Amit Agarwal (Suspended Director Of ... vs Mr. Sandeep Khaitan (Erstwhile ...

Amit Agarwal, (Suspended Director of Sundaram Mahadeo Autoworld Pvt. Ltd.) ...Appellant

Versus

Sandeep Khaitan, (Erstwhile RP of Sundaram Mahadeo Autoworld Pvt. Ltd) ...Respondent

Present:

For Appellant : Mr. Nirmal Goenka, Advocate. For Respondent : Mr. Ankur Mittal, Mr. Srijan Jain & Ms. Muskan Jain, for R-2. Mr. Vikram Wadhera, for R-6/ Liquidator.

JUDGMENT

Per: Justice Rakesh Kumar Jain:

The Appellant is the suspended director of the Corporate

Debtor, namely, Sundaram Mahadeo Auto World Pvt. Ltd. who is

aggrieved against the order dated 22.04.2024 by which the

National Company Law Tribunal, Guwahati Bench (in short

'Tribunal') has dismissed the application bearing I.A No. 13 of 2024

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 2

filed by the Appellant and allowed I.A No. 127 of 2023 filed by

Respondent No. 6.

2. In brief, the Tribunal admitted an application bearing CP (IB)

No. 26/GB/2022 filed under Section 10 of the Insolvency and

Bankruptcy Code, 2016 (in short 'Code') on 20.01.2023.

3. Mr. Sandeep Khaitan was appointed as the Resolution

Professional/Respondent No.1 (RP) vide order dated 17.03.2023.

4. The Appellant and his brother Sumit Agarwal (both

promoters of CD) jointly purchased a land admeasuring 56,300

sq.ft., covered under Dag No. 395 of periodic Patta No. 204, under

village Rangamati, mouza Bihaguri, P.O. Pithakhowa, P.S Tazpur,

Dist. Sontipur, Assam (in short 'Subject Property') on 29.12.2014.

5. A portion of the subject property i.e land admeasuring 20,060

sq. ft. was leased by the aforesaid owners to the CD vide lease deed

dated 21.01.2016 for a period of 15 years w.e.f 01.06.2015. The

leased was to expire on 31.05.2030.

6. The leased property is landlocked from three sides and has a

pathway to access.

7. The Appellant mortgaged the subject property with State

Bank of India (Respondent No. 2) for securing loan facility availed

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 3

by the CD by executing a deed of personal guarantee with his

brother on 21.03.2016, 31.09.2019 and 29.09.2020.

8. The agency of Automobile of the CD has already been

terminated.

9. The RP in CP (IB) No. 26 of 2022 published an expression of

interest (EOI) on 10.04.2023 in the Assam Tribune (English) and

Asomiya Pratidin (Assamese) in terms of Regulation 36A of the

CIRP Regulation. No resolution plan was though received.

10. In the 08th meeting of the CoC which comprises of SBI voting

share of 34.97%, Tata Motors Finance Solutions Limited (TMFSL)

voting share of 35%, Tata Capital Financial Services Limited

(TCFSL) voting share of 29.80% and IndusInd Bank voting share

of 0.23 % it was decided to publish second round of invitation for

EOI to provide fresh opportunity to the interested parties to submit

their resolution plan for the CD.

11. Two resolution plans were received pursuant to second EOI

after which one of the members of the CoC, namely, SBI vide its

letter dated 05.09.2023 decided to include the personal property

of the Appellant in the CIRP of the CD in the overall interest of

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 4

resolution while reserving its right to receive the proceeds allocated

towards the subject property.

12. In the 9th CoC meeting held on 26.09.2023, it discussed the

inclusion of subject property in the resolution plan. It was noted

that inclusion of subject property in the process will greatly aid the

resolution of the CD.

13. In the 10th CoC meeting held on 13.10.2023 Mr. Sumit

Agarwal who has not been made a party by the Appellant in this

appeal appeared as an authorised representative or one of the PRA,

namely, PADPL.

14. In the 11th CoC meeting held on 16.11.2023, the CoC

considered the resolution plan submitted by PADPL and found it

to be non-viable, however, one week time was provided for

addendums.

15. The resolution plan was put to vote on 28.11.2023. The E-

voting window was opened for resolution plan from 30.11.2023 to

06.12.2023 and the members of the CoC with 99.78% of majority

votes (0.22% abstained) approved the liquidation of the CD as a

going concern, subject to the approval of the AA.

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 5

16. In view of the decision of the CoC taken on 28.11.2023 in the

12th meeting of the CoC, Respondent No. 1 filed an application

bearing I.A No. 127 of 2023 under Section 33(2) r/w Section 60(5)

of the Code and Rule 11 of the NCLT Rules, 2016 for an order of

liquidation of the CD.

