Y Y Butchi Babu vs State Bank Of India & Anr

(Arising against the impugned order dated 22.03.2024 passed by the Hon'ble National Company Law Tribunal, New Delhi Bench-III, in IA No. 3549/ND/2022 in CP (IB) No. 361/ND/2021)

IN THE MATTER OF:

Sh. Y.Y. Butchi Babu, Personal Guarantor to the Corporate Debtor M/s Abir Infrastructure Private Limited, R/o Flat No. E-1, Trendset Vantage Towers, Road No. ...Appellant 14, Banjara Hills, Hyderabad - 500034.

Versus

State Bank of India, represented by its Authorized Representative, with corporate office at State Bank Bhavan, Madam Cama Road, Nariman Point, Mumbai - 400021, ...Respondent No.1

and also operating through its SAMB Branch, Khairatabad, Hyderabad.

M/s Abir Infrastructure Private Limited, represented by its Authorized Representative, having registered office at SF-2, Bikaji Cama Bhawan, ...Respondent No.2 Bhikaji Cama Place, New Delhi - 110066.

With

Company Appeal (AT) (Ins) No. 936 of 2024

(Arising against the impugned order dated 22.03.2024 passed by the Hon'ble National Company Law Tribunal, New Delhi Bench-III, in IA No. 3548/ND/2022 in CP (IB) No. 303/ND/2021)

IN THE MATTER OF:

Cont'd..../ -2-

Sri Surapaneni Ramesh S/ o Sri. Surapaneni Gandhi Personal Guarantor to Corporate Debtor M/s Abir Infrastructure Private Limited, R/ o Villa No 17 , Hill County, Nizampet Road, ...Appellant Bachu pally, Hyderabad - 500090 .

Versus

State Bank of India Rep. by the Authorized Representative Corporate Office at State Bank Bhavan, Madam Cama Road, Nariman Point Mumbai Maharastra -400021. And also at :

...Respondent No.1 Interalia a SAMB Branch D. No. 6-2-915, 5th floor, HMWSSB Compound Khairatabad, Hyderabad-500004.

M/s. Abir Infrastructure Private Limited Rep. by the Authorized Representative SF-2 Bhikajicama Bhavan, Bhikajicama Palace, ...Respondent No.2 New Delhi -110066. Email: info.aipl@abir.in

Present: For Appellant: Mr. S.S. Ray Sr. Advocate, Mr. RS Sravan Kumar, Mr. Vaibhav, Mr. Shubhankar Ray, Ms. Rakhi Ray, Advocates. For Respondents: Mr. Harshit Khare, Advocate for SBI. Mr. Ayuj Agarwal, Advocate for RP. Mr. Prafful Saini, Advocate.

J U D G M EN T (7th January, 2026)

INDEVAR PANDEY, MEMBER (T)

Comp. App. (AT) (Ins.) No. 909 of 2024: First Appeal

1. The Company Appeal No. 909 of 2024 arises pursuant to an order

dated 22.03.2024 passed by the Hon'ble National Company Law Tribunal,

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -3-

New Delhi Bench-III (Adjudicating Authority) in IA No. 3549/ND/2022 in CP

(IB) No. 361/ND/2021 under Section 95 of the Insolvency and Bankruptcy

Code, 2016 (hereinafter 'Code'), which allowed the initiation of insolvency

proceedings against Mr. Y.Y. Butchi Babu/Appellant, in his capacity as a

Personal Guarantor to the Corporate Debtor, M/s Abir Infrastructure

Private Limited which is Respondent No.2 in this appeal.

2. The Adjudicating Authority, vide the impugned order, admitted the

Section 95 application filed by State Bank of India /Respondent No.1 and

appointed Mr. Rajesh Chillale as Resolution Professional and directed him to

file his report under Section 99 of the Code. Appellant asserts that despite

production of documents like bank-issued certificates; statutory auditor

confirmations; and documentary computations, and that the Bank had

already received sums far exceeding the claimed liability and that no debt

subsisted as on the date of the Demand Notice. The Appellant, therefore, has

filed this appeal under Section 61(1) of the Code, challenging the impugned

order.

Brief facts of the case:

3. The brief facts of the case are as given below:

(i) The Corporate Debtor, M/s Abir Infrastructure Private Limited, was

placed in CIRP when the Adjudicating Authority issued an order on

30.01.2019 initiating insolvency proceedings in CP (IB) 893/ND/2018

based on Section 9 petition filed by an Operational Creditor, thereby

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -4-

triggering statutory moratorium and commencement of the resolution

process under the Code.

(ii) The Corporate Debtor's resolution process concluded with the

approval of a Resolution Plan, which was formally taken on record

through the NCLT's approval order dated 28.10.2021, followed by a

rectification order on 30.11.2021, and subsequent orders dated

09.11.2022 and 18.01.2023, shifting the effective implementation date

to 20.09.2022 and recording final implementation w.e.f. 17.12.2022,

demonstrating that the Bank was receiving payments under the

approved plan.

(iii) In the Resolution Plan of Corporate Debtor, the Respondent

No.1/State Bank of India had filed a total claim of

Rs.36,17,70,23,657/- before the RP. The RP admitted an amount of

Rs.19,08,69,464/- against the aforesaid total claim filed by SBI. The

Resolution Plan of the successful Resolution Applicant approved by

Adjudicating Authority vide its order dated 28.10.2021 provided for an

amount of Rs.13,80,00,000/-for SBI.

