Dheeraj Wadhawan vs Union Bank Of India

Union Bank of India & Anr. ...Respondents Present: For Appellants : Mr. Mahesh Agrawal, Ankur Saighal, Shivam Shukla, Adv. For Respondent : Mr. Sunil Fernandes, Sr. Adv. with Anindita Roy Chowdhury, Rajshree Chaudhary, Diksha Dadu, Sushrut Garg, Adv. for R2 Mr. Abhijeet Sinha, Sr. Adv. Ranak Dhillon, Madhavi Khanna, Niharika Shukla, Aditya, Angela Dua, Animesh Bhist, Anirudh, Adv.

ORDER

Per: Justice Rakesh Kumar Jain (Oral)

14.08.2024: This order shall decide two appeals bearing

Comp. App. (AT) (Ins) No. 863 of 2024 titled as Dheeraj

Wadhawan Vs. Union Bank of India & Anr. (hereinafter referred

to as the first appeal) and Comp. App. (AT) (Ins) No. 1135 of 2024

titled as Kapil Wadhawan Vs. Union Bank of India & Anr.

(hereinafter referred to as the second appeal) as the issue

involved in both the appeals is common.

2. In the first appeal, an application was filed under Section 95

of the Insolvency and Bankruptcy Code, 2016 (in short 'Code')

read with Rule 7(2) of the Insolvency and Bankruptcy

(Application to Adjudicating Authority for Insolvency Resolution

Process for Personal Guarantors to Corporate Debtor) Rules,

2019 (in short 'Rules') by Union Bank of India as the Financial

Creditor for initiating insolvency process against the Appellant

(Dheeraj Wadhawan/Personal Guarantor of the CD, namely,

Dewan Housing Finance Corporation Limited 'DHFL') for a default amount of Rs. 3958,30,48,963.71/- including interest or

penalties in relation to credit facilities.

3. The aforesaid application was assigned CP (IB) No.

4/MB/2021 by the Adjudicating Authority (National Company

Law Tribunal, Mumbai Bench, Court II). A similar application

was filed by the same Financial Creditor against another Personal

Guarantor (Kapil Wadhawan) before the same AA bearing CP (IB)

No. 5/MB/2021.

4. The aforesaid two applications i.e. CP (IB) No. 4/MB/2021

in the first appeal was admitted on 20.03.2024 and CP (IB) No.

5/MB/2021 in the second appeal, was admitted on 02.04.2024.

Aggrieved against both the aforesaid orders, the present appeals

have been filed by both the personal guarantor of the Corporate

Debtor.

5. The brief facts of this case are that Reserve Bank of India

(RBI) filed CP (IB) No. 4258/MB/2019 as Financial Creditor

against DHFL (CD). The said application was admitted on

03.12.2019 and an Administrator was appointed. The Applicant

/UBI filed claim for an amount of Rs. 36,45,56,87,597.83 out of

which the claim to the tune of Rs. 35,17,30,39,020/- was

admitted by the Administrator.

6. DHFL availed various term loan facilities to the tune of Rs.

450 Cr. and working capital facilities to the tune of Rs. 450 Cr.

(term loan facilities and working capital facilities are collectively

referred to as 'Credit Facilities').

7. Both the Appellants gave personal guarantee in respect of

the Credit Facilities and a joint deed of guarantee was executed

on 22.06.2019 by both the Appellants.

8. It is pertinent to mention that the consortium of

banks/financial creditors executed four Security Trustee

Agreements (STA) starting from 26.06.2012 to 18.06.2015.

9. Union Bank of India (Respondent No. 1) vide its letter dated

10.09.2020 invoked the joint deed of guarantee calling upon the

Appellant to make aforesaid outstanding payment.

10. The demand notice dated 07.10.2020 was sent and after the

service of the notice, the application under Section 95 (1) of the

Code was filed by R1 against the Appellant in December, 2020 for

the amount mentioned above.

11. In these proceedings, the AA passed an order on 01.02.2022

by which the Resolution Professional was directed to submit the

report for acceptance or rejection of the application.

12. The order dated 01.02.2022 came to be challenged by

Dheeraj Wadhawan (Appellant in the first appeal) by way of CA

(AT) (Ins.) No. 214 of 2022 before this Appellate Tribunal. The

said order was maintained and the appeal was dismissed on

16.03.2022. The matter did not rest here because Dheeraj

Wadhawan challenged the aforesaid order dated 16.03.2022

before the Hon'ble Supreme Court in appeal which was also

dismissed on 02.09.2022

13. In the present litigation, the Appellant for the first time

raised an issue on the basis of clause 43 of the deed of guarantee

and 8.5 of the STA to contend that the application filed by R1

alone is not maintainable as it should have been filed either by

security trustee or by all the banks. This point was noticed by the

AA in its impugned order and returned a finding in Para 21 of the

impugned order in the first appeal which read as under:-

"43. Each of the Guarantors agree and confirm that in the event of occurrence of default by the Borrower as specified under the Facility Agreements, the said Banks shall be entitled to proceed against the Guarantors even without exhausting the remedies available with the said Banks against the Borrower."

