Mr. Babumanoharan vs Indian Bank & Ors

(Arising out of order dated 10th October, 2019 passed by National Company Law Tribunal, Division Bench, Chennai in IBA/685/2019)

IN THE MATTER OF:

1. Mr. Babumanoharan Jai Kumar Christhurajan, R/O No. 34, Ranganathan Avenue, Uthandi, East Coast Road, Chennai 600119. ...Appellant

Versus

1. Indian Bank, Represented through its Deputy General Manager, Thousand Lights Branch, 611 Anna Salai, Kannammai Building, Chennai, T.N., 600006

2. M/s Jeppiaar Cements Pvt. Ltd. Represented by its IRP Mr. Umesh Garg, Old No. 11, New No. 19, Venkatraman Streed, Srinivas Avenue, Bishop Garden Extension, R.A. Puram, Chennai, T.N., 600028

3. Mr. Umesh Garg, Interim Resolution Professional of M/s Jeppiaar Cements Pvt. Ltd. Having his office at M/s Excel Insolvency Professional Pvt. Ltd., 115 Devika Tower, Nehru Place, New Delhi 110019 ...Respondents

Present:

For Appellant: Mr. AniruddhaDeshmukh, Advocate Mr. VikramVijayraghavan, Advocate For Respondents: Mr. Aiyar&Dolia, Advocate R1 Mr. RamaswamyMeyyappan, R2, R3 Ms. Harshini Jothiraman.K.P,R2, R3 -2-

Mr. Pramodh Kumar, Advocates R2 & R3 Mr. Jayesh B Dolia, Advocate R3 Mr. Abhishek Anand, Advocate R2 & R3 & For RP Mr. Umesh Garg, R3.

JUDGMENT

(31.03.2022)

KANTHI NARAHARI, MEMBER (TECHNICAL)

Preamble:

The Present Appeal is filed against the order of the

Adjudicating Authority (National Company Law Tribunal, Division

Bench, Chennai ) in IBA No. 685 of 2019 dated 10.10.2019 whereby

the Adjudicating Authority allowed the Application of the first

Respondent herein filed under Section 7 of the I & B Code, 2016

and appointed IRP to conduct the CIRP of the Second Respondent.

Brief Facts:

Appellant's Submissions:

2. The Learned Counsel for the Appellant submitted that the

Appellant is the former Director of Respondent No.2 which is an

unlisted Pvt. Ltd. Company. The 1st Respondent i.e. the Indian

Bank initiated proceedings under Section 7 of the I & B Code, 2016

against the 2nd Respondent herein who is an Corporate Guarantor

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of M/s Jeppiaar Power Corporation Ltd. for default in payment of

term loan of Rs. 92.50 Crore by the Principal Borrower i.e. M/s

Jeppiaar Power Corporation Ltd. Further, the term loan facility was

reviewed and additional facility of Rs. 48.50 Crore was made

available to the Principal Borrower/Debtor.

3. It is submitted that due to adverse business environment and

mounting losses the Principal Debtor defaulted in repayment to the

Respondent No. 1 Bank. Hence, the Respondent No.1 filed

Application against the Principal Borrower under Section 7 of the I

& B Code, 2016 in IBA No. 128 of 2019 and the Adjudicating

Authority admitted the said Application on 04.03.2019. Thereafter,

the 1st Respondent filed OA 182 of 2019 before the DRT- II Chennai

against the Principal Borrower as well as the 2nd Respondent inter

alia seeking a recovery certificate to the extent of Rs. 150.26 Crore

jointly and severally.

4. It is submitted that after initiating proceedings against the

Principal Borrower before the Adjudicating Authority (NCLT,

Chennai) by filing Section 7 application, the 1st Respondent initiated

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proceedings against the 2nd Respondent i.e. the Corporate

Guarantor for showing the default amount of Rs. 147,89,38,608/-

which is the exact same sum that the 1st Respondent has claimed

against the Principal Borrower.

