Mr. Bhavesh Gandhi vs Central Bank Of India

[Arising out of Order dated 13.06.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench in C.P. (IB) No. 93 (AHM)2022]

IN THE MATTER OF:

Bhavesh Gandhi D-4,4th Floor, New Breach Candy Apartments, Mumbai - 400 026. ...Appellant

Versus

Central Bank of India Chander Mukhi, Nariman Point, Mumbai - 400021. ...Respondent

Present: For Appellants: Mr. Shikhil Suri, Ms. Komal Gupta and Ms. Mohima Aggarwal, Advocates. For Respondent: Mr. Ravi Raghunath, Ms. Rathina Maravarman and Ms. Aakashi Lodha, Advocates.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed against the order dated 13.06.2022

passed by the Adjudicating Authority (National company Law Tribunal),

Ahmedabad, Division Bench, Court No.1 appointing Resolution

Professional in an application filed by the Respondent - Central Bank of

Cont'd.../ -2-

India under Section 95 of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as 'I&B Code'). Brief facts of the case necessary to

be noticed for deciding this Appeal are:

(i) An application under Section 95 of the I&B Code was filed by

Central Bank of India - Respondent dated 12.10.2021 against

the Appellant - the Personal Guarantor of the Corporate

Debtor namely Reliance Naval Engineering Ltd. which

application came for consideration before the Adjudicating

Authority on 18.04.2022.

(ii) Learned counsel for the Appellant brought into notice of the

Adjudicating Authority that insolvency resolution process has

already been initiated against the Appellant - Personal

Guarantor by order dated 21.06.2021 in C.P. (IB)

50/AHM/2021 in Court No.2. On the said statement, the

Adjudicating Authority posted the matter on 13.06.2022 on

which date the Adjudicating Authority passed an order

directing the Resolution Professional to file a report within two

weeks. Aggrieved by the said order this Appeal has been filed.

2. In this Appeal an order was passed by this Tribunal on 12.08.2022

granting time to the Appellant to file an additional affidavit bringing on

record the guarantee given by the Appellant to Central Bank of India as

well as the State Bank of India. By an additional affidavit copy of the

Guarantee Deed dated 31.03.2015 has been brought on the record.

Company Appeal (AT) (Insolvency) No. 923 of 2022 -3-

Personal Guarantee was given by the Appellant to the IL&FS Trust

Company Ltd., a security trustee for the CDR Lenders. The Borrower was

the Corporate Debtor who was extended various financial facilities by the

CDR Lenders which included both Central Bank of India and State Bank

of India. Schedule-I of the Guarantee Deed contains particulars of CDR

Lenders. The Appellant gave personal guarantee by the aforesaid deed to

CDR Lenders. As noted above, the State Bank of India has already filed an

application under Section95 against the Appellant as a Personal Guarantor

in which application - CP (IB) No. 50(AHM)2021 order dated 21.06.2021

has been passed by the Adjudicating Authority directing for

commencement of interim moratorium and appointing Mr. Sunil Kumar

Agrawal as Resolution Professional.

3. Shri Shikhil Suri, learned counsel for the Appellant in support of the

Appeal challenging the order impugned contends that when Resolution

Professional was already appointed in application by the State Bank of

India, there can be no second Resolution Professional appointed, as has

been done by the impugned order dated 13.06.2022. Learned counsel for

the Appellant further contends that by virtue of order dated 21.06.2021

interim moratorium has commenced, hence, application could not have

been filed by the Central Bank of India under Section 95 on 12.10.2021.

The proceedings initiated by the Central Bank of India under Section95

was required to be stayed by virtue of the interim moratorium. The

Adjudicating Authority has committed error in calling for report from the

Resolution Professional.

Company Appeal (AT) (Insolvency) No. 923 of 2022 -4-

4. Shri Ravi Raghunath, learned counsel appearing for the Central

Bank of India refuting the submissions of learned counsel for the Appellant

contends that by the impugned order the Adjudicating Authority has not

appointed any new Resolution Professional rather same Resolution

Professional i.e. Mr. Sunil Kumar Agrawal was directed to submit the

Report. He submitted that after the impugned order, the Bank has already

written to Mr. Sunil Kumar Agrawal to file the Report. The Appellant filed

the Appeal on the ground that another Resolution Professional has been

appointed is wholly misconceived. It is further submitted that the fact that

order was passed on application filed by the State Bank of India against

the Appellant - Personal Guarantor on 21.06.2021 does not prohibit the

Central Bank of India to file another application. The analogy with respect

of Section 7 of I&B Code is not applicable in proceedings under Section 95.

