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TMI Blog2022 (11) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... aroda, State Bank of India, Union Bank of India, UCO Bank, Axis Bank Limited, M/s Roshan Engineers,India Forgings & Engineering Co. Private Limited, M/s Sunshri Engineers, Soni Rollers Private Limited, Benson Engineers Private Limited, Shubham Enterprises, Pilania Road Carriers,, S hree Vinayak Transport, A ayush Manufacturers & Financers Pvt. Ltd.,Jyotirmoyee International Private Limited , Khaitan Udyog Pvt. Ltd., Navneet Trading & Investment Co. Pvt. Ltd., Nobel Consultancy Pvt. Ltd.,Shivshakti Communication & Investment Pvt. Ltd., T .R. Investments Private Limited [Justice Ashok Bhushan] Chairperson , [Justice M. Satyanarayana Murthy] Member (Judicial) And [Mr. Barun Mitra] Member (Technical) For the Appellants: Mr. Vivek Chib, Sr. Advocate with Mr. Anirudh Wadhwa, Mr. Rohit Sharma & Mr. Bhargav Thali, Mr. Aditya Mittal, Ms. Unnati Jhunjhunwala, Advocates For the Respondents: Mr. Rishav Banerjee & Mr. Rajarshi Banerjee, Advocates for R-1, Liquidator. Ms. Neha Dutt Tenani, Mr. Soumya Dutta, Mr. Avishek Guha, Advocates for R-2 to R-6. JUDGMENT (Per Hon'ble Mr. Justice M. Satyanarayana Murthy) The Petitioners/Appellants in I.A.(IB) No.39/CTB/2019 in TP No. 19/CTB/2021 prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Respondents, the Applicants came to know that the Respondents had admitted the claim of Consortium of Banks comprising State Bank of India, Axis Bank Ltd, Union Bank of India, Bank of Baroda and UCO Bank. The consortium of Banks had lodged its claim with the Respondent No. 1 on the basis of Corporate Guarantee furnished by Hari Machines Ltd. for the loan facility availed by one PMPL from the consortium of Banks. The purported Corporate Guarantee furnished by Hari Machines Ltd. in respect of facility availed by PMPL from the consortium has been rendered void and thus the claim of the consortium ought not to have been admitted by the Respondent in view of the following: "i. The consortium had lodged its claim with the Resolution Professional of Hari Machines Limited on the basis of the purported corporate guarantee given by Hari Machines Limited in respect of facilities availed of by Pro Minerals Pvt. Ltd. from the consortium. ii. Corporate Insolvency Resolution Process of Pro Minerals Private Limited has commenced on or about 22nd February, 2019. iii. The resolution professional of Hari Machines Limited and lodged claim for the corporate guarantee amount with the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Corporate Debtor executed a Contract of Guarantee in favour of Financial Creditors for the loan sanctioned to PMPL. 5. On 16.11.2018, the Adjudicating Authority appointed Respondent No. 1 as Liquidator and CIRP was initiated against PMPL After undergoing resolution process and after negotiation with the Bankers, a Resolution Plan submitted by Essel Mining & Industries was finalized and approved. Upon approval of CoC under Section 30(4) of IBC, the same was approved by Adjudicating Authority under Section 31 of IBC. 6. As per terms of the Resolution Plan, the Consortium of Banks were to receive a sum of Rs. 37,02,26,590/- as full and final settlement of their debt due and payable by PMPL. In the said Resolution Plan it has been clearly set out that the final settlement with the Financial Creditors are without prejudice to their right to proceed against the guarantors under the relevant Deeds of Guarantee. Such agreement was executed in order to secure the due repayment of the entire dues under the relevant credit facility. A perusal of the contents of the Resolution Plan would make inexplicably clear that by virtue of Resolution Plan, the rights of the creditors, available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Essel Mining & Industries Ltd. and AIC Steel Pvt. Ltd. In the 9th CoC meeting on 10.01.2019, CoC approved the Resolution Plan submitted by M/s Essel Mining & Industries Ltd by 100% voting share, requested the Resolution Professional to submit the Plan for approval. Accordingly, Resolution Professional filed application for approval of Plan and after hearing the parties, Adjudicating Authority by an order dated 22.2.2019 approved the Resolution Plan for PMPL. 9. The Respondents were to receive a sum of Rs. 269,51,45,209/- as full and final settlement of their dues in proportion of their debt but according to the Plan, the amount was received by Financial Creditors with prejudice to their rights to proceed against the Guarantors under Deeds of Guarantee. Therefore, Respondent Nos. 2 to 6 submitted their claim before the Liquidator, who in turn admitted their claims though it reduced the amount payable to other Operational Creditors. The admission of the claim of the Respondent Nos. 2 to 6 is in accordance with law since they reserved the right to proceed against the Guarantors under Deeds of Guarantee, since, Guarantors were discharged from their liability by acceptance in the Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted in the main Petition. Therefore, the contentions raised in Reply needs no further reiteration. 