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2020 (11) TMI 800 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - claim against Corporate Debtor second time on the same set of claims, initially made on principal borrower - Respondent stood Guarantor for the Principal Borrower - Borrower committed default in repayment of loan - when Application under Section 7 had been admitted against the Principal Borrower whether the present Application by the same Financial Creditor could be admitted against Corporate Guarantor on same set of claims and default. HELD THAT - It is clear that in the matter of guarantee, CIRP can proceed against Principal Borrower as well as Guarantor. We are unable to agree with the arguments of Learned Counsel for Respondent that when for same debt claim is made in CIRP against Borrower, in the CIRP against Guarantor the amount must be said to be not due or not payable in law. Under the Contract of Guarantee, it is only when the Creditor would receive amount, the question of no more due or adjustment would arise. It would be a matter of adjustment when the Creditor receives debt due from the Borrower/Guarantor in the respective CIRP that the same should be taken note of and adjusted in the other CIRP. This can be conveniently done, more so when IRP/RP in both the CIRP is same. Insolvency and Bankruptcy Board of India may have to lay down regulations to guide IRP/RPs in this regard. The law as laid down by the Hon ble High Courts for the respective jurisdictions, and law as laid down by the Hon ble Supreme Court for the whole country is binding - reliance can be placed in the case of STATE BANK OF INDIA VERSUS V. RAMAKRISHNAN AND ANR. 2018 (8) TMI 837 - SUPREME COURT where it was held that The object of the Code is not to allow such guarantors to escape from an independent and coextensive liability to pay off the entire outstanding debt, which is why Section 14 is not applied to them. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the Corporate Insolvency Resolution Process (CIRP) can be initiated against a Corporate Guarantor if the Principal Borrower is already undergoing CIRP. 2. Whether the application against the Corporate Guarantor is duplicative and impermissible if the CIRP is already initiated against the Principal Borrower. 3. Interpretation of Section 60(2) and (3) of the Insolvency and Bankruptcy Code (IBC) in the context of simultaneous CIRP proceedings against Principal Borrowers and Corporate Guarantors. 4. Applicability of the judgment in "Vishnu Kumar Agarwal vs. Piramal Enterprise Ltd." to the present case. Detailed Analysis: 1. Whether the Corporate Insolvency Resolution Process (CIRP) can be initiated against a Corporate Guarantor if the Principal Borrower is already undergoing CIRP: The Appellant, State Bank of India, filed an application under Section 7 of the IBC against Athena Energy Ventures Private Limited (the Corporate Guarantor) after initiating CIRP against the Principal Borrower, Athena Chattisgarh Power Ltd. The Respondent opposed this application, citing the judgment in "Vishnu Kumar Agarwal vs. Piramal Enterprise Ltd." which held that once a petition under Section 7 is admitted against the Principal Borrower, a second application for the same claim and default cannot be admitted against the Corporate Guarantor. The Adjudicating Authority, relying on this precedent, declined to admit the application against the Corporate Guarantor. 2. Whether the application against the Corporate Guarantor is duplicative and impermissible if the CIRP is already initiated against the Principal Borrower: The Respondent argued that the application against the Corporate Guarantor was duplicative since the same claim and default were already being addressed in the CIRP against the Principal Borrower. The Adjudicating Authority agreed, stating that the Principal Borrower and the Corporate Guarantor are not joint venture companies and thus, the application against the Corporate Guarantor could not be maintained. 3. Interpretation of Section 60(2) and (3) of the Insolvency and Bankruptcy Code (IBC) in the context of simultaneous CIRP proceedings against Principal Borrowers and Corporate Guarantors: The Appellant argued that Section 60(2) of the IBC allows for simultaneous applications against both the Principal Borrower and the Corporate Guarantor. The Tribunal noted that the judgment in "Piramal" did not consider the amended Section 60(2) and (3) of the IBC, which explicitly allows for such simultaneous proceedings. The Tribunal emphasized that the IBC does not prevent simultaneous CIRP against the Principal Borrower and the Corporate Guarantor and that the proceedings should ideally be before the same Adjudicating Authority to facilitate coordination. 4. Applicability of the judgment in "Vishnu Kumar Agarwal vs. Piramal Enterprise Ltd." to the present case: The Tribunal distinguished the present case from "Piramal," noting that the latter dealt with simultaneous proceedings against two Corporate Guarantors, not a Principal Borrower and a Corporate Guarantor. The Tribunal also highlighted that the "Piramal" judgment did not consider the amendments to Section 60(2) and (3) of the IBC, which support simultaneous proceedings against both the Principal Borrower and the Corporate Guarantor. The Tribunal referred to the Insolvency Law Committee Report of February 2020, which supported the view that creditors could initiate and maintain CIRP against both the Principal Borrower and the Corporate Guarantor. Conclusion: The Tribunal allowed the appeal, quashing the Impugned Order dated 4th March 2020 and directing the Adjudicating Authority to admit the application against the Corporate Guarantor. The Tribunal emphasized that the same Interim Resolution Professional (IRP) or Resolution Professional (RP) should be appointed for both CIRP proceedings to ensure coordination and proper adjustment of claims. The Tribunal's decision underscores the permissibility of simultaneous CIRP proceedings against Principal Borrowers and Corporate Guarantors under the IBC, aligning with the amended provisions and the Insolvency Law Committee's recommendations.
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