It is submitted that there is no pleading or ground regarding non-

maintainability of application due to interim moratorium.

5. We have considered the submissions of learned counsel for the

parties and perused the record.

6. The Deed of Guarantee dated 31.03.2015 which has been brought

on the record alongwith the Additional Affidavit dated 05.09.2022 indicates

that the appellant has given personal guarantee to the IL&FS Trust

Company Limited in its capacity as Security Trustee for the CDR Lenders.

Alongwith the Guarantee Deed, in Schedule-I particulars of CDR Lenders

have been mentioned in which at Serial No. 13 is Central Bank of India and

Company Appeal (AT) (Insolvency) No. 923 of 2022 -5-

at Serial No. 17 is State Bank of India. The Appellant is thus Personal

Guarantor of both the CDR Lenders i.e. Central Bank of India and State

Bank of India.

7. An application under Section 95 was filed by the State Bank of India

being CP (IB) No.50(AHM)2021 in which following order was passed on

21.06.2021:

"ORDER

This application is filed under Section 95 of the Code against the Personal Guarantor.

Learned Counsel seeks an order may be passed under Section 96 read with Section 99 and direction may be given to the RP.

The interim moratorium shall commence under Section 96 from the date of application. The RP, as suggested by the Applicant, Mr. Sunil Kumar Agrawal present in person. We direct RP to file report within 10 days with respect to the Corporate Debtor.

List the matter for further consideration on 23.08.2021."

8. The order which is impugned in the present Appeal dated 13.06.2022

is to the following effect:

"ORDER

Company Appeal (AT) (Insolvency) No. 923 of 2022 -6-

We direct the Resolution Professional to file the report within two weeks by giving a copy to the other side.

The matter stands adjourned to 16.08.2022."

9. Learned counsel for the Bank has submitted that by order impugned

dated 13.06.2022 a new Resolution Professional has not been appointed

rather the same Resolution Professional Mr. Sunil Kumar Agrawal who was

appointed in CP (IB) No. 50(AHM)2021 has been directed to submit the

report. In the reply filed on behalf of the Central Bank of India it has been

clearly stated that the Bank through their Advocate informed Shri Sunil

Kumar Agrawal regarding the order dated 29.06.2022 passed by the

Adjudicating Authority directing the Resolution Professional to file report.

We proceed on the premise that by the impugned order dated 13.06.2022

no new Resolution Professional has been appointed and the same

Resolution Professional who was appointed on the application of State

Bank of India has been directed to file report.

10. The question which has been pressed by learned counsel for the

Appellant is that in view of the interim moratorium which was commenced

with effect by order dated 21.06.2021 in CP (IB) No. 50(AHM)2021, the

application filed by the Central Bank of India ought to have been stayed

and not proceeded any further.

11. Learned counsel for the Respondent has submitted that there are no

pleadings as no grounds with regard to interim moratorium enforced by

Company Appeal (AT) (Insolvency) No. 923 of 2022 -7-

order dated 21.06.2021. Appellant having raised the issue of jurisdiction

of the Adjudicating Authority to proceed further with the Section 95

application subsequently filed by the Central Bank of India after

enforcement of interim moratorium, which question is a question of law

arising out of statutory provisions of the Code, we have permitted the

Appellant to raise the submission and we have also permitted learned

counsel for the Bank to reply the said submission.

12. Thus, the question to be answered in present appeal is as to whether

when an application is filed against the Personal Guarantor whether

another Lender of same transaction can proceed against the Personal

Guarantor by filing another application under Section 95 of the I&B Code.

13. For answering the above question, we need to look into the provision

of I&B Code. Section 95 provides for application by creditor to commence

insolvency resolution process. In the present case, the State Bank of India

filed CP (IB) No. 50(AHM)2021 in which resolution process commenced by

order dated 21.06.2021. Interim moratorium is provided in Section 96,

which is to the following effect:

"96(1) When an application is filed under section 94 or section 95--

(a) an interim-moratorium shall commence on the date of the application in relation to all the debts and shall cease to have effect on the date of admission of such application;

and

Company Appeal (AT) (Insolvency) No. 923 of 2022 -8-

(b) during the interim-moratorium period--

(i) any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and

(ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt.

(2) Where the application has been made in relation to a firm, the interim-moratorium under sub-section (1) shall operate against all the partners of the firm as on the date of the application.

(3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator."

