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TMI Blog2022 (9) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... No.6 and it was noticed in the Offer Letter itself that the valuation of Flat is Rs.300 million, i.e., equivalent to the Financial Facility, which was to be extended to the Principal Borrower - the Corporate Debtor cannot escape from its liability from repayment of the loan sanctioned to the Principal Borrower on the ground that Letter of Guarantee was insufficiently stamped. Whether IL FS can be treated as Financial Creditor of the Guarantor Company or not - HELD THAT:- The submission raised by learned Counsel for the Appellant has to be rejected in view of the law laid down by the Hon ble Supreme Court in Laxmi Pat Surana vs. Union Bank of India and Another [ 2021 (3) TMI 1179 - SUPREME COURT ]. The Hon ble Supreme Court has laid down in the above case where an Application was filed under Section 7 by Financial Creditor against a Corporate Person who had offered guarantee to the two loans of Principal Borrower - It was held in the case that we find no substance in the argument advanced before us that since the loan was offered to a proprietary firm (not a corporate person), action under Section 7 IBC cannot be initiated against the corporate person even though it had off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on filed by the Resolution Professional under Section 33. No infirmity is found in the order of the Adjudicating Authority directing for liquidation of the Corporate Debtor. There is no merit in any of the Appeals, both the Appeals are dismissed. - Company Appeal (AT) (Insolvency) No. 468 of 2022, Company Appeal (AT) (Insolvency) No. 1027 of 2022 - - - Dated:- 20-9-2022 - [ Justice Ashok Bhushan ] Chairperson , [ Justice M. Satyanarayana Murthy ] Member ( Judicial ) And [ Barun Mitra ] Member ( Technical ) For the Appellant : Mr. Abhijeet Sinha, Mr. Rahul Arya, Mr. Ashish Chaudhury and Mr. Raktim Gogoi, Mr. Kartikeya Singh, Advocates For the Respondent : Mr. Krishnendu Dutta, Sr. Advocate with Mr. Satendra K. Rai, Ms. Varsha, Advocates for R-1 Mr. Shashank Agrawal and Aadil Khan, Advocates for R-2, Mr. Rajesh Jhunjhunwala JUDGMENT ASHOK BHUSHAN , J. These two Appeals have been filed by the same Appellant, who is suspended Director of the Corporate Debtor M/s G.C. Property Private Limited. The Company Appeal (AT) (Insolvency) No.468 of 2022 has been filed against the order dated 11.03.2022 passed by National Company Law Tribunal, Mumbai Bench, Court III, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) Respondent No.1-Financial Creditor filed an Application under Section 7 of the Code dated 28.08.2019 claiming total amount of default of 36,36,16,503/-. Notice was issued in the Application and Corporate Debtor filed its reply objecting Section 7 Application. (iv) The Adjudicating Authority vide order dated 11.03.2022 admitted the Section 7 Application. 3. In the Appeal an interim order was passed that occupants of the flat No.6 shall not be asked to vacate the premises till 31.07.2022. The interim order was not extended after 31.07.2022. There being no interim order staying the CIRP, the Committee of Creditors ( CoC ) in its 3rd Meeting passed Resolution for liquidation of the Corporate Debtor. In pursuance of the Resolution of the CoC, an IA No.1557 of 2022 was filed by the Resolution Professional, which was allowed vide order dated 06.07.2022 by the Adjudicating Authority directing the liquidation of the Corporate Debtor M/s G.C. Property Private Limited. 4. Shri Abhijeet Sinha, learned Counsel for the Appellant challenging the order dated 11.03.2022 admitting Section 7 Application, raised following submissions: (i) That letter of Guarantee dated 29.12.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document indicate that the Guarantee Agreement comprises of E-stamp certificate, which makes it evidently clear that requisite stamp duty has been paid at the time of signing of execution of the Guarantee Agreement. Further, even if it is assumed that an insufficient stamped duty is paid on the Agreement, the same is not bar to admitting Section 7 Application. Relying on the judgment of this Tribunal in Koncentric Investment vs. Standard Chartered Bank London Company Appeal (AT) (Insolvency) No. 911 of 2021, it is submitted that even if Facility Document is not stamped, other materials on record could be relied on for finding debt and default. The mere fact that Principal Borrower has further transferred the amount to M/s Vadraj Cement Ltd. in no manner diminishes the liability of the Corporate Debtor to make the payment of debt. The IL FS is not a party to the Agreement between the Borrower and M/s Vadraj Cement Ltd., hence, the same has no bearing on the liability of the Borrower and the Corporate Debtor under the Loan Agreement/ Guarantee Agreement. 6. We have considered the submissions of learned Counsel for the parties and have perused the record. 7. Before we proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hulabhai Desai Road, Mumbai 26 was handed over to the Financial Creditor on behalf of the Corporate Debtor. The Corporate Debtor also got the Charge created on 29.12.2017 registered with the Registrar of Companies and Certificate of Charge was issued on 09.03.2018. 9. Now we come to the first submission of the learned Counsel for the Appellant that Letter of Guarantee having not been sufficiently stamped could not be looked into for any purpose. The learned Counsel for the Respondent, although, contended that the Letter of Guarantee contains an E-stamp certificate, but have failed to prove that the Letter of Guarantee was sufficiently stamped as per requirement of the statute. The E-stamp, which is at Exhibit-C to the reply, only indicates that the Rs.150/- has been affixed. We, thus, proceed on the premises that Letter of Guarantee is not sufficiently stamped. 