In the matter of Bharat Harilal Valia,

The case is fixed for the pronouncement of the order. The order is pronounced in the open court, vide separate sheet.

-SD- -SD- SAMEER KAKAR SHAMMI KHAN MEMBER (TECHNICAL) MEMBER (JUDICIAL)

BEFORE THE ADJUDICATING AUTHORITY NATIONAL COMPANY LAW TRIBUNAL DIVISION BENCH-I, AHMEDABAD CP/IB/337/AHM/2020 Filed under Section 94 of the Insolvency & Bankruptcy Code, 2016 In the matter of Mr. Bharat Harilal Valia Mr. Bharat Harilal Valia, Personal Guarantor to API Industries Pvt. Ltd. 100/B, Rupani House, 32 Ashok Nagar Society, NS Road 9, Juhu, Mumbai- 400056 … Personal Guarantor Order pronounced on 08.12.2023 CORAM: SHAMMI KHAN, MEMBER (JUDICIAL) SAMEER KAKAR, MEMBER (TECHNICAL) For Personal Guarantor : Mr. Rajesh Bohra, Advocate For the Respondent/SBI : Ms. M.A. Gogia, Adv.

Per: Bench

1. The Present Application is filed under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as "IBC, 2016") r/w Rule 6 (1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for IRP for Personal Guarantors to Corporate Debtor) Rules, 2019. The prayer made is to initiate the Insolvency Resolution Process (hereinafter referred as "IR Process") against the CP/IB/337/AHM/2020

Applicant/Debtor who is the Personal Guarantor of State Bank of India (hereinafter referred as the "the Bank") for an amount of Rs. 34.05 Crores in relation to the credit facility extended by the Bank in favour of API Industries Private Limited (hereinafter referred as the "the Company"). 2. Facts of the Case are as follows: - i. The Applicant Personal Guarantor had given a personal guarantee in respect of credit facility amounting to Rs. 34,00,00,000 granted in favour of Corporate Debtor API Industries Private Limited, having Registered Office at A/3, Rameshwar Complex, Ghogha Circle, Bhavnagar, Gujarat- 364002, by the State Bank of India-Sir PM Road Branch, Mumbai, on 28.03.2014. The debt was secured by way of hypothecation and mortgage of various assets. Page No. 6 of FORM A contains Details of Financial Creditor and Page No 28 contains Particulars of secured assets. ii. The Corporate Debtor (CD) however defaulted in repayment of dues and accordingly the debt was classified as Non-Performing Asset by the Financial Creditor (FC) SBI on 27.09.2014.

CP/IB/337/AHM/2020 iii. A Demand Notice dated 09.10.2014 was issued by the Financial Creditor w/s 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, calling upon the borrower API Industries Pvt Ltd to repay the amount mentioned in the notice being Rs.37,04,68,870.39 plus interest and other incidental charges up to the date of payment. Page No. 30 of FORM A contains Proof of Invocation of Guarantee. iv. After failure of the CD to repay dues despite repeated reminders, on 18.12.2014 the Financial Creditor took possession of mortgaged properties i.e., Industrial Unit in Andheri and Unit 10 situated in Thane, Mumbai, Maharashtra. On 27.04.2015 the Financial Creditor took possession of another mortgaged property of the CD i.e., Factory, Land & Building situated in Bhavnagar, Gujarat. Page No. 28 of FORM A contains details of Mortgaged Properties and Possession Notices w.r.t to above properties are on Page Nos. 29, 30 and 33 of FORM A. v. On 31.01.2018, the Corporate Debtor API Industries Pvt Ltd filed an application before this Tribunal to CP/IB/337/AHM/2020 initiate a Corporate Insolvency Resolution Process (CIRP) against it under section 10 of the Insolvency and Bankruptcy Code, 2016 read with Rule of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Page No. 196 of FORM A contains details of the application by CD to initiate CIRP. vi. The petition of the CD [CP(IB) No. 77/10/NCLT/AHM/2018] was admitted by the Hon'ble NCLT vide order dated 19.02.2019. Page No. 204 of FORM A contains copy of order of Hon'ble NCLT admitting the application to initiate CIRP against CD API Industries Pvt Ltd. vii. The Hon'ble NCLT passed order on 23.09.2019 for liquidation of the Corporate Debtor. Page No. 218 of FORM A contains copy of liquidation order of API Industries Pvt Ltd. viii. FORM A (Application by Guarantor to initiate Insolvency Resolution) under Rule 6(1) of the Insolvency & Bankruptcy Code, 2016 was filed on 05.10.2020 by the Applicant Personal Guarantor, Bharat Harilal Valia, through IRP Anjali Nirav Choksi.

