Krishan Kumar Jajoo vs Piramal Enterprises Limited (Earlier ...

Company Appeal (AT) (Ins) No. 1601 of 2024 & I.A. No. 5835 of 2024

(Arising out of the Order dated 11.06.2024 passed by the National Company Law Tribunal, New Delhi, Court-III in IA No. 2699/2022 in IB No. 382 (PB)/2021.)

IN THE MATTER OF:

Krishan Kumar Jajoo S/o Late Mr. Rattan Lal Jajoo, Flat No. 1001, 10th Floor, Tower - 2, Pyramid Urban Homes, Sector-67A, Gurugram Haryana - 122001 ...Appellant

Versus

1. Piramal Enterprises Ltd. (Earlier PHL Fininvest Pvt. Ltd. ) Having registered office at: Piramal Ananta, Agastya Corporate Park, Opp. Fire Brigade, Kamani Junction, LBS Marg, Kurla (West), Mumbai City, Mumbai - 400070. Also at : T34, 1st Floor, Okhla Phase II, Okhla Industrial Estate, New Delhi, Delhi 110020 Email: corporate.communication@piramal.com ...Respondent No. 1

2. Jayant Prakash (Resolution Professional) Having Office at: 15/775, Vasundhara Ghaziabad, Uttar Pradesh- 201012 ...Respondent No. 2

Present For Appellants: Mr. Vikas Dutta, Mr. Siddharth Silwal, Ms. Shivani Sharma, Advocates. Comp. App. (AT) (Ins.) No. 1601 of 2024

For Respondents: Mr. Prashant Kumar, Mr. Angad, Mr. Kevin Chadha & Ms. Nikita Menon, Advocates for R-1. Mr. Adhish Srivastava, Advocate for R-2. Mr. Jayant Prakash, RP.

JUDGEMENT

(21.02.2025)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present appeal has been filed by the Appellant i.e., Krishan Kumar Jajoo

under Section 61 (1) of the Insolvency and Bankruptcy Code, 2016 ("Code")

against the Impugned Order dated 11.06.2024 passed in Interlocutory Application

No.2699 of 2022 in IB No. 382 (PB)/ 2021 by the National Company Law

Tribunal, New Delhi, Court-III ('Adjudicating Authority').

2. Piramal Enterprises Ltd. earlier known as PHL Fininvest Pvt. Ltd. is the

Respondent No.1 herein, engaged in various financial services business.

3. Mr. Jayant Prakash who is the Resolution Professional of the Corporate

Debtor is the Respondent No.2 herein.

4. It has been brought to our notice that the facility in question was initially

granted by Piramal Finance Limited ("PFL") to Hema Engineering Industries

Limited ("HEIL") ('Corporate Debtor') under the Facility Agreement dated

20.07.2017. The Appellant further submitted that following the order of the

National Company Law Tribunal, Mumbai Bench, dated 06.04.2018, and

pursuant to the scheme of amalgamation, PFL (the original lender) and Piramal

Page 2 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

Capital Limited ("PCL") were amalgamated with Piramal Housing Finance

Limited ("PHFL"). Subsequently, the name of PHFL was changed to Piramal

Capital & Housing Finance Limited ("PCHFL"), as reflected in the Certificate of

Incorporation dated 12.06.2018. The Appellant contends that under the

Assignment Agreement dated 22.03.2019, the Facility Agreement dated

20.07.2017, originally entered into between PFL and HEIL, was assigned to PHL

Fininvest Private Limited (now Piramal Enterprises Ltd.), the Respondent No.1

herein.

5. We have also been informed that, as per the Facility Agreement dated

20.07.2017, the Respondent No.1 extended a term loan facility of Rs.400 cr to

HEIL. It is also noted that HEIL's obligation to repay the loan, along with all other

amounts due under the said Facility Agreement, was secured by a Personal

Guarantee dated 20.07.2017, which was executed by the Appellant in favour of

Piramal Trusteeship Services Private Ltd. ("PTSPL"), the appointed Security

Trustee.

6. It is noted that the Demand Notice in Form B was issued to the Appellant

under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating

Authority for Insolvency Resolution Process of Personal Guarantors to Corporate

Debtors) Rules, 2019, which sought repayment of the outstanding amount of Rs.

443,36,21,727. The Respondent No.1 filed an application under Section 95(1) of

the Code on 21.06.2021, seeking initiation of personal insolvency proceedings

against the Appellant.

Page 3 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

7. The Appellant submitted that the objections raised by him were not

considered by the Adjudicating Authority while passing the Impugned Order

dated 11.06.2024. The Appellant submitted that the Impugned Order is a non-

speaking order, which merely replicates the report under Section 99 of the Code

submitted by the Respondent No.2. The Appellant alleged that Impugned Order

fails to comply with the settled procedure as mandated under the Code.

8. The Appellant submitted that on the date of the appointment of the

Respondent No. 2 as Resolution Professional i.e., 08.04.2022, the record did not

contain any authorization or consent from the Respondent No. 2, as required

under Regulation 4(2) of the Insolvency & Bankruptcy Board of India

(Insolvency Resolution Process for Personal Guarantors to Corporate Debtors)

Regulations, 2019.The Appellant stated that, the Respondent No.2 initially

suggested by Respondent No. 1 had its registered office in Mumbai.

Consequently, the Adjudicating Authority directed Respondent No. 1 to submit

the name of a new Resolution Professional in accordance with the Code.

However, Respondent No. 1 later mentioned the name of Respondent No. 2

without filing the required AFA, and therefore the post-facto consent obtained

from the Respondent No.2 is contrary to the mandates of the Code.

9. The Appellant submitted that, even otherwise, the appointment of the

Respondent No.2 does not comply with the 'Insolvency Professionals to Act as

Interim Professionals, Liquidators, Resolution Professionals & Bankruptcy

Trustees (Recommendation) (Second) Guidelines dated 01.12.2021

Page 4 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

("Guidelines"). The Appellant submitted that the said Guidelines outline the

procedure for preparing a panel of Insolvency Professionals to act as Interim

Resolution Professionals, Liquidators, Resolution Professionals, and Bankruptcy

Trustees and as per the said Guidelines the Respondent No.2 with a registered

office in Allahabad was not eligible for appointment within the jurisdiction of

Delhi.

10. The Appellant submitted that there was no privity of contract between the

parties, as the Deed of Guarantee dated 20.07.2017 ("Guarantee Deed") was

executed by the Appellant in favour of PTSPL (the Security Trustee), and not

with Respondent No. 1. It is the case of the Appellant that it is a settled principle

of law that a Guarantor is governed by the terms of the Guarantee. In this regard,

the Appellant relies on the judgment of this Appellate Tribunal in Pooja Ramesh

Singh vs. State Bank of India & Anr., Company Appeal (AT) (Insolvency) No.

