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TMI Blog2024 (8) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... ce requires to be determined in the background of the facts and circumstances of each case as there is no one-size fits all formula. Having said that, we need to also appreciate the background in which the Adjudicating Authority decided to reserve the matter for orders. It is significant to note that the Adjudicating Authority while reserving the matter for orders observed that the that RP had filed its report under Section 99 of IBC long back and the matter at hand was old - the statutory provisions of IBC under Section 100 provides for only 14 days time to the Adjudicating Authority to adjudicate on the admission or rejection of Section 95 application from the date of submission of the Report of the RP. In view of such stringent timelines provided under the IBC for initiation of Insolvency Resolution Process under Chapter-III of the IBC, prima facie, the Adjudicating Authority cannot be faulted in the given circumstances for having proceeded with reserving the matter for orders after giving the Appellant due liberty to file further written submissions. In view of the time-bound nature of IBC proceedings, there are no infirmity in the endeavour made by the Adjudicating Authority t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor got triggered on the invocation of guarantee. By virtue of this Deed of Guarantee, the PG was therefore mandatorily obliged to honour its guarantee. The Adjudicating Authority did not commit any error in holding that the right of the Respondent No.1 to recover money from the PG emanates from the terms of the Deed of Guarantee which were not in any manner obliterated, overwhelmed or superseded by the Put Option Agreement with the latter having its own sphere of operation. The liability of the PG was purely dependent on the terms of the Deed of Guarantee which was independent of the Put Option Agreement - Once the Assignment Deed was duly executed and registered, the Respondent No.1 by operation of law was substituted in place of the original lender in all actions for realisation of the debt vis- -vis the Corporate Debtor. The legal position recognising the rights of an Asset Reconstruction Company to act in furtherance of assignment of debt as a valid legal right is no longer res integra. That being so, the borrower or the guarantor has no locus or right to challenge any such assignment. This Bench is of the considered view that the liability of the Appellant as surety being coe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with RBL Bank Ltd., the original lender, on 28.11.2015 whereunder a credit facility was extended to the Corporate Debtor. In consideration of the sanction/renewal/enhancement of the credit facility, the Corporate Debtor as well as its Personal Guarantors ( PG in short), namely, Paresh Parekh and Manish Patel, executed various documents and secured the said credit facilities not exceeding Rs.32.30 crore. A Deed of Guarantee was executed on 28.11.2015 and 17.10.2016 by the PG to repay the debt in respect of the aforesaid credit facility in case of default on the part of the Corporate Debtor. On 12.11.2016, a Put Option Agreement was entered into between the Corporate Debtor, RBL Bank, PG and Agnus Capital LLP ( Agnus in short) whereunder, on the occurrence of default by the Corporate Debtor under the facility agreement, the Put Option would be exercised by RBL requiring Agnus to pay outstanding amounts due and payable by the Corporate Debtor as consideration for transfer of the pledged shares of the Appellants. The Corporate Debtor-SIESL having defaulted, the loan account of the Corporate Debtor was declared as NPA on 31.05.2018. An Assignment Agreement was executed on 28.06.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of hearing. However, the Adjudicating Authority closed further opportunity of hearing to the Appellant and instead reserved the matter for orders after directing the Appellant to file written submissions in lieu of the oral arguments on the very same day. Thus, even the time afforded to furnish the written statement was compressed to less than a few hours which however was complied to by the Appellant. Besides the fact that grossly insufficient time was allowed to furnish their written submission, it was submitted that these submissions did not even receive due cognisance of the Adjudicating Authority and was summarily brushed aside in the impugned order by simply recording a line that the PG had filed additional affidavit raising certain objection to the present application. This curtailment of their right tantamount to violation of principles of natural justice and prejudicially affected their interests. It was contended that since the matter was not heard on merits, the matter deserves to be remanded back to the Adjudicating Authority for re-hearing. 6. From the perspective of merit, it was also contended that the report of the RP under Section 99 of IBC suffered fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the Appellant had wrongly premised their argument on the fact that the Financial Creditor was precluded from exercising its rights under the Deed of Guarantee as it was obligated to first exercise rights in term of the Put Option Agreement. It was vehemently contended that since the terms of Deed of Guarantee were absolute in nature and the Appellant had breached the guarantee terms, there was no irregularity on the part of Respondent No.1 in invoking the guarantee and initiating proceedings under Section 95 of the IBC by virtue of being an assignee of the original lender. 