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TMI Blog2019 (2) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... t' was entered into by 'All India Society for Advance Education and Research' (hereinafter referred to as "Principal Borrower") with 'M/s. Piramal Enterprises Ltd.' (hereinafter referred to as "Financial Creditor") for grant of Rs. 38,00,00,000/- (Rupees Thirty-Eight Crores Only) which was guaranteed by two 'Corporate Guarantors' namely- 'Sunrise Naturopathy and Resorts Pvt. Ltd.'- ("Corporate Guarantor No.1" for short) and 'Sunsystem Institute of Information Technology Pvt. Ltd.'- ("Corporate Guarantor No.2" for short). The loan amount was disbursed in two tranches by the 'Financial Creditor' to the 'Principal Borrower' which is as follows: DATE AMOUNT (IN RS.) 28th October, 2013 31,17,00,000 1st November, 2013 6,83,00,000 Total 38,00,00,000 3. Between the years January, 2014 to July, 2017, the 'Principal Borrower' has repaid more than Rs. 22 Crores of the loan. 4. The 'Financial Creditor' had filed a Civil Suit bearing No. 46/40/2017 before the Court of Additional District Judge-I, Alwar, Rajasthan against the 'Principal Borrower' and both the 'Corporate Guarantors' on 15th September, 2017, which is pending adjudication. 5. During the pendency of this suit, the 'Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & 2' (shown as 'Corporate Debtors') it is clear that same claim amount has been shown in both the Form-1, and reliance has been placed on same agreement. Debt amount and the amount of default, date of default etc. are also same which is in terms of the agreement dated 18th October, 2013. The Adjudicating Authority noticed the similarity in two separate impugned orders and used same language and reasoning though passed orders one on 24th May, 2018 and the other on 31st May, 2018. 11. In the aforesaid background, learned counsel for the Appellant raised question of maintainability of two 'Corporate Insolvency Resolution Processes' against two 'Corporate Guarantors' based on same sets of claim; debt, default and record. 12. Learned counsel for the Appellant submitted that no 'Corporate Insolvency Resolution Process' can be initiated against the 'Corporate Guarantors', without initiating 'Corporate Insolvency Resolution Process' against the 'Principal Borrower'. Further, according to him, the 'Principal Borrower' not being a Company, no application under Sections 7 or 9 can be filed against it. If no application under Sections 7 or 9 can be filed against the 'Principal Borrower', the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Four Thousand) Copies of the Memorandum of Association, the Articles of Association Of the Corporate Debtor along with the extract of the master data for the Corporate Debtor as available on the website of the Ministry of Corporate Affairs 5. ADDRESS OF THE REGISTERED OFFICE OF THE CORPORATE DEBTOR P.O. Kalighati (SIR) Panchayat, Bilochi, Tehsil - Arner, Jaipur PART-III PARTICULARS OF THE PROPOSED INTERIM RESOLUTION PROFESSIONAL 1. NAME, ADDRESS, EMAIL ADDRESS AND REGISTRATION NUMBER OF THE PROPOSED INTERIM RESOLUTION PROFESSIONAL Name: Mr. Sethurathnam Ravi Registration No: IBBI/IPA-O0l/IP-POO372/20l7-18/10629 Address: 505-A, 5th Floor, Rectangle 1, District Centre, Saket .New Delhi,Delhi, 110017 Email Address: sravi.fca@gmail.com Form 2 along with registration certificate issued by IBBI in favour of the proposed Interim Resolution Professional is annexed herewith as Annexure A-3 (Colly.) PART -IV PARTICULARS OF FINANCIAL DEBT 1. TOTAL AMOUNT OF DEBT GRANTED DATE(S) OF DISBURSEMENT Rs. 38,00,00,000 (Rupees Thirty Eight Crores) granted to All India Society for Advance Education and Research ("Borrower") by the Financial Creditor the repayment of which was guaran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ALUE AS PER THE CREDITOR. [ATTACH A COPY OF A CERTIFICATE OF REGISTRATION OF CHARGE ISSUED BY THE REGISTRAR OF COMPANIES (IF CORPORATE DEBTOR IS A COMPANY)] N/A 2. PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR ARBITRAL PANEL ADJUDICATING ON THE DEFAULT, IF ANY. As stated above, a civil suit is pending adjudication and the matter has been referred for mediation. Since no progress is made in the mediation, the Financial Creditor intends to withdraw from the mediation. 