Furthermore, the Security Trstee Agreement executed by the Banks in favour of Security Trustee provides as under:

"8.5 PERFORMANCE BY THE SAID BANKS Any duty or obligation of the Security Trustee hereunder or under any Security Document or other agreement, document or instrument contemplated herein or therein may be performed by the said Banks and any such performance shall not be construed as revocation of trust or agency created hereby."

A conjoint reading of the aforementioned clauses make it very clear that the rights of the Banks to enforce the guarantee is concurrent with that of the security trustee and any interpretation restricting the enforcement action only by security trustee goes against the letter and spirit of the deed of guarantee. We are, therefore, not persuaded by the argument that the personal guarantee could not have been invoked by the Bank/Creditor alone."

14. In the second appeal also the AA recorded a finding in this

regard in para 37 of the impugned order which read as under:-

"37.Accordingly, a conjoint reading of the aforesaid clauses of the security trustee agreement and deed of guarantee clearly provides that an individual lender can maintain an action against the guarantor and therefore the Petition is maintainable. The Judgement relied on by the Respondent of the Hon'ble NCLAT in Mr. Rakshit Dhirajlal Doshi (supra) cannot be applicable to present case as in the present case the banks, which includes individual bank also as concluded in the earlier paragraphs, have the power to invoke the guarantee dehors security trustee in terms of clause 10 read with clause 43 of the Deed of Guarantee. Further, the said decision of the Hon'ble Appellate Tribunal is distinguishable as in that case the issue was whether the Respondent Creditor could have declared an 'Event of Default' in accordance with inter se agreement of the creditors. However, in the present matter the Petitioner under clause 43 of Deed of Guarantee clause provides that the said banks shall be entitled to proceed against the guarantor without exhausting remedies available against the principle borrower. We have already clarified in the preceding paragraph that banks in the present case also mean to include each of the bank. Accordingly, the event of default could be declared by an individual bank in the present case."

15. The appellants in both the appeals being dissatisfied with

the aforesaid findings recorded in both the impugned order has

reiterated the same issue before us contending that the

application at the instance of one of the bank, in the absence of

the consent of all the banks, under Section 95 is not

maintainable.

16. He has again pressed clauses 43 of the deed of guarantee

and 8.5 of STA which are reproduced for ready reference:-

"43. Each of the Guarantors agree and confirm that in the event of occurrence of default by the Borrower as specified under the Facility Agreements, the said Banks shall be entitled to proceed against the Guarantors even without exhausting the remedies available with the said Banks against the Borrower. The Liability of the guarantors shall be immediate. In the event any of the guarantors refuses to comply with the demand made by the said Banks, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a wilful defaulter."

"8.5 PERFORMANCE BY THE SAID BANKS Any duty or obligation of the Security Trustee hereunder or under any Security Document or other agreement, document or instrument contemplated herein or therein may be performed by the said Banks and any such performance shall not be construed as revocation of trust or agency created hereby."

17. In support of his submissions, he has relied upon a decision

of this Court rendered in the case of Rakshit Dhirajlal Doshi (one

of the suspended directors) Vs. IDBI Bank Ltd. and Ors., 2022

SCC OnLine NCLAT 4524 decided on 15.11.2022.

18. On the other hand, Counsel appearing on behalf of the

Respondents i.e. Financial Creditor and the RP, have vehemently

contested the stand taken by the Appellants on the ground that

firstly, the Appellants cannot take this plea of non-

maintainability of application under Section 95 of the Code in the

second round of litigation as in the first round of litigation the

matter reached up to the Hon'ble Supreme Court and in those

proceedings no such plea was taken and the said plea stands

closed in terms of Order II Rule 2 of the CPC. Secondly, it is

submitted that the decision in the case of Rakshit Dhirajlal

(Supra) is not applicable to the facts of this case because in that

case the dispute was between the lenders inter se on the issue of

filing the application without the consent of the others whereas in

the present case none of the lenders has either approached the Appellants for the purpose of raising this issue nor they have

filed any IA to support the case of the Appellant for the purpose

of dismissal of the application under Section 95 filed before the

Court below on this ground that the application has been filed

solely by Union Bank Of India (R1). It is also submitted that in

the case of Rakshit Dhirajlal (Supra) the consortium of Banks

had given power only to the security trustee to invoke the bank

guarantee and also to file application under Section 95 in case of

any need and since application was filed by one of the financial

creditor, therefore, there was a dispute between the parties which

is not the situation in the present case.

