Mr. Mohit Arora vs Pnb Housing Finance Ltd. & Ors

[Arising out of the Order dated 11.10.2022, passed by the 'Adjudicating Authority' (National Company Law Tribunal, New Delhi Bench, Court-II), in I.A. 4750/ND/2021 in Company Petition No. (IB)-395(ND)/2021]

IN THE MATTER OF: MOHIT ARORA C 1/10, SECTOR 36, NOIDA GAUTAM BUDH NAGAR 201303 UTTAR PRADESH ...Appellant

Versus

1. PNB HOUSING FINANCE LIMITED 9th FLOOR, ANTRIKSH BHAWAN 22, KASTURBA GANDHI MARG CONNAUGHTPLACE NEW DELHI 11000 ..Respondent No.1 2. RAKESH PRASAD KHANDELWAL RESOLUTION PROFESSIONAL E-504, ISPATIKA APARTMENTS, PLOT NO. 29, SECTOR 4, DWARKA NEW DELHI 11007 ..Respondent No.2

Present: For Appellant : Mr. V. Siddharth, Mr. Mudit Sharma, Ms. Nandini Sharma, Mr. Ritesh Dhyani, Mr. Sachin Sharma & Mr. Shashank Shekhar Pandey, Advocates. For Respondent : Mr. V.D' Costa, Ms. Gauri Goel & Mr. Sarthak Jain, for R-1. Mr. Rakesh Prasad Khandelwal, for R-2/RP.

JUDGMENT

(Hybrid Mode)

[Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]

The instant appeal has been preferred by Mohit Arora -Appellant

Guarantor against the impugned order dated 11.10.2022, passed by the Ld. National Company Law Tribunal, New Delhi, Bench Court-II (Adjudicating

Authority) in IA No. 4750/ND/2021 in CP No. (IB) 395(ND)/2021 whereby

the Ld. Adjudicating Authority has admitted the petition filed by the

Respondent No. 1 under Section 95 of the Insolvency and Bankruptcy Code,

2016 (Code).

Factual Matrix

2. Facts of this appeal in brief are that Respondent-PNB Housing

Finance Ltd. has sanctioned loan facilities totalling Rs. 275 Crores vide

sanction letter dated 04.01.2017 in favour of Supertech Ltd. (Corporate

Debtor) and the terms and condition of the sanction letter was stated to be

modified vide sanction letter dated 08.03.2017 and the loan agreement was

executed on 10.03.2017 between the CD along with its co-borrowers namely

Sarv Realtors Pvt. Ltd. and ASP Sarin Realty Pvt. Ltd. and Mr. Mohit Arora

along with Mr. RK Arora and Ms. Sangita Arora who had provided their

personal guarantees in favour of the creditor to secure these credit facilities

availed by the CD.

3. It is further reflected that the CD has defaulted in payment of the

monthly instalment due and payable to the creditor on various dates and

the creditor served a demand notice under Section 13 (2) of the SARFAESI

Act, 2002 on the CD and the personal guarantors demanding repayment of

complete outstanding amount of Rs. 279.20 Crore along with future

interest.

4. The creditor has also issued demand notice dated 09.07.2021, in

requisite Form-B as required under Rule 7 (1) of the Insolvency and

Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution

Company Appeal (AT) (Ins) No. 1284 of 2022 2 of 27 Process for Personal Guarantors to Corporate Debtor) Rules, 2019 (PG to CD

Rules, 2019), demanding the total outstanding debt of Rs. 358.91 Crore and

it is stated that no reply to this notice was given by the guarantor and

consequently petition under Section 95 of the Code was presented before the

Ld. Adjudicating Authority who after appointment of the RP and after

considering its report as well as after hearing the submission of Ld. Counsel

for the parties admitted the application by passing impugned order which

has been assailed by the appellant by filing the instant appeal.

Submissions of parties

5. Ld. Counsel for the appellant submits that the Ld. Adjudicating

Authority has committed an legality in admitting the petition filed by the

financial creditor on the ground that the petition filed by the PNB under

Section 95 of the IBC was filed during the commencement of the interim

moratorium initiated on the filing of a petition under Section 95 IBC by the

another creditor IFCI being CP (IB) No. 428(ND)/2021 on 02.06.2021 while

the petition by the PNB (Respondent No. 1) was filed on 24.07.2021

therefore the petition filed by the PNBHFL resulting in the impugned order

was a non-est and the impugned order passed thereon is also a nullity.

6. It is further submitted that the entire controversy in the present

matter arises on account of the fact that the PNBHFL petition while file

subsequently was numbered prior to the IFCI Petition and was also listed

prior to the IFCI petition.

7. The PNB petition was listed on 03.08.2021, for the first time and on

the same day the order was reserved and the IFCI petition was first listed on

12.08.2021 before a different Bench of Ld. Adjudicating Authority and

Company Appeal (AT) (Ins) No. 1284 of 2022 3 of 27 thereafter vide order dated 27.08.2021, Ld. Adjudicating authority permitted

the appellant to file the preliminary objection with regard to the

maintainability of the IFCI petition.

8. It is further submitted that on 29.09.2021, the Resolution

Professional was appointed and the said order was challenged by the

appellant before this Appellate Tribunal by filing CA (AT) (Ins) No. 851 of

2021 and during the pendency of this appeal both the petitions i.e. the PNB

petition and IFCI Petition were proceeding before the Ld. Adjudicating

Authority, however before different Benches.