10. Advancing their arguments further, it was pointed out that once the Assignment Deed was duly executed and registered, the Respondent No.1, being the assignee of the debt disbursed by the original lender/RBL, it had stepped into the shoes of original lender. The Respondent No.1 had thus become a secured Financial Creditor of the Corporate Debtor and fully eligible to exercise such rights as that of a financial creditor. It was further stated that the records of NeSL clearly reflected the liability of both the Corporate Debtor as well as the Appellant qua the Respondent No.1. The Appellant having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-video problems. It is also clear from the order that while no further right of hearing was given to the Appellant by the Adjudicating Authority, it also allowed the Appellant to file written submissions. It is also noticed that even the after the matter was reserved for orders, the Appellant did not take any steps to file an application seeking recall of the order of the Adjudicating Authority. The Appellant could always have agitated the matter before the Adjudicating Authority against forfeiture of the right to hearing which it did not choose to do. Instead, the Appellant availed the opportunity of filing an additional affidavit to press further submissions. 16. The application of principles of natural justice requires to be determined in the background of the facts and circumstances of each case as there is no one-size fits all formula. Having said that, we need to also appreciate the background in which the Adjudicating Authority decided to reserve the matter for orders. It is significant to note that the Adjudicating Authority while reserving the matter for orders observed that the that RP had filed its report under Section 99 of IBC long back and the matter at hand was old ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant clause which clearly bequeaths this power to assign only on the Bank and not on the Borrower. The relevant clause reads as follows: 14. BANK'S RIGHT TO ASSIGN The Borrower shall not assign or transfer any of its rights, duties or obligations under this Agreement except with the prior written permission of the Bank. The Borrower expressly recognizes and accepts that the Bank shall be absolutely entitled and shall have full power and authority to sell, assign or transfer in any manner, in whole or in part, and in such manner and on such terms as the Bank may decide, (including reserving a right to the Bank to retain its power thereunder to proceed against the Borrower on behalf of the purchaser, assignee or transferee) any or all outstanding dues of the Borrower to any third party of the Bank's choice without any further reference or intimation to the Borrower. Any such action and any such sale, assignment or transfer shall bind the Borrower to accept such third party as creditor exclusively or as a joint creditor with the Bank as the case may be. ( Emphasis supplied ) To be fair to the Appellant, it has not disputed the Term Loan Agreement. Neither has it questioned the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Guarantor/s shall forthwith on demand, without any demur or protest, irrevocably and unconditionally without any reference to the Borrowers, and without raising any objection or issue whatsoever and irrespective of or notwithstanding any dispute or difference in respect of the said amounts falling due to the Bank, pay to Bank the whole of such Guaranteed Sum together with interest, costs, charges, expenses and/or any other monies as may be then due to Bank in respect of the loan and shall indemnify and keep indemnified Bank against all losses of the said Guaranteed Sum, interest or other monies due and all costs charges and expenses whatsoever which Bank may incur by reason of any default on the part of the Borrower. This is a guarantee of payment and not of collection. 14. The Guarantee shall be irrevocable and enforceable against the Guarantor/s not withstanding any dispute between Bank and the Borrower. ( Emphasis supplied ) 23. Equally relevant are clauses 5, 8 and 12 of the Deed of Guarantee which clearly postulate that the guarantee shall be enforceable against the guarantor notwithstanding failure to discharge separate securities or any other collateral as set out here- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted by Bank. 32. However Bank shall be entitled to, without issuing any notice or obtaining any consent from the Guarantor/s, sell or assign this Deed with or without any other security in favour of Bank (Including all guarantee/s, if any) to any person ( Intending Assignee ) of Bank's choice in whole or in part and in such manner and on such terms and conditions as Bank shall decide. Any such sale, assignment, securitization or transfer shall conclusively bind the Guarantor/sand all other related persons. ( Emphasis supplied ) Having read the clauses of the Deed of Guarantee, it becomes clear that the present Deed of Guarantee is an independent contract between the original lender and the Appellant-PG and that the Deed of Guarantee could be assigned by the original lender/RBL. 25. The other salient agreement is the Put Option Agreement of 12.11.2016 to which particular attention has been drawn by the Appellant. It would be relevant to notice the core recitals of this Agreement which are to the effect: C. One of the conditions of the Loan is that on the happening of a Put Option Event (as defined below), the Put Option Party shall have the obligation to purchase the Pledged Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso canvassed by the Appellant that the Assignment Agreement was entered into to overcome the ramifications of the Put Option Agreement and aimed at securing an unfair advantage to Respondent No.1 to fabricate claims against the PG. It has been asserted that the Adjudicating Authority has failed to appreciate that the Assignment Agreement was not executed in good faith. 