Posco-India Pune Processingh Center ... vs Dhaval Jitendrakumar Mistry And Anr

MR. DHAVAL JITENDRA KUMAR MISTRY Resolution Professional, M/s Poggenamp Nagarsheth Powertonics Pvt. Ltd. 9-B, Vardan Complex, Near Vimal House, Lakudi Circle, Navrangpura, Ahmadabad, Gujarat, 380014 ...Respondent No. 1

CONSORTIUM OF "MR. GAUTTAM NIPINBHAI NAGARSHETH" AND "MR. GAURANG NIPINBHAI NAGARSHETH" C-1/B 4402, PH-IV GIDC Estatevatva, Ahmedabad - 382445 ...Respondent No. 2

UCO BANK Gandhinagar Branch Plot No. 445, Near HDFC Bank, GH-5, Near Petrol Pump, Sector 16, Gandhinagar, Gujarat - 382016 gangar@ucobank.co.in ...Respondent No. 3

Present: For Appellant : Mr. Sanjeev Sen, Sr. Advocate along with Mr. Ravi Kimi, Mr. Abhay Itagi, Mr. Azeem, Advocates.

For Respondents : Mr. Ramji Srinivasan, Sr. Advocate along with Ms. Shruti Pandey, Mr. Palash Singhai, Mr. Atul Sharma, Advocate for R1/RP. Mr. Krishnendu Datta, Sr. Advocate alongwith Mr. Kunal Vyas, Ms. Anushree Kapadia, Ms. Ruchi Krishna Chauhan & Mr. Rajat Singh, Advocate for R2. 2

Mr. Abhishek Anand, Ms. Nipun Gautam & Mr. Vaibhav Mendirata, for R3/CoC.

JUDGMENT

Per: Justice Rakesh Kumar Jain:

The Appellant 'POSCO India Pune Processing Center Pvt. Ltd.'

(Operational Creditor) filed an application under Section 9 of the Insolvency

and Bankruptcy Code, 2016 (in short 'Code') r/w Rule 6 of the Insolvency and

Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (in short

'Rules') against the Respondent 'Poggenamp Nagarsheth Powertronics Pvt.

Ltd.' (Corporate Debtor) for the resolution of a debt of Rs. 16,08,45,996/-. The

said application was admitted on 22.01.2020 by the Adjudicating Authority

(National Company Law Tribunal, Ahmadabad Bench) and an Interim

Resolution Professional (IRP) was appointed. However, vide order dated

03.06.2020 the IRP was replaced by the RP.

2. The RP published Form-G to invite Expression of Interest (EOI) to

submit the resolution plans and on 13.07.2020 a provisional list of Proposed

Resolution Applicants (PRAs) was prepared and five days' time was provided

to raise any objection till 18.07.2020. The RP published the final list of PRAs

on 28.07.2020 for submission of resolution plan which included the name of

the erstwhile promoters of the Corporate Debtor. It is alleged that the

Appellant, vide its letter dated 30.07.2020, raised objection about the

ineligibility of the erstwhile promoters on the ground that they had given

personal guarantee for the Corporate Debtor but the RP, vide email dated

12.08.2020, informed that Section 29A(h) of the Code do not apply in view of

the fact that the Corporate Debtor is registered as MSME under MSME Act,

2006. It is alleged that the Appellant filed an application I.A. No. 514 of 2020

Company Appeal (AT) (Insolvency) No. 931 of 2021 3

on 14.08.2020 for seeking a direction that RP cannot accept the resolution

plan submitted by the erstwhile promoters because the Corporate Debtor does

not have MSME status at the time of filing of the application under Section 9

of the Code and cannot take the benefit of Section 240A of the Code. The

Adjudicating Authority, vide order dated 06.01.2021, observed that the

Corporate Debtor at this stage cannot be treated as MSME and cannot take

the benefit of MSME, in view of amendment brought vide notification issued

on 01.06.2020 w.e.f. 01.07.2020 by taking its retrospective effect and

admittedly on the date of filing of application under Section 9 of the Code the

Corporate Debtor was covered under the criteria of MSME. Hence, the

question of not accepting the resolution plan filed by the erstwhile promoters

does not arise as the erstwhile promoters shall be ineligible under Section 29A

of the Code to file the resolution plan. However, the application i.e. I.A. No.

514 of 2020, in which the aforesaid order was passed on 06.01.2021, was

rejected being bad in the eyes of law and was not maintainable.

3. On 13.01.2021, in the 12th Meeting of the CoC, the RP declared that the

resolution plan of the erstwhile promoters has been approved and in respect

of the order dated 06.01.2021, the CoC decided and issued a direction to the

RP to seek clarification from the Adjudicating Authority regarding the

ineligibility of the erstwhile promoters to submit the resolution plan in

pursuance to which the RP filed a Pursis before the Adjudicating Authority

on 16.01.2021 seeking clarification in respect of the order dated 06.01.2021.

