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TMI Blog2018 (2) TMI 1354X X X X Extracts X X X X X X X X Extracts X X X X ..... ssity of doing so. We have not been able to persuade ourselves to accept the submissions of Mr. Mehra that there is nothing in the order passed by the Economic Courts at Dushanbe to create a bar for filing of an application under Section 7 of the Code. The arguments with regard to the jurisdiction of the Economic Courts at Dushanbe has not impressed us because the applicant-Financial Creditor has not only surrendered to the jurisdiction but it has filed pleadings. In the present case, we have noticed the orders passed by the Economic Courts at Dushanbe to show the non-existence of liability of ‘Principal Debtor’ and there could not be any default on its part. Therefore, no liability could be fastened on the guarantor-Corporate Debtor. We are not executing those order so as to require fulfilment of various features of Section 13 and Section 44A of the CPC. As already held the principal debtor cannot be regarded in default in accordance with law and therefore, no liability of guarantor/surety would arise at this stage. Petition dismissed. - C.P. NO. (IB)-392 (PB)/2017 - - - Dated:- 11-1-2018 - MR. M. M. KUMAR AND Ms. DEEPA KRISHAN, JJ. For The Financial Creditor : Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of Mr. Prem Shankar Gupta to act as an Interim Insolvency Professional. A certificate of registration dated 17.05.2017 issued by the Insolvency and Bankruptcy Board of India has been placed on record (at page No. 77) attached with the application. He has registration No. IBBI/IPA-001/IP-P00104/2017-18/10204. He has also made declaration and sent a written communication dated 19.09.2017 (Annexure-4 (Colly). According to the declaration made, Mr. Prem Shankar Gupta has no disciplinary proceedings pending against him nor he is a related party to Financial Debtor namely CHL Limited nor he is an employee of the CHL Limited. Loan Agreement between EXIM Bank-CHL International 5. Facts which are material to the controversy raised may first be noticed. As per the case of the Financial Creditor loan agreement dated 23.09.2010 was executed between the Financial Creditor and CHL International (not the Corporate Debtor) for grant of a sum of USD 18,000,000/- (United States Dollars Eighteen Million) for the purpose of financing and setting up of and developing a five star hotel at Dushanbe, Tajikistan. It is pertinent to mention that CHL International Tajikistan is a subsidiary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 July 2014 414,442.87/- TOTAL 8,500,000/- USD 6 MILLION FACILITY LOAN NO. :HOOIFUSD00000903 Date of Disbursement Amounts Disbursed (in USD) 24 March 2015 3,000,000/- 27 April 2015 2,480,000/- 30 July 2015 520,000/- TOTAL 6,000,000/- 6. A perusal of the aforesaid details of disbursement would show that the Financial Creditor, through multiple financial facilities and loan agreements, advanced as financial debt to the CHL International, Tajikistan, a subsidiary of Corporate Debtor amounting to an aggregate sum of USD 32,500,000 (United States Dollars Thirty Two Million and Five Hundred Thousand). EXIM Bank Corporate Debtor Guarantee 7. It is averred by the Financial Creditor that the Corporate Debtor guaranteed repayment of a total debt aggregating to USD 32,500,000 (United States Dollars Thirty Two Million and Five Hundred Thousand) together with interest, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 560,242.56 51,702.16 6,611,944,72 TOTAL 32,500,000 3,735,449.86 308,243.90 36,543,693.76 The details regarding the date and the days of defaults with respect to the facilities granted by the Financial Creditor to the CHL International as guaranteed by the Corporate Debtor have been placed on record as Annexure 6 (Colly). 11. The facilities have been recalled by the Financial Creditor vide recall notice dated 2 May 2017 and the corporate guarantee issued by the Corporate Debtor for securing the amounts extended to CHL International, has also been invoked by the Financial Creditor vide notice of invocation dated 1 June 2017 seeking payment of an amount of USD 35,164,530.13/- (United States Dollars Thirty Five Million One Hundred and Sixty Four Thousand and Five Hundred Thirty and Thirteen cents) being the amount in default under the financial facilities. 12. The details of the security held by, or created for the benefit of financial creditor for securing the financial contracts for the facilities along with the security document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Corporate Guarantee dated 1 June 2017 issued by the Financial Creditor to the Corporate Debtor upon the failure of CHL International to repay the amounts in accordance with the Recall notice dated 2 May 2017. (e) Copy of the Annual Report of the Corporate Debtor for the year 2015-16 including the Balance Sheet of the Corporate Debtor as on 31 March 2016 admitting the debt owed to the Financial Creditor (as available with the Financial Creditor). (f) Various Balance confirmations issued by CHL International to the Financial Creditor acknowledging the debt towards the Financial Creditor. 16. The present application has been filed by Applicant/Financial Creditor in its capacity as the Financial Creditor of CHL Limited ( Corporate Debtor ) being the guarantor of loan amount and that the default has occurred on the part of the principal borrower. The Corporate Debtor has guaranteed a total debt aggregating to USD 32,500,000 (United States Dollars Thirty Two Million and Five Hundred Thousand) together with the interest, additional interest and other monies on behalf of Closed Joint Stock Company CHL International, a subsidiary of the Corporate Debtor incorporated und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isbursement which do not take away the admitted fact on record that CHL International is in default of repayment of the principal as well as interest, much in excess of the threshold of INR 1,00,000 (Indian Rupees One Lakh) under Section 4 of the Code. (vi) In any case, in terms of Corporate Guarantees, the obligation of the Corporate Debtor under the Corporate Guarantees shall remain in full force till the repayment of the principal, interest and other monies under the loan agreements and shall not be affected by any dispute or difference of any nature whatsoever that may arise between CHL International and the Applicant/Financial Creditor. 