Dr. Vishnu Kumar Agarwal vs. M/s. Piramal Enterprises Ltd - Insolvency Application against Two CD's with same set of papers

NCLAT (08.01.2019) in Dr. Vishnu Kumar Agarwal vs. M/s. Piramal Enterprises Ltd.[Company Appeal (AT) (Insolvency) No. 346 & 347 of 2018] held that once for the same set of claim application under Section 7 filed by the ‘Financial Creditor’ is admitted against one of the ‘Corporate Debtors’ [‘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’). 

Excerpts of the order;

# 4. The ‘Financial Creditor’ had filed a Civil Suit bearing No. 46/40/2017 before the Court of Additional District Judge-I, Alwar, Rajasthan against the ‘Principal Borrower’ and both the ‘Corporate Guarantors’ on 15th September, 2017, which is pending adjudication.

 

# 5. During the pendency of this suit, the ‘Financial Creditor’ issued separate demand notice to both the ‘Corporate Guarantors’ on 24th October, 2017 and 26th October, 2017 calling upon each of the ‘Corporate Guarantors’ to make payment of the outstanding amount of Rs. 40,28,76,461/- (Rupees Forty Crores Twenty-Eight Lakhs Seventy-Six Thousand Four Hundred and Sixty-One Only) from the ‘Principal Borrower’ within 15 days of receipt of such notice, failing which, the ‘Financial Creditor’ may take all remedial measures including the initiation of the ‘Corporate Insolvency Resolution Process’ in terms of the ‘Insolvency and Bankruptcy Code, 2016’ (“I&B Code” for short).

 

# 7. The ‘Financial Creditor’- (‘M/s. Piramal Enterprises Ltd.’) thereafter, filed an application under Section 7 of the ‘I&B Code’ for initiation of the ‘Corporate Insolvency Resolution Process’ against ‘Sunrise Naturopathy and Resorts Pvt. Ltd.’- (“Corporate Guarantor No.1”) and another application under Section 7 of the ‘I&B Code’ for initiation of the ‘Corporate Insolvency Resolution Process’ against ‘Sunsystem Institute of Information Technology Pvt. Ltd.’- (“Corporate Guarantor No.2”).

  

# 8. The Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi, by impugned order dated 24th May, 2018 admitted the application and initiated ‘Corporate Insolvency Resolution Process’ against ‘Sunsystem Institute of Information Technology Pvt. Ltd.’- (“Corporate Guarantor No.2”).

 

# 9. By another order dated 31st May, 2018, the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi, admitted the application and initiated ‘Corporate Insolvency Resolution Process’ against ‘Sunrise Naturopathy and Resorts Pvt. Ltd.’- (“Corporate Guarantor No.1”).

 

# 11. In the aforesaid background, learned counsel for the Appellant raised question of maintainability of two ‘Corporate Insolvency Resolution Processes’ against two ‘Corporate Guarantors’ based on same sets of claim; debt, default and record.

 

# 12. Learned counsel for the Appellant submitted that no ‘Corporate Insolvency Resolution Process’ can be initiated against the ‘Corporate Guarantors’, without initiating ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’. Further, according to him, the ‘Principal Borrower’ not being a Company, no application under Sections 7 or 9 can be filed against it. If no application under Sections 7 or 9 can be filed against the ‘Principal Borrower’, the application under Section 7 for same claim and debt cannot be filed against the ‘Corporate Guarantors’.

 

# 13. It was also submitted that for same set of claim amount and debt, two ‘Corporate Insolvency Resolution Processes’ cannot be initiated against two different ‘Corporate Guarantors’.

 

# 15. The questions arise for consideration in these appeals are:

• i. Whether the ‘Corporate Insolvency Resolution Process’ can be initiated against a ‘Corporate Guarantor’, if the ‘Principal Borrower’ is not a ‘Corporate Debtor’ or ‘Corporate Person’? And;

• ii. Whether the ‘Corporate Insolvency Resolution Process’ can be initiated against two ‘Corporate Guarantors’ simultaneously for the same set of debt and default ?