9. It is further submitted that in the impugned judgment it has been

acknowledged that the PNB petition has been filed during the

commencement of the interim moratorium by filing IFCI petition and even

then the application has been accepted which in the light of the law

propounded in Krishna Kumar Basia vs. SBI, CA (AT) (Ins) No. 721 of

2022, decided on 14.07.2022 and the Dilip B. Jiwrajka vs. Union of

India & Ors., (2023) SCC Online SC 1530 could not be passed. Reliance is

also being placed on E.S. Krishnamurthy vs. Bharat Hi-Tecch Builders

Pvt. Ltd., (2022) 3 SCC 161 and Arun Kumar Jagatramka vs. Jindal

Steel and Power Ltd. (2021) 7 SCC 474.

10. It is further submitted that there was no occasion for the Ld.

Adjudicating Authority to have invoked the inherent powers and the usage

of inherent powers cannot be used contrary to the statue or by-passing the

prescribed procedure. Reliance in this regard has been placed on the

following judgments:

Company Appeal (AT) (Ins) No. 1284 of 2022 4 of 27

(i)Lokhandwala Kataria Construction Pvt. Ltd. vs. Nisus Finance &

Investment Manager LLP, 2017 SCC Online NCLAT 406.

(ii)Lokhandwala Kataria Construction Pvt. Ltd. vs. Nisus Finance &

Investment Managers LLP, (2018) 15 SCC 589.

11. It is further submitted that the Ld. Adjudicating Authority has

recorded a finding of fraud on the basis of the material found in the IFCI's

petition i.e. CP (IB) No. 428/2021 which was pending before another Bench

and this material was never put to the appellant and was considered when

the judgment was reserved resulted in the violation of Principles of Natural

Justice and illegality has also been committed by taking judicial notice of

certain facts under Section 56 of the Indian Evidence Act contrary to the

established law. Reliance in this regard has been placed on Atma S. Berar

vs. Mukhtiar Singh (2003) Vol 2 SCC 3 and SBI & Ors. vs. Rajesh

Agarwal and Ors., (2023) 6 SCC 1.

12. It is further submitted that presumption has been made by the Ld.

Adjudicating Authority with regard to the knowledge of the appellant with

regard to the proceedings and orders passed in the petition of IFCI and it is

only the appellant Counsel, while preparing the appeal filed by the appellant

before this Appellate Tribunal, has found the pendency of the IFCI petition

and it was not known to the appellant earlier.

13. It is further submitted that the fullest possible opportunity was

granted by Ld. Adjudicating Authority to advance submission to the

appellant and this fact has been side lined by the Ld. Adjudicating Authority

that prior to the appointment of the RP the appellant has no role in any

petition filed under Section 95 of the Code and therefore he may not be Company Appeal (AT) (Ins) No. 1284 of 2022 5 of 27 responsible for bringing into the cognizance of the Ld. Adjudicating

Authority the fact of pendency of any petition.

14. It is further submitted that Respondent No. 1 has sought to introduce

some new facts which were never argued or pleaded before Ld. Adjudicating

Authority and have also not been dealt with in impugned judgment. Reliance

in this regard has been laid on Modern Insulators Ltd. vs. Oriental

Insurance Company Ltd. (2000) 2 SCC 734 and Karpagathachi and

Ors. vs. Nagarathinathachi, AIR 1965 SC 1752.

15. It is next submitted that the Respondent No. 1 -PNBHFL has not

challenged any finding of the impugned judgment especially the finding that

the IFCI petition was filed prior in time to the petition of the PNB and

therefore cannot dispute the said finding as Respondent. It is a settled

Principle that Appellate Court may not travel beyond the impugned order.

16. It is further submitted that the second petition [CP (IB) No. 395 of

2021] filed by the PNB on 24.07.2021 would relate back to the first petition

[CP (IB) No. 203 of 2021] filed by it and the same was withdrawn with the

liberty to file afresh vide order dated 08.07.2021 and both these petitions

would be treated as separate and independent and in any case the IFCI

petition was filed prior to the PNB's second petition and during the

commencement of the interim moratorium triggered by filing the IFCI

petition.

17. It is further submitted that the Ld. Adjudicating Authority has stepped

out of its jurisdiction in looking into the record of the another case which

was not the subject matter of dispute before it and have completely given go

by to the Principle that interim moratorium triggered by the institution of

Company Appeal (AT) (Ins) No. 1284 of 2022 6 of 27 the petition under Section 95 of the Code shall remain in operation till final

culmination of the petition.

18. It is also submitted that Ld. Adjudicating Authority has also

committed a mistake in relying on email dated 28.07.2021 in order to return

a finding against the appellant while no service was affected on appellant on

28.07.2021 with regard to the IFCI Petition as the said email was not send

on the correct email of the appellant.

19. It is further submitted that the liability of the personal guarantor has

been discharged upon the change of the borrower as vide order dated

19.11.2019 passed by the Haryana Real Estate Authority (HREA) the

liability originally extended to Supertech Ltd. has been transferred to Sarv

Realtors Pvt. Ltd. and thus the impugned judgment is reliable to be set

aside.

20. Ld. Counsel for the Respondent No. 1-PNB Housing Finance Ltd.

submits that conduct of the Appellant guarantor is very important in the

instant matter and IFCI petition. So far as the instant petition CP (IB) No.

395 of 2021 and CP (IB) No. 428 of 2021, it is highlighted that the appellant

appeared in the IFCI Petition namely 428 of 2021 and has made complete

disclosure of the existence and pendency of PNB Petitions proceeding

pending before Ld. Adjudicating Authority and has also disclosed the

existence and pendency of PNB Petition.

21. It is further submitted that in the IFCI Petition the RP informed the

Ld. Adjudicating Authority about its appointment in PNB Petition No. 395 of

2021 and the requirement of filing another report is obviated and the report

filed in PNB Petition- 395 of 2021 was requested to be relied on and this was

Company Appeal (AT) (Ins) No. 1284 of 2022 7 of 27 never objected by the appellant, while the appellant was duty bound to

disclose the other proceedings pending against him.

