Pooja Ramesh Singh vs Jammu And Kashmir Bank Limited And Anr

Comp. App. (AT) (Ins) No. 1808 of 2024 & I.A. No. 6593 of 2024

IN THE MATTER OF:

Pooja Ramesh Singh ...Appellant

Versus

Jammu and Kashmir Bank Ltd. & Anr. ...Respondents

Present:

For Appellant : Mr. Gautam Narayan, Mr. Vishesh Kalra, Ms. Smriti Churiwal & Mr. Jaiveer Kant, Advocates.

For Respondents : Mr. Sumesh Dhawan, Mr. Jaskaran S. Bhatia, Mr. Shaurya Shyam, for R-1.

JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal is filed by the suspended director of the Corporate Debtor,

namely, Essel Infraprojects Ltd. (for short 'EIL') against the order dated

28.08.2024 passed in RCP No. 06/IB/MB-V/2023 connected with CP No.

361/IB/2022 by which an application filed by the Financial Creditor, namely,

Jammu and Kashmir Bank Ltd. under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (for short 'Code') against the CD/(EIL) for the

resolution of a debt of Rs. 87,43,17,925.37/- inclusive of contractual interest,

penal interest, costs and expenses, has been admitted and Hemant J Mehta

was appointed as the Interim Resolution Professional (for short 'IRP').

2. The present appeal came up for preliminary hearing on 13.09.2024.

This court while issuing notice in this appeal also directed that "In the 2

meantime, no further steps shall be taken in pursuance of the Impugned

Order dated 28.08.2024.".

3. Brief facts of this case are that the Financial Creditor sanctioned a

long term working facility of Rs. 200 Cr. to Pan India Utilities Distribution

Company Ltd. (PIUDCL) on 17.12.2013. The loan to PIUDCL was secured

by a corporate guarantee given by the CD with mortgage over land measuring

196.16 acres, located in Gorai Village, Borivali (West), Mumbai, owned by

the CD. The loan agreement was executed on 27.12.2013 after formalizing

the security arrangements. The CD executed deed of mortgage in favour of

the Financial Creditor. The loan was renewed on 18.11.2017 through a

renewal cum reduction letter.

4. The Borrower, namely, PIUDCL defaulted in repayment of instalments

agreed to by it by the loan agreement dated 27.12.2013/ sanction letter dated

17.12.2013.

5. The Financial Creditor claimed the default by the CD of debt of Rs.

69,97,71,800.00/- as on 01.03.2019 with interest Rs. 17,36,47,021.00/-

calculated @ 2.55% p.a with monthly rest plus 2% penal interest (effective

12.20% p.a.) as on 30.06.2020 with legal expenses and other charges of Rs.

9,99,104,005.

6. The Financial Creditor sent a demand notice to PIUDCL dated

31.01.2019 and 02.03.2019 intimating that the credit facility granted to

the CD has been matured on 28.12.2018 and principal amount of Rs. 70 Cr.

is outstanding which is required to be repaid.

3

7. In reply to the said notice dated 31.01.2019, PIUDCL, vide its reply

dated 05.03.2019, admitted the debt and default and requested for further

time to repay the same raising the issue of liquidity.

8. The Financial Creditor issued a letter on 29.10.2019 to the Corporate

guarantor /CD qua repayment of outstanding loan as per his obligation but

no reply was received.

9. The Company Petition No. 543 of 2021 came to be filed by State Bank

of India against the CD who had issued corporate guarantee which was

admitted into CIRP on 01.03.2023. Subsequently, the present FC filed CP

(IB) No. 361/MB/2019 against the same CD but this petition was dismissed

on 01.03.2023 because the CD was already facing CIRP in CP (IB) No. 543

of 2021. However, the order of admission passed in CP (IB) No. 543 of 2021

was set aside in appeal, therefore, an application for restoration was filed

for restoring CP (IB) No. 361/MB/2019 which was allowed on 02.11.2023,

therefore, the present petition has been numbered as RCP No. 06/IB/MB-

V/2023 connected with CP No. 361/IB/2019.

