Rakesh Kumar Gupta vs Mahesh Bansal Interim Resolution ...

Rakesh Kumar Gupta Director, M/S Gupta marriage halls Pvt. Ltd. H. No.- C-7, Pushpanjali Enclave, Pitampura, Delhi- 110034. ...Appellant

Vs. 1. Mahesh Bansal Interim Resolution Professional M/S Gupta Marriage Halls Pvt. Ltd. SCF 24, 1st Floor, Bhadaur House, Ludhiana- 1410008 ...RespondentsNo. 1

2. Punjab National Bank Having its Head Office at: Plot No. 4, Sector- 10 New Delhi- 110075

AND

Having its Branch Officer at: Assets Recovery Management Branch, MayurVihar Phase- II, Pocket 'E' CSC Delhi- 110091. ...Respondents No. 2

For Appellant: Mr. S.L. Gupta and Akanksha, Advocates. For Respondent: Mr. Ashok Juneja, Mr. Akash Srivastav and Ms. Akshita Rishi, Advocates for R-1 (RP) Mr. Shekhar Gupta, Mr. Mohd. Shahbaz, Mr. SibanandaBhanja and Mr. AtulRohilla, Advocates for R-2. -2-

ORDER

(20.02.2020)

1. Heard learned Counsel for Appellant and the Respondents. The Appeal

has been filed by the Appellant in view of admission of an Application under

Section 7 of Insolvency and Bankruptcy Code 2016, (in short IBC) which was

filled by the Respondent No. 2 Punjab National Bank (Financial Creditor) against

Gupta Marriage Hall Private Limited (Corporate Debtor). The Application of the

Financial Creditor was admitted by the Adjudicating Authority (NCLT, New Delhi

Court No. III) in IB-979/ND/2019 on 3rd September, 2019. Thus, the present

Appeal.

The learned Counsel for the Appellant referred to the Appeal. He is

submitting that it is the case of the Appellant that the Corporate Debtor was not

duly served with the Notice of Application under Section 7. The other ground

raised is that, the Bank had already resorted to various proceedings under the

Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 (SARFAESI Act) and had also resorted to proceeding

under recovery of debts due to Banks and Financial Institutions Act, 1993. The

Counsel states that, as the Bank resorted to those remedies, the Bank could not

have filed an Application under Section-7 of IBC and the Application should have

been rejected.

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2. The learned Counsel for the Appellant is relying on Judgement in the

matter of "Pegasus Assets Reconstruction Pvt. Ltd. Vs Haryana Concast Ltd.

and Anr." reported in (2016) 4 Supreme Court Cases 47. The Counsel states

that in that matter SARFAESI proceedings were resorted to and then parties

resorted to proceedings under Company's Act and Hon'ble Supreme Court

observed:-

"30. Since we have held earlier in favour of views of the Delhi

High Court, it is not necessary to burden this judgment with the

case law which supports that view and have been noted by the

High Court. We are in agreement with the submissions

advanced on behalf of respondent Kotak Mahindra Bank as

well as Respondent 2 that there is no lacuna or ambiguity in

the SARFAESI Act to warrant reading something more into it.

For the purpose it has been enacted, it is a complete code and

the earlier judgments rendered in the context of the SFC Act or

the RDB Act vis-à-vis Companies Act, cannot be held applicable

on all fours to the SARFAESI Act. There is nothing lacking in

the Act so as to borrow anything from the Companies Act till the

stage the secured assets are sold by the secured creditors in

accordance with the provisions in the SARFAESI Act and the

Rules."

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Reference is then made to Paragraph 31:-

"31. The aforesaid view commends itself to us also because of

the clear intention of Parliament expressed in Section 13 of the

SARFAESI Act that a secured creditor has the right to enforce

its security interest without the intervention of the court in

tribunal. At the same time, this Act takes care that in case of

grievance, the borrower, which in the case of a company under

liquidation would mean the liquidator, will have the right of

seeking redressal under Section 17 and 18 of the SARFAESI

Act."

3. The learned Counsel for Appellant submits that the securities held by the

Bank were of value which was more than the claim which was said to be

outstanding and this is clear from the Application under Section 7 which was

filed. It is stated that because of this also the Application under Section 7 should

not have been filed admitted.