4. While the Pursis was still pending, two applications came to be filed

before the Adjudicating Authority i.e. I.A. No. 145 of 2021 by the Appellant for

rejection of the application filed by the RP for approval of the resolution plan,

Company Appeal (AT) (Insolvency) No. 931 of 2021 4

inter alia, on the ground that the SRA was ineligible in view of Section 29A(h)

of the Code and application I.A. No. 58 of 2021 was filed by the RP for seeking

approval of the resolution plan submitted by the erstwhile promoters. Both

the applications were taken up together by the Adjudicating Authority but I.A.

No. 145 of 2021 was decided earlier then I.A. No. 58 of 2021. In I.A No. 145

of 2021 the following order was passed "Accordingly, I.A. No. 145 of 2021 is

rejected and disposed of in terms indicated above" and I.A. No. 58 of 2021

was allowed with the following orders "Accordingly, I.A. No. 58 of 2021 in CP

(IB) No. 268 of 2018 is allowed and stands disposed of in terms of the above

directions."

5. The present appeal has thus been filed by the Appellant to challenge

the order passed in I.A. No. 145 of 2021 because if this appeal is allowed and

it is held that the SRA was not eligible then the resolution plan submitted by

the said SRA would automatically become redundant.

6. The main argument of the Appellant in this case is that the SRA was

not eligible in view of Section 29A(h) of the Code.

7. Section 29A(h) is reproduced as under: -

"29A(h) has executed a guarantee in favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such creditor has been admitted under this Code and such guarantee has been invoked by the creditor and remains unpaid in full or part"

8. According to the Appellant, the SRA had given a guarantee dated

03.06.2015.

9. The said letter dated 03.06.2015 is also reproduced as under: -

"Date: 03 June,2015

Company Appeal (AT) (Insolvency) No. 931 of 2021 5

To, THE BOARD OF DIRECTORS POSCO-INDIA PUNE PROCESSING CENTER PRIVATE LIMITED Plot No.A-9, Floriculture Park, Talegaon MIDC, Pune 410 507 Subject: Assurance/Promise in respect of Long Outstanding Overdue Payments against Supplies received

Sir,

This is in reference to the Long Outstanding Overdue Payments to be made by POGGEN-AMP NAGARSHETH POWERTRONICS PRIVATE LIMITED ("POGGEN-AMP") in respect of the supplies made by your Company i.e. POSCO- INDIA PUNE PROCESSING CENTER PRIVATE LIMITED ("POSCO-IPPC").

POGGEN-AMP hereby acknowledge the receipt of Materials from POSCO-IPPC, as briefly mentioned in the Annexure herein, for which the entire payments are yet to be made by POGGEN-AMP to POSCO-IPPC.

In furtherance to your continuous follow-ups, our commitments to pay the said Outstanding Dues, and various discussions between both the Companies herein, we being the Promoters /Directors of POGGEN-AMP, would like to provide you this written assurance/commitment for payment of the said Outstanding Dues, as mentioned herein.

Accordingly, we the Undersigned, hereby acknowledge that as on 1st June, 2015, a Total Amount of Rs. 160,487,392/- (Rupees Sixteen Crore Four Lac Eighty Seven Thousand Three Hundred and Ninety Two Only) is yet to be Payable by POGGEN-AMP to POSCO- IPPC, towards the Cost of Materials received.

We (the Undersigned) also acknowledge that, as earlier agreed between both the Companies herein, POGGEN-AMP is paying / shall be paying to POSCO-IPPC Simple Interest at the Rate of

10.50% Per Annum on the balance Outstanding Dues, until payment of the entre Outstanding Dues, which is / will be in addition to the payment of entire Principal Outstanding Dues.

Further, we (the Undersigned) being the Promoters / Directors of POGGEN-AMP, hereby give the commitment / assurance on behalf of POGGEN-AMP, as well as the commitment / assurance in our personal capacity, that POGGEN-AMP will pay the entire

Company Appeal (AT) (Insolvency) No. 931 of 2021 6

Outstanding Dues, as mentioned herein, of POSCO-IPPC along with the applicable Interest thereon, within next 18 (Eighteen) Months (i.e. starting from June, 2015 up to November, 2016) in the 18 (Eighteen) Equal Installments.

In case of failure on the part of POGGEN-AMP to pay to POSCO- IPPC the said Outstanding Dues, as mentioned herein, we (the Undersigned) shall provide / execute Personal Guarantees in our respective individual capacities in favor of POSCO-IPPC within 30 days from the date of such failure.

This Letter is being issued as the Assurance / Promise to pay the said Outstanding Dues of POSCO-IPPC by POGGEN-AMP.

