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TMI Blog2019 (5) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... cknowledged the debt payable by the principal borrowers on 3.10.2016, likewise the debtor has not even disputed the Creditor Bank sending demand notices to the principal borrowers, the Creditor Bank sending recall notice to the principal borrowers and the guarantors. Whether or not any debt is a financial debt, it does not entail who the parties are, the only requisite to determine that it is a financial debt is as to whether or not the obligation falls within the ambit of any of the sub clauses of clause 8 of section 5 of the Code. Once it is proved that the debt falling within the ambit of debt payable along with interest which is disbursed against the consideration for the time value of the money and debt falling under any of the sub-clauses mentioned in clause 8 of section 5 of the Code, then it becomes financial debt as envisaged under clause 8. In this case, the corporate debtor admittedly being corporate guarantor to the money borrowed by the principal borrowers against payment of interest, it is a financial debt falling under sub-clause (i) of Clause 8. In this case, the person in default as per sub-clause (i) of clause 8 of section 5 is a company as envisaged unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the Corporate Debtor. Petition is admitted - Moratorium declared. - CP/1314/IB/2018 - - - Dated:- 8-4-2019 - MR B. S. V. PRAKASH KUMAR, MEMBER (JUDICIAL) AND MR S. VIJAYARAGHAVAN, MEMBER (TECHNICAL) For The Financial Creditor : Shri N.P. Vijay Kumar, Advocate And Sri R. Pradeep, Advocate For The Corporate Debtor : Shri P.J. Rishikesh, Adv. And Shri P.J. Sri Ganesh, Advocate ORDER Per : B.S.V. Prakash Kumar, Member. (Judicial) It is a petition filed by the Financial Creditor namely M/s. Karur Vysya Bank Limited (the Creditor) u/s. 7 of Insolvency Bankruptcy Code, 2016 (the Code) against the Corporate Debtor/Guarantor namely M/s. Maharaja Theme Parks Resorts Private Limited (the Debtor) for initiation of Corporate Insolvency Resolution Process (CIRP) by invoking guarantee against the debtor on the ground the Debtor defaulted in paying ₹ 171,14,99,866.78 as on 31.03.2017 towards the loans extended to the principal borrowers namely M/s. Sri Maharaja Refineries, M/s. Sri Maharaja Industries and M/s. Sri Maharaja Enterprises because all of them failed to repay the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri Maharaja Industries ₹ 75.42 crores Sri Maharaja Enterprises ₹ 11.86 crores Total ₹ 171.14 crores 6. These accounts have become non-performing assets on the following dates: Sri Maharaja Refineries, Partnership Firm 21.2.2017 Sri Maharaja Industries 8.2.2017 Sri Maharaja Enterprises 30.6.2017 7. The Creditor has filed all the loan documents executed by the principal borrowers as well as the Guarantors including this Corporate Debtor reflecting execution of loan agreements, hypothecation deeds, consent letters, renewal letters and reflecting this Debtor itself executing documents upto as late as 2017 to prove that debt is in existence. The Creditor has also filed recall notice issued by the Creditor to the principal borrowers and its guarantors. As the Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Guarantor shall be read to the extent of the definition given in the Code not beyond the definition because definition of the corporate Guarantor means Corporate Person who stood as surety or guarantor to the Corporate Debtor, therefore against whichever corporate person CIRP is initiated, the corporate guarantee given on behalf such corporate person will be called as Corporate Debtor, but this does not mean the corporate guarantee given to the non-corporate persons by a corporate person are no more to be treated as guarantors. 13. As to second limb of defence raised by the debtor counsel regarding limitation, the creditor counsel submits since this debt falls within the ambit of Clause (i) of Sub-section (8) of section 5 of the Code, as to the defence of the debtor counsel saying that the deed of guarantee executed on behalf of M/s. Sri Maharaja Refineries and M/s. Sri Maharaja Industries on 25.06.2014 being lapsed as on the date of filing i.e., on 02.01.2019, this Petition will not lie in respect to the loans availed by the above two principal borrowers, because the fresh Deed of Guarantee dated 06.02.2016 executed by the debtor is only limited to the loan availe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans availed by the principal borrowers are not against the consideration for the time value of money, otherwise also it is out and out money borrowed against interest which fact the debtor counsel can't even deny. 19. As to sub-clauses (a) to (h) of Clause (8) of Section 5, the Code signifies what borrowings would become financial debts, when it comes to sub-clause (i) of Clause 8, it signifies the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in debts falling within the ambit of the Clauses (a) to (h) of this clause shall be considered as financial debt. 20. Therefore to say to the