 

# 21. From clause (h) of Section 5 (8) of the ‘I&B Code’, it is clear that counter-indemnity obligation in respect of a guarantee comes within the meaning of ‘financial debt’ and, therefore, there is no dispute that ‘M/s. Piramal Enterprises Ltd.’ is a ‘Financial Creditor’ of both ‘Sunrise Naturopathy and Resorts Pvt. Ltd.’- (“Corporate Guarantor No.1”) and ‘Sunsystem Institute of Information Technology Pvt. Ltd.’- (“Corporate Guarantor No.2”).

 

# 25. In view of the aforesaid decision of the Hon’ble Supreme Court, we hold that it is not necessary to initiate ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’ before initiating ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Guarantors’. Without initiating any ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’, it is always open to the ‘Financial Creditor’ to initiate ‘Corporate Insolvency Resolution Process’ under Section 7 against the ‘Corporate Guarantors’, as the creditor is also the ‘Financial Creditor’ qua  Corporate Guarantor’. The first question is thus answered against the Appellant.

 

# 29. In the present case, the ‘Financial Creditor’- (‘M/s. Piramal Enterprises Ltd.’) has claimed that it was owed financial debt of Rs. 40,28,76,461/- from ‘Sunsystem Institute of Information Technology Pvt. Ltd.’- (“Corporate Guarantor No.2”), which means that the ‘Financial Creditor’ was owed debt which is disbursed against the time value of money. Once such claim is made by the same very ‘Financial Creditor’- (‘M/s. Piramal Enterprises Ltd.’) against one of the ‘Corporate Debtor’ (‘Corporate Guarantor No.2’) in respect of same financial debt for triggering ‘Corporate Insolvency Resolution Process’ and such application is admitted (on 24th May, 2018), the question arises as to whether for same very claim and for same very default, the application under Section 7 against the other ‘Corporate Debtor’- (‘Corporate Guarantor No.1’)— ‘Sunrise Naturopathy and Resorts Pvt. Ltd.’ can be initiated?

 

# 31. The matter can be looked from another angle. The question arises whether the ‘Financial Creditor’- (‘M/s. Piramal Enterprises Ltd.’) can claim same amount of Rs. 40,28,76,461/- from the ‘Resolution Professional’ appointed pursuant to the ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Guarantor No.1’ (‘Sunrise Naturopathy and Resorts Pvt. Ltd.’), as also from the ‘Resolution Professional’ appointed pursuant to ‘Corporate Insolvency Resolution Process’ initiated against ‘Sunsystem Institute of Information Technology Pvt. Ltd.’- (“Corporate Guarantor No.2”)? Admittedly, for same set of debt, claim cannot be filed by same ‘Financial Creditor’ in two separate ‘Corporate Insolvency Resolution Processes’. If same claim cannot be claimed from ‘Resolution Professionals’ of separate ‘Corporate Insolvency Resolution Processes’, for same claim amount and default, two applications under Section 7 cannot be admitted simultaneously. Once for same claim the ‘Corporate Insolvency Resolution Process’ is initiated against one of the ‘Corporate Debtor’ after such initiation, the ‘Financial Creditor’ cannot trigger ‘Corporate Insolvency Resolution Process’ against the other ‘Corporate Debtor(s)’, for the same claim amount (debt).

 

# 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 the same set of claim application under Section 7 filed by the ‘Financial Creditor’ is admitted against one of the ‘Corporate Debtors’ (‘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 provision to file joint application under Section 7 by the ‘Financial Creditors’, no application can be filed by the ‘Financial Creditor’ against two or more ‘Corporate Debtors’ on the ground of joint liability (‘Principal Borrower’ and one ‘Corporate Guarantor’, or ‘Principal Borrower’ or two ‘Corporate Guarantors’ or one ‘Corporate Guarantor’ and other ‘Corporate Guarantor’), till it is shown that the ‘Corporate Debtors’ combinedly are joint venture company.

 

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