15. Learned Sr. Counsel for the Appellant reiterated the contentions besides filing Written Submissions raising specific contentions contending that when the claim of Respondent Nos. 2 to 6 i.e., the Consortium of banks was approved, both by CoC of PMPL and Adjudicating Authority, the liability of Guarantor stood discharged and thereby not entitled to make a claim before the Liquidator of Hari Machine Ltd. It is also contended that there was no clause 2.9.5. of Resolution Plan of PMPL reserving the right to proceed against the Guarantor and even if any such reservation is made, it is not binding on the Appellants. It is also contended that as per Section 146 of Indian Contract Act, the Appellants are entitled to be liable only to contribute equally along with other seven Guarantors but the Respondent Nos. 2 to 6 did not proceed against other Guarantors. Therefore, the acceptance of claim of Consortium of Bank by Respondent No. 1/Liquidator is in contravention of law i.e., Section 146 of Indian Contract. Learned Sr. Counsel placed reliance on following four judgements of Hon'ble Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereinafter referred 'CIRP'). The petition was allowed and CIRP was initiated. In the process, the consortium of Banks agreed to receive amount of Rs.37,02,26,590/-while reserving their right to proceed against the guarantors for recovery of the outstanding amount in the Resolution Plan, vide clause 2.9.5. Hari Machine Ltd also went to liquidation, appointing 1st Respondent herein as Liquidator under Section 33 of IBC. It is also an admitted fact that the consortium of Banks filed their claim for the balance amount of loan advanced by consortium of Banks to PMPL. The same was admitted by 1st Respondent/Liquidator. Challenging the same, they preferred Application before the Adjudicating Authority to direct the Liquidator to reject the claim of consortium of Banks. 21. The Appellants raised several contentions hence, it is necessary to advert to certain provisions of IBC which deal with Resolution Plan, liquidation. Section 33 deals with the initiation of liquidation process and Section 34 deals with appointment of Liquidator and fee to be paid. Whereas, Section 35 deals with the power of the Liquidator. According to Section 35, it is the duty of the Liquidator to verify the claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riminal, in the name of on behalf of the corporate debtor; (l) to investigate the financial affairs of the corporate debtor to determine undervalued or preferential transactions; (m) to take all such actions, steps, or to sign, execute and verify any paper, deed, receipt document, application, petition, affidavit, bond or instrument and for such purpose to use the common seal, if any, as may be necessary for liquidation, distribution of assets and in discharge of his duties and obligations and functions as liquidator; (n) to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation of the corporate debtor and to report the progress of the liquidation process in a manner as may be specified by the Board; and (o) to perform such other functions as may be specified by the Board. (2) The liquidator shall have the power to consult any of the stakeholders entitled to a distribution of proceeds under section 53: Provided that any such consultation shall not be binding on the liquidator: Provided further that the records of any such consultation shall be made available to all other stakeholders not so consulted, in a manner specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist or the claim against the guarantors, under the Agreement of Guarantee, is extinguished thereby the consortium of Banks is not entitled to put forth claim under Chapter-III, Section 38 & 39 of IBC and 1st Respondent/Liquidator ought to have rejected the claim under Section 40 of IBC. 26. Learned Sr. Counsel for the Appellants has drawn attention of this Tribunal to Sections 133, 134, 135 and 136 of the Indian Contract Act to contend that when once Respond Nos. 2 to 6 agreed to receive Rs. 37,02,26,590/- as approved Resolution Plan by CoC, the Corporate Debtor is deemed to have been discharged. But Section 133 has no relevance to decide the present issue. However, Section 134 deals with discharge of surety by release or discharge of principal debtor by surety. Discharge by any contract between the creditor or principal debtor by which the principal debtor is released or by any or omission of the Creditor, the legal consequence of which is the discharge of the principal debtor. But in the present case, the Respondent Nos. 2 to 6 reserved their right to proceed against the Creditor as per clause 2.9.5, which we extract hereunder. "All security (including Guarantees) provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. As held by his court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process i.e., by operation of law, or due to liquidation or insolvency proceeding, does not of an independent contract.' 31. The IBC legislation is subsequent to the Indian Contract Act and as such it will prevail over the provision of Indian Contract Act. In view of the principle laid down in "State Bank of India vs. V. Ramakrishnan" and "Lalit Kr. Jain vs. Union of India" referred supra, the Guarantors are not absolved from their liability since Consortium of Banks, i.e., Respondent Nos. 2 to 6 reserved their right in the Resolution Plan to proceed against the Guarantors for recovery of the balance amount of loan. 32. During hearing, learned Sr. Counsel for the Appellants drawn attention of this Tribunal to the judgments of "State Bank of India vs. V. Ramakrishnan" and "Lalit Kr. Jain vs. Union of India" besides two other judgments of Hon'ble Apex Court in the matter of "Ram Kishun & Ors v. State of U.P. and Ors" referred supra. 33. "Wolmershausen V. Gullick" [1893] 2 Ch. 514, referred supra of 1893 of Chancery Division, which is in consonance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all or any of the sureties including principal debtor and one surety cannot direct the creditor to proceed against any of them or all of them. Therefore, it is for the Respondent Nos. 2 to 6 to recover the amount from either of the sureties or from principal debtor or against all in terms of Section 140 of Indian Contract Act since the liability of sureties is co-extensive with that of the principal debtor. The Adjudicating Authority adverted to Sections 140 and 146 of Indian Contract Act and decided this issue against the Appellants. 