5. In the light of the ratio of the Judgement of this Tribunal in

'Piramal Enterprises Ltd.' the application filed against the 2nd

Respondent i.e. the Corporate Guarantor is not at all maintainable.

6. It is submitted that having initiated proceedings against the

Principal Borrower and the Present Proceedings against the

Corporate Guarantor are void ab-initio and the same cannot be

allowed to "double-dip" in respect of the same amount.

7. It is submitted that the Adjudicating Authority failed to note that

there in a distinction between the initiation of the proceedings

under the IBC against the Principal Borrower and the Corporate

Guarantor and the continuation of the two independent proceedings

against the Corporate Guarantor and Principal Borrower and erred

in observing that the Hon'ble Supreme Court has stayed the order

of this Tribunal in Piramal Enterprises Ltd.

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8. The Ld. Counsel for the Appellant relied upon the Judgments in

the matter of (1)"Dr. Vishnu Kumar Agarwal vs. Piramal Enterprises

Ltd." in CA (AT) (Ins) No. 346 of 2018 dated 08.01.2019. (2) "M/s

SEW Infrastructure Ltd. vs M/s Mahendra Investment Advisors Pvt.

Ltd."(3) "Shabad Khan vs. M/s Nisus Finance and Investment

Manager & Ors." in CA (AT) (Ins) No. 82 of 2020. (4) "Sagufa Ahmad

& Ors. vs Upper Assam Plywood Products Pvt. Ltd." (SC) in Civil

Appeal Nos. 3007-3008 of 2020 dated 18.09.2020. (5) "Laxmi Pat

Surana vs. Union Bank of India" Civil Appeal No. 2734 of 2020 (SC)

dated 26.03.2021".

1st Respondent's Submissions:

9. The Learned Counsel appearing for this Respondent submitted

that the present Appeal is not maintainable for the reason that the

Appellant has not filed the Appeal within the time prescribed under

law and filed beyond the period of limitation and therefore the

appeal is liable to be dismissed on this ground itself.

10. It is submitted that the Adjudicating Authority admitted the

Application filed by them under Section 7 in IBA No. 685 of 2019 on

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10.10.2019 and appointed an IRP to conduct CIRP against the 2 nd

Respondent. The Appellant was aware of the order being passed by

the Adjudicating Authority on 10.10.2019 by participating in the 2nd

CoC meeting held on 10.12.2019 wherein he has affixed signatures

in the attendance sheet for having participated in the meeting thus,

the Appellant is having the knowledge of admitting the application

on 10.10.2019 however, the Appellant applied the certified copy of

the order and obtained it on 27.02.2020 which is an afterthought

and cannot be entertained.

11. It is submitted that the Appellant has not given any valid

reasons for delay and under Section 61 of the IBC the Appellate

Authority can condone the delay of 15 days and not beyond the said

period.

12. It is admitted by the Appellant itself that he is a Former

Director of the 2nd Respondent and the 2nd Respondent, offered its

Corporate Guarantee loan availed by the Principal

Borrower/Debtor. The Ld. Counsel submitted that the Appellant

relied upon two Judgments of this Tribunal in the case of "Piramal

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Enterprises Ltd." and "Sew Infrastructure Ltd." is concerned the said

Judgments are Per-incuriam. Even Section 31 of IBC does not

prohibit or bar the Financial Creditor to proceed against the

Corporate Debtor and Corporate Guarantor simultaneously. In fact

Section 5(8) of IBC defines Financial Debt and sub clause (i) of

Section 5(8) clearly states that the amount of any liability in respect

of any of the guarantee or indemnity for any of the items referred to

in sub-clauses (a) to (h) of this clause. Thus, for any amount

borrowed against payment of interest, if guarantee is given the

Financial Creditor has right to proceed against the Corporate

Debtor or Corporate Guarantor irrespective of the fact that

proceedings against the Corporate Debtor are over as long as

Financial Creditor has not got maximisation of its money value.