3. RECORD OF DEFAULT WITH THE INFORMATION UTILITY, IF ANY. N/A 4. DETAILS OF SUCCESSION CERTIFICATE, OR PROBATE OF A WILL, OR LETTER OF ADMINISTRATION, OR COURT DECREE (AS MAY BE APPLICABLE), UNDER THE INDIAN SUCCESSION ACT, 1925 (10 OF 1925). N/A 5. THE LATEST AND COMPLETE COPY OF THE FINANCIAL CONTRACT REFLECTING ALL AMENDMENTS AND WAIVERS TO DATE. i. Deed of Guarantee dated 18 October 2013 executed by the Corporate Debtor in favor of the Financial Creditor ii. Term Loan Agreement dated 18th October 2013 between the Financial Creditor and the Borrower. The above financial contracts are annexed herewith as AnnexureA-5 (COLLY) 6. A RECORD OF DEFAULT AS AVAILABLE WITH ANY CREDIT INFORMATIO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the present Application in terms of Section 7 of the Insolvency and Bankruptcy Code, 2016. Yours sincerely, Signature of person authorised to act on behalf of the financial creditor Name Shikha Varun Ginodia Position with or in relation to the financial creditor Manager, Legal Address of person signing Piramal Enterprises Limited, Piramal Tower, Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400013 "Sunsystem Institute of Information Technology Pvt. Ltd.'-("Corporate Guarantor No.2")" Relevant Extract of Form-1 PART - II PARTICULARS OFTHE CORPORATE DEBTOR 1. NAME OF THE CORPORATE DEBTOR Sunsystem Institute of Information Technology Private Limited 2. IDENTIFICATION NUMBER OF THE CORPORATE DEBTOR CTN: U16911RJ2001PTC016911 3. DATE OF INCORPORATION OF THE CORPORATE DEBTOR 8 March, 2001 4. NOMINAL SHARE CAPITAL AND THE PAID-UP SHARE CAPITAL OF THE CORPORATE DEBTOR AND/OR DETAIL OF GUARANTEE CLAUSE AS PER MEMORANDUM OF ASSOCIATION (AS APPLICABLE) AUTHORISED SHARE CAPITAL OF THE CORPORATE DEBTOR. Authorised Share Capital: Rs. 1,55,00,000 (Rupees One Crore Fifty Five Lakhs) Paid Up Share Capital: Rs. 1,50,00,000 (Rupees One Crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt (in Rs.) Interest Payable 5,80,01,098 Principal Outstanding 28,53,44,965 Penal Interest payable 5,95,30.399 Total Outstanding 40,28,76,461 The Applicant reserves its rights to file an updated claim before the RP inclusive Of the applicable interest post 30 September, 2017. * The Borrower originally defaulted in repayment of its obligations to the Financial Creditor on 30 April, 2014 and since then has persistently defaulted on its repayment obligations. The Financial Creditor has already commenced Civil Suit No. 46/40/2017 before the court of Additional District Judge-I, Alwar against the Borrower and the guarantors, including the Corporate Debtor herein on 15 September, 2017. * The Financial Creditor issued a notice of demand to the Corporate Debtor on 24 October, 2017 and 26 October, 2017 calling upon me Corporate Debtor to make payment of the amount outstanding from the Borrower within 15 days of receipt. Details of dates on which the installments became due and were not honored by the Borrower is annexed hereto as Annexure A-4. PART-V PARTICULARS OF FINANCIAL DEBT (DOCUMENTS, RECORD AND EVIDENCE OF DEFAULT) 1. PARTICULARS OF SECURITY HELD, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shah & Co., Chartered Accountants (vii) Letter dated 12 July, 2016 issued by the Financial Creditor to inter alia the Corporate Debtor (viii) Notice of Demand/Invocation dated 24 October, 2017 issued by the Financial Creditor to the Corporate Debtor (ix) Legal Notice dated 24 October, 2017 issued by the counsel on behalf of the Financial Creditor, KNM & Partners, to the Corporate Debtor (x) Letter dated 26 October, 2017 issued on behalf of the Financial Creditor to the Corporate Debtor Copies of the above documents are annexed herewith as Annexure A-6 (COLLY) The Financial Creditor hereby certifies that to the best of its knowledge, Mr. Sethurathnam Ravi, is fully qualified and permitted to act as an insolvency professional in accordance with the Insolvency and Bankruptcy Code, 2016, and the associated rules and regulations. The Financial Creditor has paid the requisite fee of Rs. 25,000 for this application through a demand draft bearing no. 506409 dated 11 January 2018 drawn on Deutsche Bank, 28, Kasturba Gandhi Marg, ECE House, Main Building, New Delhi payable at New Delhi The Financial Creditor submits that this Hon'ble Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... older; Sec. 3(11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; Sec. 3(12) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be." 20. Certain definitions contained in Section 5 of the 'I&B Code', relevant of which are Section 5(7) & (8) and reads as follows:- "Sec. 5. Definitions.