35. Learned Sr. Counsel for the Appellants had drawn the attention of this Tribunal, the decision of the Hon'ble Apex Court in the matter of "Ram Kishun & Ors v. State of U.P. and others" where Hon'ble Supreme Court had an occasion to decide the prerogative of the Creditors to proceed against the all or any of the sureties and principal debtor. The Hon'ble Supreme Court held that the liability of sureties is co-extensive with that of the principal debtor. In case when there are more than one surety, the liability is divided to all for any unpaid amount. Thus, each surety is liable to pay equally to discharge the unpaid debt in view of Section 146 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truth, therefore, until the one has paid more than his proportion, either of the whole debt, or of that part of the debt which remains unpaid by the principal, it is not clear that he ever will be entitled to demand anything from the other, and before that, he has no equity to receive a contribution, and consequently no right of action, which is founded on the equity to receive it. Thus, if the surety, more than six years before the action, have paid a portion of the debt, and the principal has paid the surety within six years, the Statute of Limitations will not run from the payment by the surety, but from the payment of the residue by the principal, for until the latter date it does not appear that the surety has paid more than his share. In Re Snowdown (1881) 17 Ch.D. 44, the Court of Appeal held that a surety is not entitled to call upon his co-surety for contribution until he has paid more than his proportion of the debt due to the principal creditor. In Stirling v. Burdett [1911] 2 Ch. 418, the Chancery Division held that interest and premiums constituted one debt, that, until the plaintiffs had paid more than their due proportion of the entire debt, they could not call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n equal amount; and if not equally, then proportionately to the amount for which each is a surety. Thus, from the law declared by various Courts in England, Supreme Court of India and judgments of Madras High Court, it is abundantly clear that when one surety discharged the liability of the principal debtor to the creditor, the other sureties are liable to contribute equally based on the Principle of Equity, till the surety paid part or whole of the debt due to the creditor by the principal debtor, the question of claiming right of contribution against the co-surety does not arise. The judgments of England referred supra, though not binding precedent under Article 141 of Constitution of India, they are of greater persuasive value, since the principles of Indian Contract Act are borrowed from England. The judgements of foreign Courts are having highest persuasive value though not binding precedent, as those judgments are not the law declared by the Apex Court under Article 141 of Constitution of India. In "Forasol v. ONGC" 1984 (Supp.) SCC 263 the Apex Court observed that the English decision are of high persuasive value and our Courts should be cautious enough whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Respondent Nos. 2 to 6 placed reliance on the same judgment but needs no further consideration. 39. Learned Counsel for Respondent No. 1/Liquidator has pointed out that the Appellants have no right to direct the Creditor/Respondent Nos. 2 to 6 to proceed against any one Guarantor, more particularly, when the Respondents reserved the right to appropriate claim against the Guarantor and proceed in accordance with law. The Hon'ble Supreme Court in the matter of "Lalit Kr. Jain vs. Union of India" has held in paragraphs 111 and 104 that the approval of the Resolution Plan does not absolve the surety/guarantor of his or her liability, which arises out of independent contract. In "Maharashtra State Electricity Board Bombay Vs. Official Liquidator, High Court, Ernakulam & Anr." referred supra laid down a similar principle as in "Lalit Kr. Jain vs. Union of India". The Hon'ble Apex Court in "Harihar Nath & Ors. Vs. State Bank of India & Ors." (2006) 4 SCC 457, paragraph-23 held that it is open to the Creditor to recover the amount in the manner it deems fit. Thus, it is upto the Financial Creditor to decide which Corporate debtor is to be proceeded against Guarantors of such Contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are loosing part of the claim even after admission of claim in the liquidation process of Hari Machines Ltd, thereby the reduction in the claim of the Petitioner/Appellant on account of admission of the claim of the Respondents is not sufficient ground to reject the claim of Respondent Nos. 2 to 6. 42. Therefore, we find absolutely no error in the order passed by the Adjudicating Authority, warranting interference by this Tribunal while exercising the power under Section 61 of IBC since the order is free any illegality. 43. The Adjudicating Authority recorded its findings based on the material. Hence the finding of the Adjudicating Authority is hereby affirmed. Accordingly, the point is answered in favour of the Respondents and against the Appellants 44. Though no plea was raised initially by the Petitioners/Appellants in the petition filed under but in the Rejoinder the Appellants improved its case by manifold and prayed the Adjudicating Authority to adjudicate upon these contentions. One of such contentions of the Agreement of Guarantee does not contain the signature of authorised person of PMPL thereby the Respondent Nos. 2 to 6 cannot recover the amount. 45. The Adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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