Ajay Chaturvedi vs Jm Financial Asset Reconstruction Co. ...

(Arising out of Order dated 11th May, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai in C.P. NO. 1729/IBC/NCLT/MAH/2017)

IN THE MATTER OF:

Ajay Chaturvedi ...Appellant

Vs

JM Financial Asset Reconstruction Co. Ltd. & Anr. ....Respondents

Present:

For Appellant: Mr. Arvind Kumar Gupta, Ms. Henna George, Mr. Shreya Mathur and Mr. Atul Batra, Advocates.

For Respondents: Mr. Ramji Srinivasan, Senior Advocate with Mr. Sonal Jain, Mr. Naveen Hegde, Ms. Aishwarya, Advocates. Ms. Heena Sharma, Mr. Ishkaran Singh and Mr. Abhishek Anand, Advocates.

Mr. Anant A. Pavgi, Advocate for R.P.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Appeal has been preferred by Mr. Ajay Chaturvedi, Shareholder

of 'Yes Power & Infrastructure Ltd.'- ('Corporate Debtor') against the order

dated 11th May, 2018 passed by the Adjudicating Authority (National

Company Law Tribunal), Mumbai Bench, Mumbai, whereby and

whereunder, the application under Section 7 of the 'Insolvency and

Bankruptcy Code, 2016 ('I&B Code' for short) preferred by the Respondent-

Company Appeal (AT) (Insolvency) No. 320 of 2018 2

'JM Financial Asset Reconstruction Company Ltd.'- ('Financial Creditor')

has been admitted.

2. The main plea taken by the counsel for the Appellant is that in spite

of the order passed by the Adjudicating Authority no 'substituted service'

has been made by the Respondent- 'JM Financial Asset Reconstruction

Company Ltd.'- ('Financial Creditor') and they sent the notice by Speed

Post, which was never received by the Appellant. Therefore, according to

Appellant, the admission order dated 11th May, 2018 is bad having been

passed ex parte by misleading the Adjudicating Authority.

3. Learned counsel for the Appellant submitted that there was no

provision for filing an application under Section 7 of the 'I&B Code' against

the 'Corporate Guarantor' except against the 'Personal Guarantor'.

However, such submission cannot be accepted, in view of the definition of

'Financial Creditor' as defined in Section 5(7) read with Section 5(8) of the

'I&B Code', which reads as follows:

5. Definitions. ─ (7) "financial creditor" means

any person to whom a financial debt is owed and

includes a person to whom such debt has been

legally assigned or transferred to;

(8) "financial debt" means a debt along with

interest, if any, which is disbursed against the

Company Appeal (AT) (Insolvency) No. 320 of 2018 3

consideration for the time value of money and

includes--

(a) money borrowed against the payment of

interest;

(b) any amount raised by acceptance under

any acceptance credit facility or its de-

materialised equivalent;

(c) any amount raised pursuant to any note

purchase facility or the issue of bonds, notes,

debentures, loan stock or any similar

instrument;

(d) the amount of any liability in respect of

any lease or hire purchase contract which is

deemed as a finance or capital lease under

the Indian Accounting Standards or such

other accounting standards as may be

prescribed; (e) receivables sold or discounted

other than any receivables sold on non-

recourse basis;

(f) any amount raised under any other

transaction, including any forward sale or

purchase agreement, having the commercial

effect of a borrowing;

(g) any derivative transaction entered into in

connection with protection against or benefit

Company Appeal (AT) (Insolvency) No. 320 of 2018 4

from fluctuation in any rate or price and for

calculating the value of any derivative

transaction, only the market value of such

transaction shall be taken into account;

(h) any counter-indemnity obligation in

respect of a guarantee, indemnity, bond,

documentary letter of credit or any other

instrument issued by a bank or financial

institution;

(i) the amount of any liability in respect of

any of the guarantee or indemnity for any of

the items referred to in sub-clauses (a) to (h)

of this clause"

4. Clause (i) of sub-section (8) of Section 5 shows that any liability in

respect of any 'guarantee' or 'indemnity' for any of the items referred to in

sub-clauses (a) to (h) comes within the meaning of 'Financial Debt'. The

'Corporate Debtor' having given 'guarantee' on behalf of the principal

borrower for the items referred to in sub-clause (a), guarantor company will

also come within the meaning of 'Corporate Debtor' qua the 'Financial

Creditor' in whose favour the guarantee has been given.

5. Learned counsel for the Appellant placed reliance on notice issued

under the 'SARFAESI Act, 2002' on 18th November, 2013, from which it is

clear that the 'Financial Creditor' has already invoked the guarantee

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against the 'Corporate Debtor' and, therefore, it cannot take plea that the

guarantor does not come within the meaning of the 'Corporate Debtor'.

6. In so far as the service of notice of admission is concerned, even if it

is accepted that it was not served, we are not inclined to remit the case on

such ground as it will be mere formality, as admittedly debt is payable by

the 'Corporate Debtor' and the 'Corporate Debtor' defaulted to pay. It is not

the case of the Appellant that if the notice would have been served before

admission of the application under Section 7, the 'Corporate Debtor' would

have cleared the debt amount.

7. In view of the aforesaid facts and findings, no relief can be granted. In

absence of any merit, the appeal is dismissed. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

NEW DELHI

29th November, 2018

AR

Company Appeal (AT) (Insolvency) No. 320 of 2018