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2020 (8) TMI 545 - AT - Insolvency and BankruptcyMaintainability of application - initiation of three simultaneous CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt or not - HELD THAT - The issue raised by the Appellant as a shareholder of the Corporate Debtor is that the Respondent Nos.1 and 2 being Financial Creditors could not be allowed to initiate and trigger three simultaneous Corporate Insolvency Resolution Processes for one set of claim. Reliance has been placed on the judgment rendered by this Appellate Tribunal in DR. VISHNU KUMAR AGARWAL VERSUS M/S. PIRAMAL ENTERPRISES LTD. 2019 (2) TMI 316 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , which is still occupying the field as the same has not been set aside by the Hon ble Apex Court. It is not in dispute that the aforesaid judgment in Dr. Vishnu Kumar Agarwal s case rendered by this Appellate Tribunal has neither been stayed nor set aside by the Hon ble Apex Court and it holds the field till date. The proposition of law is unmistakably, unambiguously and lucidly clear that where a Financial Creditor , whether singly or jointly with other Financial Creditors seeks initiation of Corporate Insolvency Resolution Process against the principal borrower or one or the other corporate guarantors in respect of a claim, it cannot file second application for the same set of claim against the other Corporate Debtor , be it the principal borrower or one or other Corporate Guarantor. Since the order passed by this Appellate Tribunal in appeal arising out of triggering of Corporate Insolvency Resolution Process initiated at the instance of an Operational Creditor against the principal borrower has been set aside by the Hon ble Apex Court and the dismissal of appeal by this Appellate Tribunal against the order of admission dated 28th August, 2019 stands quashed by the Hon ble Apex Court, interim protection granted in terms of order dated 30th September, 2019 which had been extended by the Hon ble Apex Court in terms of order dated 18th February, 2020 while dismissing the appeal and the Adjudicating Authority having extended the interim protection till further orders while being ceased of application under Section 65 of the I B Code , in essence the matter qua the principal borrower stands remanded back to the Adjudicating Authority to go into the allegation of the Corporate Insolvency Resolution Process having been initiated fraudulently and with malicious intent not for the purpose of resolution in the context of there being a collusion between the principal borrower and the operational creditor. It is abundantly clear that the interim protection granted by the Hon ble Apex Court and further adopted and extended by the Adjudicating Authority is in regard to the admission of the application under Section 9 of the I B Code allegedly filed by the Operational Creditor in collusion with the principal borrower. The appeal is disposed off .by directing the Adjudicating Authority to have a fresh look at the order of admission of application of the Financial Creditors under Section 7 of the I B Code against the Corporate Guarantor -EUIPL (which has been impugned in this appeal) only after application under Section 65 of the I B Code filed by the Financial Creditors is disposed of
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Validity of simultaneous CIRP proceedings against multiple corporate guarantors for the same debt. 3. Legal obligations and liabilities under the Debenture Trust Deed (DTD). 4. Impact of the judgment in "Dr. Vishnu Kumar Agarwal v. M/s. Piramal Enterprises Ltd." on the current case. 5. Allegations of fraudulent and malicious initiation of CIRP proceedings. Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016: The joint application by Respondent Nos. 1 & 2 (Financial Creditors) sought initiation of CIRP against Respondent No.3 (Corporate Debtor) under Section 7 of the I&B Code. This was admitted by the Adjudicating Authority (National Company Law Tribunal), which imposed a moratorium on the assets of the Corporate Debtor and appointed an Interim Resolution Professional. The Appellant, a shareholder of the Corporate Debtor, challenged this admission on several grounds. 2. Validity of simultaneous CIRP proceedings against multiple corporate guarantors for the same debt: The Appellant argued that the Financial Creditors could not initiate multiple CIRP proceedings for the same set of claims against different entities. The reliance was placed on the judgment in "Dr. Vishnu Kumar Agarwal v. M/s. Piramal Enterprises Ltd.," which states that once a claim is admitted against one corporate debtor, the same claim cannot be admitted against another corporate debtor. The Financial Creditors had already initiated CIRP against the principal borrower, Earthcon Infracon Pvt. Ltd. (EIPL), and filed claims against other guarantors, which the Appellant argued was impermissible. 3. Legal obligations and liabilities under the Debenture Trust Deed (DTD): The DTD dated 13th June 2017, and subsequently amended, involved multiple parties, including the Corporate Debtor. The Corporate Debtor executed various documents, including a Deed of Corporate Guarantee and Deed of Hypothecation. The Financial Creditors disbursed funds, and upon default by the issuer company, the Corporate Debtor was legally obligated to repay. The Corporate Debtor contended that its liability was limited to collateral in the form of 200 units/flats, which was rejected by the Adjudicating Authority as the Corporate Debtor never offered possession of these units to the Financial Creditors. 4. Impact of the judgment in "Dr. Vishnu Kumar Agarwal v. M/s. Piramal Enterprises Ltd." on the current case: The Adjudicating Authority and the Appellate Tribunal considered the applicability of the "Dr. Vishnu Kumar Agarwal" judgment, which prohibits simultaneous CIRP proceedings for the same claim against different corporate debtors unless they constitute a joint venture. The Appellate Tribunal emphasized that this judgment still holds the field and must be followed, thereby impacting the maintainability of the current CIRP proceedings against the Corporate Debtor. 5. Allegations of fraudulent and malicious initiation of CIRP proceedings: The Financial Creditors raised concerns about collusion between the principal borrower and the operational creditor, which led to the initiation of CIRP proceedings. The Hon’ble Apex Court had earlier set aside the Appellate Tribunal's order and directed the Adjudicating Authority to address these allegations under Section 65 of the I&B Code. The outcome of this inquiry would directly affect the CIRP proceedings against the Corporate Debtor. Conclusion: The Appellate Tribunal directed the Adjudicating Authority to re-evaluate the admission of the CIRP application against the Corporate Debtor only after disposing of the application under Section 65 of the I&B Code. The proceedings under Section 7 of the I&B Code were stayed until further orders. The judgment emphasized adherence to the legal principles established in "Dr. Vishnu Kumar Agarwal" and the necessity to address allegations of fraudulent initiation of CIRP proceedings. The appeal was disposed of with no order as to costs, and a temporary stay of the judgment was granted to enable the Respondent to seek remedy before the Hon’ble Apex Court.
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