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TMI Blog2023 (9) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... e Corporate Debtor not having been contested, there are no error on the part of the Adjudicating Authority in admitting the Section 7 application. Non-service of notice of the company petition on the Corporate Debtor - HELD THAT:- The Adjudicating Authority had taken cognizance of the Affidavit of Service which had been filed by the Respondent No.1. From the totality of above cited circumstances, we have sufficient reason to believe that notice was properly served upon the Corporate Debtor at their valid email address on three separate occasions and an affidavit of service to this effect was also filed as placed on record at pages 25-29 of Reply Affidavit. However, after service of notice, if the Corporate Debtor did not appear before the Adjudicating Authority, the Respondent No.1 cannot be held responsible for not having sent proper notice - the Appellant cannot rightfully claim that they were deprived of reasonable opportunity of hearing due to non-service of notice. While it is axiomatic that principles of natural justice are not an empty formality, it cannot be unmindful of the fact that this cannot be resorted to by a litigant to cover up their own shortcoming and derail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estructuring Agreement ( MRA in short) was executed between the principal borrower and lenders with SBI as the Lead Bank. In terms of the MRA, a Deed of Guarantee was executed on 30.09.2013 by the Corporate Debtor in favour of SBICAP Trustee Company Ltd. ( SBICAP in short) which secured the loans availed by the Corporate Debtor. This was followed by a second Supplemental and Amendatory MRA on 12.06.2015 and thereafter the Corporate Debtor executed revival letter of acknowledgment on 16.07.2016. SBI entered into an Assignment Agreement with Respondent No.1-CFM Asset Reconstruction Pvt. Ltd., on 18.01.2021 assigning the debt owned by the Principal Borrower. After signing of Assignment Agreement, the charge registered on behalf of Corporate Debtor with MCA was modified on 16.04.2021 and registered in favour of Respondent No.1. SBI filed Section 7 application against the principal borrower on 13.08.2018 vide CP(IB) No.1096 of 2018 which was admitted on 23.03.2022. Section 7 application was filed by the Respondent No.1 vide CP(IB) 108/PB/2022 against the Corporate Debtor which was admitted on 11.05.2022. Aggrieved by this order, this appeal has been filed by the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Adjudicating Authority. It was further submitted that the agreement executed by SBI being in accordance with the statutory scheme under Section 5 of the SARFAESI Act, there was no need for the Assignment Agreement to be registered. Moreover, Respondent No.1 having been registered as a Securitization and Asset Reconstruction Company under Section 3 of the SARFAESI Act, acquisition by Respondent No.1 was complete immediately upon execution of the Assignment Agreement. It was also submitted that provisions of Registration Act, 1908 applies only qua immovable property which is not the subject matter in the present case. It was further stated that SBI in the Assignment Agreement had absolutely assigned and transferred all of its rights in the credit facilities to the principal borrower along with all security interests and right to enforce such security interests to the Respondent No.1. Hence, Respondent No.1 had stepped into the shoes of the SBI and in terms of Section 5 of the SARFAESI Act, the guarantees executed by the Corporate Debtor in favour of SBICAP stood vested upon Respondent No.1. It was also pointed out that pursuant to the Assignment Agreement, the MCA had modif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Corporate Debtor. Subsequently, the entire company petition was sent at the registered email ID of the Corporate Debtor on 28.02.2022. In the said email of 28.02.2022, it was also intimated to the Corporate Debtor that the Adjudicating Authority had on 22.02.2022 ordered that notice be issued to the Corporate Debtor for further consideration of the matter on 02.03.2022. Thereafter, an affidavit of service was filed before the Adjudicating Authority regarding service of notice upon the Corporate Debtor. Again on 01.03.2022, an email was sent to the Corporate Debtor wherein the copy of the order of the Adjudicating Authority dated 28.02.2022 was enclosed. 13. At this stage, it may be useful to note the relevant portion of the orders of the Adjudicating Authority dated 22.02.2022, inter alia, on modalities of issue of notice which is to the effect: Accordingly, notice to the Respondent/Corporate Debtor, be issued. This Notice to be sent by the Petitioner/Operational Creditor under NCLT Rules, Form-5. 1. By way of an email to the registered email of the Corporate Debtor available with the petitioner. 2. By way of an email to the CD email address registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unregistered document in terms of Section 17 of the Registration Act, 1908. It is noticed that the same contention qua the same Assignment Agreement was raised before this Appellate Tribunal in a connected matter in CA(AT)(Ins.) No.470 of 2023 in Naresh Kumar Aggarwal v. CFM Asset Reconstruction Pvt. Ltd. Ors. wherein it has been held that since the Assignment Agreement was in accordance with Section 5 of the SARFAESI Act, the Asset Reconstruction Company has to be deemed to be a lender and is entitled to exercise all rights which are vested in the lender. 