NCLAT (08.03.2021) in Edelweiss Asset Reconstruction Company Ltd. Vs. Gwalior Bypass Projects Ltd. [Company Appeal (AT) (Ins) No.1186 of 2019] Held that;
For above reasons discussed by us in the matter of “Athena Energy”, we find that the present Appeal is required to be allowed. We do not find that there is bar for the Financial Creditor to proceed against the principal borrower as well as Corporate Guarantor at the same time, either in CIRPs or file claims in both CIRPs.
Excerpts of the order;
# 1. This Appeal has been filed by the Appellant against the Impugned Order dated 12th September, 2019 passed by the Adjudicating Authority (National Company Law Tribunal, Principal Bench at New Delhi) in CA- 1475(PB)/2019 in CP/IB 1140(ND)/2018. The Application filed by the Appellant was rejected and hence, the present Appeal. The issue involved in this matter is that if CIRP (Corporate Insolvency Resolution Process) has been initiated against the principal borrower, could the Appellant have filed claim in CIRP initiated against the Corporate Guarantor.
# 2. A few facts may be referred for the context.
a) Adel Landmarks Ltd. (then Era Landmark Ltd.) – principal borrower had applied for loan on 24th September, 2013 to ECL Finance Ltd., a non-banking financial company, seeking financial assistance of INR 170 Crores.
b) The loan was granted and interest was specified. Loan Agreement was executed on 07.10.2013. Principal borrower along with co guarantors executed security/transaction documents.
c) There was default and account was declared NPA by the NBFC on 31.12.2015.
d) The NBFC assigned the debt to the Appellant on 23rd March, 2017.
e) Subsequently, the Corporate Debtor – Gwalior Bypass Projects Ltd. secured the debt of Adel Landmarks Ltd. by executing Guarantee Agreement dated 3rd May, 2018. Thus, it is guarantor.
f) On 10th July, 2018, the Appellant by Notice dated 2nd July, 2018 recalled the loan seeking repayment from principal borrower and also invoked corporate guarantee dated 3rd May, 2018.
g) The Appellant filed Application under Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC – in short) in CP No.1083(PB)/2018 and the same was admitted on 5th December, 2018 against principal borrower – Adel Landmarks Ltd.
h) ICICI Bank filed another Application under Section 7 of IBC against Corporate Debtor - Gwalior Bypass Projects Ltd. which was admitted on 29th May, 2019.
i) Appellant filed Form ‘C’ in CIRP against Corporate Debtor for Rs.4,587,862,930/- on 11th June, 2019.
j) On 19th June, 2019, IRP rejected the claim of the Appellant relying on Judgement of National Company Law Appellate Tribunal (NCLAT – in short) in the matter of “Dr. Vishnu Kumar Agarwal Vs M/s. Piramal Enterprises Ltd.” - Company Appeal (AT) (Ins) No.346 of 2018 decided on 8th January, 2019.
k) Appellant filed Application CA 1475 (PB)/2019 before theAdjudicating Authority. After hearing, the Application was rejected relying on same Judgement in the matter of “Piramal” on 12th September, 2019 and thus, the Appeal.
l) The above are broad facts and developments in the present matter regarding which there is no issue as such.
# 3. Learned Counsel for the Appellant has argued that the law on the issue has now been explained in Judgements passed by the Hon’ble Supreme Court as well as this Tribunal in the matter of “State Bank of India vs. Athena Energy Ventures Pvt. Ltd.” - Company Appeal (AT) (Ins) No.633 of 2020 dated 24th November, 2020.
# 7. Similar issue had come up before us in the matter of “State Bank of India vs. Athena Energy” (referred supra) and we had occasion to revisit Judgement in the matter of “Piramal” to consider if interpretation of law as laid down in the matter of “Piramal”, was still required to be followed. We had observed as under:-. . . . . . .
# 8. For above reasons discussed by us in the matter of “Athena Energy”, we find that the present Appeal is required to be allowed. We do not find that there is bar for the Financial Creditor to proceed against the principal borrower as well as Corporate Guarantor at the same time, either in CIRPs or file claims in both CIRPs.
# 9.(A) For the above reasons, the present Appeal is allowed. Impugned Order is quashed and set aside. We find that the claim submitted by the Appellant was required to be considered by the IRP/RP in the CIRP proceedings. The matter is remitted back to the Adjudicating Authority and the Adjudicating Authority is requested to pass further Orders with regard to the claim made by the Appellant which was required to be considered by the IRP/RP. The Resolution Plan pending for approval before the Adjudicating Authority may be sent back to COC for reconsideration in view of the present Orders in Appeal.
(B) It is made clear that the Adjudicating Authority may separately decide the Avoidance Application on its merits in accordance with law which is stated to have been filed. We have not expressed any view on the said controversy.
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