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TMI Blog2022 (7) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... laya Steels Private Limited and all of them pledged their security which has been mentioned in the Schedule appended with the Agreement and made themselves liable to pay the dues of the Financial Creditor jointly and severally, meaning thereby giving an option to the Financial Creditor to initiate action against the security of any of the pledgor but in no case the pledgor can be termed as a principal debtor for the purpose of recovery of the entire amount that too by resorting to the filing of the application under Section 7 of the Code. There are no error in the findings recorded by the Adjudicating Authority - the present appeal is totally without any merit and deserves to be dismissed - appeal dismissed. - Hon'ble Judges Rakesh Kumar Jain, J. (Member (J)), Kanthi Narahari and Dr. Alok Srivastava, Members (T) For the Appellant : Krishnendu Datta, Sr. Adv., R. Sudhinder, Ekta Bhasin, Aastha Trivedi, Niharika Sharma and Rajat Sinha, Advocates For the Respondents : Charu Tyagi, Anup Kumar and Sukriti Tyagi, Advocates ORDER RAKESH KUMAR JAIN, J. (MEMBER (J)) 1. This appeal is directed against the order dated 31.01.2020 read with Corrigendum order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of AMIL cannot be provided, top by way of cash/cash collateral to be provided within the same timeframe. (b) Personal Guarantee of Mr. Manoj Agarwal II. Other Security Demand Promissory note in favour of Lender. The promissory note shall bear the common seal of the Borrower duly supported by a resolution of the Board of Directors of the Borrower ECS Mandate for Principal Interest 3. On 27.02.2015 itself an Unattested Pledge Agreement was also executed amongst the Financial Creditor, the Borrower, Mahananda Suppliers Limited and one Sungrowth Share Stocks Limited. In this Agreement the Borrower has been referred to as Pledgor-I, Mahananda Suppliers Limited as Pledgor-II and Sungrowth Share and Stocks Limited as Pledgor-III. This agreement was executed simultaneously with the Facility Agreement dated 27.02.2015 as an additional security. A Schedule is appended having the details of the Pledged Securities with this Agreement which is reproduced as under:- Name of the holder/owner Name of the Company Number of Securities Pledged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force. (a) IFIN shall by a Notice in writing to the Borrower be entitled at its sole discretion to exercise any of the powers mentioned below: (i) recall the whole or part of the principal amount of Facility together with accrued interest and other monies payable by the Borrower; and/or (ii) declare the entire amount of the Borrower's dues outstanding to be due and payable; and/or (iii) declare that the said Facility is cancelled, suspended, terminated; and/or (iv) enforce any or all of the Security, as specified in the Annexure hereto, in part or whole, to realize either in part or entire amount of the Borrower's dues; and/or (v) invoke any guarantee provided under this Agreement or as specified in the Annexure hereto; and/or (vi) enforce repayment under the Promissory Note and/or the post dated cheques; and/or (vii) enter upon and take possession of the Security, in part or whole, as mentioned under this Agreement or as specified in the Annexure hereto; and/or (viii) exercise any and all rights specified in the documents executed with respect to the Security created; and/or (ix) exercise other remedies as may be permitted under applicable la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Agrawal. It was denied that any guarantee was given to the Financial Creditor rather it is alleged that only the securities were pledged by the Pledge Agreement dated 27.02.2015. 7. According to the Appellant, Clause 5.1(g) of the Pledge Agreement is in fact a guarantee extended by the pledgors to the Financial Creditor to recover the amount in question from any one of the pledgors as they have admitted their liability jointly and severally. The Adjudicating Authority, vide the impugned order, did not agree with this contention and dismissed the application vide its order dated 31.01.2020 in which the following observations have been made: 30. We have gone through the pleadings and heard very impressive arguments of the Ld. Counsel on both sides. The whole controversy revolves around the so called unattested Pledge Agreement which is being given a new nomenclature as agreement of pledge and guarantee. Each and every clause points to the clear cut intention of the parties who had entered into a Pledge Agreement thereby pledging the shares of the Corporate Debtor and other Pledgers. None of the clauses of the agreement except clause 5.1(g) referred to above and clause 6.2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to secure the dues of the Company. If there had been any intention to include the Pledger Corporate Debtor herein as a Guarantor, a similar guarantee agreement would have been executed from the Corporate Debtor as well. An unconditional and irrevocable personal guarantee of Mr. Manoj Kumar Agarwal, the Promoter Director of the Borrower Company had been directed to be given by the Financial Creditor which was submitted to them by the Borrower. 33. The present application under Section 7 seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, which is only a Pledger of shares, and has not availed any financial benefit from the Financial Creditor and has never signed any document intending to be a Guarantor, cannot be allowed to be proceeded against under Section 7 of the Code. Admission of this petition and initiation of CIRP against the corporate Debtor shall be the harshest action if allowed to be taken in the foregoing facts and circumstances. As a passing reference, we must mention that the Financial Creditor has taken no steps for recovery of its dues either against the principal borrower or against other Pledger and even against the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in connection with the Facility and/or the Pledged Securities and/or this Agreement. 11. It is further submitted that in Clause 6.2 pertaining to the remedies it can enforce any or all of the security, in part or whole as mentioned in this Agreement and/or the Facility Agreement, to realize either in part or entire amount of the Borrower's Dues and/or invoke any guarantee provided under the Facility Agreement. It is sought to be argued that the Financial Creditor has exclusive right to recover the amount payable from the present Respondent by virtue of Clause 5.1(g) of the Pledge Agreement which is basically a guarantee extended to the Financial Creditor on behalf of the Borrower. 12. In reply, Counsel for the Respondent has submitted that the Pledge Agreement cannot be read as an agreement of guarantee or even a hybrid agreement because it confines to the limited liability of the pledgors who had specifically pledged the security which is provided in the Schedule. It is submitted that the only personal guarantee is of Manoj Kumar Agarwal and it has been mentioned specifically in Clause 6.2 pertaining to the remedies of the Pledge Agreement that the said guarantee is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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