4. The learned Counsel for Appellant states that the document at "Annexure-

A-5"(Page 66) is Order dated 23rd April, 2019 which was passed by the

Adjudicating Authority directing the Bank that notice should be issued to the

Corporate Debtor through all modes to its registered address and should also be

served on the Directors. Counsel states that that Bank did not serve all the

Directors. The Counsel states that the "Corporate Debtor" was not duly served

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as per directions of the Adjudicating Authority and thus principals of natural

justice were violated.

5. The learned Counsel for the Respondent Bank submits that the Bank had

made various efforts to serve the Corporate Debtor. Reference is made to

"Annexure-A-6 (Colly) (Page 67), Annexure-A-7 (Colly) (Page78) and Annexure-

A-8 (Colly) (Page 83) to demonstrate that the Bank took various efforts and steps

to serve the Corporate Debtor. The Counsel pointed out that the Bank had even

moved the Authorities of the Postal Department and they have reported (Page87)

of notice being served on 1st May, 2019 and even given proof of the delivery at

Registered Office of Corporate Debtor which is at Page 88.

6. The learned Counsel for the Respondent Bank is relying on Judgement of

this Appellate Tribunal in the matter of "Aditya Kumar Jajodia Vs. Srei

Infrastructure Finance Ltd.and Ors.",Company Appeal (AT) (Insolvency) No.

292, 293 and 324 of 2017 dated 26th April, 2018, reported in

MANU/NL/0079/2018, to submit that even if proceedings under SARFAESI had

been moved or original Application was filed to DRT, that does not bar the Bank

from resorting to Application under Section 7 of IBC. It is stated that in the

present matter, the account became NPA on 28th October, 2016 and the

Application under Section 7 of IBC, was filed on 23rd March, 2019. It is stated

that when the account had become NPA the bank was bound to take action

within time.

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7. When the learned Counsel for the Appellant raised the question of want of

notice of the Application under IBC we asked the Counsel to tell us whether the

Appellant can show that the debt was not due or not payable or that it was not

in default. To this, the submissions of the learned Counsel for the Appellant are

still on the basis that as actions were taken by the Bank with regard to SARFAESI

and the proceedings were pending in DRT at Lucknowand the Application should

not have been admitted. The Adjudicating Authority has at Page 4 of the

impugned order observed as under:-

"In relation to the Corporate Debtor, it is brought to the notice of

this Tribunal from the record of the proceedings that service of

notice sent to the Corporate Debtor in relation to the proceedings

pending before this Tribunal, there is no appearance on the part

of Corporate Debtor, Ld. Counsel for the petitioner in this regard

points out to the affidavit which has been filed from time to time

in compliance to the directions of this Tribunal as ordered and

upon service of notice upon the Corporate Debtor dated

14.05.2019, 18.07.2019 & 07.08.2019, perusal of the affidavit

collectively discloses that the Corporate Debtor has been duly

served as is evident from the correspondence exchanged as

between the petitioner as well as the Post Master, Saraswati

Vihar Post Officer, Delhi-110034, wherein it is evident that the

Corporate Debtor has been served with the notice of the

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proceedings and acknowledged by the Corporate Debtor and

inspite of these facts, there is no appearance on part of

Corporate Debtor deliberately and we are constrained to

proceed with the matter in the absence of Corporate Debtor."

The Adjudicating Authority held that service has been done and

considering the documents pointed out to us, we also do not find any reason to

doubt that service was done. The learned Counsel for the Appellant no doubt is

insisting that the Directors also should have been separately served, but even if

for a moment it is to be said that service was not correctly done, no case is

pointed out to us justifying remand.

8. Judgment in the matter of "Pegasus Assets"(supra) was in the context of

provisions of SARFAESI in relation to earlier Companies Act. Last part of Para

30 of the Judgment needs to be kept in view, which reads as under:-

"Thus, it is evident that the required provisions of the Companies

Act have been incorporated in the SARFAESI Act for harmonising

this Act with the Companies Act in respect of dues of workmen and

their protection under Section 529-A of the Companies Act. In view

of such exercise already done by the legislature, there is no

plausible reason as to take recourse to any provisions of the

Companies Act and permit interference in the proceedings under

the SARFAESI Act either by the Company Judge or the liquidator.