19. The Corporate Debtor has filed a detailed reply controverting the allegations and has opposed the admission of the application. The stand taken by the Corporate Debtor in essence is that firstly it is erroneous to call it as a Corporate Debtor as it does not fulfil the basic requirement of the expression as used in Section 3(8). It has further been pointed out that there is active and deliberate suppression of material facts which should be regarded sufficient to deny grant of any relief to the Financial Creditor. Elaborating the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to restructure the Corporate Debtor who is in default so as to maximize the returns to the stakeholders. It has then been submitted that the applicant-Financial Creditor does not satisfy the mandatory perquisites of Section 5(8), IBC which defines the expression financial debt . According to the pleadings financial debt must mean undisputed debt between the applicant and its borrower. The aforesaid feature having not been fulfilled in the present case as the borrower has disputed its liability in the proceedings initiated in the Economic Court at Dushanbe, the present petition would not be maintainable. The Corporate Debtor has also set up the plea that the applicant-Financial Creditor has contested the proceedings in the Economic Court at Dushanbe and no objection whatsoever has been taken to the jurisdiction of the Court there and therefore, it cannot now take up a contrary stand before the courts in Delhi. Reference has also been made to Clause XXII(3) and (4) to show that the law applicable to the loan agreement was to be governed by and construed in accordance with the laws of Republic at Tajikistan. Likewise, the jurisdiction has been conferred for bringing any legal ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agreement and the contract of guarantee are two separate events and the Financial Creditor is entitled to invoke the guarantees without even invoking the provisions in the loan agreement against the principal debtor. Mr. Mehra has maintained that this is the essence of Section 128. For the aforesaid proposition, learned Counsel has placed reliance on the observations made in para 36 of Hon ble the Supreme Court judgment in the case of Industrial Finance Corpn of India Ltd. v. Cannanore Spg. Wvg. Mills Ltd. [2002] 5 SCC 54. Reliance has also been placed on the observations made by the Division Bench judgment of Madras High Court in para 6 in the case of Gopilal J. Nichani v. Trac Industries Co. Ltd. AIR 1978 Mad 134. It has also been argued that the liability of the guarantor is absolute and unconditional and even in cases where the principal debtor has gone into liquidation, his liability of the guarantor would not be discharged and on the aforesaid proposition reliance has been placed on the judgment of the Hon ble Supreme Court in the case of Maharashtra State Electricity Board v. Official Liquidator [1982] 3 SCC 358. Our attention has been drawn to the observations made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of Divisional Superintendent Northern Railway Delhi Division v. Mukund Lal ILR 10 Punj. Har. 1059. Banking on the principle laid down by the full bench, learned Counsel has argued that on account of order passed by the Courts at Dushanbe on 06.01.2017, 07.07.2017 and 03.10.2017 clearly suggesting that no coercive action is to be taken and the loan agreement have been suspended, the Financial Creditor has the audacity to initiate the present proceedings. Elaborating his arguments, Mr. Kathpalia has submitted that Section 128 of the Indian Contract Act, 1872 dealing with the liability of the surety is not absolute. It is subject to the agreement of the parties. In that regard, Mr. Kathpalia has placed reliance on Clause 4 of Deed of Guarantee dated 07.10.2010 which provides that the liability of the guarantor would arise only if the principal debtor is in default. It has been maintained that in view of order passed by the Economic Court at Dushanbe, the liability of the principal debtor, i.e. CJSC CHL International has been put in abeyance by suspending the operation thereof which would be evident from the orders dated 06.01.2017, 07.07.2017 and 03.10.2017 (at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on it. A bare perusal of the aforesaid provision makes it patent that the liability of surety could be co-extensive with that of the principal debtor, if it is not otherwise provided by the contract. 33. In the present case, the contract of guarantee was executed between the applicant-Financial Creditor and the Corporate Debtor on 07.10.2010 and in Clause 4, it is expressly provided that the guarantor would be liable if a default on the part of the borrower (principal debtor) was to occur. The aforesaid clause is commended for verbatim reading which is as under: In the event of any default on the part of the Borrower in the due repayment of the Loan or any part thereof (whether at stated maturity or upon acceleration or otherwise) including any converted Rupees amount (s) consequent upon default (in the case of Loan in foreign currency) or in payment of any interest, compound interest, additional interest by way of liquidated damages or other monies in accordance with the Loan Agreement, or in the due compliance with any of the terms and conditions of the Loan Agreement, then in and in such an event, the Guarantor shall, within a period not exceeding seven days from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Republic of Tajikistan, the Economic Court at