329 of 2023, decided on 28.04.2023.

11. The Appellant submitted that the Guarantee was not invoked by the proper

party, as the Demand Notice dated 21.04.2021 was issued by PHL Fininvest

Private Limited, whereas the Guarantee was executed between the Appellant and

Piramal Trusteeship Services Private Limited. The Appellant stated that in light

of this, the Respondent No.1 had no locus to invoke the Guarantee against the

Appellant. The Appellant emphasized that an application under Section 95 of the

Code cannot be maintained without proper invocation of the Guarantee. In this

regard, the Appellant relies on the judgment dated 26.07.2023 of this Appellate

Page 5 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

Tribunal passed in Company Appeal (AT) (Ins) No. 920 of 2023 titled Mudhit

Madanlal Gupta vs. Supreme Constructions and Developers Pvt. Ltd.

12. The Appellant submitted that there is no valid Board Resolution to show that

Respondent No. 1 is authorized to file its application under Section 95 of the

Code. The Appellant stated that the original Board Resolution dated 12.04.2021

filed by Respondent No. 1 limited the authority of the signatory to the extent that

he could only file claims or proceedings in CP(IB) No. 900 of 2020 titled PR

Rolling Mills v. Hema Engineering Industries Ltd. and the said Board Resolution

did not grant any authority to initiate proceedings against the Appellant, including

the application under Section 95 of the Code. It is the case of the Appellant that

upon objections raised by the Appellant, Respondent No. 1 rectified the Board

Resolution in its Rejoinder by placing on record a new Board Resolution dated

22.12.2021, thereby ratifying its actions. The Appellant submitted that the new

Board Resolution of Respondent No. 1 cannot be considered for adjudicating the

application under Section 95 of the Code. It is the case of the Appellant that since

the original Board Resolution does not grant Respondent No. 1 the authority to

take action against the Appellant, the application filed by Respondent No. 1 under

Section 95 of the Code is liable to be dismissed on this ground.

13. The Appellant submitted that adequate security is already available with

Respondent No. 1 in the form of a first and exclusive mortgage over various

properties both immovable and movable, which were charged in favour of

Piramal Finance Limited at the time of the execution of the Facility Agreement

Page 6 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

dated 20.07.2017 by HEIL.The Appellant submitted that a Guarantor is not a

primary party to the agreement but is considered as an additional comfort for the

lender. The Appellant further submitted that Respondent No. 1 has already filed

its claim for an amount of Rs. 4,43,36,21,727/- before the Respondent No.2 in the

Corporate Insolvency Resolution Process ('CIRP') initiated against HEIL vide

order dated 05.04.2021, which is currently under liquidation, hence there is no

need to initiate PIRP against him.

14. Concluding his arguments, the Appellant requested this Appellate Tribunal to

set aside the Impugned Order and allow his appeal.

15. Per contra, the Respondent No.1 denied all averments made by the Appellant

as misleading and baseless.

16. The Respondent No. 1 submitted that the debt is due and payable from HEIL

("Corporate Debtor"), and the Appellant, as the Personal Guarantor of the

Corporate Debtor, has committed defaults in repaying the same. The Respondent

No.1 stated that Appellant has not disputed the sanction of the credit facilities or

the validity of the Personal Guarantee dated July 20, 2017 executed by him in

relation to such sanction, therefore, the Appellant is bound by the terms of the

Personal Guarantee.

17. The Respondent No.1 submitted that the debt payable is undisputed, as

evidenced by the fact that the claim against the Corporate Debtor is undergoing

liquidation, and the personal insolvency resolution process has been initiated

against other personal guarantors by Adjudicating Authority vide order dated

Page 7 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

01.10.2024 (i.e., Chandresh Jajoo and Monica Jajoo). The Respondent No. 1

relied on the decision in Laxmi Pat Surana v. Union Bank of India [(2021) 8

SCC 481] wherein the Hon'ble Supreme Court of India held that a default is

deemed to have been committed by the guarantor if the principal borrower fails

to discharge its obligations, and as a consequence, the status of the guarantor

transforms into that of a corporate debtor under the Code.

18. The Respondent No.1 elaborated that the Hon'ble Supreme Court, in the case

of Lalit Kumar Jain v. Union of India [(2021) 9 SCC 321] has categorically held

that even after the approval of a resolution plan for the corporate debtor, the

guarantor is not discharged from their liability and the Apex Court further

clarified that the release or discharge of principal borrower from its debt, through

an involuntary process such as liquidation or insolvency proceedings, does not

absolve the surety/guarantor of their liability, which arises out of an independent

contract. The Appellant also stated that the Hon'ble Supreme Court reaffirmed

this position in Maitreya Doshi v. Anand Rathi Global Finance Ltd. and another

[2022 SCC OnLine SC 1276] holding that insolvency proceedings can be initiated

against both the principal borrower and the guarantor. Additionally, in BRS

Ventures Investments Limited v. SREI Infrastructure Finance Limited and

another [2024 SCC OnLine SC 1767], the Hon'ble Supreme Court of India held

that the approval of any resolution plan for the principal borrower does not affect

the guarantor's liability to repay amounts to the creditor, after deducting the

amount recovered from the principal borrower.

Page 8 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

19. The Respondent No. 1 submitted that the Appellant raised unnecessary

objections regarding the Board Resolution of Respondent No. 1. In this regard,

the Respondent No.1 submitted that, without prejudice to the fact that the Board

Resolution dated 19.04.2021, was valid and sufficiently broad to cover the

proceedings against the Appellant, the Respondent No. 1 had placed on record a

revised Board Resolution dated 05.01.2022, in its Rejoinder, thereby ratifying all

actions taken pursuant to the previous Board Resolution. The Respondent No. 1

relies on the judgment in United Bank of India v. Naresh and Ors. [(1996) 6

SCC 660] which establishes that a corporation can ratify the actions of its officers,

including pleadings signed by them.

20. The Respondent No. 1 submitted that the Appellant objected to the

proceedings before the Adjudicating Authority on the ground that there was no

privity of contract with the Corporate Debtor and PHL Fininvest, as there had

been no novation of the Facility Agreement executed in favor of Piramal Capital

& Housing Finance Limited, following its merger. The Respondent No.1 stated

that another objection of the Appellant was that the Facility Agreement could not

be assigned to PHL Fininvest. In this regard, Respondent No. 1 submitted that the

Facility Agreement explicitly provided that the 'Lender' was entitled, inter alia, to

assign any rights under the agreement without the consent of the Corporate

Debtor. The Respondent No.1 explained that the new lender would acquire the

same rights as the original party to the Facility Agreement. The Respondent No.1

explained that term 'Lender' under the Facility Agreement was defined to include

Page 9 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

its successors, transferees, and permitted assigns. Furthermore, the Facility

Agreement, as referred to by the Appellant, allowed for amendments to the

financing documents "if required by the Lender" as mentioned in Clause 18.7 of

Facility Agreement.