13. It is submitted that the 2nd Amendment of 2018 to the IBC an

explanation has been introduced under Section 14 to state that

moratorium shall not be applicable to a guarantor of Corporate

Debtor and there are several orders of various courts/tribunals to

hold that order of moratorium under Section 14 will be applicable

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only to proceedings against the Corporate Debtor not against

guarantor. In this regard a reliance is placed "SBI vs BS Rajendra

Kumar" Company Appeal (AT) (I) 87-91 of 2018 and "ICICI Bank Ltd.

vs Vista Steel Pvt. Ltd."

14. It is submitted that in the case of Piramal the issue concerning

regarding whether a separate applications are maintainable against

two Corporate guarantors for their debt and default.

15. It is submitted that as per Section 128 of Indian Contract Act,

1872 it is clearly establishes that the Liability of the surety is co-

extensive with Principal Debtor, joint and several. It is submitted

that there is no provision in the IBC restraining the Financial

Creditor from initiating CIRP's simultaneously against Principal

Debtor and Guarantor or filing a claim in the CIRP's against both

Principal Borrower and Guarantor.

16. The Law laid down by the Hon'ble Supreme Court in the case of

"SBI vs. Ramakrishna & Anr." (2018) 17 SCC 394 which held that

moratorium imposed upon proceedings against Corporate Debtor

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under Section 14 is not extendable to the proceedings against the

Guarantor of the Corporate Debtor.

17. In view of the reasons as stated above the Ld. Counsel prayed

this Bench to dismiss the Appeal.

2nd and 3rd Respondent's Submissions:

18. The Ld. Counsel appearing for these Respondents submitted

that the Present Appeal is time barred and liable to be dismissed at

the very threshold by this Tribunal. The order was delivered on

10.10.2019 and the certified copies of the same were made available

to all the parties involved at that time by the Registry of NCLT,

Chennai Bench. It is submitted that these Respondents have

received the copies of the order immediately after the date of

pronouncement. Therefore, the Appeal is barred by limitation for

the reason that the Appellant has not shown any genuine and bona

fide reasons for filing the Appeal beyond the time the period

prescribed for filing the appeal. In this regard the Ld. Counsel relied

upon the Judgment of this Tribunal in Company Appeal (AT) (Ins)

No. 268 of 2020 in the matter of "office of the specified officer, SEZ

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vs. Mr. V. Venkatachalam, RP". It is submitted that this Tribunal

held that as a period of limitation will have to be reckoned from the

date of knowledge of such order having been passed by the

Adjudicating Authority. From the aforesaid judgment the date of

knowledge was sufficient to state that the limitation period in

motion. The Appellant participated at the meeting held on

22.10.2019 at the factory premises of the 2nd Respondent and

subsequently at the CoC meeting convened on 18.12.2019 and the

Appellant had complete knowledge of the status of the CIRP

initiated against the 2nd Respondent.

19. The Adjudicating Authority rightly admitted the application

under Section 7 filed by the 1st Respondent and initiated CIRP

against the 2nd Respondent who is a Corporate Guarantor and the

1st Respondent has every right to invoke against the Corporate

Guarantor since the Corporate Guarantor is co-extensive of

Principal Debtor/Borrower. However, the Ld. Counsel for the

Appellant relied upon the Judgment of this Tribunal passed in "Re-

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Piramal" is concerned, the same is pending before the Hon'ble

Supreme Court, and ordered status-quo to be maintained.

20. It is submitted that accordingly the Ld. Counsel for the

Appellant wrongfully considered in "Re-Piramal" Judgment as

referred to, be one in personam and not in rem as it rightfully

dictates. However, the matter still remains to be pondered upon and

decided by the Apex court and thus reliance on the issues raised

before the Apex court would be considered premature and a faulty

understanding of the applicability of the judgment passed by this

Tribunal.

21. It is submitted that the contract of guarantee as envisaged by

the Indian Contract Act, 1872 and the agreement of guarantee

dated 07.10.2016 itself provides that the guarantor in this case the

2nd Respondent shall be jointly and severally liable to pay the 1 st

Respondent, the debt owed by the Principal Borrower. The Liability

of the 2nd Respondent shall be co-extensive to that of the Principal

Borrower. The 1st Respondent was always at liberty to proceed with

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either jointly or severally against both, the Principal Borrower or the

Corporate Guarantor.