(iv) State Bank of India issued a Demand Notice on 28.10.2020 under Rule

7(1) of the Insolvency and Bankruptcy (PG to CD) Rules, 2019 to the

appellant stating that Rs. 23,37,11,482.86 was due from the Appellant

as Personal Guarantor as on 30.09.2020.

(v) The Appellant responded on 20.11.2020, asserting that the Corporate

Debtor and Corporate Guarantors had already deposited substantial

amounts reducing or extinguishing liability, and pointed out that

another guarantor, Mr. Surapaneni Ramesh, had filed IA 2251/2019

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -5-

in OA No. 303/2018 before DRT Hyderabad with detailed

computations revealing that the Bank's claim of Rs. 110,57,60,684.34

was inflated, and that the correct computation, even with contracted

rates of interest and unpaid commission, amounted to only

Rs.104,28,20,678/-. The Appellant also highlighted that the Bank had

continuously sought adjournments before the DRT for more than 40

months, delaying the filing of its reply to IA 2251/2019, and eventually

filed its counter only on 31.10.2022, without disputing computation

sheets or the remittances that had been made.

(vi) The SBI/Financial Creditor/ Respondent No. 1 herein, filed the Section

95 application on 09.02.2021, based on same quantum of debt

(Rs.23,37,11,482.86) as shown in the Demand Notice.

(vii) The Adjudicating Authority admitted the application on 24.05.2022

and appointed Mr. Rajesh Chillale as Resolution Professional; ordered

commencement of interim moratorium; directed the RP to examine the

debt; and file a report under Section 99 of the Code.

(viii) The RP thereafter issued a communication dated 27.05.2022, followed

by an e-mail dated 30.05.2022, asking the Appellant to disclose details

of payments made by the Corporate Debtor or guarantors after

issuance of the Demand Notice and to clarify whether any amounts

had been paid subsequently, effectively seeking confirmation of

liability or absence thereof.

(ix) The Appellant replied by e-mail on 07.06.2022, enclosing the earlier

reply to SBI dated 20.11.2020, and reiterating that IA 2251/2019 filed

in DRT contained the correct computation sheets. The Appellant

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -6-

asserted that no debt was due and further highlighted that substantial

sums had been deposited towards reduction of liability prior to and

after filing of the DRT OA.

(x) The RP filed his Section 99 Report to the Adjudicating Authority on

13.06.2022, relying on the Bank's version that only Rs.85,25,00,000/-

had been paid since 12.04.2018, and concluding that

Rs.23,37,11,482.86 remained due from the Corporate Debtor/

Personal Guarantors.

(xi) The appellant filed a detailed counter reply to RP's report on

27.08.2022, stating that the total deposits made by Corporate

Guarantors amounted to Rs. 127,95,00,000/-, comprising Rs. 41.30

crore deposited between 12.04.2018 and 30.01.2019 and Rs. 86.65

crore deposited thereafter up to 28.10.2019, significantly exceeding

the Bank's claimed figure of Rs. 85,25,00,000/-.

(xii) The appellant, in the counter reply also recorded that SBI was allotted

Rs. 13,80,00,000/- under the approved resolution plan in respect of

the guaranteed facilities, of which SBI had already received

Rs.1,38,00,000/- on 15.12.2022 and Rs.1,97,14,286/- on 06.12.2023

towards redemption of the first tranche of Non-Convertible

Debentures.

(xiii) The Appellant additionally pointed out that a separate deposit of

Rs.20,00,00,000/- was made on 10.12.2018 to maintain a 100% cash

margin for BG liabilities, and that SBI subsequently released these

funds for the Corporate Debtor's operational use without adjusting

them toward any alleged outstanding dues.

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -7-

(xiv) Two SBI-issued Bank Guarantees--BG No. 0910310BG0000943 dated

26.10.2010 for Rs.2,76,93,930/- and BG No. 0910312BG0000648

dated 18.04.2012 for Rs.2,00,00,000/- were invoked by the

beneficiary, M/s Beas Valley Power Corporation Ltd., on 14.05.2018

and 23.05.2018, resulting in an additional liability of Rs.4,76,93,930/-

which when calculated with interest @ 12.15% p.a. with monthly rests,

amounted to Rs.6,35,42,861/- as on 30.09.2020. Even adding this to

the alleged debt, the aggregate liability remained far lower than the

amounts deposited by Corporate Guarantors.

(xv) The Appellant also submitted to Ld. Adjudicating Authority, State

Bank's own certificate dated 19.02.2024 (SAMB/SEC/BBR/461),

issued upon request of the Corporate Debtor, in which SBI expressly

certified receipt of Rs.123,80,00,000/- between 07.09.2018 and

28.10.2019, which contradicted the RP's reliance on the figure of

Rs.85,25,00,000/-. SBI's certification also affirmed receipt of plan-

amounts Rs.1,38,00,000/- and Rs.1,97,14,286/-, leading to further

reduction in liability. The Appellant also enclosed the Statutory

Auditor's Certificate (UDIN: 24202352BKBEHF2100) dated

19.02.2024; and the amended Written Statement filed on 07.12.2022

before the DRT. Appellant stated that these documents confirm (a) the

total remittances, (b) SBI's acknowledgment thereof, (c) that SBI had

not disputed these figures before the DRT, and (d) that there existed

no subsisting debt payable by the Personal Guarantor.