21. The Respondent No.1 submitted that in by an Assignment Agreement dated

March 22, 2019, the Assignor, Piramal Capital & Housing Finance Limited,

unconditionally and irrevocably sold, assigned, transferred, and released to the

Assignee, PHL Fininvest Private Limited, all the Assigned Receivables, including

the power to enforce the underlying security available to the Assignor in relation

to the finance documents as stated in Clause 2 of the Facility Agreement.

Moreover, the Corporate Debtor, by letter dated 20.03.2019 two days prior to the

Assignment Agreement had explicitly agreed to the transfer or assignment of the

Facility Agreement. Therefore, the assignment of the Facility Agreement to PHL

Fininvest was duly authorized, and the Appellant's objections regarding the

assignment and privity of contract are without merit.

22. The Respondent No. 1 further submitted that the merger received the

approval of the NCLT, Mumbai, on April 6, 2018, which occurred more than

three years ago. Consequently, the Assignment Agreement and the transfer of all

rights and obligations under the Facility Agreement to Respondent No. 1 are

binding on the Appellant. It is the case of the Respondent No.1 that the Appellant

cannot now seek to avoid his obligations under the Facility Agreement therefore,

the Appellant's objections to the validity of the assignment are without merit.

Page 10 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

23. The Respondent No.1 submitted that the Adjudicating Authority had issued

notice in the petition filed before it [CP(IB) No. 382/2021] on October 10, 2021.

Subsequently, by an order dated 22.02.2024, the Adjudicating Authority allowed

the substitution application (I.A. No. 798 of 2024), thereby substituting the

Financial Creditor, Piramal Enterprises Limited, in place of PHL Fininvest

Private Limited. The Respondent No.1 asserted that once the order for issuance

of notice and the order allowing the substitution application have attained finality,

they cannot be challenged by way of an appeal at a later stage.

24. In response to the appellant's objections about non speaking impugned

order passed by the Adjudicating Authority Respondent No. 1 asserts that the

Adjudicating Authority duly considered the Resolution Professional's report,

evidence, and relevant facts in paragraphs 11 and 12 of the Impugned Order, thus

meeting the standards of a reasoned order while adhering to the principles of

natural justice. The Respondent No.1 emphasizes the Adjudicating Authority's

summary jurisdiction, distinct from that of a civil court, which implies that the

criteria for a reasoned order may differ and this limited scope prevents the

Adjudicating Authority from interfering with the commercial wisdom of the

Committee of Creditors ('CoC').

25. The Respondent no.1 submitted that the Resolution Professional was

appointed by an order dated 08.04.2022, which was not challenged by the

Appellant. As such, the order has attained finality, and the Appellant is deemed

to have acquiesced to this appointment. Regarding the delay in filing the report,

Page 11 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

it is submitted that the Resolution Professional filed Interlocutory Application No.

2680 of 2022 before the Adjudicating Authority, seeking exclusion of the period

from 08.04.2022, to 28.04.2022. This request was granted by the Adjudicating

Authority through an order dated 27.02.2024, which has attained finality, as the

Appellant did not challenge the said order. Furthermore, the Appellant's reliance

on the Insolvency Professionals to act as Interim Resolution Professionals,

Liquidators, Resolution Professionals, and Bankruptcy Trustees

(Recommendation) (Second) Guidelines, 2024, is misplaced. In terms of the

decision in L. Ramalakshmamma and Ors. v. State Bank of India

(MANU/NL/0510/2021), where this Appellate Tribunal held that confirmation of

the Board by the Adjudicating Authority is only directory in nature and not

mandatory. The Respondent No.1 submitted that the appointment of a Resolution

Professional is within the judicial discretion of the Adjudicating Authority.

26. The Respondent No.1 submitted that an objection which is raised by the

Appellant regarding the invocation of the statutory demand notice by an improper

party, claiming a non-joinder of the Security Trustee, could not have initiated the

proceedings before the Adjudicating Authority. In this regard, the Respondent

No.1 submitted that the Personal Guarantee explicitly states that it was executed

for the benefit of the lender, i.e., Respondent No. 1. The Respondent No.1 further

submitted that the terms of the Personal Guarantee clearly establish that both the

'Lender' and the 'Trustee' are entitled to initiate action against the Appellant, as

per the Clause 2.1.1, 3.1 and 4.1 of the guarantee.

Page 12 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

27. The Respondent No.1 also submitted that all notices and demand letters,

including the Demand Notice dated October 24, 2020, the Demand/Recall Notice

dated February 24, 2021, and the Statutory Demand Notice dated April 21, 2021,

were duly issued by the Lender to the Appellant, however, the Appellant never

raised any objections regarding these notices. The Respondent No.1 further

submitted that Respondent No. 1, as the Lender and ultimate beneficiary under

the Personal Guarantee, is fully entitled to institute and maintain the proceedings

against the Appellant under the Code.

28. Concluding his pleadings, the Respondent No.1 requested this Appellate

Tribunal to dismiss this appeal with cost.

29. The Respondent No.2 also denied all averments made by the Appellant as

frivolous, misleading and baseless.

30. The Respondent No.2 submitted that on 21.04.2021, the Financial Creditor

served a statutory demand notice under Section 95(4)(b) of the Code to the

Appellant/Personal Guarantor for an outstanding debt of ₹443,26,21,727/-,

encompassing principal, interest, penal interest, and un-deposited TDS. In

response, the Appellant/Personal Guarantor, in a reply dated 24.05.2024, claimed

to have never personally taken a loan from the Financial Creditor, asserting that

the matter pertains to HEIL ("Principal Borrower") and transfer the demand

notice is required to be served on HEIL demanding payment of the amount of

default.

Page 13 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

31. The Respondent No. 2 submitted that on 21.06.2021, the Financial

Creditor initiated an Insolvency Resolution Process against the

Appellant/Personal Guarantor by filing Application IB No. 382 (ND) of 2021

before the Adjudicating Authority under Section 95(1) of the Code, r/w Rule 7(2)

of the Insolvency and Bankruptcy (Application to Adjudicating Authority for

Insolvency Resolution Process for Personal Guarantors to Corporate Debtors)

Rules, 2019.

32. The Respondent No. 2 stated that, by order dated April 8, 2022, the

Adjudicating Authority appointed the Answering Respondent as the Interim

Resolution Professional ('IRP') under Section 97 of the Code. The Adjudicating

Authority further directed the Respondent No.2 to submit a report within ten days,

recommending either approval or rejection of the Application.