10. The CD did not dispute the existence of debt and default but it claimed

that its liabilities have been transferred to another company due to a scheme

of demerger and a subsequent scheme of amalgamation. The CD entered

into a scheme of demerger where a specific asset (Gorai Land) and its

related project were transferred to Essel Urban Infraprjects Ltd. (for short

'EUIL') and the remaining assets and business of the CD remained with it.

The demerger was approved by the Bombay High Court on 04.04.2014. EUIL

merged with Pan India Infraprojects Pvt. Ltd. (for Short 'PIIPL') by scheme

of amalgamation because of which all assets and labilities of the EUIL 4

including Gorai land were transferred to PIIPL. This merger was approved

by the Bombay High Court on 20.06.2014.

11. It is the case of the CD that all its liabilities including the liability under

a corporate guarantee were transferred to EUIL and then to PIIPL, therefore,

it has no longer having any liability for the debt. It was also the case of the

CD that renewed sanctioned letter dated 18.11.2017 has not mentioned the

guarantee, therefore, it should be considered as relinquished or

extinguished.

12. The Tribunal did not accept the contention of the CD and while referring

to the decisions of the Hon'ble Apex Court in the case of State Bank of

India Vs. M/s Shree Ram Urban Infrastructure Ltd., 2020 SCC OnLIne SC

341, Everest Kento Cylinders Ltd. Vs. Union of India (2015) 2 SCC 1, ICICI

Bank Ltd. Vs. Urban Infrastructure Real Estate Ltd., (2019) 16 SCC 528,

V.S Dempo & Co. Ltd. Vs. Reliance Communications Ltd., (2021) 10 SCC

176, Canara Bank Vs. N.G. Subbaraya Setty & Anr., (2018) 16 SCC 228 and

Sarbjit Singh Vs. Union Bank of India, (2022) 7 SCC 464 held that the

guarantee given by the CD shall still exist and will not be effected where the

two orders referred to herein above passed by the Bombay High Court and

admitted the petition because debt and default was not denied.

13. Aggrieved against the order impugned herein, the present appeal has

been preferred under Section 61 of the Code.

14. Counsel for the Appellant has not disputed the facts narrated herein

before about the loan advanced by the Financial Creditor to the principal

borrower and the guarantee given by the CD besides executing a mortgage

deed of the immovable property. There is no dispute that there was renewed 5

sanctioned letter dated 18.11.2017 and that an order of scheme of

demerger entered into by the CD by which it transferred mortgaged land

and its related project to EUIL and the said scheme was approved by the

Hon'ble Bombay High Court on 04.04.2014 and that EUIL was merged with

PIIPL through scheme of amalgamation approved by the Bombay High

court on 20.06.2014. All that has been argued before this Court is that the

scheme before the said orders passed by the Hon'ble Bombay High court

are binding on all creditors including the financial creditor/Respondent No.

1. However, there is a provision in the guarantee deed in the nature of clause

8 which says that "this guarantee shall not be determined and not in any

way prejudiced by any absorption or by any amalgamation of the guarantor

company with any other company, shall incur and be available to the Bank

till such time the loan accounts of the borrower company is adjusted in

the books of accounts of the bank." In this regard, Counsel for the Appellant

has submitted that once the liability of the CD was transferred, it cannot

be pushed into CIRP on account of debt and default. It is also submitted that

schemes approved by the Hon'ble Bombay High Court on 04.04.2014 and

20.06.2014 were not challenged and had attained finality. Counsel for the

Appellant has further submitted that clause of the renewed sanctioned letter

dated 18.11.2017 provides that all other existing terms and conditions

remain applicable, would mean that other than the conditions modified by

the 2017 sanction letter, the subsisting conditions of the 2013 sanction

letter would remain the same. It is further submitted that 2013 sanction

letter was replaced by the 2017 sanction letter which is different from the

earlier one. 2013 sanction letter was for 200 Cr. whereas 2017 sanction letter 6

was reduced to Rs. 130 Cr.. In the 2013 sanction letter, the mortgagor and

guarantor was CD/EIL whereas in 2017 sanction letter the mortgagor and

guarantor was PIIPL. It is submitted that on the date of filing of Section 7

petition, the operative sanction letter was the 2017 whereas debt has been

claimed on the basis of the sanction letter 2013.