22. It is also highlighted that appellant has deliberately did not disclose

the existence of the two proceedings before the NCLT and has concealed

material information from the court and has utilised the same as dilatory

tactic.

23. It is also submitted that the conduct of the appellant is derogatory in

intimating the Ld. Adjudicating Authority about the report of the RP filed in

PNB petition 395 of 2021 only on 15.07.2022 while the appeal against the

appointment of the RP in IFCI petition was already filed by the appellant

being CA (AT) (Ins) No. 851 of 2021.

24. It is further submitted that Respondent PNBHFL has initially filed a

Company Petition bearing CP (IB) No. 203 of 2021 on 26.03.2021 wherein

the appellant appeared through Counsel and thus the petition filed by the

IFCI subsequently on 02.06.2021 is itself hit by the interim moratorium

commenced by filing the petition by the PNB on 26.03.2021 and therefore

the petition filed by the IFCI on 02.06.2021 was a non-est petition and may

not cause any interim moratorium thereafter.

25. Ld. Counsel for the Respondent Bank while drawing the attention

towards the report of the Insolvency Law Committee (February, 2020)

submits that the discretion granted to the Ld. Adjudicating Authority for

interim moratorium has been devised as a safeguard from abuse and the

inherent power of the Tribunal would also include the power to modify or

withdraw the order of interim moratorium in preventing an unjustifiable

harm to a creditor. Reliance in this regard has been laid on NUI Pulp and

Company Appeal (AT) (Ins) No. 1284 of 2022 8 of 27 Papers Industries Pvt. Ltd. vs. M/s Roxcel Trading GMBH, CA (AT) (Ins)

No. 664 of 2019.

26. It is further submitted that reliance of the appellant on the judgment

of Krishna Kumar Basia (supra) is of no use as the same has been passed

on 14.07.2022 whereas the RP in the above proceeding was appointed on

29.09.2021.

27. Ld. Counsel for the Respondent Bank also relied on the law laid down

by the Hon'ble Supreme Court in Goan Real Estate and Construction Ltd.

& Ors. vs. Union of Indian (2010) 5 SCC 388 and Managing Director

ECIL Hyderabad and Ors. vs. B Karunakar & Ors. (1993) 4 SCC 727.

Ld. Counsel for Respondent No.2/RP submits that he does not want to make

any submission.

28. We have heard Ld. Counsel for the parties and have perused the

record.

29. Section 95 and 96 of the Code are relevant and are reproduced as

under:

Section 95: Application by creditor to initiate insolvency resolution process.

"(1) A creditor may apply either by himself, or jointly with other creditors, or through a resolution professional to the Adjudicating Authority for initiating an insolvency resolution process under this section by submitting an application.

(2) A creditor may apply under sub-section (1) in relation to any partnership debt owed to him for initiating an insolvency resolution process against--

(a) any one or more partners of the firm; or

(b) the firm.

(3) Where an application has been made against one partner in a firm, any other application against another partner in the same firm shall be presented in or

Company Appeal (AT) (Ins) No. 1284 of 2022 9 of 27 transferred to the Adjudicating Authority in which the first mentioned application is pending for adjudication and such Adjudicating Authority may give such directions for consolidating the proceedings under the applications as it thinks just.

(4) An application under sub-section (1) shall be accompanied with details and documents relating to--

(a) the debts owed by the debtor to the creditor or creditors submitting the application for insolvency resolution process as on the date of application;

(b) the failure by the debtor to pay the debt within a period of fourteen days of the service of the notice of demand; and

(c) relevant evidence of such default or non-repayment of debt.

(5) The creditor shall also provide a copy of the application made under sub-section (1) to the debtor. (6) The application referred to in sub-section (1) shall be in such form and manner and accompanied by such fee as may be prescribed.

(7) The details and documents required to be submitted under sub-section (4) shall be such as may be specified".

Section 96: Interim Moratorium.

(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

(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.

Company Appeal (AT) (Ins) No. 1284 of 2022 10 of 27

30. At this juncture, we recall celebrated Judgment of Hon'ble Supreme

Court passed in Dilip B. Jiwrajka vs. Union of India, (2024) 5 SCC 435

wherein in para no. 10,11,19, 20, 30.4 and 57 the Hon'ble Supreme Court

has highlighted the scheme of Section 96 of the Code in the following words:

"10. Chapter III provides for the insolvency resolution process. Under Chapter III, the insolvency resolution process can be initiated by a debtor or a creditor. Section 94(1) enables a debtor who commits a default to apply, either personally or through a resolution professional to the adjudicating authority for initiating the insolvency resolution process.

11.Section 95 enables the creditor to apply for the initiation of the insolvency resolution process either by himself, or jointly with other creditors or through a resolution professional. Under sub-section (2), a creditor may apply under sub-section (1) in relation to any partnership debt owed to him for initiating a resolution process against any one or more partners of the firm; or the firm. Section 95 (4) stipulates the requirements of an application made by a creditor for the initiation of the insolvency resolution process. The application is governed by the form and manner as prescribed by Rules framed by the Central Government under Section 239. A copy of the application has to be furnished to the debtor. Immediately on the filing of an application under Section 94 or Section 95, an interim moratorium operates by virtue of the statutory provisions of Section 96 and the adjudicating authority is required to appoint a resolution professional.

19.The interim moratorium under Section 96 commences from the application filed under Sections 94 or 95, and ceases to have effect on the date of the admission of the application. Consequently, Section 101 contains provisions for a statutory moratorium with effect from the admission of an application under Section 100.