33. The Respondent No. 2 submitted that the Financial Creditor informed that

Mr. Krishan Kumar Jajoo, the Appellant, was incommunicado and unresponsive

at his last known address and email. Consequently, the Respondent No.2 issued

an Intimation / Notice dated 29.04.2022, under Section 99(2) of the Code to the

Appellant's counsel, requesting the Appellant, through his counsel, to provide

evidence of repayment of the debt mentioned in the Application.

34. The Respondent No. 2 further submitted that the intimation was also sent

to the Appellant's last known email address on 30.04.2022. Additionally, the

intimation under Section 99(2) of the Code was dispatched to the

Page 14 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

Appellant/Personal Guarantor's last known residential address, which is 917 A,

The Aralias, DLF Golf Links, DLF Phase V, Gurgaon - 122009.

35. The Respondent No. 2 stated that, having received no acknowledgment or

response from the Appellant or his legal counsel, he sent a further email to the

Appellant's counsel on 05.05.2022, as a final reminder for the Appellant/Personal

Guarantor to submit proof of debt repayment by 06.05.2022. However, no

response was received from the Appellant.

36. The Respondent No. 2 submitted that, in accordance with the order dated

April 8, 2022 (received by the Resolution Professional on April 28, 2022), the

Respondent No.2 prepared a report under Section 99(1) of the Code. This report

recommended the acceptance of the Application filed by the Financial Creditor

under Section 100(1) of the Code.

37. The Respondent No.2 submitted that on 20.07. 2017, a Facility Agreement

was executed between HEIL as the Principal Borrower, Piramal Capital &

Housing Finance Ltd. (formerly known as Piramal Finance Ltd.),

Promoters/Guarantors of HEIL (including the Appellant/Respondent), and

Piramal Trusteeship Services Pvt. Ltd. ("Security Trustee"), for financial

assistance of Rs. 400 cr extended to HEIL. The Respondent No.2 explained that

the obligations of the Principal Borrower to repay the loan and all associated

amounts under the Facility Agreement were secured by an irrevocable and

unconditional guarantee dated July 20, 2017, from the Appellant in favor of the

Security Trustee for the benefit of the Financial Creditor.

Page 15 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

38. The Respondent No. 2 submitted that the Financial Creditor issued a

demand letter on 24.10.2020, to the Principal Borrower, the Appellant/Personal

Guarantor, and others, highlighting the defaults and demanding clearance of

outstanding dues with interest. The Respondent No.2 stated that on 24.02.2021, a

recall/demand notice was issued to the same parties, recalling the entire loan as

per the Facility Agreement. This notice directed the Principal Borrower and the

Guarantors, including the Appellant/Personal Guarantor, to pay the outstanding

amounts as of 23.02.2021, within 7 days of receipt. The Respondent No.2 stated

that despite receiving the demand letter, the Appellant/Personal Guarantor and

the Principal Borrower remained in default, and no payment was made to the

Financial Creditor and Respondent No.2 submitted that a record of default was

submitted to the Information Utility, National E-Governance Services Limited

('NeSL'), on 14.04.2021.

39. The Respondent No. 2 submitted that in the Reply dated 02.12.2021, filed

by the Appellant/Personal Guarantor, the execution and existence of the Deed of

Guarantee have not been denied and the liability of the Appellant has also not

been denied. While objections regarding the maintainability of the Application

have been raised, there is no specific defense against the liability of the

Appellant/Personal Guarantor. The Appellant/Personal Guarantor has not denied

the existence of a valid and subsisting debt, nor the fact that a default in repayment

has occurred.

Page 16 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

40. The Respondent No. 2 stated that the Financial Creditor provided a

Statement of Accounts detailing the debt and default of HEIL, which the

Respondent No.2 reviewed. The Respondent No.2 explained that the Statement

of Accounts reflects the disbursal of the principal amount under the Facility

Agreement. Consequently, the liability of the Appellant/Personal Guarantor arose

upon the Financial Creditor's invocation of the Personal Guarantee, following the

demand made by the Financial Creditor on 21.04.2021.

41. The Respondent No. 2 submitted that, based on the examination and

verification of the Application, the supporting documents, and the requirements

outlined in Section 95(4) of the Code, he recommended that the Adjudicating

Authority accept the Application. The matter was extensively argued before the

Adjudicating Authority, and both parties were permitted to file written

submissions detailing their respective positions. Consequently, the Adjudicating

Authority admitted the application against the Appellant and initiated the Personal

Insolvency Resolution Process against the Appellant vide impugned order dated

11.06.2024.

42. The Respondent No. 2 submitted that the Resolution Professional's role is

facilitative and administrative, and he is only required to recommend the

admission or rejection of a petition based on the documents and information

collated. The Resolution Professional does not possess an adjudicatory function

as defined in Section 99 of the Code. The Respondent No.2 provided a reasonable

opportunity by following the principle of natural justice, considered the various

Page 17 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

documents, and concluded that the Personal Insolvency Resolution Process could

be initiated against the Appellant/Personal Guarantor.

43. The Respondent No. 2 strongly refuted the Appellant's allegation that the

impugned order is a non-speaking order and terms such allegations as an attempt

to delay the Personal Insolvency Resolution Process through technical objections,

challenging Adjudicating Authority directions that have already been decided and

for which no appeal has been filed. It is the case of the Respondent No. 2 that the

gave reasonable opportunity following the principle of Natural Justice and

considered the various documents including copy of the Information Utility

Report evidencing record of Default; Copy of the Letter of Intent; along with

Deed of Guarantee; Copy of the Letter of Invocation of Guarantee and Copy of

the Statutory - Demand Notice in Form B and has come to a conclusion that

Insolvency Proceedings be initiated against the Personal Guarantor.

44. The Respondent No. 2 submitted that the objections raised by the Appellant

are substantially the same as those presented in response to IA No. 2680 of 2022.

The Adjudicating Authority considered these submissions and ruled on them in

an order dated 27.02.2024. As the Appellant did not appeal the order dated

27.02.2024, the Appellant cannot reintroduce the same issue in the present appeal,

as the decision stands confirmed. Given these facts, the Adjudicating Authority

did not address issues already decided and admitted between the parties. The

Appellant has deliberately withheld this information in an attempt to mislead this

Tribunal.

Page 18 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

45. Concluding his arguments, the Respondent No.2 requested this Appellate

Tribunal to dismiss this appeal with exemplary cost.

Findings

46. The Appellant had challenged the Impugned Order on several ground based

on which we find the following issues are required to be examined and determined

upon to decide the present appeal.

47. Issue No. I (a) Whether there was no privity of contract between the

Appellant and Respondent No.1.

