2022 (9) TMI 14 - Tri - Insolvency and Bankruptcy

Recovery of dues of Financial Creditors - whether the amounts of financial creditors will be recovered either on the culmination of CIRP into approval of the Resolution Plan or Liquidation of the assets of the Corporate Debtor are yet to be ascertained and in the absence of which, the amount recoverable from the Respondent herein, if any, cannot be crystallized - surety to secure the credit facilities sanctioned by the members of the consortium to Corporate Debtor - production of vouchers and other supporting documents in support of the alleged debit entries and other alleged transactions contained in the statements of accounts. HELD THAT - There is no provision in the Code which bars the initiation of Insolvency Resolution Process against the Personal Guarantor until the debt amount which is to be recovered from the Corporate Debtor gets crystallized. Further it is a well settled principle that the liability of surety in the Contract of Guarantee is co- extensive with that of Principal Borrower. Other contention raised by the Personal Guarantor is that the Respondent/Personal Guarantor was coerced into signing the Personal Guarantee agreement - HELD THAT - The Law of Contract is very clear with respect to voidable contract that when consent to an agreement is caused by coercion, the agreement which is a contract is voidable at the option of the party whose consent was so caused. Meaning thereby that unless proved otherwise the said agreement would be valid and enforceable and since no action was taken to make the contract void it will remain valid and enforceable as per law. Production of vouchers and other supporting documents in support of the alleged debit entries - HELD THAT - It is pertinent to mention here that the Applicant has registered the debt with the Information Utility i.e. NESL and the copy of the same is also annexed with the application filed by the Financial Creditor. Further, section 99(3) of the IBC, 2016 states that when the debt is registered with the information utility the debtor shall not be entitled to raise dispute to the validity of such debt. Hence, this contention of the Respondent is also not sustainable. After going through all the documents on record the Petition filed under the provisions of Section 95 of IBC, 2016, is hereby admitted under section 100 of the IBC, 2016 - Petition admitted - moratorium declared.

Issues Involved:
1. Whether the amounts recoverable from the Personal Guarantor can be crystallized before the conclusion of CIRP proceedings of the Corporate Debtor.
2. Whether the Personal Guarantor was coerced into signing the Personal Guarantee agreement.
3. Whether the Applicant has provided sufficient supporting documents for the alleged debit entries.

Detailed Analysis:

Issue 1: Crystallization of Amounts Recoverable from the Personal Guarantor
- The Tribunal noted that the incorporation of provisions related to the initiation of the Insolvency Resolution Process for Personal Guarantors to Corporate Debtors was to provide a comprehensive picture of the assets available during and post-insolvency process. This would enable the Committee of Creditors to better negotiate with the Personal Guarantor, considering the potential recovery from both the Personal Guarantor and the Corporate Debtor.
- The Tribunal emphasized that there is no provision in the Insolvency and Bankruptcy Code (IBC) that bars the initiation of the Insolvency Resolution Process against the Personal Guarantor until the debt amount recoverable from the Corporate Debtor is crystallized. It reiterated the principle that the liability of a surety in a contract of guarantee is co-extensive with that of the principal borrower.

Issue 2: Alleged Coercion in Signing the Personal Guarantee Agreement
- The Tribunal found the contention of coercion raised by the Personal Guarantor implausible and unconvincing. It reasoned that it is unlikely that the Personal Guarantor would not have been alerted if coerced into signing a significant number of documents related to a loan for another party.
- The Tribunal further noted that no legal action was taken by the Personal Guarantor to void the contract, which would have been the appropriate legal recourse if coercion had indeed occurred. The Tribunal clarified that the law of contract stipulates that an agreement induced by coercion is voidable at the option of the coerced party. Since no action was taken to void the contract, it remains valid and enforceable.

Issue 3: Sufficiency of Supporting Documents for Alleged Debit Entries
- The Tribunal addressed the contention regarding the lack of supporting documents for the alleged debit entries. It highlighted that the debt was registered with the Information Utility (NESL), and a copy was annexed with the application filed by the Financial Creditor.
- According to Section 99(3) of the IBC, when the debt is registered with the Information Utility, the debtor is not entitled to dispute the validity of such debt. Therefore, this contention by the Personal Guarantor was deemed unsustainable.

Conclusion:
- Based on the analysis and the reasons recorded in the Resolution Professional's report, the Tribunal admitted the petition filed under Section 95 of the IBC, initiating the Insolvency Resolution Process against the Personal Guarantor, Mrs. Asha Mittal.
- The Tribunal declared a moratorium commencing from the date of the order, which will cease after 180 days as per Section 101 of the IBC. During this period, any pending legal action or proceeding in respect of any debt shall be stayed, creditors shall not initiate any legal action or proceedings, and the debtor shall not transfer or dispose of any assets.
- The Resolution Professional was directed to publish a public notice inviting claims from all creditors within 7 days of the order, prepare a list of creditors, and submit a Repayment Plan in consultation with the debtor within specified timelines. The Tribunal outlined the procedures for conducting creditors' meetings and submitting reports as per the provisions of the IBC.

Final Order:
- The Tribunal admitted the petition under Section 95(1) of the IBC, 2016, and initiated the Insolvency Resolution Process against the Personal Guarantor, Mrs. Asha Mittal.

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