8) TMI 837 - SUPREME COURT and has ultimately held that CIRP proceedings against the principal borrower and guarantor can be proceeded with and there is no bar in IBC, 2016 against such proceeding - this defence as raised by the Corporate Debtor (corporate guarantor) is not maintainable. Proper authorization of officer who had filed this application on behalf of bank - HELD THAT - These proceedings are filed on the basis of power of attorney are not maintainable. The officer presenting the application is not the Financial Creditor but it is the bank who is Financial Creditor. Since debt and default are admitted by the Corporate Debtor, it is not deemed proper to reject these applications on this technical ground more particularly when we are dealing with the matter pertain to commercial/economic law where huge public money is involved. The Corporate Debtor are required to be admitted in CIRP - application admitted - moratorium declared.

Summary

Issues Involved:
1. Declaration of loan account as NPA by Financial Creditor.
2. Compliance with Section 215 of IBC, 2016.
3. Maintainability of CIRP proceedings against corporate guarantors when the principal borrower is already admitted in CIRP.
4. Authorization of the officer filing the application on behalf of the bank.

Detailed Analysis:

Declaration of Loan Account as NPA by Financial Creditor:
The corporate guarantors argued that the bank wrongly declared the principal borrower's loan account as a Non-Performing Asset (NPA), ignoring RBI guidelines. The tribunal found no substance in this defense, noting that the principal borrower defaulted on the loan as per the terms of the loan agreement. The guarantees given by the corporate guarantors were rightly invoked by the bank. The tribunal cited the Supreme Court's ruling in Innoventive Industries Ltd. Vs. ICICI Bank & Ors., stating that once the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete. Hence, the defense regarding the non-observance of RBI guidelines was rejected outright.

Compliance with Section 215 of IBC, 2016:
The corporate guarantors contended that the Financial Creditor did not comply with Section 215 of IBC, 2016, which involves submitting financial statements to the Information Utility Service Providers. The tribunal clarified that it is not mandatory for the Financial Creditor to file a certificate of default issued by the Information Utility for initiating CIRP. The Financial Creditor can prove the debt and default through other evidence, which was overwhelmingly present in this case. Therefore, this defense was also rejected.

Maintainability of CIRP Proceedings Against Corporate Guarantors:
The corporate guarantors argued that once the principal borrower is admitted in CIRP, the application under Section 7 of IBC, 2016 is not maintainable against the guarantors for the same debt and default. They cited the NCLAT order in Dr. Vishnu Kumar Agarwal v. Piramal Enterprises Ltd. In contrast, the Financial Creditor relied on the NCLAT's later order in State Bank of India vs Athena Energy Ventures Pvt. Ltd., which stated that IBC permits simultaneous proceedings against the principal borrower and the guarantor. The tribunal favored the latter interpretation, noting that the NCLAT had considered amendments to Section 60(2)(3) of IBC, 2016 and the Supreme Court's decision in State Bank of India vs V. Ramakrishnan and Another, which allowed simultaneous CIRP proceedings. Thus, this defense was deemed not maintainable.

Authorization of the Officer Filing the Application:
The corporate guarantors claimed that the officer who filed the application on behalf of the bank was not properly authorized, and proceedings based on a power of attorney are not maintainable. The tribunal clarified that the officer presenting the application is not the Financial Creditor; the bank is. Given that the debt and default were admitted, the tribunal did not reject the applications on this technical ground, especially considering the commercial nature and the involvement of significant public funds.

Conclusion:
The tribunal concluded that the Corporate Debtors in both applications required admission into CIRP. The name of Mr. Vikash Prakash Gupta was suggested and appointed as the Interim Resolution Professional (IRP). The order included the imposition of a moratorium under Section 14 of the Code, prohibiting suits or proceedings against the Corporate Debtor and ensuring the continuation of essential services. The IRP was directed to make a public announcement of the CIRP and perform duties as specified under the Code. The Financial Creditor was directed to pay the IRP a sum of ?2,00,000 as fees and expenses until the Committee of Creditors (CoC) decides on the matter. The registry was instructed to communicate the order to relevant parties and upload it on the website immediately after pronouncement. The commencement of the CIRP was effective from the date of the order, and both applications were allowed and disposed of.