(b) Whether the Adjudicating Authority could have passed the Impugned

Order based on invocation of personal guarantee by 3rd party.

(c) Whether the guarantee was not invoked by proper party as Demand Notice

dated 21.04.2021 was issued by PHL Fininvest Private Limited whereas the

Guarantee was executed into between the Appellant and Piramal Trusteeship

Services Private Limited.

Issue No. (II) Whether the Impugned Order is a non-speaking order and

contravene the principal of natural justice.

Issue No. (III) Whether the appointment of Respondent No. 2 was not in

accordance with provision of the Code.

Issue No. (IV) Whether there was no valid Board Resolution to show that the

Respondent No. 1 was authorised to file its Application u/s 95 of the Code.

Page 19 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

Issue No. (V) Whether when adequate securities are already available with

the Respondent No. 1 by way of first and exclusive mortgage of various properties

(both immoveable and moveable) charged in favour of the Piramal Finance

Limited at the time of execution of the Facility Agreement dated 20.07.2017 by

Corporate Debtor (HEIL) and therefore, the Appellant as Guarantor is not liable

for outstanding dues.

48. Issue No. I (a) Whether there was no privity of contract between the

Appellant and Respondent No.1.

(b) Whether the Adjudicating Authority could have passed the Impugned

Order based on invocation of personal guarantee by 3rd party.

(i) At the outset we would like to mention that the same issue has been

examined by this Appellate Tribunal in the matter of Shantanu Jagdish

Prakash Vs. State Bank of India & Anr. in Company Appeal (AT) (Ins.)

No. 1609 of 2024 decided on 23.01.2025, where we upheld the decision of

the Adjudicating Authority in favour of the Lenders. We note that the facts

are similar in the present case, however, we shall deal the issue in the

present appeal based on the facts of the present appeal.

(ii) As regard, the issue of privity of contract, it has been pleaded by the

appellant that the personal guarantee was between the Appellant along with

other guarantors with PTSPL and the Respondent No. 1 was not signatory

to personal guarantee as such the Respondent No. 1 could not have initiated

application under Section 95 of the Code.

Page 20 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

(iii)We note that concept of trusteeship is to act on behalf of the creditors/

Lenders. Such trusteeship deeds are generally signed between the trust on

behalf of the lenders and the personal/ corporate guarantor of the principal

borrower. However, by its inherent nature and intent, the lenders or the

Financial Creditors are the true beneficiaries of such deed of guarantee.

(iv) We further note that Section 95 of the Code provides right to the creditors

to file application to initiate Personal Insolvency Resolution Process

('PIRP'). The security trustee is merely holding security in favour of the

Financial Creditor or consortium of creditors and therefore either the trust

or creditors may file application under Section 95 of the Code. The wording

of Section 95(1) of the Code clearly stipulates that creditor may apply

"either by himself or generally with other creditors". Therefore, the

creditor i.e., Respondent No. 1 is within his right to initiate Section 95

application and does not prevent him based on alleged lack of privity of

contract with the Appellant. It is settled law that a party can enforce the

contract made for its benefit.

(v) From the terms of Security Trusteeship Agreement dated 20.07.2017 and

Facility Agreement dated 20.07.2017, it is clear that the security trustees

are holding 'Security' not for themselves, but on behalf of, and for the

benefit of Financial Creditor/Lender. The Lenders, can therefore, enforce

the security documents even if he is not a party to the trusteeship

agreement.

Page 21 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

(vi) In this connection, we note relevant Clauses of the Facility agreement, which

read as under:-

"18.2 - The Lender may without the consent of the Borrower, assign all or any part of its rights and benefits hereunder or transfer or novate all or part of its rights, benefits and obligations hereunder or under the Financing Documents, to any person, including Bank, Financial Institution or Public Financial Institution (under section 4A of the Companies Act 1956), or institutional lender ("New Lender") at any time in accordance with the provisions herein. Whilst the Lender may exercise the aforesaid right, it shall not be under any obligation to do so. However, In the event the Lender exercises this right, it shall inform the Borrower of the same prior to the assignment/novation. The Borrower shall take such action as may be necessary to perfect such assignment, transfer or novation, as the case may be, at the costs of the Lender;

18.3- The New Lender shall, upon such assignment/ novation/ transfer, acquire the same rights and assume the same obligations as regards the Borrower as they would have acquired and assumed had the New Lender been an original party to this Agreement and other Financing Documents. 18.7- If required by the Lender, the Borrower shall, for the transfer, novation or assignment of the Facility to any person, Including bank, financial institution or public financial institution (under section 4A of the Companies Act 1956), or institutional lender subject to the provisions of this Agreement, execute necessary amendments to the Financing

Page 22 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

Documents, as may be mutually agreed between the Parties, with respect to any one or all of the following provisions:

(a) to the dispute resolution provisions under this agreement;

(b) to incorporate the names and details of any such assignee, novatee or transferee of the Lender;

(c) to the administrative procedures specified under this Agreement; and

(d) such other deeds, documents and writings as may be required under the Applicable Laws to facilitate or otherwise give effect to such assignment, transfer, novation, or securitization, as the case may be."

(Emphasis Supplied)

(vii) We note that Section 5(7) of the Code which defines 'financial creditor'

to mean any person to whom a financial debt is owed and includes a

person to whom such debt has been legally assigned or transferred to.

We observe that the definition of 'Lender' under the Facility Agreement

deemed to include its successors, transferees and permitted assignment

of debts and the Facility Agreement imposed a restriction on the transfer

of the rights and obligations by HEIL and not on lenders. We observe

that clause 18.2 of the Facility Agreement stipulated that the 'Lender'

was entitled inter alia to assign any rights under the Facility Agreement

without the consent of the Corporate Debtor and such new lender would

acquire the same rights as the original party to the Facility Agreement.

It is noted that clause 18.7 of the Facility Agreement pertained to

amendments to the financing documents if required by the Lender.

Page 23 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

Therefore, it may be concluded that the Assignment Agreement and the

transfer of rights and obligations under the Facility Agreement were

binding on the Corporate Debtor and accordingly, the Appellant could

not seek to escape his obligations thereunder.

(viii) It is settled law that beneficiaries under the terms of a contract have the

right to enforce the covenants thereof as held by the Hon'ble Supreme

Court of India in case of M.C. Chacko v. tile State Bank of Travancore,

Trivandrum, [(1969) 2 SCC 343].

(ix) Thus, the issue discussed above i.e privity of contract between the

Appellant and Respondent No.1, we find no merits in the arguments of

the Appellant and reject the same.

Issue No. (I) (c) Whether the guarantee was not invoked by proper party as

Demand Notice dated 21.04.2021 was issued by PHL Fininvest Private Limited

whereas the Guarantee was executed into between the Appellant and Piramal

Trusteeship Services Private Limited.