22. It is submitted that the provisions contained in Sections 5(8)(i),

14 and 31 are to be read harmoniously with each other and thereby

further the objective of the code enabling the maximisation of value

in a time bound manner. The Ld. Counsel also relied upon the

Judgment of the Hon'ble Supreme Court in "State Bank of India vs.

Ramakrishna & Anr. (2018) 17 SCC 394" held that the moratorium

imposed on the Corporate Debtor would not extend to the

proceedings against the Corporate Guarantor. This was further

substantiated by an amendment to the I & B Code thereafter.

23. In view of the reasons as stated above the Ld. Counsel prayed

this Bench to dismiss the Appeal as it devoid of any merit.

24. The Respondents 1, 2 & 3 relied upon the Judgment of this

Tribunal on the point of limitation in the matter of "Office of the

specified officer, Special Economic Zone vs. Mr. V. Venkatachalam". On the point of simultaneous initiation of CIRP against the

Principal Borrower and Corporate Guarantor, the Ld. Counsel for

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the Respondents relied upon the following judgments viz, the

Hon'ble Supreme Court in (1) "Laxmi Pat Surana vs. Union bank of

India" in Civil Appeal No. 2734 of 2020 dated 26.03.2021, (2) "State

Bank of India vs. Ethena Energy" in CA (AT) (Ins) No. 633 of 2020

dated 24.11.2020, (3) "Edelweiss Asset Reconstruction Company vs.

Gwalior Bypass Projects in CA(AT) (Ins) No. 1186 of 2019 dated

08.03.2021, (4) "State Bank of India vs. Animesh Mukhopadhyay in

CA (AT) (Ins) No. 186 of 2021 dated 08.03.2021, (5) " Lalit Kumar

Jain vs. Union of India & Ors." transferred case (Civil No. 245 of

2020) dated 21.05.2021.

Analysis/Appraisal:

25. Heard the Ld. Counsel appeared for the respective parties

perused the pleadings, documents and citations relied upon by

them. After analysing the pleadings the moot points for

consideration is:

(i) Whether the Appeal is filed within the time as prescribed

under Law?

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(ii) Whether simultaneous proceedings can be initiated

against the Principal Borrower/Debtor and Corporate

Guarantor?

26. Now we deal with the Limitation aspect:

The Respondent's raised strong objection that the Appeal filed

by the Appellant is beyond the period of limitation as prescribed

under Section 61 of the I & B Code, 2016 hence the appeal needs to

be dismissed in limine. According to Sub-Section 1 of Section 61 of

the I & B Code, 2016 any person aggrieved by the order of the

Adjudicating Authority may prefer an appeal to the National

Company Law Appellate Tribunal. Sub- Section 2 of Section 61 of I

& B Code, 2016 every appeal under Sub-Section 1 shall be filed

within 30 days before the National Company Law Appellate

Tribunal. However, a proviso to Sub-section (2), empowers the

NCLAT to allow an Appeal to be filed after the expiry of the said

period of 30 days, if it is satisfied that there was sufficient cause for

not filing the Appeal but such period shall not exceed 15 days.

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27. From the above provision of law the Appeal shall be filed

against the order of the Adjudicating Authority within a period of 30

days mandatorily. The Appellant in the Appeal stated that the

certified copy of the order dated 10.10.2019 was made available to

the Appellant only on 27.02.2020. It is also stated that the certified

copy of the order was sent to the Erstwhile Registered Office of the

Respondent No.2 which had been vacated, consequently the

impugned order was returned and went back to the Registry of the

Adjudicating Authority. It is stated that the Respondent No.2 was

not represented by legal Counsel before the Adjudicating Authority

as on the date of hearing on merits of the case. However, in the

order dated 10.10.2019 one Mr. S. Shanmuga Surya's name reflects

in the preamble of the order reflecting that as if the said Mr. S.