20. The moratorium remains in force for a period of 180 days or when an order approving the repayment plan is passed, whichever is earlier. The effect of the statutory moratorium is that any pending legal action in respect of the debt is stayed; no new action may be initiated by the creditors in respect of the debt; and the debtor shall not transfer or alienate his assets or legal rights or beneficial interest therein.

Company Appeal (AT) (Ins) No. 1284 of 2022 11 of 27 30.4. The moratorium under Section 96, unlike Section 14, is for the benefit of the guarantor or, as the case may be, the debtor. At the stage of an application under Section 94 or Section 95, no adjudication takes place. The interim moratorium under Section 96 does not impose an embargo on alienation of assets, legal rights or beneficial interest of the debtor. Hence, the moratorium under Part II under Section 14 is markedly different in its nature and character from the interim moratorium under Section 96 in Part III;

57.Section 96, as its marginal note indicates, deals with an "interim moratorium". In terms of Section 96, the interim moratorium takes effect on the date of the application. In other words, the very submission of an application under Section 94 or Section 95 triggers the interim moratorium which then ceases to have effect on the date of the admission of the application (under Section 100). The consequences which flow from an interim moratorium are specified in clause (b) of sub-section (1) of Section 96. The impact of the interim moratorium under Section 96 is that a legal action or proceeding pending in respect of any debt is deemed to have been stayed and the creditors or the debtors shall not initiate any legal action or proceedings in respect of any debt. The crucial words which are used both in clause (b) (i) and clause (b) (ii) of sub-section (1) of Section 96 are "in respect of any debt". These words indicate that the interim moratorium which is intended to operate by the legislature is primarily in respect of a debt as opposed to a debtor. Clause (b) of sub-section (1) indicates that the purpose of the interim moratorium is to restrain the initiation or the continuation of legal action or proceedings against the debt".

31. It is reflected that there is contradiction between the parties with

regard to the date of filing of the CP (IB) -203 (ND) 2021 by the Respondent-

PNB Housing Finance Ltd. (PNBHFL) on 26.03.2021. However, we notice

that the Respondent in written submissions filed by it on 06.07.2023 at

page no. 19 has placed case details obtained from the e-portal of the NCLT

wherein the date of filing of CP (IB) No. 203 of 2021 has been shown as

26.03.2021 and nothing has been placed by the appellant along with his

written submissions which may show that the date of filing of the CP (IB)

Company Appeal (AT) (Ins) No. 1284 of 2022 12 of 27 No. 203 of 2021 was other than 26.03.2021 and in his written submissions

dated 14.04.2026, in para no. 9 of the same it has been stated that the PNB

Housing Finance Ltd. contends for the very first time, the date of filing of CP

IB No. 203 of 2021 against the appellant under Section 95 of the Code as

26.03.2021. In the written submissions filed by the appellant neither the

date of filing of the CP IB No. 203 of 2021 has been specifically denied nor

any documentary evidence has been placed in order to show that the CP IB

No. 203 of 2021 was not filed by the Respondent on 26.03.2021. So we can

safely take the date of filing of CP IB No. 203 of 2021 as 26.03.2021.

32. It is further reflected from the record that on 08.07.2021, the

aforesaid CP IB No. 203 of 2021 was withdrawn by the Respondent and the

following order was passed by the Ld. Adjudicating Authority:

"IA No. 2828/ND/2021:

Learned Counsel for the applicant PNB Housing Finance Ltd. on instructions seeks to withdraw the application. Learned Counsel for the applicant also seeks liberty to file afresh on receiving the documents. Liberty is granted. Application is allowed to be withdrawn with the liberty to file afresh on receiving the documents".

Thus the prayer of the Respondent Bank was allowed so far as withdrawal of

the petition is concerned with the liberty to file it afresh.

33. It is also reflected from the record and also appears to be an admitted

fact that on 02.06.2021 the IFCI, (the other creditor of the CD to which the

appellant had stood guarantor) has filed a petition under Section 95 of the

Code against the appellant and it was on 20.12.2023, Mr. Ritesh Kumar

Agarwal was appointed as the Resolution Professional (RP) therein to submit

a report in terms of Section 99 of the IBC.

Company Appeal (AT) (Ins) No. 1284 of 2022 13 of 27

34. It is further reflected that an appeal being CA (AT) (Ins) No. 151 of

2024, was filed by the appellant-Mohit Arora against the order dated

20.12.2023 passed in CP (IB) No. 428/2021 and vide order dated

05.04.2024 on the submissions made by Ld. Counsel for the Appellant-

Mohit Arora that the Resolution Professional has already been appointed in

CP IB No. 395/ND/2021 filed against the personal guarantor Mohit Arora

on 29.09.2021 allowed the appeal and the order dated 20.12.2023 was set

aside and on the basis of the aforesaid order passed by this Appellate

Tribunal, the Ld. Adjudicating Authority vide order dated 13.06.2024, closed

the CP IB No. 428 of 2021.

35. It may be recalled that after withdrawing the CP IB No. 203 of 2021 on

08.07.2021 with the liberty to file afresh, the PNB filed second petition being

CP IB No. 395 of 2021 on 24.07.2021 against the appellant -Mohit Arora

under Section 95 of the Code and in this petition also the RP was appointed

on 29.09.2021.

36. Thus, the submission of Ld. Counsel for the appellant is that the

second petition under Section 95 of the Code was filed by the Respondent

PNBHFL on 24.07.2021, during the interim moratorium effected with regard

to IFCI petition (428 of 2021) vide Section 96 of the Code and thus the said

petition is not maintainable as having been filed during the moratorium

commenced due to the filing of the aforesaid petition being CP IB No. 428 of

2021 on 02.06.2021 under Section 95 of the Code by IFCI another creditor

of the CD to whom the appellant-Mohit Arora had stood guarantor.