17. At the same time, the Appellant herein also filed an

application bearing I.A No. 13 of 2024 under Section 60(5) r/w

Rule 11 of the Rules as an objection to the application bearing I.A

No. 127 of 2023 in which it was alleged that the Appellant is the

co-owner of the property which has ben mortgaged with SBI as

security for the loan availed by the CD and that CD holds leasehold

rights in respect of the some part of the said property. It is also

alleged, in the objection, that in the second EOI, the Respondent

No. 2 sent a letter dated 05.09.2023 to the RP who had decided to

include the personal property in the CIRP of the CD. This also has

been discussed in the 9th meeting of the CoC.

18. The Appellant also raised the objection that the personal

property of the objector/appellant does not form part of the assets

of the CD in the Information Memorandum (IM) and the RFRP as

reflected in the minutes of the meeting of the CoC held on

13.10.2023.

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 6

19. It is alleged that the Appellant had also raised formal

objection vide email dated 19.10.2023 sent to the RP against the

inclusion of his personal property in the CIRP to which RP replied

vide email dated 25.10.2023 in which it was alleged that the

R2/SBI is the sole holder of the equitable mortgage of the personal

property of the Appellant and they are at the liberty to enforce the

same as deemed fit by them.

20. It is also alleged that in the 11th meeting of the CoC held on

16.11.2023, the objection of the Appellant was for the first time

formally discussed and it was affirmed that all the emails of the

Appellant had been duly responded to and all the replies were

shared with the members as well. In the same meeting, TCFSL also

raised objections against the inclusion of the personal property of

the Appellant in the CIRP of the CD while personal insolvency

resolution proceedings against the personal guarantor was still

pending before the Tribunal and interim moratorium was

operational.

21. In so far as the application bearing I.A No. 13/2024 is

concerned, in the said application, the Respondent herein filed the

reply in which it is alleged that the leased property is land locked

within the said larger area of the subject property which has only

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 7

passage providing access to the leased property. He has also

submitted that the objector has no right to file objection in the

liquidation application because the minutes of every meeting and

accompanying annexures, containing details of the discussions

and deliberations and the decisions taken in every meeting were

sent to the suspended board which included the objector who did

not raise any objection.

22. The Tribunal dismissed the application bearing I.A No. 13 of

2024 and allowed the application bearing I.A No. 127 of 2023 with

the following observations:-

"5.5. It is a settled principle under law that interim- moratorium under Section 96(1)(a) of the IBC does not operate as a bar on the CIRP process of the CD on behalf of which the personal guarantee was given. This would organically include the outcome of a failed CIRP process i.e. liquidation of the CD. Moreover, the interim-moratorium under Section 96(1)(a) covers only debts of the individuals who are personal guarantors to the CD, and cannot in any conceivable way hinder the decision of the CoC to liquidate the CD in their commercial wisdom.

5.6. In addition, it is conceded by the Objector that Objector's Property has been mortgaged to SBI as security for the loan availed by the CD. It is also the

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 8

submission of the SBI that owing to the peculiar facts and circumstances and the layout of the Objector's Property, there is no efficient conceivable way to alienate the Leased Property of the CD while not touching the adjoining area of land, especially when there is one common boundary for the entire identified piece of land.

5.7. In Mr Prateek Gupta & Ors v Kotak Mahindra Bank Limited Company Appeal (AT)(Insolvency) No. 147 of 2022, the Hon'ble NCLAT permitted the composite sale of land in which a portion belonged to the CD while the larger remaining portion mortgaged to the Bank belonged to the ex-Directors of the CD. This ruling is an aid to understand how the qualms of the Objector are misplaced at this present stage of merely allowing the liquidation of the CD. Even if the liquidation is allowed, the abovementioned case narrates how the composite property may be treated in the following manner:

"7. After considering the submission which have been made by the Learned Counsel for the Appellant, we are of the view that in the peculiar facts and circumstances of the case, no error can be found with the Order of the Adjudicating Authority directing for composite sale of land of both the parts under SARFARSI Act, 2002. Even the Liquidator

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 9

when he sells the property under the liquidation, he has to follow the procedure under the SARFAESI Act, 2002 for sale of the property......... The Proportionate amount will be given to the Liquidator which shall be in the liquidation estate hence, the Corporate Debtor cannot suffer any loss in the aforesaid sale."

5.8. There is nothing on record to establish that the RP or the CoC kept the Objector in dark regarding the position and treatment of Objector's Property in the CIRP process or have clandestinely included Objector's Property against the provisions and procedure laid down in the Code."

23. Aggrieved against this order, the present appeal has been

filed.