Dushanbe city may apply immediate temporary measures (interim measures) based on the application of a party to a court case and/or the other party, in cases provided by the said Code, in order to secure the claim of property interests (assets) of the applicant. As provided by part 2 of the said Article, in case if it will be difficult or impossible to fulfil a court decision in the absence of security measures (interim measures), such measures can be applied at any stage of the economic court proceedings. According to part 1, Article 91 of the said Code, an application for security measures (interim measures) can be filed in parallel with a court claim and/or in the court proceedings prior to adoption of a court decision (verdict) by which the consideration of a case on its merits is completed (disposal of the case is completed). The request for security measures (Interim measures) can be stated in the court claim. It follows from the court claim that the respondent can apply the compulsory recovery of funds form the applicant s account. According to the requirements of paragraphs 5, Part 1, Article 90 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter written by the principal borrower divulging the information that the Financial Creditor is keen to initiate proceedings in other courts for complete and lumpsum recovery of principal, interests accrued and other sums from the guarantor Mr. L.K. Malhotra and the Corporate Debtor. It is in the aforesaid context that the Economic Court at Dushanbe has passed an order on 07.07.2017, which reads as under: Republic of Tajikistan Economic Court of Dushanbe 734042, Dushanbe, Aini ave. 14A, tel.+992 372 222 20 80 Letter #2/246 dated 07.07.2017 To: CJSC CHL International Dushanbe, Ayni str. 48. CC: Export-Import Bank of India Economic Court of Dushanbe examines your letter #123 dated June 22nd 2017 regarding legal case #2-99-17 as per claim of CJSC CHL International to the defendant-Export-Import Bank of India on amendment to clauses V and VI of the Loan Contract concluded between CJSC CHL International and Export-Import Bank of India, as of September 23, 2010. It has been revealed from content of your letter, that Export-Import Bank of India notwithstanding the fact that proceedings on Loan contracts dated September 23rd 2010, Augus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the abovementioned loan contract is being considered by the courts of Republic of Tajikistan . 37. The matter does not end there and the principal borrower has to write another letter again on 02.10.2017. Reiterating the order dated 06.01.2017, the Economic Court observed as under: Republic of Tajikistan Economic Court of Dushanbe 734042, Dushanbe, Aini ave. 14A, tel.+992 372 222 20 80 Letter #2/364 dated 03.10.2017 To: CJSC CHL International Dushanbe, Aini str. 48. CC: Export-Import Bank of India Economic Court in Dushanbe has examined your letter #206 dated 02 October 2017 regarding legal case #2-99-17 according to CJSC CHL International claim against the defendant-Export-Import Bank of India on amendment of revisions and supplements to clauses V and VI of the Loan agreements dated 23 September, 2010, 26 August 2013 and 18 March 2015 executed by CJSC CHL International and Export-Import Bank of India. The request of CJSC CHL International has been upheld by the Judicial definition of the Economic Court in Dushanbe dated January 6th 2017, and the validity of Loan agreements dated 23 September, 2010, 26 August 2013 and 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Economic Courts at Dushanbe to show the non-existence of liability of Principal Debtor and there could not be any default on its part. Therefore, no liability could be fastened on the guarantor-Corporate Debtor. We are not executing those order so as to require fulfilment of various features of Section 13 and Section 44A of the CPC. Even an application filed by the Financial Creditor was rejected vide order dated 29.03.2017, which reads as under: Ruling On the refusal of the collateral Dushanbe March 29, 2017 Chairman of the Economic Court of Dushanbe, having examined the request of the representative of the Exim Bank of India on countermeasures in the case of the Suit/Application of CJSC CHL International against the Respondent-Exim Bank of India on Amendments to the Credit Agreements dated September 23, 2010, August 26, 2013 and March 18, 2015, concluded between the Claimant and the Respondent, Has defined: CJSC CHL International applied to the Economic Court of Dushanbe with the claim for Amendments to the Credit Agreements and at the same time the enactment of interim measures. (READ STAY order). 01/06/2017 The court ruled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se that the Suit/application/Statement of CJSC CHL International does not have a object/motive of collection of money or property claims, but has the essence of amending the Credit Agreements. In addition, the loan that disbursed to the Claimant is secured by pledge and the Claimant s obligations to the Respondent are very large. Including, according to the Contract on Agreements to the Mortgage Contract dated September 23, 2010, the building of a five-star hotel in Dushanbe that belongs to the Claimant and, by agreement of the parties, is valued at $53,830,000, the equivalent of TJS 423,631,334 at the rate of the National Bank Tajikistan on the date of 21.04.2016, is also placed in the pledge, According to the Pledge Agreement of certain shares of CJSC CHL International as of September 23, 2010, all actions of the Claimant with all rights arising from the shares, including the right to vote at general meetings, options, guarantees and the right to purchase other shares, the right to Statutory Capital, Profit and dividends and other rights, with a face value of $4,798,033, as well as in accordance with the Pledge of Movable Property of ZAO CHL International of August ..... X X X X Extracts X X X X X X X X Extracts X X X X
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