(xvi) The Adjudicating Authority, vide its order dated 22.03.2024, accepted

the RP's Report and admitted the Section 95 application, and thereby

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -8-

initiated the Insolvency Resolution Process against the Personal

Guarantor. This impugned order is the subject of the present appeal

under Section 61(1) of the Code.

4. The appellant has made the following prayers in his appeal:

a) Kindly set aside the Impugned Orders dated 22.03.2024 passed by the National Company Law Tribunal, New Delhi III IN CP (IB) NO. 361(ND) 2021.

b) Pass an order directing the Adjudicating Authority to consider the relevant material submitted by the Appellant.

c) Pass any such other or further order(s) as this Hon'ble Appellate Tribunal may deem fit and proper in the facts and circumstances of the present case.

Comp. App. (AT) (Ins.) No. 936 of 2024: Second Appeal

5. This appeal has been filed by Mr. Surapaneni Ramesh, against an

order passed by Ld. NCLT, New Delhi Bench-III (Adjudicating Authority) on

22.03.2024 in IA No. 3548/ND/2022 in CP (IB) No. 303/ND/2021, starting

an insolvency process against him as a Personal Guarantor of Abir

Infrastructure Pvt. Ltd.

6. We shall now mention only those factual aspects in this appeal which

differ from the facts recorded in Comp. App. (AT) (Ins.) No. 909 of 2024, as

all other facts remain common and identical between the two guarantors.

7. In the second appeal, one major difference is that the appellant had

filed a writ petition before the Hon'ble Supreme Court under Article 32,

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -9-

challenging certain provisions of Sections 95 to 100 of the IBC. The writ

petition was registered as Diary No. 24816 of 2022. This appeal was disposed

in terms of Hon'ble Supreme Court's judgment in 'Dilip B. Jiwrajka v. Union

of India' [(2023) SCC OnLine SC 1530] and the stay in proceedings against

Personal Guarantors to Corporate Debtors was vacated.

8. Another difference is that, in the in the second appeal, the Amended

Written Statement filed in DRT proceedings (OA 303/2018) is specifically

mentioned as having been filed after IA 2251/2019 was allowed on

07.12.2022.

9. The appellant has made the following prayers in his appeal:

a) Kindly set aside the Impugned Orders dated 22.03.2024

passed by the National Company Law Tribunal, New Delhi III

IN CP (IB) No. 303(ND) 2021.

b) Pass an order directing the Adjudicating Authority to consider

the relevant material submitted by the Appellant.

c) Pass any such other or further order(s) as this Hon'ble Appellate

Tribunal may deem fit and proper in the facts and

circumstances of the present case.

10. Both the appeals Comp. App. (AT) (Ins.) No. 909 of 2024 and Comp.

App. (AT) (Ins.) No. 936 of 2024 arise from the insolvency process of

Corporate Debtor M/s Abir Infrastructure Private Limited. In both cases the

appellants are Personal Guarantors to the same loan of Corporate Debtor

(M/s Abir Infrastructure Private Limited). The underlying Loan Agreement

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -10-

and Guarantee Agreement are the same. The pleadings of appellants in both

the cases are the same and rely upon the pending proceeding in DRT.

Accordingly, the Comp. App. (AT) (Ins.) No. 909 of 2024 would be referred to

as the first appeal and Comp. App. (AT) (Ins.) No. 936 of 2024 would be

referred to as the second appeal for the purpose of disposal of these matters.

As the facts in both these appeals are identical and the pleadings for the

appellant in first appeal has been adopted for the pleadings of the appellant

in the second appeal also, we would dispose of both the appeals by a common

order.

Submissions of the appellants

11. Learned counsel for the Appellants respectfully submits that the

Appellant, being a Personal Guarantor to the Corporate Debtor, has invoked

the appellate jurisdiction of this Hon'ble Tribunal challenging the Impugned

Order dated 22.03.2024 passed in CP (IB) No.361 (ND) 2021. The grievance

of the appellant is that the said order has been passed solely on the basis of

the Resolution Professional's report which, according to the Appellant, is

fundamentally erroneous and misleading. The Resolution Professional

(hereinafter "RP") has allegedly ignored crucial documents, figures,

statements and acknowledgements furnished by the Appellant, thereby

rendering the report factually incorrect and incomplete. Counsel submits

that the RP failed to observe and discharge his statutory duties under the

Code, in particular the duty of conducting an independent verification and

due diligence into the debt claimed and instead acted merely as an extended

arm of the Bank by unquestioningly accepting the Bank's assertions as

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -11-

gospel truth without examination or reconciliation of repayments already

made.

12. It is further submitted by the appellant that the RP himself has stated

in the reply that his report is "not binding", thereby distancing himself from

the consequences flowing from the erroneous findings recorded therein.

Counsel submits that this conduct reveals an attempt to shield himself from

accountability, while simultaneously permitting an adjudicatory process to

be triggered against the Appellant solely on the foundation of such defective

material. This Hon'ble Tribunal may appreciate that once a statutory

professional submits a report, the natural consequence is that the

Adjudicating Authority will rely upon it for drawing conclusions. Hence,

washing his hands of responsibility while simultaneously submitting a report

that directly prejudices the rights of the Appellant amounts to abdication of

duty and is contrary to the scheme and statutory obligations imposed upon

a Resolution Professional under the IBC.