19. It is further submitted that even a petition under Section 95

of the Code can be filed either by himself, or jointly with other

creditors, or through a resolution professional. It is therefore,

submitted that once the law permits to file the petition by one of

the creditors without joining the other creditors who have not

raised any objection in the present case, it does not lie in the

mouth of the Appellant at this stage when a round of litigation

has already taken place upto the Hon'ble Supreme Court to

contend that the application under Section 95 is not

maintainable because it has not been filed by the Banks but filed by one of the Banks. They have also relied upon a decision of this

Court rendered in the case of Shri Prem Prakash Bansal Vs. M/s

IDBI Bank Limited, CA (AT) (Ins) No. 1541 of 2022 decided on

10.04.2024 in which one of issue was that "the Respondent No. 1

could not have initiated the action of its own of filing Section 7

application without the formal meeting held with other lenders

and their consent and authorisation". It is submitted that this

issue has been decided by this Court in the following manner

"the allegation of the Appellant regarding want of support of other

three bankers to the Respondent No. 1 are also found baseless as

the proposed intervenors for three other lenders supported the

CIRP proceedings of the Corporate Debtor and confirm the same

during hearing before us and the same has been mentioned in

their intervention applications filed in the present appeal. Thus,

the contention of the Appellant on this ground stand rejected."

20. In rebuttal, Counsel for the Appellant has submitted that

argument raised by the Respondents is that this issue cannot be

raised in the second round as alleged is totally misplaced

because at the time when first round of litigation reached up to

the Hon'ble Supreme Court and concluded, STA did not come

into being, therefore there was no occasion to raise the issue.

21. In respect of the other arguments raised by Respondents

that Section 95(1) of the Code itself permits to file the petition

either by a single creditor or by the creditors collectively or by RP

cannot be looked into because of the specific agreement between

the parties. He has also submitted that the decision in the case of

Rakshit Dhirajlal Doshi (Supra) shall apply to this case because

no consent of the other lenders has been taken.

22. We have heard Counsel for the parties and perused the

record with their able assistance.

23. Since the facts are not in dispute, therefore, while recording

our findings, we need not to refer the facts again for the sake of

brevity but it would be suffice to mention that it is a case where

the petition under Section 7 stands admitted against the

principal borrower. It is also pertinent to mention that both the

appellants, who happened to be the brothers, gave personal

guarantee in respect of the credit facilities taken by the principal

borrower. The issue raised in the first round of litigation about

the non-service of notice came to be decided against both the

Appellants by this Court which has been upheld by the Hon'ble

Supreme Court holding that guarantee was rightly invoked and

demand notice was served. The question would thus arise that who had invoked the guarantee. The guarantee was invoked by

Respondent No. 1 and the demand notice was also issued by

Respondent No. 1. The Appellant cannot be allowed to agitate

now that it is not within his knowledge that the demand notice

could not have been issued or the application under Section 95

could not have been filed by one of the members of the

consortium because this plea, in our considered opinion was

available to the Appellant at the time of first round of litigation

which could have been taken and in the second round of

litigation, this plea cannot be allowed to be taken otherwise there

would be no end to this type of objection being taken in respect of

maintainability of the application. It is also well settled that the

objection regarding the maintainability of the application or

suit/petition has to be raised at the threshold and cannot be

taken at the fagend of the matter when the application was about

to be admitted. Having observed the aforesaid, we are also

amazed to know as to how the Appellant is an aggrieved person.

The decision in the case of Rakshit Dhirajlal (Supra) which is

solely relied upon by the Appellant is contrary to the facts of this

case because in that case, the authority was given to the security

trustee by all the members of the banks whereas the application was filed by Bank despite the said authority and therefore, there

was a dispute inter se of the members of consortium. In the

present case, this is not a situation because all the members of

consortium stands together in support of R1 (referred to as lead

bank) and have not raised any objection either before the AA in

respect of its authority to file Section 95 or before this Court by

filing any application as intervenor to support the case of the

Appellant.

24. Thus, in our considered opinion the Appellant in fact has no

case for the purpose of maintaining the appeal under Section 61

of the Code as it is not found to be an aggrieved party.

25. As far as Section 95 is concerned, it is categorically provided

that application can file either by himself, or jointly with other

creditors, or through a resolution professional but it is nowhere

provided that if there are more financial creditors then all have to

file the same collectively. The provisions which have been

mentioned by the Appellant i.e clauses 43 of the deed of

guarantee and 8.5 of the STA are for the consortium of bank and

have nothing to do with the Appellants.

26. No other point has been raised.

27. Thus, in view of the aforesaid facts and circumstances, we

hardly find any merit in the present appeals for the purpose of

interference in the impugned orders. Thus, both appeals fails and

are dismissed as such. No costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

(Mr. Indevar Pandey) Member (Technical)

Sheetal/Ravi