9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (2) TMI 109 - AT - IBCMaintainability of Petition filed by the Respondent No. 1 under Section 95 of IBC - initiation of Personal Insolvency Resolution Process (PIRP) against the Appellant who is the guarantor of the of the Corporate Debtor ESL - barred by limitation - no privity of contract between the Appellant and State Bank of India (SBI) - Impugned Order based on invocation of personal guarantee by 3rd party - no direction issued u/s 100 (2) of the Code regarding negotiations to be held in Appellant/ personal guarantor and the Creditor/ Respondent - undervaluation of shares. The application filed under Section 95 of the Code was barred by limitation - HELD THAT - The Respondent No. 1 issued a demand notice on 22.06.2018 requesting for payment within 60 days i.e. by 22.08.2018 and therefore for the purpose of calculating limitation period in the present case would have started on 22.08.2018 and would have ended on 21.08.2021. The application was filed on 31.03.2021 much before the expiry of the limitation period. Both the demand notice as well as Section 95 application were filed within period the period of limitation - arguments of the Appellant on the issue of limitation stand rejected. Privity of contract - HELD THAT - There was no privity of contract between Respondent No.1/ SBI and Appellant/ personal guarantor. Impugned Order based on invocation of personal guarantee by 3rd party - HELD THAT - The Adjudicating Authority could not have passed the Impugned Order based on invocation of personal guarantee by 3rd party - such trusteeship deeds are generally signed between the trust on behalf of the lenders and the personal/ corporate guarantor of the principal borrower. However by its inherent nature and intent the lenders or the Financial Creditors are the true beneficiaries of such deed of guarantee. From the terms of the MRA and the STA it is clear that the security trustees are holding Security not for themselves but on behalf of and for the benefit of the Claimant/Lender. The Lenders can therefore enforce the security documents even if they are not a party to the trusteeship agreement. The Adjudicating Authority has rightly held in para 14 of the Impugned Order that merely because the trustee acted on behalf of Respondent No. l/SBI it cannot be said that the beneficiary/creditor cannot enforce the Personal Guarantee executed by the Appellant. As can be seen from clause O of the MRA SBICAP was appointed as Security Trustee in accordance with the terms of the Security Trustee Agreement dated 25.03.2014 for the purpose of holding the security interest for the benefit of the CDR lenders and non-CDR lenders. Thus SBI had the locus to file the Company Petition - there are no merit and the pleadings of the Appellant on this account stand rejected. The Appellant has also challenged on the ground that the debt itself has not been crystalised - HELD THAT - The personal guarantor signed the personal guarantee on 03.06.2015 and became guarantor on behalf of principal borrower. The borrower amount has been stipulated therein. It is already noted that there has been established the case of default of debt and subsequently CDR was sanctioned which also failed - the arguments of the Appellant not appreciated on this account based on argument that mere fact that the case is pending before the DRT and certain counter claims have been filed by the Appellant will not make debts payable by the Appellant as debts not have been crystalised - the contention of the Appellant on this ground stand rejected. Impugned Order did not issue directions under Section 100 (2) of the Code regarding negotiations to be held in Appellant/ personal guarantor and the Creditor/ Respondent - HELD THAT - Section 100 (2) Code is applicable if repayment plan is prepared by the debtor under Section 105 of the Code then opportunity should be offered to the debtor. The order of the Adjudicating Authority is only if the Resolution Professional makes an application for the same. The Impugned Order ignored the fact regarding under valued sale of shares of Corporate Debtor subsidiary in learning.com leading to gross under recovery for the principal borrower - HELD THAT - There are no merit on this ground in the present appeal. Conclusion - i) The application under Section 95 was filed within the limitation period. ii) The lack of direct privity of contract did not prevent the creditor from enforcing the personal guarantee. iii) The debt was crystallized and pending proceedings did not affect this status. iv) No directions for negotiations were warranted under Section 100(2) as no repayment plan was proposed. v) The undervalued sale issue was addressed in a separate judgment and no merit was found in the Appellant s arguments. Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Appellate Tribunal in this judgment were: a) Whether the application filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation. b) Whether there was a privity of contract between the Respondent No. 1 (SBI) and the Appellant (personal guarantor). c) Whether the Adjudicating Authority could pass an order based on the invocation of a personal guarantee by a third party. d) Whether the debt itself had been crystallized. e) Whether the Impugned Order failed to issue directions under Section 100(2) of the Code for negotiations between the Appellant and the Creditor. f) Whether the Impugned Order ignored the undervalued sale of shares of Learning.com by the Corporate Debtor's subsidiary, leading to under-recovery for the principal borrower. 2. ISSUE-WISE DETAILED ANALYSIS (a) Limitation Issue The Appellant contended that the limitation period for filing the application under Section 95 had expired, as the Corporate Debtor was declared an NPA on 31.03.2013, and even considering a revival letter dated 30.11.2016, the limitation would have ended by 30.11.2019. The Respondent argued that the limitation period commenced on 22.08.2018, following a demand notice issued on 22.06.2018, and the application filed on 31.03.2021 was within the limitation period. The Tribunal found that the loans were restructured on 25.03.2014, making the original NPA date irrelevant. The acknowledgment of liability through the revival letter reset the limitation period, and the demand notice and subsequent application were filed within the permissible period. Thus, the Appellant's arguments on limitation were rejected. (b) Privity of Contract and Invocation by a Third Party The Appellant argued that there was no privity of contract between SBI and the Appellant, as the personal guarantee was executed with SBICAP Trustee Company Limited. The Tribunal noted that the concept of trusteeship allows for actions on behalf of creditors, and Section 95 of the Code permits creditors to file applications. The Tribunal held that the security trustee acts for the benefit of creditors, and lenders can enforce security documents even if not directly party to the trusteeship agreement. The Tribunal cited legal precedents affirming that beneficiaries can enforce contracts made for their benefit. Thus, the Appellant's arguments on privity were dismissed. (c) Crystallization of Debt The Appellant claimed that the debt was not crystallized due to pending proceedings and counterclaims in the Debt Recovery Tribunal. The Tribunal found that the personal guarantee was executed with a specified debt amount, and the default was established. The Tribunal rejected the Appellant's argument, stating that pending proceedings do not negate the crystallization of debt. (d) Directions for Negotiations under Section 100(2) The Appellant argued that the Impugned Order failed to direct negotiations between the debtor and creditors. The Tribunal noted that Section 100(2) applies only if a repayment plan is proposed by the debtor, which was not the case here. The Tribunal found no merit in the Appellant's argument, as the Appellant did not present a repayment plan. (e) Undervalued Sale of Shares The Appellant contended that the undervalued sale of Learning.com shares by the Corporate Debtor's subsidiary led to under-recovery. The Tribunal noted that this issue was separately challenged in a connected appeal, and a judgment was pronounced allowing the appeal of SBI Singapore. The Tribunal found no merit in the Appellant's arguments on this ground in the present appeal. 3. SIGNIFICANT HOLDINGS The Tribunal upheld the Impugned Order, rejecting all grounds of appeal presented by the Appellant. The Tribunal concluded that: - The application under Section 95 was filed within the limitation period. - The lack of direct privity of contract did not prevent the creditor from enforcing the personal guarantee. - The debt was crystallized, and pending proceedings did not affect this status. - No directions for negotiations were warranted under Section 100(2) as no repayment plan was proposed. - The undervalued sale issue was addressed in a separate judgment, and no merit was found in the Appellant's arguments. The appeal was dismissed, and the Tribunal found no merit in any of the Appellant's contentions. No costs were awarded, and any pending applications were closed.
|