27. At this stage we may see how the Adjudicating Authority has considered these issues. The findings of the Adjudicating Authority are captured in paragraph 9 of the impugned order which is extracted below: 9. As far as Assignment Agreement is concerned, provision for the same is mentioned in the Deed of Guarantee clause 32, the bank has the power to assign the deed with any party and the same was binding on the guarantor. Further as regards the put option clause to have been exercised, it is a separate document regarding the pledged security or a right available for the parties, but the same does not have a provision in the guarantee document executed. Guarantee is a separate document which can be invoked when the default occurs. The respondent has not questioned the default which becomes payable under provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invocation of the guarantee. The dispute raised in the context of Put Option Agreement is immaterial and inconsequential. The Deed of Guarantee and Put Option Agreement were two different transactions and the liability of the PG has to be read from the Deed of Guarantee. 31. In our opinion, therefore, the Adjudicating Authority did not commit any error in holding that the right of the Respondent No.1 to recover money from the PG emanates from the terms of the Deed of Guarantee which were not in any manner obliterated, overwhelmed or superseded by the Put Option Agreement with the latter having its own sphere of operation. The liability of the PG was purely dependent on the terms of the Deed of Guarantee which was independent of the Put Option Agreement. 32. Now coming to the other contention canvassed by the Appellant that the Assignment Agreement was entered into with the malafide motive to overcome the ramifications of the Put Option Agreement and that the Assignment Agreement was inapplicable on them since they were not a party to the said assignment agreement and their prior consent was not taken while executing the same, we need to see whether the assignment in the given f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Respondent No.1 as the assignee in the Assignment Agreement clearly stepped into the shoes of her assignor and was therefore fully entitled to exercise its right to initiate proceeding under Section 95 of IBC against the PG. The Respondent No.1 has to be deemed to be lender and is thus entitled to exercise all rights which were vested in the lender. Once the Assignment Deed was duly executed and registered, the Respondent No.1 by operation of law was substituted in place of the original lender in all actions for realisation of the debt vis- -vis the Corporate Debtor. The legal position recognising the rights of an Asset Reconstruction Company to act in furtherance of assignment of debt as a valid legal right is no longer res integra. That being so, the borrower or the guarantor has no locus or right to challenge any such assignment. Furthermore, since Clause 32 of the Deed of Guarantee which was an exclusive contract and made provision for the Assignment Agreement, the terms of this agreement became binding on the Appellant-PG and the locus of the PG to object to the assignment does not arise. Thus, our reply to the question framed at Sl No (iii) at para 12 supra is in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor; Deed of Guarantee; Loan Agreement; Memorandum of Pledge of Physical Shares; Deed of Hypothecation etc. We also find that the RP issued notice dated 05.10.2021 to the PG to give evidence, if any, of proof of payment of debt which had been claimed as unpaid by Respondent No.1. The records of NeSL which clearly reflected the liability was also taken notice of. However, as per the Report, the RP having received no documentary evidence or information from the PG to show repayment of debts nor having received any documents to show that the Deed of Guarantee stood cancelled or set aside. The PG having failed to rebut the factum of default, we do not find any infirmity in the Report of the RP recommending to the Adjudicating Authority to admit the Section 95 petition. 39. At this stage we would like to see how the Adjudicating Authority has considered the Report of the RP and whether it had dealt with the limitation aspect in the impugned order which is as extracted below : 10. Further, the application is filed within the period of limitation. In the present case the date of default as mentioned in the application is 31.03.2018 and the application filed before this tribunal on 09.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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