2021 (9) TMI 337 - AT - Insolvency and Bankruptcy

Correctness of admitting the application - for same debt two proceedings could not be maintained or not - Co-borrowers and Guarantor - interpretation of scope Borrower and Pledgor - Loan cum Pledge Agreements - HELD THAT - M/s Premier Ltd. and M/s Doshi Holdings were Co-borrowers and promised to pay back the loan with interest. Their liability to pay is joint and several liability. The Promisee may recover the amounts jointly or severally. Here we are not concerned with rights and liabilities inter-se between the Co-borrowers when debt is enforced against one or the other or both of them - A Co-borrower is as much a Borrower like the other entity and is fully liable to repay the loan taken and it is immaterial as to in which account Co-borrowers received the money, when receipt is an admitted position. The Appellant is arguing that for same debt two proceedings could not be maintained. Piramal s 2019 (2) TMI 316 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Judgment was matter relating to filing of proceeding against Principal Borrower as well as Corporate Guarantor and in that context this Tribunal had held that for same debt there could not be two separate proceedings and that in one proceeding filed under Section 7 of IBC action against two Corporate Debtors was not contemplated. We need not enter into the question if in Pledgor-Pledgee relationship would it be Financial Debt. Doshi Holdings, in addition to stepping into the shoes of Co-borrower, which is financial debt, additionally pledged shares. The liability invoked by Financial Creditor is on the basis of Corporate Debtor being Co-borrower and not merely Pledgor. It is surprising to find that the Appellant is denying liability on account of Doshi Holdings when the Appellant has signed joint documents after documents in favour of Respondent No.1 as Authorised Signatory for both the Companies - Corporate Debtor cannot be permitted to back out from the documents and promises made. When the Adjudicating Authority admitted the Application under Section 7 of IBC although there was error in observations where reference is made interchangeably to Co-borrower and Guarantor. The Adjudicating Authority at the same time dealt with the case as a matter of Co-borrower. It is a case of Co-borrower, we decline to interfere with the impugned order admitting the Application. Appeal dismissed.

Summary

Issues Involved:
1. Whether the Corporate Debtor, Doshi Holdings Pvt. Ltd., is liable for the loan disbursed to Premier Ltd. under the Loan cum Pledge Agreements.
2. Whether the initiation of Corporate Insolvency Resolution Process (CIRP) against Doshi Holdings is justified when CIRP has already been initiated against Premier Ltd. for the same debt.
3. Whether Doshi Holdings can be considered a Financial Debtor under the Insolvency and Bankruptcy Code, 2016 (IBC).

Issue-wise Detailed Analysis:

1. Liability of Doshi Holdings for the Loan Disbursed to Premier Ltd.:
The Appellant argued that Doshi Holdings was merely a pledgor of shares and not liable for the loan disbursed to Premier Ltd. However, the Loan cum Pledge Agreements explicitly referred to Doshi Holdings as "Borrower 2/Pledgor" and collectively with Premier Ltd. as "Borrower(s)." The agreements and related documents, such as the Sanction Letter and Demand Promissory Note, were executed by both entities, indicating joint liability. The Tribunal concluded that Doshi Holdings was a Co-borrower, not just a pledgor, and thus jointly liable for the loan repayment.

2. Initiation of CIRP Against Doshi Holdings:
The Appellant contended that CIRP against Doshi Holdings was not maintainable since CIRP had already been initiated against Premier Ltd. for the same debt, citing the judgment in 'Dr. Vishnu Kumar Agarwal Vs. M/s Piramal Enterprises Ltd.' The Tribunal, however, distinguished this case from Piramal, noting that Doshi Holdings and Premier Ltd. were Co-borrowers, not a Principal Borrower and Guarantor. The Tribunal referenced the judgment in 'State Bank of India vs. Athena Energy Ventures Pvt. Ltd.' and the Supreme Court's decision in 'Lalit Kumar Jain vs. Union of India,' which clarified that multiple proceedings for the same debt against different debtors are permissible under IBC.

3. Financial Debtor Status of Doshi Holdings:
The Appellant argued that Doshi Holdings could not be considered a Financial Debtor as it merely pledged shares and did not receive any loan disbursement. The Tribunal examined the agreements and found that Doshi Holdings was a Co-borrower who received the loan jointly with Premier Ltd. The Tribunal referenced the Supreme Court's judgments in 'Phoenix ARC Pvt. Ltd. vs. Ketulbhai Ramubhai Patel' and 'Anuj Jain vs. Axis Bank Ltd.' to differentiate between a mere pledgor and a Co-borrower. The Tribunal concluded that Doshi Holdings, being a Co-borrower, fell within the definition of a Financial Debtor under Section 5(7) and (8) of IBC.

Conclusion:
The Tribunal upheld the initiation of CIRP against Doshi Holdings, affirming its joint liability for the loan disbursed to Premier Ltd. and recognizing it as a Financial Debtor under IBC. The appeal was dismissed, and the Tribunal found no merit in the arguments presented by the Appellant.