Shanmuga Surya appeared for the Corporate Debtor i.e. the 2 nd

Respondent herein. The said person is only a Director of the

Corporate Debtor and not a Advocate.

28. The Ld. Counsel for the Respondent's contend that the order

was delivered on 10.10.2019 and the period of time for filing of

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Appeal as per Section 61 is only a 30 days which can be extendable

by a period of 15 days provided sufficient cause is shown. Having

taken note of the facts with regard to the limitation aspect it is an

admitted fact that the order was delivered on 10.10.2019 and it is a

fact that the Corporate Debtor was represented by one Mr. S.

Shanmuga Surya on behalf of the Corporate Debtor. The

Respondents vehemently contend that the order was pronounced on

26.09.2020 in open court amongst others, in the presence of

Suspended Director of the 2nd Respondent i.e. Mr. S. Shanmuga

Surya and the said order was Delivered on 10.10.2019. It is also

stated that the certified copies of the same were made available to

all the parties involved at the time by the Registry of the NCLT. It is

stated that the Appellant was aware of the order of CIRP and

participated in the 2nd meeting of CoC held on 18.12.2019 which is

evident from the attendance sheet. Even if the date of his knowledge

is taken as 18.12.2019, the Appellant intentionally failed to procure

a certified copy of the impugned order at the earliest. Therefore, the

Respondents contend that the for the purpose of filing of the Appeal

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under Section 61, the period of limitation should be calculated from

18.12.2019 and not on the date of receipt of the order by the

Appellant on 27.02.2020.

29. This Tribunal perused the attendance sheet of the 2nd meeting

of CoC of the 2nd Respondent held on 18.12.2019 at 11.00 AM.

From the attendance sheet it is evident that one Mr. S. Shanmuga

Surya affixed his signature on the attendance sheet and mentioned

the time in as 11.00 AM and time out as 2.00 PM. The said fact

emerges that the Director of the Corporate Debtor is aware of the

order of the Adjudicating Authority dated 10.10.2019. Even the 1st

CoC meeting held on 11.11.2019, Mr. S. Shanmuga Surya attended

the said meeting and affixed his signature. Therefore, there is no

denial with regard to the attendance of the Director of the Corporate

Debtor and having complete knowledge of the impugned order.

Therefore, this Tribunal taking into consideration the knowledge i.e.

from 18.12.2019, the Appeal should have been preferred within a

period of 30 days and the outer limit of 15 days further total a

period of 45 days from the date of knowledge and the said 45 days

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expires on 01.02.2020 whereas the present Appeal is filed on

18.03.2020 i.e. after 45 days from the date of knowledge, which is

beyond the period of limitation. It is to state that this Tribunal does

not have the power to condone the delay beyond the period of 45

days including the outer limit and if sufficient cause is shown by

the Appellant. In the present Appeal the Appellant has not shown

any sufficient cause for delay in filing the instant Appeal. Therefore,

this Tribunal dismisses the Appeal on the ground that the Appeal is

filed beyond the period of limitation as provided under the Law.

This finding is supported by Judgment of this Tribunal in "Office of

the Specified Officer Special Economic Zone, Warora, District

Chandrapur, Maharashtra vs. Mr. V. Venkatachalam Resolution

Professional of Sai Wardha Power Generation Ltd." wherein it is held

at paragraph 7:

"7. It is also manifestly clear that the outer limit of 45 days cannot be transgressed to enable an appellant to maintain an appeal under this provision. If the Appeal have been preferred beyond statutory period of 30 days and extended period of 15 days i.e. total 45 days, this Appellate Tribunal will have no jurisdiction to entertain such Appeal."

TA No.178 of 2021

Company Appeal (AT) (Ins) No. 503 of 2020 -19-

Accordingly, the issue is answered against the Appellant.

However, this tribunal intend to decide the Appeal on merits in the

next issue.

30. Now we advert to issue no. (ii):

The Adjudicating Authority admitted the application filed by

the 1st Respondent herein against the 2nd Respondent i.e. M/s

Jeppiaar Cements Pvt. Ltd. claiming a sum of Rs.