13. It is the categorical submission of the Appellant that an amount of

Rs.127.95 Crores (and not Rs.85.25 Crores as claimed by the Bank and

uncritically accepted by the RP) has been paid since 12.04.2018. Counsel

submits that this denial of credit of amounts paid towards satisfaction of

dues constitutes a material suppression and has directly resulted in

initiation of proceedings against the Personal Guarantors even though

repayments far exceeding the bank's disputed claims had already been

made.

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -12-

14. It is the submission of the appellant that the Bank had instituted O.A.

No. 303 of 2018 before DRT Hyderabad claiming Rs.110.57 Crores. Counsel

submits that the guarantor, Mr. Ramesh Surapaneni, filed I.A. No.2251 of

2019 seeking amendment to the written statement, wherein it was

demonstrated by calculation and ledger reconciliation that the actual

payable amount worked out to Rs.104.28 Crores, rather than Rs.110.57

Crores. Counsel further submits that after filing of OA, an additional Rs.37

Crores was credited to the cash credit account, resulting in the liability

payable as on 28.02.2019 reducing to Rs.83.87 Crores. These repayment

figures, which materially alter the outstanding liability, were ignored by the

RP.

15. The Bank issued its demand notice dated 28.10.2020 under Rule 7(1)

claiming Rs.23,37,11,482.86 as payable by the guarantor as on 30.09.2020.

Counsel submits that during proceedings, the Bank took a shifting stand by

claiming that interest continues to accumulate and thereby sought to deflect

from the recorded figure in the demand notice itself. This contradicts the

Bank's own acknowledgment of outstanding dues at a particular point of

time and reflects an attempt to inflate liability contrary to record.

16. Ld. Counsel further submits that detailed objections were filed to the

RP's report wherein, it was specifically pointed out that the RP had wrongly

stated that Rs.85.25 Crores had been paid after OA filing. The objection

clarified that payments aggregating Rs.123.80 Crores had been paid since

12.04.2018, out of which Rs.37.15 Crores was paid between 12.04.2018 and

CIRP commencement on 30.01.2019, and a further Rs.86.65 Crores was paid

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -13-

post 30.01.2019. The detailed loan repayment tables forming Annexure A-8

were placed before the RP and the Adjudicating Authority, but the same were

ignored.

17. It is the submission of Ld. Counsel for the Appellants that he also

placed on record written submissions before NCLT demonstrating that the

Corporate Debtor, at the request of the guarantor, sought creditor

confirmation evidencing remittances made. By letter dated 19.02.2024, the

Bank issued a certificate acknowledging payments aggregating Rs.123.80

Crores between 10.04.2018 and 20.10.2019 and further acknowledged 100%

cash margin of Rs.20 Crores during the period 10.04.2018 - 28.10.2019.

Statutory auditors of the Corporate Debtor also issued a certification

confirming remittances aggregating Rs.123.80 Crores between 07.09.2018 to

20.10.2019. These confirmations demonstrate beyond doubt that the RP's

report did not reflect true figures.

18. Accordingly, Ld. Counsel submits that total repayments of

Rs.123,80,00,000/- were received by the Bank and therefore the claimed

figure of Rs.85,25,00,000/- is wholly false and fabricated. Thus, no further

liability survives against the Appellants and no insolvency trigger threshold

exists.

19. Ld. Counsel further submits that the Adjudicating Authority,

proceeded solely on the basis of the incorrect RP's report without referring,

analysing, or adjudicating upon the detailed documents, objections,

repayment confirmations and written submissions that were placed on

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -14-

record. The failure to examine material and relevant evidence constitutes a

patent error and has resulted in grave miscarriage of justice.

20. It is his submission that the statutory scheme of the Code

contemplates independent evaluation by the RP of the debt claimed in the

demand notice. The RP is obliged to examine documents, records and

confirmations produced by the Personal Guarantor and Corporate Debtor

and cannot mechanically adopt the creditor's claim. Such independent

determination is a mandatory precondition to recommending

commencement of PIRP. The RP failed entirely to discharge this statutory

obligation.

21. Ld. Counsel submits that once written submissions and documentary

evidence were filed before the Adjudicating Authority, it was obligatory for

the Adjudicating Authority to evaluate and consider the same prior to

passing orders. Counsel submits that the Impugned Order issued directions

solely on the erroneous RP report, ignoring writings and records placed on

file by the Appellant, thereby vitiating the order.

22. In view of the above submissions, counsel for the Appellant prays that

this Hon'ble Tribunal may set aside the Impugned Order dated 22.03.2024

and direct consideration of all material placed on record demonstrating

repayment of debt and absence of default.

Submissions of the Respondent No.1 - SBI

23. Ld. Counsel for Respondent No.1 SBI (which is the contesting

Respondent) submits that in terms of Clause 19 of the Guarantee Agreement

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -15-

dated 21.04.2011, the Guarantors expressly agreed that any statement of

account duly certified by an authorised officer of the Respondent Bank would

be conclusive and binding upon them. The contract consciously creates an

obligation upon the Guarantors to accept the correctness of such certified

statements, and it also recognises that any acknowledgment, admission or

part-payment made by the Borrower shall equally bind the Guarantors.

