In the matter of Ritzy Chemicals Private Limited

IN THE NATIONAL COMPANY LAW TRIBUNAL NEW DELHI BENCH (COURT – II) Item No. 201 (IB)-703/ND/2023 IN THE MATTER OF: Varsha … Applicant/Petitioner Versus Ritzy Chemicals Private Limited … Respondent Under Section: 7 of IBC, 2016 Order delivered on 17.01.2024 CORAM: SH. ASHOK KUMAR BHARDWAJ SH. SUBRATA KUMAR DASH HON’BLE MEMBER (J) HON’BLE MEMBER (T) PRESENT: For the Applicant : Adv. Harsh Sharma, Adv. Pranav Khanna For the Respondent : For the RP : Hearing Through: VC and Physical (Hybrid) Mode ORDER The present application has been preferred by the Applicant, namely Mrs. Versha D/o – Late M.K. Malhotra alleging that she stood as Guarantor qua the CD which Ritzy Chemicals Private Limited and as the CD defaulted to discharge its liability towards its Creditor i.e. Union Bank of India, the Bank could recover the money from her. According to her, the FDIs offered by her as security were encashed by the Bank. It is her submission,since the Bank had recovered a total amount of Rs. 26,57,60,000/- from the Financial Creditor/ Guarantor i.e. the Applicant, she has become Financial Creditor qua the CD. According to her, in September, 2023, she demanded the amount of Rs. 26,57,60,000/- from the CD, but the CD could not respond to her demand.

2. Having drawn our attention to Letter dated 01.07.2023, the Ld. Counsel appearing for the Applicant, could espouse that the CD had agreed to pay the aforementioned amount of Rs. 26,57,60,000/- to the Applicant

Satya Prakash- 17.01.2024 on or before 30.09.2023, the text of the Letter enclosed as Annexure-I to the Application reads thus:-

3. To show the discharge of the liability of the CD towards Union Bank of India by her the Applicant has made reference to its Ledger account for the period from 01.06.2022 to 20.04.2023. A copy of Ledgerhas been placed on record at Page 31 of the Application.

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4. The Guarantee deed executed by the Applicant in favour of the Union Bank of India is on record at Page 26 of the Application and reads thus:

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5. To buttress the plea that the amount of Loan sanctioned to the CD was repayed by the Applicant, the Ld. Counsel appearing for the Applicant has made reference to the Order dated 25.08.2022 passed by Mr. Rajesh Malhotra, Presiding Officer of DRT,which reads thus:

6. In Part-IV of the Application, the Applicant has given the details of the amount recovered by the Creditor from the Applicant, as the Applicant stood as Guarantor qua the CD in favour of the Financial Creditor in respect of the said amounts, the Part-IV of the Application reads thus:

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7. We issued notice to CD on 13.11.2023, but the Applicant could not file proof of service. Thus, we issued fresh notice to CD on 12.12.2023. The Applicant could file affidavit of service of notice on 04.01.2024.Today, again there is no appearance on behalf of the Respondents- CD despite service of notice. We cannot be oblivious of the facts that Section 7(4) of IBC, 2016 has the spirit that the decision regarding an application filed under Section 7(1) of IBC, 2016 need to be taken within 14 days of the date of receipt of the application. We cannot wait for CD to appear in the matter indefinitely.

8. As can be seen from the Section 7(5) of IBC, 2016 where the adjudicating authority is satisfied that the default has occurred and the application under Section 7(1) is complete and there is no disciplinary proceedings pending against the proposed Resolution Professional it may by order admit such application. In the present case, the Ld. Counsel appearing for the Applicant would draw our attention to the letter written by the CD to Applicant, assuring her that the payment of the amount of Guarantee would be made to her by the date mentioned in the letter i.e. 30.09.2023. In the wake, particularly in view of the order passed by the DRT, the Guarantee Deed and the letter of CD placed on record, we are left with no doubt that the CD has liability towards the Applicant. As can be seen from the order passed by Kolkata Bench of this Tribunal in the matter ofOrbit Towers Pvt. Ltd. vs. Sampoorn Suplyers Pvt. Ltd. in (C.P (IB) No. 2046/KB/2019) dated 27.06.2022, a Corporate Guarantor can initiate Insolvency Proceedings under Section 7 of Insolvency and Bankruptcy Code, 2016