(i) We shall deal with the issue raised by the Appellant that the statutory

notice under Section 95(4)(b) of the Code was invoked and the

proceedings for insolvency proceedings were initiated by the not proper

party against the Appellant. The Appellant had raised a objection that

the statutory demand notice was not invoked by a proper party, there

was a non-joinder of the Security Trustee and that Respondent No. 1

Page 24 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

could not have filed the proceedings before the Adjudicating Authority.

Both the Respondents pleaded that the Personal Guarantee clearly

stipulated that the same was executed for the benefit of the lender i.e.,

the Respondent No. 1.

(ii) We note that all the notices / demand letters were issued by the Lender

to the Appellant, including the Demand Notice dated October 24, 2020,

Demand / Recall Notice dated February 24, 2021, and Statutory

Demand Notice dated April 21, 2021; however, no such objection was

ever raised by the Appellant in this regard.

(iii) We also observe that the Respondent No. 1 / Lender, being the ultimate

beneficiary under the Personal Guarantee, could institute and maintain

the proceedings initiated against the Appellant under the Code.

(iv) The Appellant further challenged that the report is not infirmity of the

Code especially under Section 99(1), 99(7) and 99(9) of the Code, he

specifically referred to Para 11 of the Impugned order in its record.

(v) We take into consideration para 11 of the Impugned Order along with

other relevant paras of the Impugned Order dated 11.06.2024 which

read as under:-

"7. This Adjudicating Authority vide order dated 08.04.2022 initiated the interim moratorium period in terms of Section 96 of IBC and appointed Mr. Jayant Prakash (having IBBI Registration: - IBBI/IPA-001/IP-P-00597/2017-2018/11049) as the Resolution Professional and the Resolution

Page 25 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

Professional was directed to submit a report in terms of Section 99 IBC. Accordingly, the Resolution Professional has filed a report and a copy of the said report has been duly served on the Personal Guarantor by all modes.

8.The Resolution Professional vide IA-2699/2022 dated 09.05.2022 has filed its report before this Adjudicating Authority. The Recommendations of the Resolution Professional are as under:

"9. In pursuance of the aforesaid, the present Report is being submitted whereby, I recommend approval of the above Application filed under Section 95 of the Code by the Applicant/Financial Creditor, for reasons as set out in Annexure A. In the view of the aforesaid, I hereby recommend acceptance of the Application filed by the Applicant/Financial Creditor under Section 100(1) of the Code."

9.In Response to the Report filed by the Resolution Professional, the Personal Guarantor filed its reply and stated that the present Application is not only a blatant abuse of the process of law but also based on bald and baseless assertions and allegations apart from the material concealment of facts.

10.We have heard the submissions made by Ld. Counsel for the Applicant, Resolution Professional and Personal Guarantor and perused the report.

11. On a perusal of the report, we find that the Resolution Professional has given reasonable opportunity following the principle of Natural Justice and has taken into consideration Page 26 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

the various documents and has come to a conclusion that the Personal Insolvency Resolution Process be initiated against the Personal Guarantor.

12.The Objections raised by the Personal Guarantor are not substantiated with adequate evidence and are not tenable. We are satisfied with the grounds/reasons given by the Resolution Professional for the initiation of the Personal Insolvency Resolution Process against the Personal Guarantor. Having regard to the facts and circumstances of the case, we are of the view that the Personal Insolvency Resolution Process ought to be initiated against the Personal Guarantor.

(Emphasis supplied)

(vi) At this stage, we would like to go through relevant clauses of personal

guarantee agreement dated 20.07.2017 which read as under: The

relevant clauses are as under:

"Clause 2.1.1 UNDERTAKING TO PAY In consideration of the Lender extending the Facility to the Borrower per the terms of Financing Documents, the adequacy of which is hereby acknowledged, the Guarantor guarantees to pay to the Lender, on failure to pay the Outstanding Amounts by the Borrower and on demand by the Lenders and/or the Trustee, all Outstanding Amounts and discharge any outstanding obligations and liabilities now or hereafter due, owing or incurred by the Borrower to the Lenders and/or Trustee

Page 27 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

under or pursuant to the Financing Documents, and whether such obligations or liabilities are express or implied, present, future or contingent, joint or several, incurred as principal or surety, originally owing to them. Clause 3.1 In the event of any default on the part of the Borrower in payment/repayment of any of the monies referred to in Clause 2 above the Guarantor shall, upon demand, forthwith pay to the Lenders and/or the Trustee, without demur, all the amounts demanded by the Lenders and/or the Trustee and payable by the Borrower under the Financing Documents.

Clause 4.1 INDEMNITY BY THE GUARANTOR The Guarantor shall also indemnify and keep the Lender and the Trustee indemnified against all losses, damages, costs, claims and expenses whatsoever, which the Lender and the Trustee may suffer, pay or incur by reason of or in connection with any default on the part of the Borrower and/or the Guarantor in performance of their respective obligations under the Financing Documents, including Legal Proceedings taken against the Borrower and/or the Guarantor for recovery of the moneys referred to in Clause 2 and 3 above or on account of any misrepresentation on the part of the Guarantor.

(Emphasis Supplied)

Page 28 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

(vii) The terms of the Personal Guarantee clearly stipulated that 'Lender' or

the 'Trustee' could initiate action against the Appellant as discussed

below:

a. The Personal Guarantor guaranteed to pay the lender, on failure to

pay the outstanding amounts by the Corporate Debtor and on demand

by the Lender and/or Trustee

b. In the event of default on the part of the Corporate Debtor in

payment, the Guarantor shall, upon demand, forthwith pay to the

Lenders and/or Trustee, without demur, all amounts demanded by the

Lenders and/or Trustee.

c. The Lender and the Trustee would be entitled to take action against

the Corporate Debtor and the Guarantor as it deems fit, in the event of

failure to honour any terms of the Deed of Guarantee.

(viii) Above clauses of the Personal Guarantee dated 20.07.2017 are loud and

vocal and establish the independent rights of creditors in addition to

Trust. By no way of imagination it can be argued by the Appellant (as

guarantor) that creditor (including its assignee) can not pursue his rights

against the Appellant. The pleading of the Appellant does not stand to

any logic and need to be dismissed. We do not find any merit in the

pleadings of the Appellant on their issue and stand rejected.

Page 29 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

49. Issue No. (II) Whether the Impugned Order is a non-speaking order and

contravene the principal of natural justice.

(i) We note that the Appellant pleaded that the Adjudicating Authority has

not given reasoned order and therefore, it is a non speaking order which

merely replicate the report of the Resolution Professional filed under

Section 99 of the Code.