─ (7) "financial creditor" means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; Sec. 5(8) "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its dematerialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n "But the surety is a guarantee; and it is his business to see whether the principal pays, and not that of the creditor". In the absence of some special equity the surety has no right to restrain an action against him by the creditor on the ground that the principal is solvent or that the creditor may have relief against the principal in some other proceedings. 5. Likewise where the creditor has obtained a decree against the surety and the principal, the surety has no right to restrain execution against him until the creditor has exhausted his remedies against the principal. In Lachhman Joharimal v. Bapu Khandu and Surety Tukaram Khandoji the Judge of the Court of Small Causes, Ahmednagar, solicited the opinion of the Bombay High Court on the subject of the liability of sureties. The creditors having obtained decrees in two suits in the Court of Small Causes against the principals and sureties presented applications for the imprisonment of the sureties before levying execution against the principals. The Judge stated that the practice of his court had been to restrain a judgment-creditor from recovering from a surety until he had exhausted his remedy against the principal but i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; xx "13 In the present case before us the decree does not postpone the execution. The decree is simultaneous and it is jointly and severally against all the defendants including the guarantor. It is the right of the decree-holder to proceed with it in a way he likes. Section 128 of the Indian Contract Act itself provides that "the liability of the surety is coextensive with that of the principal debtor, unless it is otherwise provided by the contract". xx xx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tim, as noticed and referred in the preceding paragraphs. 27. In "Innoventive Industries Ltd. v. ICICI Bank and Ors.─ (2018) 1 SCC 407", the Hon'ble Supreme Court observed and held as follows: "27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning nonpayment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of "debt", we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of "claim", we have to go back to Section 3(6) which defines "claim" to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be." 28. A 'Financial Creditor' has been defined under sub-section (7) of Section 5 means any person to whom a financial debt is owed and 'financial debt' is defined in sub-section (8) of Section 5 as a debt which is disbursed against the consideration for the time value of money. 29. In the present case, the 'Financial Creditor'- ('M/s. Piramal Enterprises Ltd.') has claimed that it was owed financial debt of Rs. 40,28,76,461/- from 'Sunsystem Institute of Information Technology Pvt. Ltd.'- ("Corporate Guarantor No.2"), which means that the 'Financial Creditor' was owed debt which is disbursed against the time value of money. Once such claim is made by the same very 'Financial Creditor'- ('M/s. Piramal Enterprises Ltd.') against one of the 'Corporate Debtor' ('Corporate Guarantor No.2') in respect of same financial debt for triggering 'Corporate Insolvency Resolution Process' and such applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r same set of claim application under Section 7 filed by the 'Financial Creditor' is admitted against one of the 'Corporate Debtor' ('Principal Borrower' or 'Corporate Guarantor(s)'), second application by the same 'Financial Creditor' for same set of claim and default cannot be admitted against the other 'Corporate Debtor' (the 'Corporate Guarantor(s)' or the 'Principal Borrower'). Further, though there is a provision to file joint application under Section 7 by the 'Financial Creditors', no application can be filed by the 'Financial Creditor' against two or more 'Corporate Debtors' on the ground of joint liability ('Principal Borrower' and one 'Corporate Guarantor', or 'Principal Borrower' or two 'Corporate Guarantors' or one 'Corporate Guarantor' and other 'Corporate Guarantor'), till it is shown that the 'Corporate Debtors' combinedly are joint venture company. 33. For the reasons aforesaid, while we uphold the initiation of the 'Corporate Insolvency Resolution Process' initiated under Section 7 of the 'I&B Code' against 'Sunsystem Institute of Information Technology Pvt. Ltd.'- ("Corporate Guarantor No.2") by impugned order dated 24th May, 2018, we hold that the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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