9911796707
TMI Blog2025 (1) TMI 1452X X X X Extracts X X X X X X X X Extracts X X X X ..... . The question to be answered is as to whether when no CIRP or liquidation proceedings of a Corporate Debtor is pending before the NCLT, whether an Application for personal insolvency against a Personal Guarantor has to be filed before the NCLT. Sub-section (2) of Section 60 begins with the expression "Without prejudice to sub-section (1)". Thus, the provision of sub-section (2) are without prejudice to provisions of sub-section (1) of Section 60. The expression "without prejudice", came for consideration before the Hon'ble Supreme Court in large number of cases. Reference made to judgment of the Hon'ble Supreme Court in Shri Shiv Kripal Singh vs. Shri V.V. Giri [1970 (9) TMI 127 - SUPREME COURT], where the Hon'ble Supreme Court held that the expression "without prejudice is to the generality of the provisions of sub-section (i)". It is well settled that when this expression is used anything contained in the provisions following this expression is not intended to cut down the generality of the meaning of provision. Two judgments have been relied by learned Counsel for the Respondent, which need to be noticed. The first judgment, which has been relied by learned Counsel for Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guarantors to situations where proceedings against the corporate debtor are pending.
It is not required to accept the submissions of the Appellant that NCLT Delhi has no jurisdiction to entertain Section 95 Application filed by the Financial Creditor against the Personal Guarantor for initiating insolvency resolution process - there is no merit in the appeal - appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority for entertaining an Application initiating insolvency resolution process against the Personal Guarantor. For entertaining the insolvency resolution process against the Personal Guarantor the proper Authority is Debts Recovery Tribunal ("DRT"). The order passed by Adjudicating Authority admitting Section 95 Application is without jurisdiction. 4. Dr. U.K. Chaudhary, learned Senior Counsel appearing for Vistra submits that only submission, which was raised before the NCLT, Principal Bench, New Delhi was that appointment of RP was not in accordance with Section 97, sub-section (3). No objection was raised with regard to jurisdiction of NCLT to entertain Section 95 Application and Appellant cannot be allowed to raise any submission regarding the jurisdiction of the NCLT now. It is submitted that RP appointed by Adjudicating Authority was fully eligible and qualified and no disciplinary proceedings are pending against the RP. Learned Senior Counsel for the Respondent, however, contended that NCLT is fully entitled to entertain proceedings under Section 95 for initiation of CIRP against the Personal Guarantor of a Corporate Person by virtue of Section 60, sub-section (1). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the database of the insolvency professionals, including information about disciplinary proceedings against them, with the Adjudicating Authority from time to time. (2) For the purposes of sub-section (4) of section 97 and sub-section (3) of section 98, the Board may share a panel of insolvency professionals, who may be appointed as resolution professionals, with the Adjudicating Authority." 9. When we look into Rule 8, it provides a mechanism of nomination by the IBBI. Rule 8 specifically caters Section 97, sub-section (3). The Adjudicating Authority has appointed the RP, relying on Form-C submitted by IRP, where RP has conveyed his consent and certified that there are no disciplinary proceedings are pending against him. The appointment of RP by order dated 29.04.2024, cannot be said to be violative of provision Section 97, sub-section (3). We, thus, do not find any substance in the submission of the Appellant that appointment of RP was not in accordance with Section 97, sub-section (3) of the IBC. 10. Now, we come to the submission of the learned Counsel for the Appellant that NCLT has no jurisdiction to entertain Section 95 Application filed by the Financial Creditor and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lvency resolution process or liquidation is pending against the Corporate Debtor, Application under Section 95 is maintainable before NCLT for initiation insolvency resolution process. Coming to the judgment of the NCLT, Kolkata in Tata Capital Financial Services Ltd. vs. Arjun Agarwal and Aditya Birla Finance Ltd. vs. Sarita Mishra, it is submitted that the orders passed by NCLT, Kolkata Bench are directly contrary to the binding decisions of Hon'ble Supreme Court and this Tribunal in Mahendra Kumar Agarwal vs. PTC India Financial Services Ltd. and State Bank of India vs. Mahendra Kumar Jajodia. It is also contended that Section 7 Application is pending against Allied Strips Ltd. being C.P.(IB) 731/ND/2024 before NCLT, New Delhi. It is submitted that Nivaya Allied Strips Pvt. Ltd., who has issued the debentures, is a SPV that was incorporated with the sole objective of financing the resolution of Allied Strips Ltd., therefore Corporate Borrower, for all intents and purpose is Allied Strips Ltd. 13. We have considered the submissions of learned Counsel for the parties and have perused the record. 