24. He submits that Clause 19 of the Guarantee specifically stipulates that

the Borrower would be deemed to act as the duly authorised agent of the

Guarantors for purposes of acknowledgement of debt under Sections 18 and

19 of the Limitation Act, 1963, and further provides that in the event the

Bank obtains any judgment, award or order against the Borrower, the same

shall be binding against the Guarantors. Thus, by contractual consent, the

Guarantors have waived the right to dispute the correctness of bank-certified

statement of accounts.

25. It is the submission of Respondent No. 1, that in the light of these

contractual terms, the Statement of Account placed on record and certified

in terms of the Bankers' Books Evidence Act constitutes valid proof of debt

and must be held binding on the Appellants. Any contrary computation

subsequently prepared by the Appellants cannot displace the binding

contractual effect of the Bank's certified statements.

26. Ld. Counsel further submits that the record shows two parallel

statements one produced by the Appellants at page 281 of their appeal and

the other prepared and certified by SBI at page nos. 519, 520, 521, 523 and

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -16-

524 of the reply. In this circumstance, the contractual binding-effect clause

squarely applies, and therefore, the Bank's computation must prevail.

27. It was submitted by the Ld. Counsel that the Appellants' unilateral act

of preparing a separate computation of dues based upon interest rates

assumed on their own is wholly impermissible. The said sheet does not form

part of any contractual or statutory requirement and ignores the interest

applied uniformly by the Bank in ordinary course of banking. Such self-

generated statements cannot override or cast doubt upon the Respondent

Bank's certified statement of account, particularly when the Guarantee

Agreement itself binds the Guarantors to accept the correctness of the Bank's

accounting records.

28. Ld. Counsel submits that the Appellants' argument based on pendency

of a DRT application is wholly misconceived as a matter of law. The two fora

operate in distinct statutory domains, the DRT adjudicates recovery, whereas

proceedings under IBC are for collective insolvency resolution. Pendency of

recovery proceedings does not oust or restrict the jurisdiction conferred upon

NCLT under Section 95 read with Sections 97-100 of IBC.

29. Ld. Counsel for the SBI submits that the Hon'ble NCLAT in Mr. G.

Sundaravadivelu v. Indian Overseas Bank, Company Appeal (AT) (CH) (INS)

No. 143 of 2022, has categorically held that pendency of DRT proceedings is

not a bar for a Financial Creditor to initiate insolvency proceedings and that

adjudicating authority need not await DRT outcomes before rendering

findings.

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -17-

30. Ld. Counsel further places reliance on State Bank of India v. Abhijeet

Ferrotech Ltd., Company Appeal (AT) (INS) No. 690 of 2023, wherein this

Appellate Tribunal reiterated that even if DRT proceedings remain pending

and inconclusive, such pendency cannot be invoked as a ground to hold stall

IBC proceedings.

31. It is submitted by Ld. Counsel that although aforesaid matters relate

to Section 7 proceedings under IBC, the legal principle applies pari materia

to proceedings under Section 95, since there exists no statutory prohibition

restricting initiation of insolvency proceedings against personal guarantors

pending recovery actions.

32. He submits that the Appellants have on their own disputed

calculations before the DRT. However, pendency of such dispute cannot

prevent a Financial Creditor from invoking statutory remedies under IBC.

The legislative intent is clear; existence of parallel proceedings does not

defeat right to initiate insolvency.

33. Ld. Counsel submits that in CIRP proceedings of the Corporate Debtor

(M/s Abir Infrastructure Pvt. Ltd.), the claim of the Respondent Bank as

secured creditor was admitted at Rs.19,08,69,464/- out of the total filed

claim of Rs.36,17,70,23,657/-. Under the Resolution Plan submitted by

SREI Multiple Asset Investment Trust and approved by NCLT, the

Respondent Bank was entitled to receive INR 13,80,00,000/- towards partial

settlement of the admitted claim.

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -18-

34. It is the submission of Ld. Counsel that despite payments under the

Resolution Plan, a balance sum of INR 5,28,69,464/- remains outstanding,

with interest accruing thereafter until payment. As guarantors, the

Appellants remain jointly and severally liable to satisfy such unpaid debt.

35. He submitted that the claim admitted in CIRP and the resolution plan

approved by NCLT were never challenged by the Appellants or any other

stakeholder. Hence, the debt has attained legal finality. The Appellants

cannot now dispute unpaid dues or quantum payable in their capacity as

guarantors.

36. Ld. Counsel submits that the Bank's letter dated 19.02.2024 relied

upon by the Appellants, merely records receipt of Rs.1,23,80,00,000/- and

clarifies that a further amount of Rs. 23.37 crores remain pending, for which

Section 95 petitions have been filed. The letter nowhere states that entire

liability has been satisfied nor does it operate as a release or discharge of the

guarantors' continuing liability.

37. Counsel submits that a 'No-Dues Certificate' must expressly

acknowledge extinguishment of liability, which is completely absent here.

Instead, the letter reaffirms subsistence of outstanding debt.

38. Ld. Counsel therefore prays that this Hon'ble Tribunal be pleased to

dismiss the present appeals, uphold the impugned order dated 22.03.2024

passed by the Hon'ble NCLT, and pass such further orders as deemed fit in

the interests of justice.