15. On the other hand, Counsel for the Financial Creditor, while

vehemently opposing the present appeal, has submitted that the loan

sanctioned in 2013 of an amount of Rs. 200 Cr. was secured by mortgage

of land measuring 196.16 acres and a corporate guarantee issued by the CD

in its favour. It is further submitted that the order of Hon'ble Bombay High

Court dated 04.04.2014 approving the scheme of demerger of EIL was in

respect project land (demerged undertaking) which was transferred to

another group entity, namely, EUIPL. It is submitted that the scheme of

demerger clearly states that all assets and liabilities pertaining to the

demerged undertaking stands transferred as per the scheme means the

development, operation and maintenance of a facility centre to be

established in the Gorai Region being the development and maintenance of

the land mortgaged by the CD to the FC. It is submitted that it was only an

asset which was demerged from the CD whereas clause 8 clearly provided

that it shall not be affected by any amalgamation or absorption of the

guarantor company. It is also submitted that in revised sanction which was

pertaining to Rs. 130 Cr. it was clearly stipulated that all other existing

terms and conditions shall remain applicable which include clause 8 of the

earlier guarantee deed. Counsel for the Respondent has also submitted that

PIUDCL vide its letter dated 12.12.2017 addressed to FC unequivocally 7

acknowledged the continued subsistence of the Corporate guarantee issued

by CD despite intervening scheme of demerger/merger and requested for the

release of guarantee given by the CD. It is also submitted that corporate

guarantee executed by the CD never stood transferred/discharged under the

scheme of demerger and merger because in its letter dated 12.12.2017,

three years after the merger, request was made to the Respondent No. 1 to

release the guarantee given by the CD. It is further argued that the CD

has failed to bring on record a single letter from the Bank by which it

had discharged the guarantee given by the CD which cannot be accepted

on inference and the corporate guarantee cannot be unilaterally revoked or

assigned to another entity without the express consent of the FC. In the end,

it is submitted that corporate guarantee is an independent contract and

remains valid despite the restructuring and it cannot be linked to the Gorai

project.

16. We have heard Counsel for the parties and perused the record with

their able assistance.

17. We need not reproduce the facts again as to how the relationship of

the FC and the CD came into being but suffice it to say that for the purpose

of securing the loan advanced to the principal borrower, CD/EIL had

executed the guarantee deed as well as the mortgage deed. There were internal

adjustment by the Essl group by way of demerger/merger/amalgamation but

it has no effect in so far as the liability of the CD as the corporate guarantor

is concerned because it has been categorically mentioned in clause 8 of the

guarantee deed which has already been noticed in the early part of this order. 8

18. There is no substance in the argument of the Appellant about the

discharge of its liability after execution of the revised sanction on 18.11.2017

because it has specifically been mentioned that all other existing terms and

conditions remain applicable which include clause 8 of the guarantee deed.

19. Moreover, there is no evidence brought on record by the CD that at

any point of time the liability of the CD as a corporate guarantor was

discharged by the FC rather by letter dated 12.12.2017 which was written

by the principal borrower to the FC, requests has been made to release the

guarantee of the CD which means that post renewal of sanction letter dated

18.11.2017 the guarantee was continuing and there is no evidence brought

on record by the CD that the guarantee given by the CD was ever

discharged by the FC.

20. Thus, in view of the aforesaid facts and circumstances, we do not find

error in the impugned order which calls for any interference in this appeal,

therefore, the same is hereby dismissed though without any order as to

costs. I.As, if any, pending is/are hereby closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical) New Delhi 11th September, 2025.

Sheetal