Thank you

For POGGEN-AMP NAGARSHETH POWERTRONICS PRIVATE LIMITED"

10. The aforesaid letter was written by Gauttam Nagarsheth, Managing

Director, Gaurang Nagarsheth, Director and Parshva Nagarsheth, Director.

This issue has been hammered a lot by the Appellant as it goes to the root of

the case because if it is held that the Respondent had given their personal

guarantee in favour of the creditor on behalf of the Corporate Debtor on

03.06.2015 then their case would be covered by Section 29A(h) of the Code

and they would be held to be ineligible to submit a resolution plan.

11. On the other hand, Counsel for the Respondent No. 2 has submitted

that the RP has declared that it has received expression of interest from two

interested parties i.e. PRAs Gauttam Nagarsheth and Gaurang Nagarsheth as

one party and the Appellant as the other. It was made clear that any objection

to the inclusion or exclusion of a prospective resolution applicant in the

provisional list may be made alongwith supporting documents within five days

from the date of issue of the provisional list i.e. up to 18.07.2020. The RP had

complied with Regulation 36A(10)(11)&(12) of the Insolvency and Bankruptcy

Company Appeal (AT) (Insolvency) No. 931 of 2021 7

Board of India (Insolvency Resolution Process for Corporate Persons)

Regulation, 2016 (Regulations) but no objection was filed by the Appellant. It

is rather submitted that the Appellant never furnished the plan and was

interested only in the disqualification of Respondent No. 2 as it wanted to

drive the company into liquidation. It is further submitted that the letter dated

03.06.2015 is not a guarantee but it is only an intention to execute a personal

guarantee in case of the happening of an event. It is further submitted that

such a guarantee has to be invoked by the creditor and remained unpaid in

full or part.

12. In order to appreciate, the rival contention in this regard, the language

of the letter dated 03.06.2015 has to be appreciated. Counsel for the

Respondent has rightly argued that Section 29A(h) of the Code talks of an

event which has already taken place i.e. "has executed (a guarantee)" whereas

letter dated 03.06.2015 says that "in case of failure on the part of POGGEN-

AMP to pay to POSCO-IPPC the said outstanding dues, as mentioned herein,

we (the undersigned) shall provide/execute Personal Guarantees in our

respective individual capacities in favour of POSCO-IPPC within 30 days from

the date of such failure". A close scrutiny of the aforesaid language used in

the letter dated 03.06.2015 indicates that Respondent No. 2 had not executed

any guarantee rather it had offered to execute a guarantee in case of the

happening of a particular event. There is no other document placed on record

besides the letter dated 03.06.2015 to clinch this issue that personal

guarantee had already been executed by Respondent No. 2 at the time when

they had submitted their resolution plan and that guarantee had been

Company Appeal (AT) (Insolvency) No. 931 of 2021 8

invoked by the creditor and the amount remained unpaid in full or part,

therefore, was ineligible in view of Section 29A(h) of the Code.

13. In such circumstances, we do not find any substance in the arguments

raised by Counsel for the Appellant for the purposes of reversing the order in

the application which has been allowed by the impugned order.

14. The other submissions made by the Appellant that vide the impugned

order, the earlier order dated 06.01.2021 has been reviewed whereas it is

argued by the Respondent that the said order does not discuss the letter dated

03.06.2015 or the provision of Section 29A(h) of the Code, therefore, there is

no question of any finding which has been reviewed.

15. As regard res-judicata, it is submitted that the issue of guarantee was

decided at the stage of admission whereas the case of the Respondent is that

it was not a party, therefore, there is no question of any res-judicata.

16. After perusal of the record, we are satisfied that neither the issue of

review nor res-judicata is made out on the facts and circumstances of the

present case. Lastly, the Appellant has tried to argue that the Respondent No.

2 was not entitled to the benefit of Section 240A(1) of the Code whereas the

case of Respondent No. 2 is that it is not seeking the benefit of Section 240A(1)

and has neither claimed such a benefit. It is rather submitted that the letter

of MSME was withdrawn.

17. As a matter of fact, from the perusal of the entire record, we have found

that the whole case of the Appellant to dislodge the claim of the SRA revolves

around the letter dated 03.06.2015 i.e. alleged personal guarantee, in order

to attract the rigour of Section 29A(h) of the Code but since, Respondent No.

2 had not executed any guarantee, vide letter dated 03.06.2015, rather it was

Company Appeal (AT) (Insolvency) No. 931 of 2021 9

stated that it may execute a guarantee on failure of certain event that may

happen at the instance of the Corporate Debtor, therefore, Section 29A(h) was

not at all attracted to the present lis.

18. Having observed it repeatedly, we are of the considered opinion that

there is no error in the order impugned herein at the instance of the Appellant

and therefore, the appeal is found without any merit and the same is hereby

dismissed. No costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

New Delhi

15th March, 2023

sheetal

Company Appeal (AT) (Insolvency) No. 931 of 2021