37. Therefore, the first issue which has been raised by Ld. Counsel for the

Appellant is that the second petition being CP IB No. 395 of 2021 has been

Company Appeal (AT) (Ins) No. 1284 of 2022 14 of 27 filed by the Respondent PNBHFL on 24.07.2021 during the interim

moratorium commenced by the filing of the petition CP IB No. 428 of 2021,

on 02.06.2021 by the IFCI and therefore the same is not maintainable.

38. It appears that the first petition under Section 95 of the Code was filed

by the PNB against the appellant bearing CP (IB) No. 203 of 2021 on

26.03.2021 and during the commencement of the interim moratorium under

Section 96 of the Code by the institution of CP IB No. 203 of 2021 the IFCI

has filed its petition being CP IB No. 428 of 2021 on 02.06.2021.

39. It is also reflected that the first petition CP (IB) No. 203 of 2021 filed

by the PNBHFL was withdrawn on 08.07.2021, with the liberty to file the

petition afresh and thereafter it could only be filed on 24.07.2021 and at

that point of time the petition no. 428 of 2021 was filed by the IFCI and

pending and submission is being made on behalf of the appellant that since

the new petition being 395 of 2021 was filed by the PNB during the

pendency of the IFCI petition no. 428 of 2021, allegedly during the interim

moratorium commenced by the filing of IFCI petition, the same is not

maintainable and thus the Ld. Adjudicating Authority has committed an

illegality in admitting the same.

40. It appears to be an admitted fact to both the parties that in the IFCI

petition no. 428 of 2021 the RP was appointed and the appointment of the

RP was challenged by the appellant by filing an appeal before this Appellate

Tribunal and the said appeal was allowed on 05.04.2024 and the order

dated 20.12.2023 whereby the RP was appointed therein was set aside on

the ground that Resolution Professional has already been appointed by the

Tribunal vide order dated 29.09.2021 passed in CP IB No. 395 of

Company Appeal (AT) (Ins) No. 1284 of 2022 15 of 27 2021(second petition filed by the PNB) and in pursuance of the decision of

this Appellate Tribunal dated 05.04.2024 Ld. Adjudicating Authority has

closed the CP IB No. 428 of 2021 filed by the IFCI against the Appellant -

Mohit Arora vide order dated 13.06.2024.

41. It appears to be an admitted situation that the petition no. 428 of

2021 was filed by the IFCI on 02.06.2021. Thus the same was filed during

the pendency of the first petition filed by the PNB being CP IB No. 203 of

2021 which according to us was filed on 26.03.2021. Thus, the petition no.

428 of 2021 filed by the IFCI was filed during the interim moratorium

commenced by the filing of the first petition by the PNB being CP IB No. 203

of 2021 on 26.03.2021. Therefore, in our considered opinion the petition

filed by the IFCI i.e. 428 of 2021 on 02.06.2021 was barred by the interim

moratorium commenced by the filing of the first PNBHFL petition being CP

IB No. 203 of 2021 and thus was non-est in the eye of law and therefore the

non-est petition being CPIB No. 428 of 2021 filed by the IFCI may not

commence any interim moratorium under Section 96 of the Code.

42. The view which has been taken by us herein before is supported by

the decision of a co-ordinate Bench of this Appellate Tribunal in Sushant

Chhabra vs. Catalyst Trusteeship Ltd. and Anr., (2026) ibclaw.in

NCLAT, CA (AT) (Ins) No. 443 of 2026 and 444 of 2026 decided on

27.03.2026 wherein the Canara Bank has filed petitions, CP IB No. 122 of

2025 and 121 of 2025 under section 95 of the Code on 12.01.2025 against

guarantors of the CD and in both these petitions the RP was appointed on

27.02.2025. During the interim moratorium commenced by filing the above

petitions under Section 96 of the Code, another financial creditor of the CD

Company Appeal (AT) (Ins) No. 1284 of 2022 16 of 27 namely Catalyst Trusteeship Ltd. filed another petition under Section 95 of

the Code against the same guarantors being CP IB No. 446 and 450 of 2025

on 05.08.2025 (during the moratorium commenced by the earlier petitions)

and Ld. Adjudicating Authority also appointed RP in these petitions on

23.09.2025. The Canara Bank however withdrawn the two petitions filed by

it against the same guarantors on 10.11.2025, while having considered the

report of the RP Ld. Adjudicating Authority admitted the petitions filed by

the Catalyst Trusteeship Ltd. on 17.02.2026 and this order was challenged

by the guarantors by filing the appeal before this Appellate Tribunal,

wherein the Respondent Bank has taken the plea that since the earlier

petitions filed by the Canara Bank were withdrawn subsequently, the same

will not create any bar for the admission of the subsequent petitions filed by

Catalyst Trusteeship Ltd., during interim moratorium commenced by the

petitions filed by the Canara Bank. The co-ordinate Bench of this Appellate

Tribunal while allowing the appeal filed by the guarantors, repelled this

argument of the Respondent in following words:

"23. From the facts noted above, it is clear that although on the date when Section 95 application was filed by the Catalyst Trusteeship Ltd. against the Appellant herein on 05.08.2025, interim moratorium was already operating in Section 95 application filed Canara Bank against the Appellant. The judgment referred above, clearly prohibit any such institution. The distinguishing feature, which Respondent is contending herein is that even though application was filed by Canara Bank, prior in time and moratorium had triggered, but the application having been withdrawn on 10.11.2025, there was no inhibition in admitting Section 95 application filed by Financial Creditor against the Appellants herein. The real question to be considered and answered is whether due to withdrawal of Section 95 application by Canara Bank, the prohibition which triggered due to interim moratorium shall come to an end. When application under Section 95 filed by Canara Bank was withdrawn on 10.11.2025, admittedly

Company Appeal (AT) (Ins) No. 1284 of 2022 17 of 27 moratorium came to an end and there was no prohibition and the interim moratorium no longer existed, but what is the consequence of withdrawal of Section 95 application on 10.11.2025 on the moratorium, which was in operation on 05.08.2025, when Section 95 application filed by Catalyst Trusteeship Ltd. against the Appellants.