24. Counsel for the Appellant has argued that there has been

material irregularity in conducting the CIRP of the CD because

personal property of the Appellant has been included in the CIRP

and now the CD has been pushed into liquidation. He has

submitted that the personal property of third party/guarantors

cannot be included in the CIRP of the CD and has relied upon a

decision of this Court in the case of Nitin Chandrakant Naik Vs.

Sanidhya Industries LLP and Anr., 2021 SCC OnLine NCLAT 302.

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 10

25. It is further submitted that the letter dated 05.09.2023 by the

SBI (one of the FC) asking RP to include the property mortgaged

with it for the purpose of value maximization and successful CIRP

is against the provisions of the Code.

26. It is further submitted that despite its email dated

19.10.2023 and objection by the Financial Creditor in the meeting

of the CoC, RP continued the proceedings with the CIRP and

received resolution plan after including the personal property.

27. It is also submitted that it was necessary to explore the

possibilities of revival of the CD and not to put it for sale in

liquidation because the object is to keep the CD as going concern

as a rule and the liquidation is exception.

28. Counsel for Respondent No. 2 (SBI) has argued that decision

of the CoC in approving / rejecting a resolution plan is within the

realm of commercial wisdom of the CoC. The decision to liquidate

the CD is also a commercial decision of the CoC which does not

warrant any interference and in this regard, he has relied upon a

decision of the Hon'ble Supreme Court in the case of K. Sashidhar

Vs. Indian Overseas Bank, (2019) 12 SCC 150 and a decision of

this Court in the case of Bank of India Vs. Pradeep Kumar Goenka,

CA (AT) (Ins) No. 342 of 2022.

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 11

29. It is further submitted that the first form G was published on

10.04.2023. Though two EOIs were received but no resolution plan

was submitted for the consideration of CoC, therefore, the

argument of the Appellant that if the assets of personal guarantors

are not included even then there would have been resolution plan

is misplaced because CD which was in the automobile business

and its agency has already been cancelled. It had no other assets

except leasehold rights in the leased property limited up to 15

years from 2015 out of which 9 years had already lapsed. The

leased property is a part of subject property owned by promoters

including the Appellant which is landlocked from three sides,

therefore, there is no possibility of viable resolution plan for CD

which could have been submitted without the property of the

personal guarantor.

30. Counsel for the SBI has further argued that the right of the

Appellant is not going to be affected by the composite sale of the

immovable property of the CD and the Appellant because

Respondent No. 2 has an exclusive charge over the immovable

property which is registered in the name of the Appellant and his

brother who had time to time executed the deed of personal

guarantee dated 21.03.2016, 31.01.2019 and 29.09.2020. They

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 12

had also issued letters of confirmation dated 31.03.2016,

02.04.2019 and 30.09.2020 for mortgage of titles deeds and

creation of equitable mortgage of freehold rights on the said

immovable property and leasehold rights on the building for

securing the loan facilities availed by the CD. When the CD failed

in repayment of its dues, the Respondent No. 2 sent a demand

notice under Section 13(2) under SARFAESI Act, 2002 to the

Appellant and his brother. It is submitted that when no plan was

received by the R1 during the first EOI dated 10.04.2023. The

Respondent No. 2 in the best interest of the CD and in order to

encourage the potential resolution applicants to come forward,

issued the letter dated 05.09.2023. It is further submitted that the

asset of the CD includes the building which has been constructed

on the land leased by the Appellant for a period of 15 years

commencing from 2015 for utilising the said property as a

showroom and if the potential resolution applicant acquire the said

leasehold rights of the said building then the only way to access

the mortgaged property of the personal guarantor was through the

said leasehold property. It is alleged that because of this reason, a

composite sale of the said property was deemed to be necessary

and since none of the two PRAs were commercially viable,

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 13

therefore, the CoC decided to liquidate the CD. In support of the

submissions, Counsel for the SBI has relied upon two decisions of

this Court in the case of Ayan Mallick Vs. Pratim Bayal, 2022 SCC

OnLine NCLAT 282 and Prateek Gupta Vs. LOtak Mahindra Bank

Ltd., 2022 SCC OnLine NCLAT 2305.

31. Counsel for Respondent No. 2 has further argued that the

Appellant was very well aware of all the proceedings of the CoC

meetings because notices of every CoC meeting, the virtual

conference link for the said CoC meeting as well as written minutes

of each of CoC meeting was regularly sent to the Appellant. It was

discussed in the 7th meeting that in order to enhance the value and

to ensure a successful CIRP of the CD, inclusion of the sale of land

mortgaged with the Bank was required. Sumit Agarwal as a

representative of the suspended board of the CD sent an email to

the R1 on 05.07.2023 wherein the Appellant was also tagged and

in the 10th CoC meeting held on 13.10.2023, on the query by

Respondent No. 2, Respondent No. 1 apprised that the Appellant

was communicated about the inclusion of the subject property.