147,89,38,608.49/- outstanding as on 21.12.2018. The Corporate

Debtor against whom CIRP Proceedings were initiated is a

Corporate Guarantor of the Principal Borrower/Debtor. The main

grievance of the Appellant is that the 1st Respondent already

initiated proceedings under Section 7 of the I & B Code against the

Principal Borrower and the said proceedings are continuing and

initiation of proceedings against the 2nd Respondent who is a

Corporate Guarantor is against the Judgment of this Tribunal in

're-Piramal' and contended that the Financial Creditor cannot

initiate proceedings under Section 7 simultaneously against the

Principal Borrower and Corporate Guarantor. This Tribunal made

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note of the impugned order. Since, the Appellant strongly relies

upon the Judgment of this tribunal in Piramal, this tribunal intend

to refer to the said judgment passed in "Company Appeal (AT) (Ins)

No. 346 of 2018 in "Dr. Vishnu Kumar Agarwal vs. M/s. Piramal

Enterprises Ltd." dated 08.01.2019" whereby this tribunal held in

paragraph 32 which is extracted here at:

"32. There is no bar in the 'I & B Code' for filing simultaneously two applications under Section 7 against the 'Principal Borrower' as well as the 'Corporate Guarantor(s)' or against both the 'Guarantors'. However, once for same set of claim application under Section 7 filed by the 'Financial Creditor' is admitted against one of the 'Corporate Debtor' (Principal Borrower' or 'Corporate Guarantor(s)'), second application by the same 'Financial Creditor' for same set of claim and default cannot be admitted against the other 'Corporate Debtor' (the 'Corporate Guarantor(s)' or the 'Principal Borrower'). Further, though there is a provision to file joint application under Section 7 by the 'Financial Creditors', no application can be filed by the 'Financial Creditor' against two or more 'Corporate Debtors' on the ground of joint liability ('Principal Borrower' and one 'Corporate Guarantor', or 'Principal Borrower' or two 'Corporate Guarantor's or one 'Corporate Guarantor' and other 'Corporate Guarantor'), till it is shown that the 'Corporate Debtors' combinedly are joint venture company".

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31. On the other hand the Ld. Counsel for the Respondents

contend that the said judgment of this Tribunal in Piramal, assailed

before the Hon'ble Supreme Court and the Hon'ble Supreme Court

ordered to maintain status quo to be maintained by the parties as it

exists on that day by an order dated 01.02.2019. Therefore, the

Appellant cannot rely upon the said judgment. Before addressing

the issue this Tribunal intends to refer to certain provisions of I & B

Code, 2016 in connection with this issue.

Chapter I of Part-II of the Act deals with Insolvency Resolution

and Liquidation for Corporate Persons. Section 5 there of deal with

definitions and Sub-Section 5 of Section 5 defines (Corporate

Applicant). However, by way of Act 26 of 2018, Sub-Section 5 A has

been inserted with effect from 06.06.2018. The Sub-Section 5 A i.e.

Corporate Guarantor "means a Corporate Person who is the surety

in a contract of Guarantee to a Corporate Debtor". Whilst, the

'Corporate Guarantor' who is the surety in a contract of guarantee

to a Corporate debtor is amenable to the proceedings to be initiated

by the Creditor.

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In this regard, it is apt to note that Sub-Section 8 of Section

5 defines 'Financial Debt' means a debt along with interest, if any,

which is disbursed against the consideration for the time value of

money and includes (i) the amount of any liability in respect of any

of the guarantee or/ indemnity for any of the items refer to in sub-

clauses (a)to(h) of this clauses. From the definition of Financial

Debt the guarantee also can be considered as a part of Financial

Debt.