24. The statutory moratorium which has triggered on 12.01.2025, continued to operate till 10.11.2025 when application filed by Canara Bank was withdrawn. Section 101 of the IBC provides that when application under Section 100 is admitted, a moratorium shall commence, which shall cease to have effect at the end of period of 180 days. Thus, moratorium comes to an end on the day when application is admitted or rejected. The interim moratorium which commences on filing an application, is a statutory moratorium provided by enactment. During the interim moratorium various actions are prohibited as enumerated in Section 96, sub-section (1). The statutory interim moratorium which triggered in Section 96, shall come to an end only when application under Section 95 is either rejected or admitted. The interim moratorium in Section 96 has statutory consequences, which interim moratorium although shall come to an end when application is either dismissed or admitted or withdrawn, but during the period when interim moratorium is operating, any initiation of proceeding shall be non-est in law. The Hon'ble Supreme Court in Alchemist Asset Reconstruction Company Ltd. in Paragraph-6 has clearly held that after enforcement of moratorium under Section 14 of the IBC, any arbitration proceeding initiated is non-est in law. Thus, the proceeding, which was initiated by Financial Creditor during the currency of interim moratorium, were non-est from the very beginning, cannot become legal proceeding after interim moratorium is withdrawn on 10.11.2025. Personal Guarantors before the Adjudicating Authority has raised the issue that application is not maintainable. In the reply filed to Section 95 application, the Personal Guarantors has relied on Section 95 application filed by the Canara Bank. The Adjudicating Authority observed that Personal Guarantors has not filed reply to the report under Section 99, and they have only filed reply to Section 95 application. When the Personal Guarantors has raised objection to the application and has pointed out that earlier application under Section 95 by the Canara Bank has already been filed, which was noticed by Adjudicating Authority to be withdrawn on 10.11.2025, the Adjudicating Authority committed error in not considering the effect and consequences of triggering of interim moratorium on filing of the application by the Canara Bank

Company Appeal (AT) (Ins) No. 1284 of 2022 18 of 27 and the effect of the said moratorium on the application filed by Catalyst Trusteeship Ltd. on 05.08.2025. We, thus, are of the view that order of the Adjudicating Authority admitting Section 95 application cannot be sustained.

25. In result, both the Appeals are allowed. The impugned order dated 17.02.2026 is set aside. Section 95 applications filed by Catalyst Trusteeship Ltd. being CP(IB)450/ND/2025 and CP(IB)446/ND/2025 are dismissed. We, however, grant liberty to the Financial Creditor to file fresh applications under Section 95 in accordance with law, since interim moratorium, which was operating on the day when Section 95 application filed by Catalyst Trusteeship Ltd. is no longer existed after 10.11.2025. Parties shall bear their own costs.

43. The facts of the aforesaid Sushant Chhabra's case are identical with

the facts of the instant case and therefore in our considered opinion when

the IFCI petition being CP IB No. 428 of 2021 was filed on 02.06.2021

during the interim moratorium commenced by the filing of the petition by

the PNB being 203 of 2021 the petition filed by the IFCI on 02.06.2021

would be deemed to be non-est in the eye of law and therefore cannot

commence any interim moratorium. Therefore, we do not find any force in

the submissions of Ld. Counsel for the Appellant that the second petition

filed by the PNB CP IB No. 395 of 2021 on 24.07.2021 is barred by the

interim moratorium of CP IB No. 428 of 2021, for the reason that CP IB No.

428 of 2021 is/was non-est in the eye of law and could not commence any

interim moratorium.

44. The other submissions which has been raised by the appellants is

that the liability of the appellant -guarantors is discharged upon change of

the borrower. It is submitted by Ld. Counsel for the Appellant that vide

order dated 29.11.2019 passed by Haryana Real Estate Regulatory Authority

(HRERA), the underlying liability originally extended to Supertech Ltd. has

Company Appeal (AT) (Ins) No. 1284 of 2022 19 of 27 been transferred to Sarv Realtors Pvt. Ltd., altering the identity of the

borrower itself and Respondent Bank has also altered the borrowing entity

from Supertech to M/s. Sarv Realtor Pvt. Ltd. and therefore having regard to

Section 133 of the Contract Act, substitution of borrower has rendered the

guarantee unenforceable against the appellants.

45. Ld. Counsel for the Respondent PNB Housing finance on the other

hand submits that M/s Supertech Ltd. along with M/s Sarv Realtors Pvt.

Ltd. and M/s ASP Sarin Realty Pvt. Ltd. had entered into a joint

development agreement to develop the Project Supertech hues in Gurugram

Haryana. M/s Supertech Ltd. was the promoter developer whereas Sarv

Realtor was the land owner/licensee and was also responsible for

development and marketing of the said project and these three companies

are associate companies with Supertech having 49% shareholding in Sarv

Realtors and these three companies had jointly approached PNB Housing

Finance Ltd. for availing finance loan of Rs. 275 Crores for development of

this project and three borrowers have signed the sanctioned letter and

thereafter a loan agreement was executed on 10.03.2017 between the PNB

and these three borrowers and all these three borrowers have been referred

to in this loan agreement as borrower no. 1,2 and 3.