10. Learned Counsel for the Respondent has relied on the judgment of this Tribunal in Koncentric Investment vs. Standard Chartered Bank London (supra), in which case, an Appeal was filed challenging the order of the Adjudicating Authority admitting Section 7 Application. One of the arguments which was raised before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, in the reply, Charge Certificate dated 09.03.2018 issued by Registrar of Companies, Mumbai has been brought on record, which certifies creation of Charge dated 29.12.2017 between G.C. Property Private Limited (First Party) and IL FS Financial Services Limited (Second Party). Charge having been registered by the Corporate Debtor himself, the Corporate Debtor cannot escape from its liability for payment of loan as per its own act of creating mortgage by deposit of Title Deed and registration of Charge. It is further relevant to notice that in the Offer Letter dated 27.12.2017, as extracted above in Security Package , where Primary Security was Flat No.6 and it was noticed in the Offer Letter itself that the valuation of Flat is Rs.300 million, i.e., equivalent to the Financial Facility, which was to be extended to the Principal Borrower. We, thus, are of the view that the Corporate Debtor cannot escape from its liability from repayment of the loan sanctioned to the Principal Borrower on the ground that Letter of Guarantee was insufficiently stamped. 14. Now we come to the second submission of the learned Counsel for the Appellant that IL FS cannot be treated as Financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 7 IBC against the corporate person who had merely offered guarantee for such loan account. That action can still proceed against the guarantor being a corporate debtor, consequent to the default committed by the principal borrower. There is no reason to limit the width of Section 7 IBC despite law permitting initiation of CIRP against the corporate debtor, if and when default is committed by the principal borrower. For, the liability and obligation of the guarantor to pay the outstanding dues would get triggered coextensively. 26. To get over this position, much reliance was placed on Section 5(5-A) IBC, which defines the expression corporate guarantor to mean a corporate person, who is the surety in a contract of guarantee to a corporate debtor. This definition has been inserted by way of an amendment, which has come into force on 6-6-2018. This provision, as rightly urged by the respondents, is essentially in the context of a corporate debtor against whom CIRP is to be initiated in terms of the amended Section 60 IBC, which amendment is introduced by the same Amendment Act of 2018. This change was to empower NCLT to deal with the insolvency resolution or liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute. As noted above, the Letter of Offer itself contemplated the Primary Security and mortgage of residential property, i.e., Flat No.6, which was valued as Rs.300 million, i.e., equivalent to the Facility Loan, which was being extended to Respondent No.1 Principal Borrower. The Corporate Debtor cannot be heard in contending that it has no liability of repayment for the financial facility, which was extended by the IL FS to the Principal Borrower. The mere fact that Principal Borrower has further granted loan to M/s Vadraj Cement Ltd. out of the money received from loan sanctioned by IL FS, cannot be a ground to come to the conclusion that Corporate Debtor has no liability towards payment of loan and no debt is due on Corporate Debtor. We thus do not find any substance in this submission. 18. Now coming to the last submission of learned Counsel for the Appellant that Section 7 Application has malafidely initiated for purpose other than resolution of the Corporate Debtor. As noted above, the Corporate Debtor gave security to secure the loan of Rs.30 crores granted by IL FS to Principal Borrower. Primary security as noted above was residential Flat of the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers, draft Form G along with detailed EOI document containing proposed eligible criteria and also requested CoC to decide on the refundable participation deposit amount requirement from prospective resolution applicants. During 2nd CoC meeting held on 11th May, 2022, the CoC members informed Resolution Professional that they are not interest to publish EOI for submission of resolution plan considering the fact that the corporate debtor is not a going concern with no visible cash flows, no office infrastructure, manpower and non-availability of any records of last 7 years. The CoC members were also of the opinion that there is no possibility of resolution as the only asset available in the books of the corporate debtor is residential property. Further CoC members also informed the resolution professional about provisions of Section 33(2) of the Code, which empowers CoC of a corporate debtor to decide liquidation of corporate debtor any time before conformation of resolution plan and even before preparation of the Information Memorandum and same was also upheld by the Hon ble NCLAT in the matter of Sunil S. Kakkad Vs. Atrium Infocom Private Limited Oths. Whereby the Appellate Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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