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -19-

Analysis and findings

39. We have heard the Ld. Counsels for both the parties in detail, gone

through the voluminous records of the case, and the written submission of

both the Appellants and Respondent No.1/ SBI, the Financial Creditor.

40. We are called upon to determine whether the Adjudicating Authority

was justified in admitting the application under Section 95 of the Code by

order dated 22.03.2024 against the Appellants, who stood as Personal

Guarantors to the Corporate Debtor (M/s Abir Infrastructure Pvt. Ltd). The

core question is whether a legally recoverable debt continued to subsist

against the Guarantors at the time of filing of Sec 95 petition, or whether the

alleged repayments extinguished the debt, thereby removing the

jurisdictional foundation for admission. Resolution of this issue requires a

careful examination of factual events, documentary record, contractual

terms, statutory interpretation, procedural obligations of the Resolution

Professional, rights of guarantors, and binding judicial precedent.

41. The Appellants assert that, following the filing of OA No.303/2018

before the DRT on 12.04.2018, the Corporate Debtor and the Corporate

Guarantors remitted Rs.123.80 crores between 07.09.2018 and 28.10.2019,

besides maintaining a 100% cash margin of Rs.20 crores. To substantiate

these payments, they rely on auditor certifications and a letter issued by SBI

dated 19.02.2024 acknowledging receipt of amounts. They submit that the

Resolution Professional (RP) failed to verify repayment figures and

mechanically accepted the Bank's statements, leading to erroneous

conclusions in the Section 99 report dated 13.06.2022. They also contend

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -20-

that computation of outstanding debt is already pending before the DRT in

IA No.2251/2019 filed in OA No.303/2018, and therefore insolvency

proceedings should not have been initiated until the DRT adjudicated the

dispute. It is further alleged that certain notices were not received by the

Appellants, thereby violating principles of natural justice.

42. The Bank, in response, submits that liability continued to subsist even

after the alleged remittances because contractual interest and other

components remained unpaid, and the deposits relied on by the Appellants

did not exhaust the admitted liability. It relies on the Guarantee Agreement

dated 21.04.2011, wherein Clause 19 expressly stipulates that any certified

statement of account issued by the Bank shall be binding and conclusive

against guarantors. Clause 19 further provides that any acknowledgment or

payment made by the borrower binds the guarantors and that the borrower

is deemed to act as agent of the guarantors for purposes of Sections 18 and

19 of the Limitation Act, 1963. The Bank submits that repayments relied on

by the Appellants were adjusted as per contractual interest computation,

whereas the Appellants prepared unilateral statements applying assumed

interest rates inconsistent with the contract. It argues that acknowledgement

letters dated 19.02.2024 merely confirm receipt of amounts and cannot be

construed as settlement or "No Dues." The Bank argues that pendency before

DRT does not bar proceedings under the IBC, relying on precedents in

Sundaravadivelu v. IOB (NCLAT, Chennai Bench) and SBI v. Abhijeet

Ferrotech Ltd., wherein this Appellate Tribunal held that proceedings under

the Code are not suspended by pendency of proceedings before DRT. The

Bank submits that notices were issued by the RP and that the Appellants

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -21-

filed objections to the notice by the RP on 07.06.2022 and later on submitted

their written submissions to the notice before Ld. NCLT on 27.08.2022.

During the hearing in NCLT they further submitted their written statement

on 21.02.2024. All these activities clearly demonstrate the knowledge of

proceedings to the appellants at every stage and opportunity provided to

them at every stage of proceeding.

43. It is undisputed that the Corporate Debtor was admitted into CIRP on

30.01.2019 in CP (IB) 893/ND/2018. During CIRP, State Bank of India filed

its claim to RP as a secured creditor and the claim was admitted for an

amount of Rs.19,08,69,464/-. The Adjudicating Authority approved the

Resolution Plan on 28.10.2021 and monitored its implementation vide orders

dated 30.11.2021, 09.11.2022, and 18.01.2023. Under the approved plan,

SBI was allocated Rs.13,80,00,000/-. Thus, based on CIRP records, a

balance loan of Rs.5,28,69,464/- remained unpaid by the Corporate Debtor/

Personal Guarantors of CD. This amount excluded contractual interest

which continued accruing till the date of payment. Neither the admitted

claim amount nor the approved Resolution Plan was challenged before any

forum by the CD or the Personal Guarantors. Under Section 31 of the Code,

an approved plan binds all stakeholders, and unless it expressly provides for

discharge of guarantors, their liability continues for unpaid balances.

Consequently, the admitted unpaid portion remains legally recoverable from

personal guarantors unless discharged in law.

44. We first evaluate whether the repayment figures relied on by the

Appellants establish discharge. The key issue is not merely whether

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -22-

repayments were made, but whether such repayments exhausted

contractual liability. When repayment entries exist alongside continuing

ledger debits, it must be shown that the repayments matched or exceeded

principal and contractual interest components. The acknowledgement letters

dated 19.02.2024 only record receipt and do not state the account is settled,

closed, or discharged. Auditor certifications similarly record deposits, but do

not certify extinguishment. The computation sheets produced by the

Appellants apply interest assumptions inconsistent with contractual terms

binding the parties.