extent as to whether or not any debt is a financial debt, it does not entail who the parties are, the only requisite to determine that it is a financial debt is as to whether or not the obligation falls within the ambit of any of the sub clauses of clause 8 of section 5 of the Code. 21. Once it is proved that the debt falling within the ambit of debt payable along with interest which is disbursed against the consideration for the time value of the money and debt falling under any of the sub-clauses me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Code defining the word Corporate Guarantor. This has to be read in the context of amendment to section 60(2) (3) of the Code to decide applicability of territorial jurisdiction when proceeded against a corporate debtor's corporate guarantor, not otherwise. The applicability of this definition will come into picture when application is filed against the corporate debtor's corporate guarantor. 24. The present case is not filed resting on the jurisdiction emanating from section 60(2) (3) of the Code. It is a case filed basing on the definition of financial debt (sub-clause (i) of Clause 8 of Sections 5 of the Code) read with jurisdiction emanating from sections 6, 7 and section 60(1) of the Code. To invoke this jurisdiction, the only point to be seen is as to whether it is a financial debt or not and whether default is by a corporate person or not. Those two mandates have been complied with. 25. For the sake of clarity, we hereby reproduce the legislative history for insertion of amendment to section 60 (2) (3) of the Code, which is as follows: 23 . Linking Proceedings of Corporate Guarantor with Corporate Debtor . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... catory definition to avert the ambiguity started brewing at the initial stage as to whether CIRP could be initiated against corporate debtor's corporate guarantor at the place of its register office or before the NCLT where already CIRP initiated against the corporate debtor. Therefore section 5(5A) has to be read as clarification to the ambiguity developed in applying section 60(2) (3) of the Code against the Corporate debtor's corporate guarantor, not to nullify the definition given in sub-clause (i) of Clause 8 of Section 5 of the code. 29. And more so, the right accrued to a party in a statute cannot be invalidated by looking at supplementation come as amendment for altogether different purpose and to give clarity to the existing provisions, of course it need not be reiterated that a right accrued to a party by virtue of a provision will not be wiped out without explicit repeal of that right. Therefore it should not be misconstrued that the definition in 5(5A) has come into existence so as to exclude the Corporate Guarantee given by the company to an individual. 30. Here this Corporate Debtor clearly falls within the definition of Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date of acknowledgement. 34. Here this Company Petition having been filed on 24.10.2018, this Petition against the Corporate Debtor is well within limitation. Since it is clear that the Corporate Debtor being jointly and severally liable to the guarantee given by it to the loans availed by the Principal Borrowers, the same being within limitation, the claim is within the prescribed period of limitation. Henceforth, we have not seen any merit in the argument made by the Corporate Debtor counsel. 35. As to the argument of the Creditor counsel stating that the since proceeding has been initiated against the same subject matter before the Debt Recovery Tribunal within limitation, therefore this Petition, though not filed within three years from the date of guarantee, is not hit by limitation is not correct proposition of law because filing or initiation of proceeding in respect to the same subject matter will not save the claim from limitation because liability or debt will be within limitation only if either the debt is acknowledged or part payment is made as stated under section 18 or section 19 of the Limitation Act, 1963. This proposition has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interrupted during moratorium period. III. That the provisions of sub-section (1) of section 14 of IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. IV. That the order of moratorium shall have effect from 8.4.2019 till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of section 31 of IBC or passes an order for liquidation of corporate debtor under section 33 of IBC, as the case may be. V. That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of IBC. VI. That this Bench hereby appoints Mrs. Aneetha Subramaniam, having Registration Number [IBBI/IPA-001/IP-P00376/2017-2018/10633], A2, Saradha Apartments, 17/6, Sringeri Mutt Road, R. A Puram, Mandaveli, Chennai-600028, E-Mail: [email protected], Mobile No: 9840024178 as Interim Resolution Professional to carry out the functions as mentioned under IBC. Fee payable to IRP/RP shall be in compliance with the IBBI Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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