Section 60 of I & B Code, 2016:

Section 60 deals with Adjudicating Authority for Corporate

Persons. Sub-Section (1) read as "the Adjudicating Authority, in

relation to Insolvency Resolution and liquidation for Corporate

Persons including Corporate Debtors and Personal Guarantors

thereof shall be the National Company Law Tribunal having

territorial jurisdiction over the place where the Registered Office of

the Corporate Person is located". Sub-Section (2) read as "without

prejudice to Sub-Section (1) and not withstanding anything to the

contrary contained in this Code, where a Corporate Insolvency

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Resolution Process or Liquidation proceeding of a Corporate Debtor

is pending before a National Company Law Tribunal, an application

relating to the Insolvency Resolution or (liquidation or bankruptcy

of a Corporate Guarantor or Personal Guarantor , as the case may

be, of such Corporate Debtor) shall be filed before such National

Company Law Tribunal".

The above amendment made by incorporating the word

Corporate Guarantor or Personal Guarantor by substituting Act, 26

of 2018 w.e.f. 06.06.2018. Therefore, it is significant to note that as

per the said Sub-section (2) of Section 60 the jurisdiction for

initiation of CIRP Proceedings is the same Adjudicating Authority

where a CIRP or liquidation proceedings of a Corporate Debtor is

pending i.e. NCLT having the territorial jurisdiction. From the above

provision it is clear that there is no bar initiation of CIRP

proceedings against Corporate Guarantor or Personal Guarantor as

the case may be even though a CIRP or liquidation proceedings of

the same Corporate Debtor is pending.

TA No.178 of 2021 Company Appeal (AT) (Ins) No. 503 of 2020 -24- Section 14 of the Code deals with moratorium. Sub-section (1)

thereof empowers the Adjudicating Authority who shall by order

declare moratorium for prohibiting all of the following on the

Insolvency Commencement date namely; Clauses (a) to (d) of Sub-

section (1) and Sub-section (4). However, as per Sub-section (2) and

(2A) certain things shall not be interrupted and to be continued.

From the said provision, it is evident that there is no prohibition

under the above moratorium with regard to either Personal

Guarantor or Corporate Guarantor. Therefore, the Corporate

Guarantor is out of the clutches of moratorium when initiated

against the Principal Borrower to whom the Corporate Guarantor

extended its surety to the liability of the creditor.

The Hon'ble Supreme Court in "Laxmi Pat Surana vs. Union

Bank of India & Anr." in Civil Appeal 2734 of 2020 dated 26.03.2021

held that the right or cause of action would ensure to the lender

(Financial Creditor) to proceed against the Principal Borrower as

well as the Guarantor in equal measure in case they commit default

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in repayment of the amount of debt acting jointly and severally and

held at paragraph 19 as under:

"19. Indubitably, a right or cause of action would ensure to the lender (Financial Creditor) to proceed against the principal borrower, as well as the guarantor in equal measure in case they commit default in repayment of the amount of debt acting jointly and severally. It would still be a case of default borrower fails to discharge his obligation in respect of amount of debt. For, the obligation of the guarantor is coextensive and coterminous with that of the principal borrower to defray the debt, as predicated in Section 128 of the Contract Act. As a consequence of such default the status of the guarantor metamorphoses into a debtor or a corporate debtor if it happens to be a corporate person, within the meaning of Section 3(8) of the Code. For, as aforesaid, expression "default" has also been defined in Section 3(12) of the Code to mean non-payment of debt when whole or any part or instalment of the amount of debt has become due or payable and is not paid by the debtor or the corporate debtor, as the case may be.

Also, the Hon'ble Supreme Court dealt with the provision of

Clause (i) of Section 5 (8) of the Code and held as under:

"it is so provided in sub clause (i) of Section 5 (8) of the Code to take within its ambit a liability in relation to a guarantee offered by the Corporate Person as a result of the default committed by the Principal Borrower".

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32. Further, the Hon'ble Supreme Court in the above Judgment

held that there is no reason to limit the width of Section 7 of the

Code despite law permitting initiation of CIRP against the Corporate

Debtor, if and when default is committed by the Principal Borrower.

The liability and obligation of the guarantor to pay the outstanding

dues would get triggered coextensively.

33. Section 128 of the Indian Contract Act, 1872 which deal with

Surety's liability- means - The liability of the surety is co-extensive

with that of the Principal Debtor, unless it is otherwise provided by

the Contract.