Satya Prakash- 17.01.2024 against principal borrower using the right tosubrogationeven in the absence of contract between Guarantor and the Principal Borrower. The relevant excerpt of the Order, reads thus: “20. Now, interesting question of law has arisen in this matter, wheretheliability of the principal borrower (Corporate Debtor herein) hasbeendischarged by the Guarantor (Financial Creditor herein). Sections 140and141 of the Indian Contracts Act, 1872 talk of “right of subrogation”. It isthesubstitution of another person in place of the Creditor, so that the personsubstituted will succeed to all the rights of the creditor with referencetothedebt. The guarantor’s right to be placed in the creditor’s positiononthedischarge of the principal debtor’s obligation, to the extent that theGuarantor’s property or funds have been used to satisfy the Creditor’sclaimand to effect such discharge is called the Guarantor’s right of subrogation. The Guarantor who performed the obligations of the Principal Debtor whichare subject to his guarantee is entitled to stand in the shoes of the Creditortoenjoy all the rights that the Creditor has against the Principal Debtor. Section140 provides that rights of surety of payment or performance where adebthas become due on default of the Principal Debtor to perform, the suretyupon making payment or performance of all that, is eligible for and is investedwith all the rights which the Creditor had against the Principal Debtor. TheCreditor had the rights to sue the Principal Debtor. The Guarantor maytherefore, sue the Principal Debtor having got and invested withall rightsof the Creditor. Section 141 of the Indian Contract Act,1872 further providesthat the surety is entitled to the benefit of every security which the creditor has against the Principal Debtor, at the time when the contract of surety-ship is entered into, whether the surety knows of the existence of such security or not and if the creditor loses, or without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.”

9. In view of the aforementioned, we are left with no option but to admit the present application.Orderedaccordingly. In the wake, moratorium provided under Section 14 of IBC, 2016 is declared qua the CD and as anecessary consequence thereof the following prohibitions are imposed, which must be followed by all and sundry: (a) The institution of suits or continuation of pending suits or proceedings against the Respondent including execution of any

Satya Prakash- 17.01.2024 judgment, decree or order in any court of law, tribunal, arbitration panel or other authority: (b) Transferring, encumbering, alienating or disposing of by the Respondent any of its assets or any legal right or beneficial interest therein; (c) Any action to foreclose, recover or enforce any security interest created by the Respondent in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Respondent.

10. As proposed by the Petitioner Mr. Parminder Singh Bhullar, having Registration 1BBI/PA-002/IP-N01127/2021-2022/13700 is appointed as IRP, subject to the condition that no disciplinary proceeding is pending against him and disclosures as required under IBBI Regulations, 2016 are made by him within a period of one week from this Order. It is further ordered that: “Mr. Parminder Singh Bhullar shall take charge of the CIRP of the Corporate Debtor with immediate effect and would take steps as mandated under the IBC specifically under Section 15, 17, 18, 20 and 21 of IBC, 2016 read with extend provisions of IBBI (Insolvency Resolution of Corporate Persons) Regulations, 2016.”

11. The Petitioner is directed to deposit Rs. 2,00,000/- only with the IRP to meet the immediate expenses. The amount, however, will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Financial Creditor. 12. A copy of this Order shall immediately be communicated by the Registry/Court Officer of this Tribunal to the Petitioner /Financial Creditor, the Respondent/Corporate Debtor and the IRP mentioned above.

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13. In addition, a copy of this Order shall also be forwarded by the Registry/Court Officer of this Tribunal to the IBBI for their records.

Sd/- Sd/- (SUBRATA KUMAR DASH) (ASHOK KUMAR BHARDWAJ) MEMBER (T) MEMBER (J)

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