Oriental Bank Of Commerce vs Helios Photo Voltaic Ltd

IN THE MATTER OF: Punjab National Bank ...Appellant Versus Helios Photo Voltaic Ltd. ...Respondent Present: For Appellant : None For Respondent : Mr. Alok Dhir and Mr. Karan Grover, Advocates ORDER (ORAL)

(Per: Justice Rakesh Kumar Jain) 04.08.2022: This Appeal has been filed against the order dated

10.10.2019 passed by the National Company Law Tribunal, Principal Bench

at New Delhi by which an application filed by the Appellant under Section 7

of the Insolvency & Bankruptcy Code, 2016 (in short 'Code') read with Rule 4

of the NCLT Rules, 2016 (in short 'The Rules') was dismissed, solely on the

ground that the Appellant could not have moved the application both against

the Corporate Debtor and the Corporate Guarantor and in this regard, the

Learned Tribunal has placed reliance upon a decision of this Tribunal

rendered in the case of Dr. Vishnu Kumar Agarwal Vs. M/s Piramal

Enterprises Ltd. in Company Appeal (AT) (Insolvency) No. 346 of 2018 decided

on 08.01.2019 by this Appellate Tribunal in which it was held that:

"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 Guarantors' or one 'Corporate Guarantor' and other 'Corporate Guarantor'), till it is shown that the 'Corporate Debtors' combinedly are joint venture company."

This is not in dispute that in a recent decision by this Tribunal, the

decision rendered earlier in the case of M/s Piramal Enterprises Ltd. (supra)

has been held as not a correct law in the case of the State Bank of India Vs.

Athena Energy Ventures Pvt. Ltd., CA (AT) (Ins) No. 633 of 2020 decided on

24.11.2020 in which the following observations have been made:

"19. It is clear that in the matter of guarantee, CIRP can proceed against Principal Borrower as well as Guarantor. The law as laid down by the Hon'ble High Courts for the respective jurisdictions, and law as laid down by the Hon'ble Supreme Court for the whole country is binding. In the matter of Piramal, the Bench of this Appellate Tribunal "interpreted" the law. Ordinarily, we would respect and adopt the interpretation but for the reasons discussed above, we are unable to interpret the law in the manner it was interpreted in the matter of Piramal. For such reasons, we are unable to uphold the Judgement as passed by the Adjudicating Authority"

Company Appeal (AT) (Insolvency) No. 1293 of 2019 2 of 5 The Hon'ble Supreme Court in the case of Lalit Kumar Jain Vs. Union

of India & Ors. in Transferred Case (Civil) No. 245 of 2020, has categorially

observed that the proceedings against the Principal Borrower and Corporate

Guarantor can be simultaneously initiated before the NCLT. The relevant

observation reproduced as under:

"83. The amendment of 2018 also altered Section 60 in that insolvency and bankruptcy processes relating to liquidation and bankruptcy in respect of three categories, i.e. corporate debtors, corporate guarantors of corporate debtors and personal guarantors to corporate debtors were to be considered by the same forum, i.e. NCLT.

92. As noticed earlier, Section 60 had previously, under the original Code, designated the NCLT as the adjudicating authority in relation to two categories: corporate debtors and personal guarantors to corporate debtors. The 2018 amendment added another category: corporate guarantors to corporate debtors. The amendment seen in the background of the report, as indeed the scheme of the Code (i.e., Section 2 (e), Section 5 (22), Section 29A, and Section 60), clearly show that all matters that were likely to impact, or have a bearing on a corporate debtor's insolvency process, were sought to be clubbed together and brought before the same forum. Section 5 (22) which is found in Part II (insolvency process provisions in respect of corporate debtors) as it was originally, defined personal guarantor to say that it "means an individual who is the surety in a contract of guarantee to a corporate debtor."

95. The impugned notification authorises the Central Government and the Board to frame rules and regulations on how to allow the pending actions against a personal guarantor

Company Appeal (AT) (Insolvency) No. 1293 of 2019 3 of 5 to a corporate debtor before the Adjudicating Authority. The intent of the notification, facially, is to allow for pending proceedings to be adjudicated in terms of the Code. Section 243, which provides for the repeal of the personal insolvency laws has not as yet been notified. Section 60(2) prescribes that in the event of an ongoing resolution process or liquidation process against a corporate debtor, an application for resolution process or bankruptcy of the personal guarantor to the corporate debtor shall be filed with the concerned NCLT seized of the resolution process or liquidation. Therefore, the Adjudicating Authority for personal guarantors will be the NCLT, if a parallel resolution process or liquidation process is pending in respect of a corporate debtor for whom the guarantee is given. The same logic prevails, under Section 60(3), when any insolvency or bankruptcy proceeding pending against the personal guarantor in a court or tribunal and a resolution process or liquidation is initiated against the corporate debtor. Thus if A, an individual is the subject of a resolution process before the DRT and he has furnished a personal guarantee for a debt owed by a company B, in the event a resolution process is initiated against B in an NCLT, the provision results in transferring the proceedings going on against A in the DRT to NCLT.

111. In view of the above discussion, it is held that approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee. As held by this court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract."

Company Appeal (AT) (Insolvency) No. 1293 of 2019 4 of 5 Moreover there is an amendment in Section 60(2) of the Code by Act of

26 of 2018 w.e.f. 06.06.2018 and after the amendment Section 60(2) read as

under:

"60(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 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."

This issue has also been decided in TUF Metallurgical Pvt. Ltd. Vs.

Wadhwa Glass Processors Pvt. Ltd., CA (AT)(Ins) No. 611 of 2019 decided on

21.07.2022. Thus, in view thereof, the present Appeal is allowed. Impugned

order dated 10.10.2019 is set aside. The matter is remanded back to the

National Company Law Tribunal, Principal Bench at New Delhi to consider

and decide the Application under Section 7 of the Code on other issues. The

parties are directed to appear before the Tribunal on 1st September, 2022.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical)

[Dr. Alok Srivastava] Member (Technical) pks/rr

Company Appeal (AT) (Insolvency) No. 1293 of 2019 5 of 5