CP/IB/337/AHM/2020 ix. Status of Corporate Debtor as on date of filing of the Report Corporate Debtor API Industries Private Limited is undergoing Liquidation. 3. On presentation of the application by the Applicant/Debtor, this Authority vide order dated 21.06.2021 has appointed the Resolution Professional viz., Ms. Anjali Nirav Choksi, having Registration No. IBBI/IPA-001/IP-P00820/2017- 18/11382 & directed RP to file report under Section 99 of Insolvency and Bankruptcy Code, 2016, which has been filed by her through an Affidavit dated 13.09.2021 under Diary No. D661 recommending the admission of the application filed under section 94 of IBC, 2016. The grounds for admission of the application recorded in the Report are as follows: - i. The Applicant/Debtor has committed default in repayment of its debts.; therefore, the first requirement as set out in section 94(1) is satisfied. ii. All the debts mentioned in the Application are not excluded debts hence the requirement as set out in section 94(3) is satisfied. iii. The Applicant/Debtor is not an undischarged bankrupt, not undergoing a fresh start process, not

CP/IB/337/AHM/2020 undergoing an insolvency resolution process or bankruptcy process, therefore satisfies the requirement set out u/s 94(4). iv. That no application under Chapter III of IBC, 2016 has been admitted in respect of the Applicant/Debtor during the period of twelve months preceding the date of submission of this application u/s 94, therefore, satisfies the requirement set out u/s 94(5). v. That the Application has been duly filed in the prescribed "Form A" along with requisite fee of Rs.2000/- satisfies the requirement u/s 94(6). vi. That the Applicant/Debtor is not eligible u/s 80 for a fresh start process provided under Chapter II of IBC, 2016. 4. It is further stated in the Report that all the documents required to be attached along with Form A under rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 have been appended to the application with few of the information and documents attached to this report, which the IRP has called for from the personal guarantor:

CP/IB/337/AHM/2020 a) Particulars of debt owed by guarantor to associates of the corporate debtor for the previous three years- a) Loan of Rs. 3,82,70,276 to Hardik Valia who is an associate of the Corporate Debtor b) Loan of Rs. 20,21,203 to UIC Corporation Private Limited which is an associate of the Corporate Debtor. b) Guarantees given about any of the debts of the corporate debtor and if any of the guarantors is an associate of the corporate debtor- Guarantees given to Banks, which are not Associates of Corporate. c) Financial statements with all annexures and schedules for the business owned by the guarantor, or of the firm in which the guarantor is a partner as the case may be for the previous three years if applicable- Partner in Pioneer Plastics (Partnership Firm). The partnership is now dissolved. Annexure 2 contains the Balance Sheet of Pioneer Plastics for the previous 3 years and the Dissolution Deed of Partnership Firm. d) Wealth tax statements, if any, filed by the guarantor, for the previous three years- Not Filed. e) Payment of indirect taxes including GST for the previous three years- Not registered in GST.

CP/IB/337/AHM/2020

5. Submission by the Respondent: i. It is stated that on perusing the Insolvency Application, it is an admitted fact that the State Bank of India/Respondent is a Financial Creditor to the Corporate Debtor i.e. M/s API Industries Pvt. Ltd., wherein the present Applicant is a personnel guarantor. It is stated that in the report filed by the IRP has incorporated only the defaults and/or claims of the Personnel Guarantor only to the extent of Rs. 37,04,68,870.39 as on 27.09.2014 in case of the CD. ii. It is submitted that the Respondent which is also a Secured Creditor(s) also claims an amount of Rs. 7,91,84,717.87 as on 04.06.2014 from the present Applicant in regard to the Corporate Debtor(s)- M/s. Gujarat Packaging over and above to the above referred claims. The Respondent has initiated the recovery of its due under the provisions of the SARFAESI Act. iii. The Respondent has initiated recovery proceedings under SARFAESI Act,2002 and property(ies)/secured asset(s) are in the possession and/or under the symbolic possession of the Respondent.