46. It is further submitted that appellant Mohit Arora executed a deed of

guarantee on 10.03.2017 wherein the name of Sarv Realtors has been

shown as co borrower along with M/s Supertech Ltd. and M/s ASP Sarin

Pvt. Ltd. and recital no. 3 of this deed states that at the request of the

guarantor the PNB has agreed to make disbursement to the borrowers and

further states that the liability of the guarantor under this guarantee shall

Company Appeal (AT) (Ins) No. 1284 of 2022 20 of 27 not be affected by any change in the constitution of borrowers and the same

shall be continuing one and shall remain in full force and affect till such

time the borrower repays in full the loan.

47. Having considered the loan agreement as well as the guarantee deed

executed by the Principal Borrowers and Guarantors it is crystal clear that

Sarv Realtors Pvt. Ltd. whose name has been changed under the orders of

the HRERA was a co-borrower of the loan and the appellant guarantor-

Mohit Arora had stood guarantor to the loan jointly taken by all the

borrowers namely Supertech, Sarv Realtors Pvt. Ltd. and ASP Sarin and

since the liability of the Principal borrower and guarantor is co-extensive

and the loan has not been paid by the Principal Borrowers the liability to

pay that loan would always be of the guarantors.

48. Ld. Counsel for the Appellant has vehemently submitted that there

was no occasion for the Tribunal to have looked into the record of the CP IB

No. 428 of 2021 without providing any opportunity to the appellant to

address on the same and moreover there was no jurisdiction vested in the

adjudicating authority to have used the inherent powers vested in it and

there was absolutely no material concealment made or fraud played by the

appellant and the Ld. Adjudicating Authority has committed an illegality in

returning the finding of fraud against the appellant without providing any

opportunity to him to defend the said charge.

49. Ld. Counsel for the appellant in support of his submissions has relied

on the following case laws:

(i)Mr. Ravi Ajit Kulkarni vs. State Bank of India, CA (AT) (Ins) No. 316 of

2021.

Company Appeal (AT) (Ins) No. 1284 of 2022 21 of 27

(ii)Krishna Kumar Basia vs. State Bank of India, CA (AT) (Ins) No. 721 of

2022.

(iii)Lokhandwala Kataria Construction Pvt. Ltd. vs. Nisus Finance &

Investment Manager LLP, 2017 SCC Online NCLAT 406.

(iv)Lokhandwala Kataria Construction Pvt. Ltd. vs. Nisus Finance &

Investment Managers LLP, (2018) 15 SCC 589.

(v)E.S. Krishnamurthy vs. Bharath Hi-Tecch Builders (P) Ltd., (2022) 3 SCC

161.

(vi) Arun Kumar Jagatramka v. Jindal Steel & Power Ltd., (2021) 7 SCC 474.

(vii) Dharani Sugar & Chemicals Ltd. vs. Union of India, (2019) 5 SCC 480.

(viii)Arjun Singh vs. Mohindra Kumar & Ors., (1964) 5 SCR 946.

(ix) Manohar Lal Chopra vs. Rai Bahadur Rao Raja Seth Hiralal, AIR 1962

SC 527.

(x) Harish Raghavji Patel vs. Shapoorji Pallonji Finance Pvt. Ltd., CA (AT)

(Ins) No. 391 of 2021.

50. Ld. Counsel for the Respondent on the other hand submits that on

filing petition no. 428 of 2021 on 02.06.2021 the IFCI had served a copy of

the said petition on Mr. Mohit Arora vide email dated 28.07.2021

subsequently the second petition filed by the PNBHFL No. 395 of 2021 was

filed and listed on 03.08.2021 before the Bench No. -II of NCLT wherein the

appellant had appeared and despite being aware of the IFCI petition he did

not disclose the pendency of the same and even in the written submissions Company Appeal (AT) (Ins) No. 1284 of 2022 22 of 27 filed by Appellant on 06.08.2021 in the PNBHFL petition this fact of filing

petition by the IFCI was not taken and thereafter on 07.08.2021 an

application was filed by the appellant to keep in abeyance the

pronouncement of order by Ld. Adjudicating Authority.

51. It is further submitted that on 27.08.2021, Mr. Mohit Arora appears

in IFCI matter before Bench No. -IV of the NCLT and at that point of time

also did not disclose the pendency of PNBHFL petition while the Counsel

appearing for the appellant in both the petitions i.e. IFCI and PNBHFL were

one and same.

52. It is further highlighted that even on 08.10.2021, in the IFCI petition

the Counsel appearing for RP submitted report in presence of the appellant

against the same personal guarantor in PNBHFL petition which was pending

before Bench No. II of the NCLT and therefore the requirement of filing

another report was obviated therefore the appellant being aware of the

pendency of the IFCI petition concealed it from the Ld. Adjudicating

Authority and on one hand has get the petition filed by the IFCI dismissed

by this Appellate Tribunal by submitting that the RP has already been

appointed in petition no. 395 of 2021 (the second petition filed by the

PNBHFL) and thereafter taken a defence before the Ld. Adjudicating

Authority that petition no. 395 of 2021 is also not maintainable in view of

the fact that the same has been filed during the interim moratorium

commenced by the petition no. 428 of 2021 filed by IFCI, rendering the

financial creditors without any remedy.