(ii) We note that Chapter III of the Code is related to insolvency resolution

process and under Section 95 of the Code, the Creditor can file and

application to initiate insolvency resolution process w.r.t. parties

stipulated under Section. Further, Section 95 of the Code stipulates that

if the application is made under Section 94 or 95 through resolution

professional, the Adjudicating Authority shall appoint the Resolution

Professional, recommended under sub-Section 2 or else nominated by

board under sub-Section 4 of the code.

(iii) We also note that the Resolution Professional is required to submit his

report under Section 99 of the Code after examination the application

made under Section 95 of the Code and after examination the Resolution

Professional may recommend the acceptance or rejection of the

application in his report.

(iv) In terms of Section 100 of the Code, the Adjudicating Authority is

required to adjudicate on the application filed by the Resolution

Page 30 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

Professional under Section 99 and pass an order either admitting or

rejecting the application.

(v) Thus, significate role of the investigations has bee assigned to the

Resolution Professional who has to examine the various

documentations and reply of the debtor like Appellant/Personal

guarantor in the present case.

(vi) In above background, we note that the Impugned Order clearly stipulate

that the Adjudicating Authority had appointed the Respondent No. 2 as

Resolution Professional and directed the Respondent No. 2 to examine

the case. We further note that based on the directions of Adjudicating

Authority, the Respondent No.2 finalised the report which was

submitted and which was taken into consideration by the Adjudicating

Authority. The objections raised by the personal guarantors were filed

in the reply who stated that the application is baseless. We observe that

the Adjudicating Authority have heard the submissions made by the

Financial Creditor, the Resolution Professional and the personal

guarantors and also perused the report of the Resolution Professional.

The Impugned Order further mentioned the fact that the Resolution

Professional has also given the reasonable opportunity of the Appellant,

following the principal of natural justice and taken into consideration

the various documents before coming into conclusion that personal

Page 31 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

resolution insolvency process should be initiated against the personal

guarantor/ Appellant.

(vii) We note that proceedings under the Code are summary and time-bound,

and thus, the Adjudicating Authority is not required to conduct

proceedings akin to civil proceedings. The Adjudicating Authority's

role is limited in considering whether a debt is due and payable and

whether a default has occurred. In the present case, the amount of

default is not in dispute, nor has the Appellant disputed signing the

personal guarantee with the Financial Creditor by admitting to being a

signatory to the personal guarantee, the privity of contract is established.

The parties were granted ample opportunities to raise objections and

after considering these objections, and recognizing that substantial

objections were already addressed while deciding IA No. 2680/2022,

the Impugned Order was passed. The report filed by the Resolution

Professional meets the basic ingredients envisioned under the

code. Therefore, the Impugned Order is found to be valid and was

passed while keeping in mind the principles of natural justice and

equity.

(viii) We note that the Hon'ble Supreme Court of India in case of Dilip B.

Jiwarjka vs. Union of India & Ors. (Writ Petition (Civil)No.1281 of

2021) cautioned that the principles of natural justice cannot be

mechanically applied in a straightjacket formula and stipulated that

Page 32 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

based on the facts and circumstances, principles of natural justice on

some occasions may extend to the right to a full-fledged evidentiary

hearing while in certain cases may be circumscribed to a bare minimum

opportunity to furnish an explanation by the affected party.

(ix) Based on the provisions of the code the documents made available to us

and taking into account the Impugned Order dated 11.06.2024 passed

by the Adjudicating Authority and the Hon'ble Supreme court

judgements, we do not find merit in the contention of the Appellant that

the Impugned Order is a non speaking order and against the principal of

natural justice.

(x) We also state that the principal of natural justice could vary with

different circumstances and the Adjudicating Authority is not bound to

give exhausting hearing on each and every objection raised by the

Appellant in the same intensity.

(xi) Therefore, the Impugned Order is found to be valid and was passed

while keeping in mind the principles of natural justice and equity.

(xii) The judgment of the Hon'ble Supreme Court of India passed in the

matter of Dilip B Jiwrajka vs. Union of India & Ors. in [Writ Petition

(Civil ) No. 1281 of 2021] does not support case of the Appellant.

(xiii) Thus, we reject pleading of the Appellant on this issue.

Page 33 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

50. Issue No. (III) Whether the appointment of Respondent No. 2 was not in

accordance with provision of the Code.

(i) We note that the objections of the Appellant is regarding appointment of

Resolution Professional on technical issues that the Respondent No. 1

mentioned the name of Respondent No. 2 as Resolution Professional

without filing AFA and post facto consent was obtained from the

Resolution Professional which is against the spirit of the Code. The

Appellant also stated that the appointment of the Resolution

Professional is not in conformity with the 'Insolvency Professionals to

act as Interim Professionals, Liquidators, Resolution Professionals &

Bankruptcy Trustees (Recommendation) (Second) Guidelines dated

01.12.2021' ("Guidelines").The Appellant submitted that the said

guidelines implies that the Resolution Professional having registered

office in Allahabad was not eligible to be appointed in the jurisdiction

of Delhi.

(ii) In this regard, as far as the appointment of Resolution Professional by

the Adjudicating Authority is concerned, we note that this Appellate

Tribunal has earlier examined the same issue in the matter of

L. Ramalakshmamma and Ors. Vs. State Bank of India decided on

22.11.2021 (MANU/NL/0510/2021) where it held that it is a discretion

of the Adjudicating Authority and provisions of the Codes are directives

in nature. The relevant paras of the aforesaid judgment read as under :- Page 34 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

"Para 31- A 'Resolution Professional' is an indispensable person in 'Insolvency Resolution Process', as he has a pivotal part to play. No wonder, an 'Adjudicating Authority' can exercise his judicial discretion in appointing a 'Resolution Professional' in a given case, based on the facts and circumstances of the case, which float on the surface.

Para 32- Moreover, if viewed from the object and purpose to be achieved by 'IBC', the word 'employed' in Section 97(1) shall can only be construed as 'directory' by any stretch of imagination and not a mandatory one, that too by adopting a purposeful, meaningful, practical, pragmatic and result oriented approach, with a view to prevent an aberration of justice and to secure the ends of justice.

Para 33- In the instant case on hand, ongoing through word 'shall' occurred in Section 97(1) of 'IBC' employed in Section 97(1) of 'IBC', this 'Tribunal' is of the considered view that it is only 'Directory' and not 'Mandatory' and holds it so, in the teeth of Rule 8(1) of the Insolvency and Bankruptcy (Application to 'Adjudicating Authority' for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 and also by which the NCLT may pick up any one from the Panel for appointment of 'IRP' Liquidator, Resolution Professional and Bankruptcy Trustee. As such, when the 'Adjudicating Authority' had exercised its judicial discretion in fair manner for the appointment of Mr. Anil Kohli as an 'IRP', the same cannot be found fault with as opined by this 'Tribunal'.