CP/IB/337/AHM/2020 iv. The Respondent do not relinquish their security interest qua the Secured Assert(s) and he does want to liquidate the secured Asset(s) by the legal process either under the provision of Insolvency & Bankruptcy Code, 2016, and/or SARFAESI Act, 2002. It is further stated that The claim of Respondent being a Secured Claim and also in interest of the public money of the Respondent, be given preference to other claims. v. Thus, the Respondent has not objected to the Application and has requested the claim of State Bank of India be considered and treated as Secured Claim; in preference to other claims. 6. We have heard the learned Counsel for both the parties and perused the documents on record. We have also gone through the report dated 13.09.2021 filed by the IRP. It is noted under section 128 of Indian Contract Act, 1872 that when a default is committed, the Principal Borrower and Surety are jointly and severally liable to Creditor and Creditor has the right to recover its dues from either of them or both of them simultaneously. For benevolent reference,

CP/IB/337/AHM/2020 the said section of Indian Contract Act, 1872 is reproduced below: “The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.” The Hon’ble National Company Law Appellate Tribunal in the matter of State Bank of India Vs. Athena Energy Venture Private Limited in Company Appeal (AT)(Ins) No. 633 of 2020 observed as under: - “19. It is clear that in the matter of guarantee, CIRP can proceed against Principal Borrower as well as Guarantor.” 7. The proceedings in the matter was put on hold since the Constitutional Validity of the Sections 94 to 100 relating to the insolvency of personnel Guarantor was pending before the Hon’ble Supreme Court in the matter of Dilip B. Jiwrajka V/s Union of India & Ors. in WP(civil)No. 1281 of 2021. 8. The Hon’ble Supreme Court in the judgement of Dilip B. Jiwrajka V/s Union of India & Ors. in WP(civil)No. 1281 of 2021 dated 09.11.2023 upheld the Constitutional Validity of the Sections 94 to 100 and the Conclusion of the Judgments are as follows:

CP/IB/337/AHM/2020 i. No judicial adjudication is involved at the stages envisaged in Sections 95 to Section 99 of the IBC; ii. The resolution professional appointed under Section 97 serves a facilitative role of collating all the facts relevant to the examination of the application for the commencement of the insolvency resolution process which has been preferred under Section 94 or Section 95. The report to be submitted to the adjudicatory authority is recommendatory in nature on whether to accept or reject the application; iii. The submission that a hearing should be conducted by the adjudicatory authority for the purpose of determining ‘jurisdictional facts’ at the stage when it appoints a resolution professional under Section 97(5) of the IBC is rejected. No such adjudicatory function is contemplated at that stage. To read in such a requirement at that stage would be to rewrite the statute which is impermissible in the exercise of judicial review; iv. The resolution professional may exercise the powers vested under Section 99(4) of the IBC for the purpose of examining the application for insolvency resolution and CP/IB/337/AHM/2020 to seek information on matters relevant to the application in order to facilitate the submission of the report recommending the acceptance or rejection of the application; v. There is no violation of natural justice under Section 95 to Section 100 of the IBC as the debtor is not deprived of an opportunity to participate in the process of the examination of the application by the resolution professional; vi. No judicial determination takes place until the adjudicating authority decides under Section 100 whether to accept or reject the application. The report of the resolution professional is only recommendatory in nature and hence does not bind the adjudicatory authority when it exercises its jurisdiction under Section 100; vii. The adjudicatory authority must observe the principles of natural justice when it exercises jurisdiction under Section 100 to determine whether to accept or reject the application;

CP/IB/337/AHM/2020 viii. The purpose of the interim moratorium under Section 96 is to protect the debtor from further legal proceedings; and ix. The provisions of Section 95 to Section 100 of the IBC are not unconstitutional as they do not violate Article 14 and Article 21 of the Constitution.

