Facts of the case : ICICI Bank provided credit facilities to M/s Palogix Infrastructure Pvt. Ltd. which were guaranteed by M/s. Vista Steel Pvt. Ltd. ICICI bank recalled the loan on 05.10.2016 & invoked the Corporate Guarantee of M/s. Vista Steel Pvt. Ltd on 14.10.2016. Insolvency of Palogix Infrastructure Pvt. Ltd. was initiated on the application of ICICI Bank on 16.05,2017 (CP 37/2017). ICICI Bank now filed application U/s 7, against the Corporate guarantor M/s. Vista Steel Pvt. Ltd.
Excerpts of the order;
4. The applicant has stated that he has granted various credit facilities to Palogix Infrastructure Pvt. Ltd. The debts were granted in domestic currency for Rupee Term Loan Facilities. The dates of disbursement under each of the Rupee Term Loan Facilities have been annexed with the application at page 61 marked as Exhibit D. Various corporate guarantees furnished by the corporate debtor in favour of the financial debtor on 16/11/2010, 22/8/2013 and 21/3/2016 which are collectively referred to as the Vista Steel corporate guarantees at page 109 marked as Exhibit E.
5. The Financial Creditor recalled the RTL facilities vide Loan Recall Notice dated 5/10/2016. The borrower has failed to repay the amounts due and outstanding to the financial creditor, the financial creditor invoked the Vista Steel Corporate Guarantees vide invocation letter dated 14/10/2016.
8. The applicant further submits that this Tribunal vide order dated 16/5/2017 admitted the application being CP No.37/2017 and initiated corporate insolvency resolution process for the borrower. The applicant annexed along with the application a statement of account of the borrower as on 31/8/2017 at page 383 to 490 as Exhibit J.
11. The corporate debtor further submits that the applicant/financial creditor granted various credit facilities to Palogix Infrastructure Pvt. Ltd. The corporate debtor had given a corporate guarantee in respect of the credit facilities availed by Palogix and the applicant applied for initiation of corporate insolvency resolution process against Palogix Infrastructure Pvt. Ltd., And the application is admitted by this Tribunal.
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12. The corporate debtor further submits that Palogix Infrastructure Pvt. Ltd. preferred an appeal against the order of this Tribunal and the Hon'ble NCLAT by an order dated 20/9/2017 was pleased to dismiss the appeal filed by Palogix Infrastructure Pvt. Ltd..
13. The corporate debtor further submits that the instant application has been filed by the applicant/financial creditor against the corporate debtor who is the guarantor in respect of credit facilities availed by Palogix Infrastructure Pvt. Ltd. The Palogix Infrastructure Pvt. Ltd. is under the process of corporate insolvency resolution process and the moratorium is declared, and meeting of the committee of the creditor has been held from time to time, and the financial creditor has participated in the meeting of the committee of creditors and filed its claim before the Resolution Professional. The applicant/financial creditor cannot proceed against the corporate guarantor in respect of the same claim which has lodged before the resolution professional and the same would be in violation of the provisions of Sec.14(1)(b) of the I & B Code.
14. It is the case of the corporate debtor that during the corporate insolvency resolution process and declaration of the moratorium against the principal borrower, if another insolvency proceeding is permitted to proceed against the guarantor of the principal borrower for recovery of the debt to the extent of the guarantee given, the security interest of the financial creditor shall get transferred to the guarantor which will be in violation of Sec.14(1)(b) of the I & B Code
17. Ld. Counsel for the corporate guarantor, who happens to be corporate debtor in this case, has alleged that since the insolvency proceedings are pending against the principal borrower and financial creditor is participating in that processes before the R.P. and moratorium has also been declared in the actions against the principal borrower, therefore, fresh proceedings against the corporate guarantor is barred under Sec.14(1)(b) of the I & B Code.
19. Ld. Counsel for the corporate debtor has further alleged that the liability has not been crystalised either against the principal borrower M/S Palogix Infrastructure Pvt. Ltd. or the corporate debtor, as such, the financial creditor cannot proceed against the guarantor. On the above ground the corporate debtor has stated that the petition against the corporate debtor, in the circumstances said above is not maintainable during moratorium order passed under Sec.14(1)(b) of the 1 & B Code, which was passed in an insolvency case filed against the principal borrower i.e., Palogix Infrastructure Pvt. Ltd.
20. The above provision of law lays down the restriction on any action to foreclosure, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
23. Thus, during the pendency of the moratorium order that is passed in a case filed against the corporate debtor, i.e. Palogix Infrastructure Pvt. Ltd. It will directly affect the security interest, which is not permissible in law. It is pertinent to mention that similar view has been taken by Hon'ble Allahabad High Court in Writ Petition No.30285 of 2017, Sanjeev Shriya vs State Bank of India, vide order dated 6/9/2017. In the case mentioned above, Hon'ble Allahabad High Court has held that:
“This Court is of the considered opinion that in the aforementioned facts and circumstances once the sufficient safeguards are provided in the IBC, 2016 and the regulations framed thereunder to the bank, and even the liability has not framed thereunder to the bank, and even the liability has not been crystalised either against the principal debtor or guarantors/mortgagors at present, then the proceeding, which is pending before the Debt Recovery Tribunal, Allahabad cannot go on and the same stays till the finalisation of corporate insolvency resolution process or till the NCLT approves the resolution plan under sub section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, as the case may be.”
24. It is also important to mention that similar view has been taken by Hon'ble NCLT, Chennai Bench in the case of IA No.5/2017 in CP No.510/1B/CB/2017 in the case of Mr V. Ramakrishnan vs Vessons Energy Systems Pvt. Ltd. The Hon'ble Bench has taken a view that
It is clear that if the Financial Creditor during the Corporate Insolvency Resolution Process and declaration of the moratorium is permitted to proceed against the personal guarantor of the Corporate Debtor for recovery of the outstanding debt to the extent of the personal guarantee given, then, the security interest, if any, of the Financial Creditor shall get transferred to the guarantor which will be in violation of Section 14 (1)(b) of the I & B Code, 2016.”
# 27. In this case , insolvency petition has already been admitted under Sec.7 against the principal borrower. Therefore another insolvency proceeding against the corporate guarantor is barred on account of moratorium order passed under Sec.14(1)(a) of I & B Code against the principal borrower.
28. On the above basis, it is clear that the present petition filed against the corporate debtor who happens to be a corporate guarantor of the principal borrower, i.e. Palogix Infrastructure Pvt. Ltd. Which is barred by the provisions of the moratorium order passed under Sec.14(1)(a) of IBC 2016. Therefore, we hold that at the moment the petition under Sec.] is not maintainable until finalisation of insolvency proceedings against the principal borrower, i.e. Palogix Infrastructure Pvt. Ltd.
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Section 14(3) of IBC,2016, stands amended w.e.f. 06.06.2018 as below;
ReplyDeleteSection 14(3) The provisions of sub-section (1) shall not apply to —
(a) such transactions, agreements or other arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;
(b) a surety in a contract of guarantee to a corporate debtor.