45. We note that the Appellants rely on a repayment calculation sheet

prepared by themselves. This calculation uses interest rates assumed by the

Appellants, which are different from the interest rates applied by the Bank

in its certified statement of account. As a result, two different figures are

shown in the record, one in the Appellants' calculation at page 281 of the

appeal, and the other in the Bank's certified statement at pages 519, 520,

521, 523 and 524 of the Bank's reply. In such a situation, the guarantee

agreement becomes important.

46. In this regard, we take a look at the Clause 19 of the Guarantee

Agreement which is extracted below:

"Clause 19 of Deed of Guarantee dated 21.04.2011

19. The Guarantors agree that any admission or acknowledgement in writing signed by the Borrower of the liability or indebtedness of the Borrower or otherwise in relation to the above-mentioned credit facilities and or any part payment as may be made by the borrower towards the Principle sum

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -23-

hereby guaranteed or any judgment. award or order obtained by the Lead Bank against the Borrower shall be binding on the Guarantors and the Guarantors accept the correctness of any statement of account that may be served on the Borrower which is duly certified by any officer of the Lead Bank and the same shall be binding and conclusive as against the Guarantors also and the guarantors further agree that in the borrower making an acknowledgment of making a payment the borrower shall in addition to his personal capacity be deemed to act as the Guarantor's duly authorised agent in that behalf for the purposes of Sections 18 and I 9 of the Limitation Act of 1963."

[Emphasis supplied]

47. We note that the Clause 19 clearly indicate that Bank's certified

statements would prevail, when contractual and unilateral calculations

diverge. The Bank Statement of the borrower shall be binding upon the

guarantors and acknowledgement by the borrower shall be

acknowledgement of liability by the guarantor. Clause 19 of the Guarantee

Deed clearly states that the Bank's certified statement of account is binding

and final against the guarantors. Therefore, the Appellants' self-prepared

calculations cannot replace or override the Bank's certified figures. For

deciding whether debt remained, the Bank's certified statement has to be

accepted.

48. There is no evidence that the Bank accepted the Appellants' method of

computation or acknowledged the debt as discharged. No documents like No-

Dues Certificate, settlement agreement, accord and satisfaction, waiver,

novation, or judicial order which extinguish the liability of the

Borrower/Guarantor have been placed on record. The law requires

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -24-

affirmative proof of settlement to extinguish guarantor liability. Mere

deposits, without demonstrated exhaustion of contractual interest burden

and principal balance, cannot constitute full discharge.

49. We now consider the admitted debt figures during CIRP and its legal

consequences. The admission of debt at Rs.19,08,69,464/- constituted a

determination binding upon the parties, and allocation of only

Rs.13,80,00,000/- in the approved Resolution Plan signifies that a residual

portion remained. Under Section 31 of the Code and Hon'ble Supreme

Court's decisions (including Lalit Kumar Jain v. Union of India TRANSFERRED

CASE (CIVIL) NO. 245/2020), approval of a Resolution Plan does not

discharge guarantor liability unless explicitly provided. Section 128 of the

Contract Act confirms co-extensive liability. Since the plan payout was less

than the admitted debt and the guarantors were not expressly discharged,

the remaining debt continued and the guarantor's liability survived. This is

fatal to Appellants' case because even if their repayment figures were

credited, they failed to show that such repayments satisfied the unpaid

balance remaining post-plan allocation.

50. The argument that pendency of computation disputes before the DRT

prevents initiation of insolvency proceedings is unsustainable. The CIRP

proceedings under the Code are not designed to adjudicate monetary

disputes, but to determine insolvency status of the Corporate Debtor. This

has been settled by this Appellate Tribunal in 'Mr. G. Sundaravadivelu vs

Indian Overseas Bank [Comp. App.(AT) (CH) (Ins.) No. 143 of 2022]' and 'State

Bank of India vs Abhijeet Ferrotech Ltd. [Comp. App. (AT) (Ins.) No. 690 of

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -25-

2023]', that the pendency before DRT does not bar insolvency proceedings,

and an Adjudicating Authority under the Code need not await adjudication

by DRT. No statutory provision in the Code suspends Section 95 proceedings

due to pending debt adjudication elsewhere.

51. It is the contentions of the Appellants that their dispute on interest

computation is pending before the DRT and therefore argue that the

insolvency proceedings should not have been initiated until that adjudication

is concluded. In this context, reference may be made to decision of this

Tribunal in Mr. G. Sundaravadivelu v. Indian Overseas Bank (supra). In the

aforesaid case, this Tribunal considered whether pendency before the DRT

had any bearing on the jurisdiction of the adjudicating authority under the

IBC. The Tribunal held that the pendency of proceedings before the Debt

Recovery Tribunal is not a bar for a financial creditor to initiate insolvency

action, and that the adjudicating authority under the IBC is not required to

wait for the DRT to conclude its adjudication before proceeding. Accordingly,

the contention based on pendency before the DRT cannot bar initiation of

insolvency proceedings.

52. The relevant para 96 of the Judgment in Mr. G. Sundaravadivelu vs

Indian Overseas Bank is extracted below:

"96. It is pointed out that the pendency of proceedings before the `Debt Recovery Tribunal', is not a bar, for the `Financial Creditor', to initiate an action against the `Corporate Debtor'. That apart, an `Adjudicating Authority', need not wait for the decision of `Debt Recovery Tribunal', while rendering its findings."

