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TMI Blog2017 (11) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Axis Bank Ltd.-the Corporate Debtor-applicant on 21.07.2017. Therefore, we are unable to persuade ourselves to accept the submissions made by the applicant-Axis Bank Ltd. A careful perusal of Regulation 12 read with Regulation 13 would show that the Resolution Professional has to verify every claim as on the insolvency commencement date and maintain a list of creditors containing names of all such creditors alongwith the amount claimed. Therefore, the applicant- Axis Bank Ltd. would not qualify to the consideration of its claim as it has become due and payable after the insolvency commencement date. The provisions of Regulations 12 and 13 would not come to the rescue of the applicant-Axis Bank Ltd. An ancillary submission is that there was no intention to conceal the claim made in the CIRP initiated against the Educomp Solutions Ltd.-principal borrower would also not require any detailed consideration as we are not proceeding to decide the application on the aforesaid issue. An ancillary argument is that in any case there is no provision in the Code declaring the insolvency commencement date as the date to determine the claims of the parties. A perusal of Section 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to ₹ 396,76,07,676.68/-. The aforesaid amount was claimed being the amount guaranteed by the Corporate Debtor vide Corporate Guarantee furnished by it in favour of Educom Solutions Ltd. It is appropriate to mention that Educom Solutions Ltd. had entered into a Master Restructuring Agreement dated 25.03.2014, inter alia with the applicant-Axis Bank Ltd. for restructuring and reconstitution of the existing loans amongst other things and working capital facilities granted to Educomp Solutions Ltd. by a consortium of lenders. Thereafter, three addendums dated 03.09.2014, 29.09.2014 and 31.03.2015 were signed inter alia, between Educomp Solutions Ltd. and the applicant-Axis Bank Ltd. In addition to the Master Restructuring Agreement dated 25.03.2014, it has also been claimed by the applicant that various rules were sanctioned to the Educomp Solutions Ltd. and later restructured by Standard Chartered Bank in the year 2014. In furtherance of the Master Restructuring Agreement, SBICAP Trustee Company Limited was appointed as the Security Trustee vide the amended and restated security trustee agreement dated 03.06.2015. 3. In pursuance to the terms of the Master Restructuring Agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate Persons) Regulations 2016 (for brevity IBBI Regulations ). Axis Bank Ltd.-applicant has also placed reliance on the definition of Financial Creditor as given in Section 5(7) to argue that it includes any person to whom financial debt is owed and also includes the person to whom the said debt has been legally assigned or transferred. Reliance has also been placed on the definition of financial debt under Section 5(8) of the Code and various clauses of the corporate guarantee like clauses 1.3 and 11.10. 7. In response to the claim made by the applicant, the resolution professional has filed reply raising many preliminary objections. The first objection raised is suppression of material facts and has sought dismissal of the application on that ground. According to the Resolution Professional, Axis Bank Ltd.-applicant has already claimed the amount of debt in the corporate insolvency resolution process of the principal borrower-Educomp Solutions Ltd., which has been subject matter of proceeding in C.P. No. 101(PB)/2017. According to the preliminary objection, this is a material fact which ought to have been disclosed in the application which has substantial bearing on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t liability or obligation has to be due from any person in respect of a claim. The applicant had invoked the corporate guarantee on 21.07.2017, which is after the date of commencement of the insolvency process on 27.06.2017 and the claim has been rightly rejected. For the aforesaid submission, reliance has also been placed on Regulation 13 of the Regulations as the Resolution Professional has to verify only those claims which are existing as on the insolvency commencement date. The purpose of giving the cut-off date is to ensure that the assets and liabilities are frozen and a Resolution Plan is finalised on the basis of cut-off date. It is further submitted that the Resolution professional is under obligation to ensure that the Corporate Debtor remains a going concern and therefore, every claim before the commencement of the insolvency would not become a part of the resolution process in terms of Regulation 14 of the IBBI Regulations. The Resolution professional would only revive the amount of the claim already admitted and there is no provision for admitting any new claim. 11. The Resolution Professional has also raised the issue that invocation of corporate guarantee against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lvency process. In order to appreciate the aforesaid issue, we may first refer to certain terms and conditions of the corporate guarantee executed between the parties on 03.06.2015 (Annexure-2). Under the caption 1.3 Terms of the Guarantee clause-3 provides as under: In the event of any default on the part of the Borrower in payment/repayment and in reimbursement of any of the monies referred to above, or in the event of any default on the part of the Borrower to comply with or perform any of the terms, conditions and covenants contained in the Restructuring Documents, the Guarantor shall, upon demand from the Security Trustee/Lenders, forthwith pay to the Security Trustee/Lenders without demur all the amounts payable by the Borrower under the Restructuring Documents . A perusal of the aforesaid clause clearly postulates that in the event of any default on the part of the Borrower, i.e. Educomp Solutions Ltd. in payment/repayment or in the event of any default to comply with or perform any of the terms, conditions and covenants in the Restructuring Documents, the Guarantor under obligation upon demand from the Security Trustee/Lenders to forthwith pay to the Security T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13(1) of IBB1 Regulations, the claims are to be verified by the Resolution Professional as on the date of commencement of insolvency process. The verification has to be completed within seven days from the last date of the receipt of the claims. Thereupon, the Resolution Professional is obliged to maintain a list of creditors containing the names of creditors alongwith the amounts claimed by them. The list has to be kept available for inspection by any person who submitted proofs of claim and is required to be filed with the Adjudicating Authority/NCLT. It is also required to be presented at the first meeting of the Committee of Creditors. It is thus evident that in order to qualify as a debt firstly provisions of the corporate guarantee must be satisfied by raising a demand which is expressed by invoking the corporate guarantee and the date of its invocation has it be earlier than the insolvency commencement date. In the present case, the CIRP commenced on 27.06.2017 and the corporate guarantee was admittedly invoked on 21.07.2017, which is much after the insolvency commencement date. Therefore, we find that the Resolution professional would not be in a position to verify the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the debt which is due from any person and includes financial debt and operational debt. Going by the aforesaid provisions, debt has not become due from the Corporate Debtor on the insolvency commencement date, i.e. 27.06.2017. It became due only when the corporate guarantee was invoked by the Axis Bank Ltd.-the Corporate Debtor-applicant on 21.07.2017. 20. Therefore, we are unable to persuade ourselves to accept the submissions made by the applicant-Axis Bank Ltd. 21. The argument of Ms. Misha, learned Counsel for the applicant-Axis Bank Ltd. may now be noticed. It was submitted that the liability of the guarantor under Section 128 of the Indian Contract Act, 1872 is joint and severable. In other words, the applicant-Axis Bank Ltd, could invoke the guarantee against the principal borrower namely, Educomp Solutions Ltd. and/or against the Corporate Debtor. There can be no quarrel with the aforesaid proposition of law. However, the issue before us is whether the debt was crystallised and it was due and payable onthe date of commencement of resolution process, which is 27.06.2017. The aforesaid issue stands already answered against the applicant. In equity also, the applicant-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our view, Section 14 would clearly cover the invocation of guarantee after the insolvency commencement date. The moratorium prohibiting a number of things has been contemplated and for the present case clause (c) of sub-section (1) of Section 14 would be suffice and the same reads as under: 14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: (a) (b) (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; A perusal of the aforesaid provision makes it absolutely clear that there would be moratorium prohibiting any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property. It appears to us that invocation of corporate guarantee against the Corporate Debtor-respondent would result in enforcing of security interest and it would thus be in violation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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