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As noted earlier, the Official Liquidator as a representative of the

borrower company under winding up has to be associated, not for

supplying any omission in the SARFAESI Act but because of

express provisions therein as well as in the Rules. Hence, the

exercise of harmonising that this Court had to undertake in the

context of the SFC Act or the RDB Act is no longer warranted in

respect of the SARFAESI Act vis-à-vis the Companies Act."

Insolvency & Bankruptcy Code 2016 is subsequent Code to SARFAESI Act

of 2002 & Recovery of Debts Due to Banks & Financial Institution Act, 1993 with

provision of Moratorium under Section 14 and Section 238 giving the Provisions

of the Code overriding effect on other laws. The Judgment relied on by learned

Counsel for Appellant does not appear to support the argument of learned

Counsel for Appellant that if Bank had resorted to SARFAESI or proceeding

before D.R.T. it is barred from resorting to IBC.

9. The defence raised by the Appellant to the Section 7 application is

answered in Para 3 and 4of Judgment of this Tribunal in the matter of "Aditya

Kumar" (supra) where it is observed as under:-

" 3. Learned counsel appearing on behalf of the Appellant

submitted that the 'Financial Creditor' has already taken steps

under Section 19 of the 'Recovery of Debts Due to Banks and

Financial Institutions Act, 1933' (DRT Act. Further, according to

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him, action has been taken under Section 13 (4) of the

'Securitisation and Reconstruction of Financial Assets and

Enforcement of Securities Interest Act, 2002' (the SARFAESI

Act). Therefore, according to the Appellant, proceedings under

the aforesaid provisions having already initiated, the

Application under Section 7 of the 'I & B Code' is not

maintainable.

4. However, the aforesaid submissions cannot be accepted

in view of the decision of this Appellate Tribunal in "M/s.

Unigreen Global Private Limited v. Punjab National Bank &

Anr." Company Appeal (AT) (Insolvency) No. 81 of 2017",

wherein this Appellate Tribunal by its judgment dated 1st

December, 2017 held:

"25. Similarly, if any action has been taken by a

'Financial Creditor' under Section 13 (4) of the SARFAESI

Act, 2002 against the Corporate Debtor or a suit is

pending against Corporate Debtor under Section 19 of

DRT Act, 1993 before a Debt Recovery Tribunal or appeal

pending before the DebtRecovery Appellate Tribunal

cannot be a ground to reject an application under Section

10, if the application is complete.

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26. Any proceeding under Section 13(4) of the

SARFAESI Act, 2002 or suit under Section 19 of the DRT

Act, 1993 pending before Debt Recovery Tribunal or

appeal pending before Debt Recovery Appellate Tribunal

cannot proceed in view of the order of moratorium as may

be passed.

27. It is also desirable to refer to Section 238 of the

I&B Code, as quoted below:

"238. Provisions of this Code to override other

laws- The provisions of this Code shall have effect,

notwithstanding anything inconsistent therewith

contained in any other law for the time being in force

or any instrument having effect by virtue of any such

law."

In view of the aforesaid provision also, I & B Code shall

have the effect notwithstanding anything inconsistent

therewith contained in any other law for the time being in

force including DRT Act, 1993; SARFAESI Act, 2002;

money suit etc."

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The pendency of actions under the SARFAESI Act or actions under the

Recovery of Debts Due to Banks and Financial Institutions Act, 1993 does not

create obstruction for filling an Application under Section 7 of Insolvency and

Bankruptcy Code 2016, specially in view of Section 238 of IBC. The Application

is more to bring about a Resolution of Corporate Debtor than any penal action

or any recovery proceedings. We do not find any substance in the Appeal.

The Appeal is dismissed.No costs.

[Justice A.I.S Cheema] Member (Judicial)

[Justice AnantBijay Singh] Member (Judicial)

[KanthiNarahari] Member (Technical) sim/md

Company Appeal (AT) (Insolvency) No. 1408 of 2019