34. Further, the Hon'ble Supreme Court in above judgment at

paragraph 23 held as under:

"23. To get over this position, much reliance was placed on Section 5(5A) of the Code, which defines the expression "Corporate Guarantor" to mean a corporate person, who is the surety in a contract of guarantee to a corporate debtor. This definition has been inserted by way of an amendment, which has come into force on 06.06.2018. This provision, as rightly urged by the respondents, is essentially in the context of a corporate debtor against whom CIRP is to be initiated in terms of the amended Section 60 of the Code, which amendment is introduced by the same Amendment Act of 2018. This change was to empower NCLT to deal with the

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insolvency resolution or liquidation processes of the corporate debtor and its corporate guarantor in the same Tribunal pertaining to same transaction, which has territorial jurisdiction over the place where the registered office of the corporate debtor is located. That does not mean that proceedings under Section 7 of the code cannot be initiated against a corporate person in respect of guarantee to the loan amount secured by person not being a corporate person, in case of default in payment of such a debt".

35. The Hon'ble Supreme Court further held that "In law, the

status of the guarantor, who is a Corporate Person metamorphosis

into Corporate Debtor the moment Principal Borrower (regardless of

not being a Corporate Person) commits default in payment of debt

which have become due and payable". Thus, action under Section 7

of the Code could be legitimately invoked against a Corporate

Guarantor being a Corporate Debtor. The definition of Corporate

Guarantor in Section 5(5A) of the Code needs to be so understood.

36. Thus, from the above judgment of the Hon'ble Supreme Court

and the provisions of law with regard to the Corporate Guarantor it

is unequivocal that the CIRP can be initiated by the Creditor

against the Principal Borrower and the Corporate Guarantor

simultaneously and there is no bar.

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37. This Tribunal in "State Bank of India vs. Ethena Energy

Ventures Pvt. Ltd." in CA (AT) (Ins) No. 633 of 2020 dated 24.11.2020

after deliberating the judgment of this Tribunal in "Vishnu Kumar

Agarwal vs. Piramal Enterprises" and the judgment of the Hon'ble

Supreme Court in "Innoventive Industries and V. Ramakrishnan" is

of the view that in the matter of guarantee, CIRP can proceed

against Principal Borrower as well as guarantor.

38. Further, this Tribunal in the matter of "Edelweiss Asset

Reconstruction Company vs. Gwalior Bypass projects Ltd." in CA (AT)

(Ins) 1186 of 2019 dated 08.03.2021 after discussing the various

judgments held that, there is no bar for the Financial Creditor to

proceed against the Principal Borrower as well as Corporate

Guarantor either in CIRP's or file claims in both the CIRP's.

39. Further, this Tribunal in the matter of "State Bank of India vs.

Animesh Mukhopadhyay RP" in CA (AT) (Ins) No. 186 of 2021 dated

08.03.2021 taking into consideration the judgment passed in

"Ethena Energy and Edelweiss Asset Reconstruction Company Ltd."

(supra), by concurring the judgments passed in Ethena Energy and

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Edelweiss held that, there is no bar for the Financial Creditor to

proceed against the Principal Borrower as well as Corporate

Guarantor either in CIRP's or file claims in both the CIRP's.

40. Findings/Conclusion:

In view of the decisions of this Tribunal and the ratio of the

Hon'ble Supreme Court and the fact that the judgment passed in

'Piramal' is pending before the Hon'ble Supreme Court, the

simultaneous proceedings by the Creditor against the Principal

Borrower and the Corporate Guarantor being surety having

coextensive liability, can be initiated simultaneously. In view of the

reasons/analysis as discussed above the Appeal sans any merit.

41. Resultantly, the Appeal is dismissed. No costs. Interim orders if

any stand vacated. All Applications stand closed.

[Justice M. Venugopal] Member (Judicial)

[Kanthi Narahari] Member (Technical) sr

TA No.178 of 2021 Company Appeal (AT) (Ins) No. 503 of 2020