During the same meeting Sumit Agarwal appeared as authorised

representative of one to the PRA, namely, PADPL but no objection

on the inclusion of the subject property was raised. Therefore, it is

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 14

submitted that the objection filed by the application bearing I.A

No. 13 of 2024 was totally after thought especially when the

application under Section 10 is filed by the promoter/guarantor.

32. Counsel for Respondent No. 6 (Liquidator) has also raised the

same argument which has been raised by the Respondent No. 2. It

is submitted by him that on 05.07.2023 the suspended board

proposed a 2nd invitation and after discussion, held in the CoC

meeting on inclusion of the larger land in the process in which the

Appellant and his brother participated in the entire process

including deliberations and negotiations on the resolution plans.

It is submitted that the CoC has passed the resolution for

liquidation of the CD with 99.78% voting share which cannot be

challenged by the Appellant being the commercial wisdom of the

CoC and in this regard, he has also relied upon the decision of the

Hon'ble Supreme Court in the case of K. Sashidhar (Supra) and

CoC of Essar Steel India Limited Vs. Satish Kumar Gupta, (2020)

8 SCC 531.

33. We have heard Counsel for the parties and perused the record

with their able assistance.

34. From the narration of the facts and finding recorded by the

Tribunal coupled with the submissions made by the Appellant, Comp. App. (AT) (Ins) No. 919 & 920 of 2024 15

Respondent No. 2 and Respondent No. 6, it has come to the fore

that the CD was running an automobile agency after constructing

a showroom over the land taken on lease from the Appellant which

has been land locked on three sides with the remaining land of the

Appellant and his brother. The remaining land is mortgaged by the

Appellant with the SBI/R2 as a guarantee for the loan availed by

the CD. It is needless to mention that the guarantors are the

promoters of the CD. The Application under Section 10 was filed

by the CD. In this CIRP proceedings, the first EOI was published

on 10.04.2023 but keeping in view the only asset owned by the

CD, namely, the piece of land i.e showroom, no resolution plan was

received, thereafter, it was decided on 12.07.2023, in the 8th

meeting of the CoC, that there should be a second round of

invitation for EOI to provide fresh opportunity to the interested

parties to submit their resolution plan. The land in question was

also included because the property of the CD was not attracting

the resolution plan, therefore, Respondent No. 2 wrote a letter on

05.09.2023 to Respondent No. 1 in which following averments

have been made:-

4. SBI is in a view that for value maximisation and successful CIRP it is essential to include the entire

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 16

landed property over the land measuring 3 Bigha 4 Katha and 11 Lessas available to prospective Resolution Applicants in CIRP in order to fetch a successful RO (Resolution plan) in Sundaram Mahadeo Autoworld Private Limited.

5. The above inclusion of entire property in CIRP process is subject SBI being paid the full value of the property in view of exclusive rights.

6. ln view of the above, please arrange to suitably advise/ intimate the prospective Resolution Applicants on the above lines.

35. The Appellant and his brother participated as representative

of the CD in the meetings of the CoC post inclusion of the land in

question but did not raise any objection, however, the resolution

plan which were ultimately received as confirmed in the 9th CoC

meeting held on 26.09.2023, were voted upon in the 12th CoC

meeting held on 28.11.2023 but the CoC with 99.78% majority

voting (0.22% abstained) rather approved the liquidation of the CD

as a going concern subject to the approval of the AA as a result of

which I.A No. 127 of 2023 was filed by the Respondent No. 1 and

objection to these proceedings by way of I.A No. 13 of 2024 was

filed by the Appellant. The decision relied upon by the Respondent

No. 2 in the case of Prateek Gupta (Supra) applies to this case. The

Comp. App. (AT) (Ins) No. 919 & 920 of 2024 17

only difference is that in that case it was a prayer made by the

Bank for composite sale whereas in this case the prayer made by

the liquidator for the composite sale for the purpose of

maximisation of the asset. Similar view has been taken by this

Court in the case of Ayan Mallick (Supra). Counsel for the

Appellant has not cited any decision contrary to the aforesaid two

decisions.

36. Therefore, in view of the aforesaid facts and circumstances,

we do not find any reason to differ from the order passed by the

Tribunal and hence, the present appeal is hereby dismissed. No

costs.

I.As, if any, are hereby closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

New Delhi 21st March, 2025.

Sheetal

Comp. App. (AT) (Ins) No. 919 & 920 of 2024