16. We have no doubts in our mind, therefore, that the ratio of this Tribunal in the Naresh Kumar Aggarwal judgment (supra) is squarely applicable which is to the effect: 6 Section 5 of the SARFAESI Act, 2002 provides as follows: 5. Acquisition of rights or interest in financial assets. - (1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any 1[asset reconstruction company] may acquire financial assets of any bank or financial institution (a) by issuing a debenture or bond or any other security in the nature of debenture, for consideration agreed upon betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be the lender and all the rights of such bank or financial institution shall vest in such company. When the legislature uses the deeming fiction it is always for purpose and object. 8. Hon ble Supreme Court had occasion to consider provision of Section 43 of the Indian Contract Act, 1872 which contains the deeming provision and on fulfilling the ingredients as provided in the statute, legal fiction will come into play, irrespective whether the transaction was in fact intended or even anticipated to be so. We may refer to Para 22.2.1, 22.2.2 and 22.3 of the judgment of the Hon ble Supreme Court in Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited vs. Axis Bank Ltd. Ors., (2020) 8 SCC 401 , which is to the following effect: 22.2.1. As regards construction of a deeming fiction, this Court pointed out the basic and settled principles in the following: 88. In every case in which a deeming fiction is to be construed, the observations of Lord Asquith in a concurring judgment in East End Dwellings Co. Ltd. v. Finsbury Borough Council: 1952 AC 109 (HL) are cited. These observations read as follows: (AC pp. 132-133) If you are bidden to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible. (Per Lord Radcliffe in St. Aubyn v. Attorney General:1952 AC 15 (HL), AC p. 53) 14. Deemed , as used in statutory definitions [is meant] to extend the denotation of the defined term to things it would not in ordinary parlance denote, is often a convenient devise for reducing the verbiage of an enactment, but that does not mean that wherever it is used it has that effect; to deem means simply to judge or reach a conclusion about something, and the words deem and deemed when used in a statute thus simply state the effect or meaning which some matter or thing has the way in which it is to be adjudged; this need not import artificiality or fiction; it may simply be the statement of an undisputable conclusion. (Per Windener, J. in Hunter Douglas Australia Pty. v. Perma Blinds: (1970) 44 Aust LJ R 257) 15. When a thing is to be deemed something else, it is to be treated as that something el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Asset Reconstruction Company shall be deemed to be Lender for all purposes. As a Lender, the Respondent No.1 was fully entitled to exercise its right to initiate proceeding under Section 7. 17. It is pertinent to add here that two case citations, namely, Palm Products Pvt. Ltd. v. T.V.L. Narsimha Rao and Anr., 2021 SCC OnLine NCLAT 37 and Citi Securities Financial Services Pvt. Ltd. v. Sudip Bhatacharya referred to by the present Appellant in the present matter in support of their contention that assignment of financial debt has to be by registered document has also been considered in Naresh Kumar Aggarwal (supra) but both were held to be distinguishable in facts and therefore held inapplicable. We agree with the finding in Naresh Kumar Aggarwal (supra) that the ratio in Palm Products Pvt. Ltd. v. T.V.L. Narsimha Rao and Anr. is not applicable since in that case the applicant was a NBFC and not an Asset Reconstruction Company while the present is a case where an asset has been acquired by an Asset Reconstruction Company in conformity with the provisions of Section 5 of SARFAESI Act. We also find that the ratio of Citi Securities Financial Services Pvt. Ltd. v. Sudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having admitted against the Principal Borrower, it was not open for the Respondent No.1 to file application against the Corporate Guarantor since two simultaneous proceedings under Section 7 cannot be proceeded with. Learned counsel for the Appellant has placed reliance on judgment of this Tribunal in 2019 SCC OnLine NCLAT 542, Dr. Vishnu Kumar Agarwal vs. Piramal Enterprises Ltd. , where in Para 32 following observations have been made by this Tribunal: 32. There is no bar in the 'I B Code' for filing simultaneously two applications under Section 7 against the 'Principal Borrower' as well as the 'Corporate Guarantor(s)' or against both the 'Guarantors'. However, once for 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor, as the case may be. 16. The scheme of I B Code, in view of law laid down by the Hon ble Supreme Court in Laxmi Pat Surana vs. Union of India Anr. , we are not persuaded to follow judgment of this Tribunal in Dr. Vishnu Kumar Agarwal (Supra). 20. It may not be out of place to mention here that the decision of this Tribunal in Naresh Kumar Aggarwal (supra) has been challenged in the Hon ble Supreme Court. However, since the matter is pending adjudication before the Hon ble Apex Court and has not been stayed, the judgment of this Tribunal continues to hold sway. 21. As already noticed by us at para 10 above, the issue of debt and default on the part of the Corporate Debtor is not in contention and no submissions have been made in this regard by the Appellant. In result, we find no error in the impugned order admitting the Section 7 application. We have also carefully considered the other submissions made by the Appellant and for reasons stated above, find them to be devoid of merit. The appeal is accordingly dismissed. The Respondent No.2-IRP has submitted a status report on the steps taken so far in CIRP proceedings. Since the CoC has already be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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