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -26-

53. The Appellants also placed reliance on the pendency of Section 19

proceedings before the DRT to argue that the Section 95 proceedings should

be deferred. In this regard, reference may be made to decision of this Tribunal

in State Bank of India v. Abhijeet Ferrotech Ltd., (supra) where the Tribunal

examined a question as to whether an application under the IBC could be

rejected solely on the ground that DRT proceedings were pending and that

the DRT had passed certain orders. The Tribunal held that proceedings

under Section 19 which were still inconclusive could not prevent admission

of proceedings under the IBC, and that such pendency was not a ground to

hold an insolvency application as barred. Thus, pendency of Section 19

proceedings before the DRT cannot, by itself, bar consideration of insolvency

proceedings.

54. The relevant extracts from the Judgment in Abhijeet Ferrotech (supra)

of this Tribunal in para 22 & 23 is extracted below:

"22. One more submission was raised before the Hon'ble Supreme Court in A. Navinchandra Steels Pvt. Ltd. (supra) that pendency of winding up proceedings was not brought into the notice of Adjudicating Authority. In the above reference, the Hon'ble Supreme Court held that Section 7 is an independent proceedings and winding up proceeding would have no effect in deciding Section 7 Application on the basis of provisions contained in IBC. In paragraph 29, following was held:

"29. Dr Singhvi and Shri Ranjit Kumar have vehemently argued that SREI has suppressed the winding-up proceeding in its application under Section 7 IBC before NCLT and has resorted to Section 7 only as a subterfuge to avoid moving a transfer application before the High Court in the pending winding-up proceeding. These

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -27-

arguments do not avail the appellant for the simple reason that Section 7 is an independent proceeding, as has been held in a catena of judgments of this Court, which has to be tried on its own merits. Any "suppression" of the winding-up proceeding would, therefore, not be of any effect in deciding a Section 7 petition on the basis of the provisions contained in the IBC. Equally, it cannot be said that any subterfuge has been availed of for the same reason that Section 7 is an independent proceeding that stands by itself. As has been correctly pointed out by Shri Sinha, a discretionary jurisdiction under the fifth proviso to Section 434(1)(c) of the Companies Act, 2013 cannot prevail over the undoubted jurisdiction of NCLT under the IBC once the parameters of Section 7 and other provisions of the IBC have been met. For all these reasons, therefore, the appeal is dismissed and the interim order that has been passed by this Court on 18-12-2020 [A. Navinchandra Steels (P) Ltd. v. Srei Equipment Finance Ltd., 2020 SCC OnLine SC 1141] shall stand immediately vacated."

23. The above judgment of the Hon'ble Supreme Court clearly lays down that proceedings under Section 7 can neither be held to be barred by any order passed by DRT under the 1993 Act, nor pendency of proceedings at DRT (which is now pending at the stage of Calcutta High Court) shall preclude decision on Section 7 Application on merits."

55. It is clear from the aforesaid Judgments that pendency of a proceeding

in DRT is not a bar for initiation of CIRP process under Section 7. Section 7

in case of companies is similar to Section 95 for the Personal Guarantors to

the corporates and pari materia the same principle applies for the Personal

Guarantors.

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -28-

56. We next address the allegation of non-receipt of notice. The record

contains evidence that notices were issued by the Resolution Professional,

including notices requiring disclosure of payments. More importantly, the

Appellants replied to the notice of the RP; thereafter filed their objections

with NCLT; and finally submitted their written statements on 21.02.2024

before the Adjudicating Authority. Their participation in proceedings before

the Adjudicating Authority demonstrates knowledge of proceedings. Even

assuming some defect in service, procedural irregularity without prejudice is

not a ground to set aside admission, where debt and default are established.

57. As regards the allegation that the RP failed to verify payments, we note

that Section 99 mandates preparation of a report by the RP, but Section 100

places the ultimate duty upon the Adjudicating Authority to independently

satisfy itself regarding debt and default. The Adjudicating Authority

considered the pleadings, objections, and documents before passing the

Impugned Order. Even assuming some imperfection in the RP's verification,

no prejudice is shown because the documentary material relied on by the

Appellants is insufficient to establish extinguishment of debt. Insolvency

admission cannot be invalidated on procedural grounds, where substantive

liability is established.

58. When we look at the issue holistically considering the certified Bank

statements binding the guarantors under Clause 19 of the Guarantee deed;

the admitted CIRP claim of Rs.19,08,69,464/-; the Resolution Plan allocation

of Rs.13,80,00,000/- and the continuing unpaid balance; the absence of any

discharge document; the unilateral nature of computation sheets relied upon

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024 -29-

by the Appellants; the continuing co-extensive liability of guarantors under

Section 128 of the Contract Act; the legal irrelevance of pending DRT

proceedings in IBC jurisdiction; the opportunity afforded to the Appellants

to submit objections; and the absence of prejudice from alleged notice lapses

it becomes clear that the existence of debt and default is established. The

Appellants have not discharged the burden of proving full payment or

extinguishment.

59. In view of the findings above, we do not find any infirmity in the

impugned order. Accordingly, both the appeals are dismissed. Pending IAs,

if any, are closed. There would be no order as to costs.

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

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

SA/Pragya (LRA)

Company Appeal (AT) (Ins.) Nos. 909 & 936 of 2024