14. Before we enter into the rival submissions of the parties, it is necessary to no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (2). (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of - (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. (6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded." 18. Part-III of the Code deals with "Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms". Section 78 provides as follows: "78. Application. - This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins with wording "Subject to the provisions of section 60,…". The submission which has been pressed by the Appellant is that NCLT shall be Adjudicating Authority only in cases where insolvency resolution process or liquidation proceedings are pending before it and not in case, where no insolvency resolution process or liquidation is pending against the Corporate Debtor, the NCLT shall not be the Adjudicating Authority for insolvency resolution process of Personal Guarantor. Thus, the main ground of the Appellant to challenge the jurisdiction of NCLT is that if no insolvency resolution process is pending against the Corporate Debtor, Section 95 Application before the NCLT is not maintainable and it ought to have been filed before the DRT as per Section 79 and 179. 22. For answering the issue raised in the Appeal(s) we need to first notice the ambit and scope of Section 60, which is the basis of the submission. We need to notice the Report of Insolvency Law Committee, March 2018, which noticed that Section 60 create a link between the insolvency resolution or bankruptcy process of the Corporate Debtor and the Personal Guarantor and the matters relating to same debt are dealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generality of the meaning of provision. Paragraph 37 of the above judgment of the Hon'ble Supreme Court is as follows: "37. We do not think that the Legislature, while framing Chapter IX-A of the Code ever contemplated such a dichotomy or intended to give such a narrow meaning to the freedom of franchise essential in a representative system of Government. In our opinion the argument mentioned above is fallacious. It completely disregards the structure and the provisions of Section 171-C. Section 171-C is enacted in three parts. The first sub-section contains the definition of "undue influence". This is in wide terms and renders a person voluntarily interfering or attempting to interfere with the free exercise of any electoral right guilty of committing undue influence. That this is very wide is indicated by the opening sentence of sub-section (2), i.e. "without prejudice to the generality of the provisions of sub-section (1)". It is well settled that when this expression is used anything contained in the provisions following this expression is not intended to cut down the generality of the meaning of the preceding provision. This was so held by the Privy Council in King-Emperor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n date no CIRP or Liquidation Process is pending against the Corporate Debtor because of approval of the Resolution Plan. Section 60(2) of the Code requires that for an insolvency Resolution Process to be initiated against the guarantor there must be CIRP or Liquidation Process is pending against the principal borrower/Corporate Debtor. Since, that requirement is not satisfied in the present case, at this point of time CP(IB)/230/KB/2021 is premature and is dismissed as such."" 25. After noticing Section 60, sub-sections (1) and (2), this Tribunal laid down following in paragraph 7: "7. Sub-Section 1 of Section 60 provides that Adjudicating Authority for the corporate persons including corporate debtors and personal guarantors shall be the NCLT. The Sub-Section 2 of Section 60 requires that where a CIRP or Liquidation Process of the Corporate Debtor is pending before 'a' National Company Law Tribunal the application relating to CIRP of the Corporate Guarantor or Personal Guarantor as the case may be of such Corporate Debtor shall be filed before 'such' National Company Law Tribunal. The purpose and object of the sub-section 2 of Section 60 of the Code is that when proceedings ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the NCLT, the Application filed by the Appellant was fully maintainable and could not have been rejected only on the ground that no CIRP or Liquidation Proceeding of the Corporate Debtor are pending before the NCLT. In result, we set aside the order dated 05th October, 2021 passed by the Adjudicating Authority. The Application filed by the Appellant under Section 95(1) of the Code is revived before the NCLT which may be proceeded in accordance with the law." 26. This Tribunal held that sub-section (2) of Section 60, does not in any manner prohibit filing of proceeding under Section 95 of the Code, even if no proceedings are pending before NCLT. The order of Adjudicating Authority was set aside and the Application under Section 95(1) was revived before the NCLT Kolkata bench. The above judgment clearly covers the issue, which has been raised in the present Appeal and this Tribunal has also answered the said issue holding that even if no CIRP or liquidation is pending against the Corporate Debtor, Application under Section 95 can be filed before the NCLT. 27. Another judgment of this Tribunal relied by the Respondent is Mahendra Kumar Agarwal (supra), which was also a case where Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any event, the 'Corporate Insolvency Resolution Process' proceedings, is pending, and continued to be pending, against the 'Corporate Debtor'. Viewed in that perspective, the 'impugned order', dated 21.07.2022, in CP (IB) No. 335/95/HDB/2020, passed by the 'Adjudicating Authority' ('National Company Law Tribunal', Bench - I, Hyderabad), is free from any 'Legal Flaws'. Resultantly, the instant 'Appeal' fails." 