53. We have considered the rival submissions made by Ld. Counsel for

the parties and have also perused the findings given by the Ld. Adjudicating

Company Appeal (AT) (Ins) No. 1284 of 2022 23 of 27 Authority pertaining to the concealment of fact and alleged fraud committed

by the appellant and we find that the Ld. Adjudicating Authority has noted

sequence of events in paragraph no. 10,11, 12 and 13 of the impugned

judgment and found that the instant case is of the material concealment of

facts by the Respondent/Personal Guarantor (appellant before us) regarding

pendency of Section 95 proceedings against him by another creditor in

another Bench of the Tribunal which has led to the appointment of RP in the

petition which was filed subsequently and thereafter by looking into the

record of petition no. 428 of 2021 find that the race between filing of two

applications has given rise to this issue and it is in the light of these facts

and circumstances, it was opined by Ld. Adjudicating Authority that misuse

of the process of IBC, in registering of one application before another,

cannot be allowed to be used as a ground by the Respondent/Personal

Guarantor to avoid the insolvency proceedings and thereafter in paragraph

no. 16,17 and 18 of the impugned judgment has opined as under:

"16. Thus, it is a trite law that the fraud vitiates all the judicial acts and the 'interim moratorium' is no exception. The initiation of moratorium is an automatic effect of the provision in the statute which triggers instantly on mere filing of an application under Section 94 or 95, as the case may be. As per the scheme of the Code, there is no judicial order required for initiation of interim moratorium. Further, no express power has been given by the Legislature to monitor the interim moratorium before admission or on rejection of the Application. However, here it is a situation, where the interim moratorium is tainted with Fraud and is being utilized by the Personal Guarantor to dodge the Adjudicating Process.

17. It is to stop such abuse of process of law, this Adjudicating Authority has been empowered with "Inherent Powers" under Rule 11 of the NCLT Rules 2016. The contents of Rule 11 of NCLT Rules of 2016 are reproduced below -

Company Appeal (AT) (Ins) No. 1284 of 2022 24 of 27 "11. Inherent Powers. - Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal."

(Emphasis placed)

18. Hence, in order to prevent the effect of the abuse and for meeting the ends of justice, we consider it appropriate to exercise our inherent power under Rule 11 of NCLT Rules 2016 and treat the interim moratorium triggered by virtue of filing of IB 428 / 2021, which got vitiated by fraud by the Personal Guarantor, as nullity".

54. What is reflected from the perusal of the aforesaid paragraphs and

discussion made by the Ld. Adjudicating Authority therein is that in order to

prevent the effect of the abuse and for the purpose of meeting the ends of

justice the power under Rule 11 of the NCLT Rules, 2016 has been used by

the Ld. Adjudicating Authority and as a general rule it has been noticed that

the fraud vitiates all the judicial acts and the interim moratorium is not an

exception.

55. We are of the considered view that the finding returned by the Ld.

Adjudicating authority against the appellant is pertaining to the abuse of the

process and of material concealment of facts which in our opinion also is

evident on record. So far as the act of the Ld. Adjudicating Authority in

looking into the record of another petition is concerned we do not find any

illegality therein as well.

56. No litigant could be permitted to play hide and seek with the Courts

and who so ever is coming before the Court of law is duty bound to disclose

all the material facts which are in his or her knowledge and the act of the

appellant in not informing the Tribunal with regard to the pendency of the

IFCI petition certainly amounts to the abuse of the process and material

Company Appeal (AT) (Ins) No. 1284 of 2022 25 of 27 concealment of fact, if not fraud. What the appellant has done is that he got

the petition filed by the IFCI dismissed on the ground that RP has already

been appointed in the second petition of PNBHFL pertaining to which

impugned order has been passed and now coming up with the plea that

second petition by PNBHFL has been filed during the interim moratorium

commenced by filing the petition of IFCI and by this, his attempt is also to

get the instant petition dismissed on the ground that PNBHFL second

petition 395 of 2021 has been filed during the interim moratorium

commenced by filing of petition no. 428 of 2021 by IFCI. Certainly both

petitions could not be dismissed on the score that they have been filed

during the interim moratorium created by each other. Thus it was a perfect

case, where tribunal must have used inherent powers to correct the mischief

committed by appellant.

57. Since we in this judgment had categorically held that the petition

filed by the IFCI being 428 of 2021 was filed during the interim moratorium

commenced by the filing of the first petition of the PNBHFL i.e. 203 of 2021

and have found the petition of the IFCI being 428 of 2021 as non-est and

also that this may not cause any interim moratorium, so as to hold the

second petition of the PNBHFL i.e. 395 of 2021 barred, the issue of using of

inherent powers by the Ld. Adjudicating Authority is purely of academic

importance as in our considered view the petition no. 428 of 2021 filed by

the IFCI cannot commence any interim moratorium being non-est in the eye

of law. We do not want to go in-depth of the other minor issues highlighted

by the appellant as in our considered view in the facts and circumstances of

this case apart from the grounds mentioned by the Ld. Adjudicating

Company Appeal (AT) (Ins) No. 1284 of 2022 26 of 27 Authority in the impugned order the second petition filed by the PNBHFL

(395 of 2021) is/was maintainable for the reasons given by us herein before

and is not barred by any interim moratorium.

58. Keeping in view all the facts and circumstances of the case and the

reasons mentioned herein before we do not find any illegality in the

impugned judgment dated 11.10.2022 so far as the admission of the second

petition filed by the PNBHFL (395 of 2021) is concerned and there appears

no good grounds to interfere therein.

59. Resultantly, the appeal is devoid of merits, and is dismissed as such.

60. There is no order as to costs.

61. Pending IA's if any are also closed.

[Justice Mohd. Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical) New Delhi.

29.04.2026.

sr

Company Appeal (AT) (Ins) No. 1284 of 2022 27 of 27