14. As noted above, by order dated 21.06.2021, interim moratorium was

commenced from the date of application. Section 96(1)(a) provides that an

interim-moratorium shall commence on the date of the application in

relation to all the debts. Further, Section 96(1)(b) provides that during

the moratorium period (i) any legal action or proceeding pending in respect

of any debt shall be deemed to have been stayed; and (ii) the creditors of

the debtor shall not initiate any legal action or proceedings in respect of

any debt. The use of expression 'creditors of the debtor' obviously refers

to other creditors of the debtor apart from the creditor on whose application

interim moratorium has commenced. In the present case, the date on

which application was filed by the Central Bank of India under Section 95

Company Appeal (AT) (Insolvency) No. 923 of 2022 -9-

is 12.04.2021 i.e. after the commencement of the interim moratorium, as

noted in the order dated 21.06.2021. The interim moratorium under

Section 96 (1)(b)(ii) creates a prohibition on the creditors of the debtor from

initiating any legal action in respect of any debt. The use of expression

'any debt' also clearly indicate that debt on basis of which moratorium has

commenced is not contemplated by the expression 'any debt'. With regard

to all debts of debtor i.e. Personal Guarantor in the present case, no

proceeding can be initiated by virtue of Section 96(1)(b). The application

filed by the Central Bank of India on 12.10.2021, thus, was clearly hit by

Section 96(1)(b)(ii) and the Adjudicating Authority could not have

proceeded with the said application and appointed the Resolution

Professional. The order dated 13.06.2022 impugned in this Appeal is

clearly unsustainable.

15. Our above view is further fortified by the scheme of Code under

Chapter-III. After admission of application under Section 100, moratorium

commences in relation to all the debts under Section 101 and thereafter

public notice is issued and claims from creditors are invited under Section

102. Section 103 provides for registering of claims by creditors. Section

104 provides for preparation list of creditors and thereafter repayment plan

is contemplated under Section 105. Thus, when an insolvency resolution

process commences against the Personal Guarantor all creditors of the

Personal Guarantor are taken care of in the proceedings under Chapter-III.

The scheme of Code does not contemplate manifold applications against

same Personal Guarantor by different lenders. Multiplicity of applications

Company Appeal (AT) (Insolvency) No. 923 of 2022 -10-

against same Personal Guarantor is not contemplated under Chapter III.

When the insolvency resolution process commences against a Personal

Guarantor, claims of all creditors are taken care of under the scheme of the

Code.

16. One of the submission which has been raised by learned counsel for

the Bank is that there is no benefit in the limitation for filing an application

by any other creditors under Section 95 whereas when a moratorium is

enforced with regard to a Corporate Debtor as well as with regard to an

individual and partnership firm, there are express provision for giving

benefit of limitation for the period during which moratorium is enforced but

there being no such provision for the Personal Guarantors and the

creditors like Central Bank of India shall suffer if they are not permitted to

file their Section 7 application. Learned counsel for the Bank has referred

to Section 60 and Section 179 of the Code, which are to the following effect:

"60. Adjudicating Authority for corporate persons. - (1) 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 persons located.

(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation

Company Appeal (AT) (Insolvency) No. 923 of 2022 -11-

proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or 1[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.

(3) An insolvency resolution process or 2[liquidation or bankruptcy proceeding of a

corporate guarantor or personal guarantor, as the case may be, of the corporate debtor] pending in any court or tribunal shall stand transferred to the Adjudicating Authority dealing with insolvency resolution process or liquidation proceeding of such corporate debtor.

(4) The National Company Law Tribunal shall be vested with all the powers of the Debt Recovery Tribunal as contemplated under Part III of this Code for the purpose of sub-section (2).

(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of--

(a) any application or proceeding by or against the corporate debtor or corporate person;

(b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and

Company Appeal (AT) (Insolvency) No. 923 of 2022 -12-

(c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.

(6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.

x x x

"179. Adjudicating Authority for individuals and partnership firms - (1) Subject to the provisions of section 60, the Adjudicating Authority, in relation to insolvency matters of individuals and firms shall be the Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides or carries on business or personally works for gain and can entertain an application under this Code regarding such person.

(2) The Debt Recovery Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain or dispose of--

Company Appeal (AT) (Insolvency) No. 923 of 2022 -13-

(a) any suit or proceeding by or against the individual debtor;

(b) any claim made by or against the individual debtor;

(c) any question of priorities or any other question whether of law or facts, arising out of or in relation to insolvency and bankruptcy of the individual debtor or firm under this Code.

(3) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application in the name and on behalf of a debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded."