28. The above judgment clearly lays down the law by this Tribunal that it is not a precondition that CIRP or liquidation has to be pending before NCLT. The Application filed under Section 95 was held to be maintainable. It is further relevant to notice that judgment of this Tribunal in Mahendra Kumar Jajodia case decided by this Tribunal was also challenged before the Hon'ble Supreme Court in Civil Appeal No.1871-1872 of 2022. The Hon'ble Supreme Court vide its judgment dated 06.05.2022 dismissed the Appeal. The order passed by Hon'ble Supreme Court on 06.05.2022 is as follows: "We have heard learned Solicitor General and learned senior counsel for the parties and perused the record. We do not see any cogent reason to entertain the Appeals. The judgment impugned does not wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ously, under the original Code, designated the NCLT as the adjudicating authority in relation to two categories: corporate debtors and personal guarantors to corporate debtors. The 2018 amendment added another category: corporate guarantors to corporate debtors. The amendment seen in the background of the report, as indeed the scheme of the Code (i.e., Section 2 (e), Section 5 (22), Section 29A, and Section 60), clearly show that all matters that were likely to impact, or have a bearing on a corporate debtor's insolvency process, were sought to be clubbed together and brought before the same forum. Section 5 (22) which is found in Part II (insolvency process provisions in respect of corporate debtors) as it was originally, defined personal guarantor to say that it "means an individual who is the surety in a contract of guarantee to a corporate debtor."…" 32. In paragraph 96 of the judgment, following has been held by the Hon'ble Supreme Court: "96. This court in V. Ramakrishnan (supra), noticed why an application under Section 60(2) could not be allowed. At that stage, neither Part III of the Code nor Section 243 had not been notified. This meant that proceedings against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for whom the Adjudicating authority was common with the corporate debtor to whom they had stood guarantee. The fact that the process of insolvency in Part III is to be applied to individuals, whereas the process in relation to corporate debtors, set out in Part II is to be applied to such corporate persons, does not lead to incongruity. On the other hand, there appear to be sound reasons why the forum for adjudicating insolvency processes - the provisions of which are disparate- is to be common, i.e through the NCLT. As was emphasized during the hearing, the NCLT would be able to consider the whole picture, as it were, about the nature of the assets available, either during the corporate debtor's insolvency process, or even later; this would facilitate the CoC in framing realistic plans, keeping in mind the prospect of realizing some part of the creditors' dues from personal guarantors. 101. In view of the above discussion, it is held that the impugned notification is not an instance of legislative exercise, or amounting to impermissible and selective application of provisions of the Code. There is no compulsion in the Code that it should, at the same time, be made applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess of the corporate debtor?" 36. The Madras High Court framed two questions for consideration in the above case, which were noticed in paragraph D, which are as follows: "D. Points for consideration : 4. We have heard the rival submissions made on behalf of either side and perused the material records of the case. Upon consideration of the same, the following points arise for consideration:- (i) Whether NCLT alone has jurisdiction in matters of insolvency resolution and bankruptcy process for personal guarantors (to corporate debtors) in view of Section 60(1) of The IBC? (ii) Whether in view of the filing of the insolvency resolution process against the corporate debtor, the pending proceedings in I.B.C.No.1 of 2022 before the DRT is to be transferred to the NCLT in view of Section 60(3) of The IBC? 37. The Madras High Court answered the Question No.1 in negative holding that NCLT alone has no jurisdiction in a matter of insolvency resolution. The Madras High Court has relied on the judgment of the Hon'ble Supreme Court in State Bank of India vs. V. Ramakrishnan and Anr., Civil Appeal No. 3595 of 2018 with Civil Appeal No.4553 of 2018. The issue which came for consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India vs. V. Ramakrishnan and Anr. was dealing with entirely different issue and cannot be said to be laying down any such law that unless proceedings of insolvency resolution process are pending against the Corporate Debtor, Section 95 Application cannot be filed before the NCLT. We, thus, are of the view that reliance on the said judgment cannot be held to be a precedent on the issue, which has arisen. The Madras High Court has relied on earlier judgment of the Madras High Court dated 28.07.2021, where the Madras High Court has rejected the submission that proceeding against Personal Guarantor can only be before the NCLT. We need