9. Therefore, in view of the above averments, we are of the considered opinion that is a fit case for admission and proceed against the Personal Guarantor/Applicant and initiate Insolvency Resolution Process. Hence, we admit CP(IB)No. 337 of 2020 filed under the provisions of section 94 of IBC,2016 under Section 100 of the IBC,2016 by following order: I. Initiate Insolvency Resolution Process against the Applicant/Personal Guarantor and moratorium in relation to all the debts is declared, from today i.e. date of admission of the application and shall cease to have effect at the end of the period of 180 days, or this Tribunal passes order on the repayment plan under Section 114 whichever is earlier as provided under Sec 101 of IBC, 2016. During the moratorium period; a) Any pending legal action of proceeding in respect of any debt shall be deemed to have been stayed: and b) The creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt; and CP/IB/337/AHM/2020 c) The debtor shall not transfer, alienate, encumber, of dispose of any of his assets or his legal rights or beneficial interest therein; d) The provisions of this section shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. II. The Resolution Professional viz. Ms. Anjali Nirav Choksi, having Registration No: IBBI/IPA-001/IP P00820/2017- 2018/11382, office at 2nd Floor, HN House, Opp. Muktajivan Colour Lab, Near Stadium Circle, Navrangpura, Ahmedabad-380009 who was appointed when the Section 97 application was allowed vide Order dated 05.10.2021, is directed to cause a public notice published on behalf of the Adjudicating Authority within 7 days of passing this Order on the website of the NCLT Ahmedabad Bench, inviting claims from all Creditors, within 21 days of such Issue. The notice under Sub Section (1) of Section 102(2) shall include: - a) details of the order admitting the application; b) particulars of the resolution professional with whom the claims are to be registered; and c) the last date for submission of claims. III. The publication of notice shall be made in two newspapers, one in English and other in Vernacular which have wide circulation in the State where the Corporate Debtor and Personal Guarantor situated/resides. The Resolution Professional shall

CP/IB/337/AHM/2020 furnish two spare copies of the notice to the Registry for the record. IV. The Resolution Professional in exercise of the powers conferred under Section 104 shall prepare a list of creditors on the basis of: a) the information disclosed in the application filed by the debtor under Sections 94 or 95, as the case may be, and b) claims received by the Resolution Professional under Section 102 within 30 days from the date of the notice. The debtor shall prepare a repayment plan under Section 105, in consultation with the Resolution Professional, containing a proposal to the Creditors for restructuring of his debts or affairs. The repayment plan may authorize or require the Resolution Professional to: - a) carry on the debtor's business or trade on his behalf or in his name or b) realise the assets of the debtor, or c) administer or dispose of any funds of the debtor. The repayment plan shall include the following, namely:- a) justification for preparation of such repayment plan and reasons on the basis of which the creditors may agree upon the plan; b) provision for payment of fee to the Resolution Professional.

CP/IB/337/AHM/2020

V. The Resolution Professional shall submit the repayment plan along with his report on the plan to this Authority within a period of 21 days from the last date of submission of claims, as provided under Section 106. VI. In case the Resolution Professional recommends that a meeting of the creditors is not required to be called, he shall record the reasons therefor. If the Resolution Professional is of the opinion that a meeting of the creditors should be summoned, he shall specify the details as provided under Section 106(3) of IBC, 2016. The date of meeting should not be less than 14 day or more than 28 days from the date of submission of the Report under sub-section (1) of Section 106 of IBC, 2016, for which at least 14 days’ notice to the creditors las per the list prepared shall be issued by all modes. Such notice must contain the details as provides under the provisions of Section 107 of 1BC, 2016. VII. The meeting of the creditors shall be conducted in accordance with Sections 108, 109, 110 & 111 of IBC, 2016. The Resolution Professional shall prepare a report of the meeting of the creditors on repayment plan with all details as provided under Section 112 of IBC, 2016 and submit the same to this Tribunal, copies of which shall be provided to the Debtor and the Creditors. It is made clear that the Resolution Professional shall perform his functions and duties in compliance with the Code of Conduct provided under Section 208 of IBC, 2016.

CP/IB/337/AHM/2020

VIII. The Resolution Professional shall submit his periodic reports before this Tribunal every 30 days.

10. In terms of the above, CP(IB)/337(AHM)/2020 filed under Section 94 (1) of the IBC, 2016 is admitted and the Insolvency Resolution Process stands initiated against the Applicant/Personal Guarantor.

-SD- -SD- SAMEER KAKAR SHAMMI KHAN MEMBER (TECHNICAL) MEMBER (JUDICIAL)

Shubhanshu/LRA

CP/IB/337/AHM/2020