17. Section 60 Sub-section (1) provides that 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. Reliance is placed on Sub-Section (6)

of Section 60 and counsel for the Bank submitted that the said benefit

extended by Sub-Section (6) of Section 60 is only available to the Corporate

Person and shall not be extended to the Personal Guarantors. Sub-Section

(6) of Section 60 has to be read in conjunction with Section 60 Sub-Section

(1). When Section 60 Sub-Section (1) refers to corporate persons including

corporate debtor and personal guarantors, proceedings in which the benefit

Company Appeal (AT) (Insolvency) No. 923 of 2022 -14-

of Section 60 Sub-Section (6) has to be extended are insolvency resolution

proceedings against the Personal Guarantors also. Submission of learned

counsel for the Bank that benefit of Section (60) Sub-Section (6) shall not

be extended to the creditors of the Personal Guarantors cannot be

accepted. In view of the above, creditors of the Personal Guarantors who

are unable to file an application due to enforcement of moratorium under

Section 96 can very well avail the benefit of period during which

moratorium continues, hence, due to interim moratorium enforced by

Section 96, the creditors like Central Bank of India and other creditors are

in no manner prejudiced. If they have not filed any application during

moratorium period, they have every right to file application and for

computation of the period of limitation, period during which moratorium is

in place is to be excluded.

18. Section 179 of the Code deals with individuals and partnership firms

where similar provision has been made under Section 179 Sub-Section (3)

giving benefit in computing the limitation for a suit or application in which

period during which moratorium is in place is to be excluded.

19. Learned counsel for the Appellant has also submitted that with

regard to another Personal Guarantor Mr. Nikhil Gandhi an application

under Section 95 was filed by Central Bank of India on which C.P. (IB) No.

94(AHM)2022 was registered, an order was passed on 08.04.2022, which

is to the following effect:

Company Appeal (AT) (Insolvency) No. 923 of 2022 -15-

"ORDER

Application filed under Section 95 IBC, 2016. Learned Counsel for the Applicant states that original Corporate Debtor M/s. Reliance Naval Engineering Limited is under CIRP.

Application is filed by Financial Creditor under Section 95 of the Code seeking initiation of Insolvency Resolution Process against the personal guarantor of the Corporate Debtor, namely, Surya Exim Limited. Issue notice.

Learned Counsel for the applicant requests for appointing the Insolvency Professional by the Bench. Mr. Kabra Rajendrakumar Radhakishan, Registration No. IBBI/IPA- 001/IP-P02385/2021-2022/13835 is hereby appointed as Resolution Professional. Declaration with respect to no disciplinary proceedings being pending against the RP be filed within 7 days. In view thereof, Interim Moratorium under Section 96 of the Code shall commence from the date of application. The RP Mr. Kabra Rajendrakumar Radhakishan is directed to file report within ten days.

List the matter for hearing on 27.04.2022"

20. It is submitted that subsequently it was brought to the notice of the

Court that against the Personal Guarantor - Mr. Nikhil Gandhi moratorium

has already commenced on 21.06.2021 and the Adjudicating Authority

adjourned the matter sine die with liberty to the applicant to revive the

Company Appeal (AT) (Insolvency) No. 923 of 2022 -16-

application on the basis of outcome of the proceedings already commenced.

Following order was passed on 10.06.2022:

"ORDER

Learned Counsel Mr. Maulik Nanavati for the personal guarantor states that against the said personal guarantor Mr. Nikhil Gandhi, an order of moratorium is already in existence passed by the Coordinate Bench on 21.06.2021, hence, the order passed by this Bench on 08.04.2022 cannot survive. We adjourn the matter sine- die with the liberty to the applicant to revive for appropriate directions, based on outcome of the proceedings before the Coordinate Bench."

21. It is case of the Appellant that both Mr. Bhavesh Gandhi (Appellant

in present appeal) and Mr. Nikhil Gandhi are Personal Guarantors of the

same Corporate Debtor and in the similar situation with Mr. Nikhil Gandhi

when it was pointed out to the Adjudicating Authority that interim

moratorium has been commenced by order dated 21.06.2021, proceedings

were adjourned sine die. The order passed by the Adjudicating Authority

in the case of Mr. Nikhil Gandhi dated 10.06.2022 clearly contemplate that

the Adjudicating Authority is well aware of the fact that interim moratorium

having commenced against same Personal Guarantor, no fresh proceedings

can be initiated.

22. In view of the foregoing discussion, we are of the view that in view of

the commencement of interim moratorium as per order dated 21.06.2021,

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as noticed above, the application filed by the Central Bank of India under

Section 95 on 12.10.2021 could not have been proceeded with by passing

the order dated 13.06.2022. In view of the foregoing discussion, order

dated 13.06.2022 is set aside. Appeal is allowed. However, liberty is

reserved to the Central Bank of India to proceed with the application if an

occasion so arises.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

7th February, 2023

Archana

Company Appeal (AT) (Insolvency) No. 923 of 2022