Page 35 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

Para 34- In view of the foregoing, the contra plea, taken on behalf of the Appellants that before passing of an order under Section 97(5) of 'IBC', the ingredients of sections 91 and 92 of 'IBC', are ought to be satisfied, is not acceded to by this 'Tribunal'. Looking at from any angle, the 'Impugned Orders' dated 23.07.2021 in I.A.(IBC) No. 346 of 2021 CP(IB) No. 02/95/HDB/2021 and I.A.(IBC) No. 347 of 2021 in CP(IB) No. 03/95/HDB/2021 for appointment of Mr. Anil Kohli as 'IRP' and directing him to file 'Report' under Section 19(9) of 'IBC' are free from any legal patent legal errors. Hence, the 'Appeals' fail."

(iii) We further note that the Respondent No. 2 was appointed as the

Resolution Professional by the Adjudicating Authority vide order dated

08.04.2022 which has not been challenged by the Appellant and thus

attained finality.

(iv) In view of above, we do not find any merit in the contention of the

Appellant on this issue.

51. Issue No. (IV) Whether there was no valid Board Resolution to show that

the Respondent No. 1 is authorised to file its Application u/s 95 of the Code.

(i) The Appellant objected to the validity of the board resolution dated April

12, 2021, filed in favour of the authorized representative of the

Respondent No. 1 in the said petition. The Appellant had contended that

the said board resolution did not authorize the power of attorney holder

to initiate any proceedings against the guarantors including the

Page 36 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

Appellant under Section 95 of the Code. It was further contended by the

Appellant that the Respondent No. 1 had wrongly mentioned that the

authorized representative was authorized under the said board

resolution dated 19.4.2021 instead 12.04.2021 and that the authorized

representative was named as 'Abhijit Verma' instead of 'Abhijeet Verma'

in the pleadings of the Respondent No. 1. It was further stated by the

Appellant that the said board resolution did not set out Mr. Verma's

designation and thus, the proceedings against the Appellant could not

be initiated based on the said board resolution that was allegedly faulty.

In response to the purported objections raised by the Appellant in

relation to the said board resolution, the Respondent No. 1 provided a

detailed clarification stating that the said board resolution was valid and

wide enough to cover the proceedings against HEIL and the Appellant.

The Respondent No. 1 further placed reliance on the decision of the

Hon'ble Supreme Court in United Bank of India v Naresh and Ors.

[(1996) 6 SCC 660] to contend that a corporation could ratify the action,

expressed or implied, of pleadings being signed by one of its officers.

Accordingly, in order to put a quietus to the flimsy objection taken by

the Appellant, the Respondent No. 1 executed and placed on record a

fresh board resolution dated 05.01.2022, thereby ratifying all acts

undertaken under the previous board resolution dated April 12, 2021. Page 37 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

(ii) We find sufficient logic in pleadings of the Respondent No. 1 which is

covered by the judgment of the Hon'ble Supreme Court of India in the

matter of United Bank of India (Supra). We do not find any merit in

the contention of the Appellant on this point.

52. Issue No. (V) Whether when adequate securities are already available with

the Respondent No. 1 by way of first and exclusive mortgage of various properties

(both immoveable and moveable) charged in favour of the Piramal Finance

Limited at the time of execution of the Facility Agreement dated 20.07.2017 by

Corporate Debtor (HEIL) and therefore, the Appellant as Guarantor is not liable

for outstanding dues.

(i) We noted the pleading of the Appellant that adequate securities were

already available with the Respondent No. 1 by way of first and

exclusive mortgage of various properties (both immoveable and

moveable) charged in favour of the Piramal Finance Limited at the time

of execution of the Facility Agreement dated 20.07.2017 by

HEIL/Corporate Debtor. It is the case of the Appellant that a Guarantor

is not a primary party to the agreement but is considered as additional

comfort for a lender.

(ii) We note that the Appellant case is that adequate securities are available

to the Respondent to recover the outstanding debt from the principal

borrower and therefore no case was required to be initiated against the

Appellant/personal guarantor. In this regard in terms of catena of

Page 38 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

judgments of the Hon'ble Supreme Court of India including the matter

of Laxmi Pat Surana vs Union of India [(2021) 8 SCC 481],it has been

clearly stipulated that this is the prerogative of the creditor to initiate the

insolvency process against the principal borrower or the personal

guarantor or both.

(iii) In terms of Section 128 of the Indian Contract Act, 1872, the liability of

the surety is co-extensive with that of the principal debtor. The Supreme

Court in the case of Industrial Investment Bank of India Ltd. v.

Biswanath Jhunjhunwala [(2009) 9 SCC 478] while examining the

issue of the term 'co extensive liability' has held that the liability of a

surety is not in alternative to the principal borrower or Corporate Debtor

and further it is not necessary for a creditor to first proceed against the

principal borrower or Corporate Debtor before initiating legal

proceedings against the surety.

(iv) We note that Section 5(22) of the Code defines personal guarantor as an

individual who is the surety in a contract of guarantee to a corporate

debtor who provides guarantee in his personal capacity against the loans

availed by the corporate debtor with co-extensive liabilities alongwith

the corporate debtor.

(v) We observe that the creditor has legal rights to initiate PIRP even without

any pending CIRP or Liquidation proceeding as held by this Appellate

Tribunal in case of State Bank of India, Stressed Asset Management

Page 39 of 41 Comp. App. (AT) (Ins.) No. 1601 of 2024

Branch Vs. Mahendra Kumar Jajodia in Company Appeal (AT)

Insolvency No. 60 of 2022 decided on 27.01.2022. This was confirmed

by Hon'ble Supreme Court of India in Civil Appeal No. 1871-1872 of

2022 decided on 06.05.2022

(vi) One also need to understand that the total recovery made from the

principal borrower and the personal guarantor may not exceed the

outstanding debts payable to the lenders. However, it can be no one's

case that if the securities are held in favour of the lenders/ creditors

based on certain charges created on the assets of the Corporate Debtor,

personal guarantor should not be responsible, therefore, is no

insolvency proceedings can be initiated against personal guarantor. We

also consciously note the resolution of Corporate Debtor could not

happen and now Corporate Debtor is under Liquidation which clearly

demonstrate without any ambiguity, need as well as right of the Lender

to recover from the Personal Guarantors in accordance with law. We

find this proposition of the Appellant as not convincing and arguments

of the Appellant therefore stand rejected.

Page 40 of 41

Comp. App. (AT) (Ins.) No. 1601 of 2024

53. In view of above discussion, we do not find any merit in the Appeal. Appeal

devoid of any merit stand rejected. No costs. I.A, if any, are closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

Sim

Page 41 of 41