to notice the judgment of Madras High Court dated 28.07.2021, which was in C.R.P. (PD) No.1289 of 2021, where the Personal Guarantor has challenged the proceeding under Section 95(1) initiated before the DRT. The questions which arose for consideration were noted in paragraph D, which we have extracted above. The contention of the petitioner has been noted in paragraph 5(iv) and for interpreting Section 60, sub-section (2) of the IBC, the Madras High Court has extracted paragraph 22 of C.R.P. (PD) No.1289 of 2021. The Division Bench while deciding the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has crossed and now insolvency resolution proceedings are pending before the NCLT and therefore, the only question which has to be gone into is to whether the proceedings are liable to be transferred under Section 60, sub-section (3) of the IBC. 40. This Tribunal in its judgment in Mahendra Kumar Agarwal has noticed the judgment of the Delhi High Court in Axis Trustee Services Ltd. vs. Brij Bhushan Singal - (2022) SCC OnLine Del., where the Delhi High Court had occasion to consider Section 60 of the IBC. After considering Section 60 and 179 of the IBC, the Delhi High Court held that NCLT will be the Adjudicating Authority in respect of insolvency proceedings against Personal Guarantors. It is useful to extract paragraph 54 of the judgment of this Tribunal in Mahendra Kumar Agarwal, where Delhi High Court has noticed following: "54. The Learned Counsel for the 1st Respondent, relies on the decision of the Hon'ble High Court of Delhi in Axis Trustee Services Limited v. Brij Bhushan Singal, reported in (2022) SCC OnLine Del. 3634, wherein, at paragraphs 17, 21 to 29, it is observed as under: 17. "To appreciate the aforesaid submissions, a reference may be made to the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be the adjudicating authority. The relevant observations of the Supreme Court are set out below. "33. Sub-section (4) of Section 60 of the IBC, 2016 states that the NCLT will have all the powers of the DRT as contemplated under Part III of the Code for the purposes of sub-section (2). Sub-section (2) deals with a situation where the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor of a corporate debtor is taken up, when CIRP or liquidation proceeding of such a corporate debtor is already pending before NCLT. The object of sub-section (2) is to group together (A) the CIRP or liquidation proceeding of a corporate debtor, and (B) the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor of the very same corporate debtor, so that a single forum may deal with both. This is to ensure that the CIRP of a corporate debtor and the insolvency resolution of the individual guarantors of the very same corporate debtor do not proceed on different tracks, before different fora, leading to conflict of interests, situations or decisions. 34. If the object of sub-section (2) of Section 60 is to ensu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for corporate persons, including corporate debtors and personal guarantors, the Adjudicating Authority shall be the NCLT. Sub-section (2) of Section 60 provides that where the CIRP of a corporate debtor is pending before an NCLT, an application relating to the insolvency of a personal guarantor of such corporate debtor shall be filed before the same NCLT. Sub-section (3) of Section 60 further provides that the insolvency resolution process in respect of a personal guarantor pending in any Court or Tribunal, shall stand transferred to the adjudicating authority dealing with the insolvency resolution process of the corporate debtor. 26. On behalf of the plaintiff, reliance has been placed on sub-section (2) of Section 60 to contend that insolvency proceedings in respect of a personal guarantor of a corporate debtor shall be filed in the NCLT only if the CIRP is pending in respect of corporate debtor before the NCLT. In view of the fact that the CIRP in respect of corporate debtor, Bhushan Steel already stands concluded, insolvency proceedings in respect of its guarantors have to be filed before the DRT and not the NCLT. The aforesaid submission overlooks the fact that sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am of the view that the NCLT would be the appropriate adjudicating authority in respect of insolvency proceedings initiated against the defendants in their capacity as personal guarantors for the corporate debtor, Bhushan Steel."" 41. The above judgment of the Delhi High Court relied on judgment of this Tribunal in State Bank of India vs. Mahendra Kumar Jajodia. The above judgment of the Delhi High Court is, thus, clearly have a different view from one which has been taken by the Madras High Court. It is well settled that judgment of the High Court has persuasive value as precedent. However, when judgments of this tribunal in State Bank of India vs. Mahendra Kumar Jajodia and Mahendra Kumar Agarwal vs. PTC India Financial Services has answered the same very issue, which has arisen for consideration, we feel ourselves bound by the judgment and we are not persuaded to take any different view to which one was taken by this Tribunal in State Bank of India vs. Mahendra Kumar Jajodia's case. 42. Learned Counsel for the Appellant has relied on judgment of NCLT Kolkata Bench in Aditya Birla Finance Ltd. vs. Sarita Mishra and Tata Capital Financial Services Ltd. vs. Arjun Agarwal. Coming ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
