Remaining amount of claim show Existence of Default Amount: NCLAT upholds Appointment of RP [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that remaining amount of claim show existence of default amount and upheld the order confirming the appointment of Resolution Professional (RP).The Tribunal  confirmed the appointment of the RP and ordered the RP to make recommendation as prescribed under Section 99 of the Code as there is a default on the part of the Appellant for not fulfilling its promise.

Hemant Bohra, the appellant filed an appeal under Section 99(1) r/w Section 99(7) of the Insolvency and Bankruptcy Code, 2016 ( ‘Code’), recommending admission of the application filed by the Creditor (State Bank of India) under Section 95 of the Code for initiation of Insolvency Resolution Process (IRP) against the personal guarantor (Appellant), has been admitted. 

The suspended director of the Corporate Debtor (M/s Bohra Industries Ltd.) (BIL) gave a guarantee to the Respondent (State Bank of India) in respect of a sanction letter dated 10.08.2017 for loan of an amount of Rs. 68.5 Cr. and executed a supplementary deed of guarantee dated 05.09.2017.

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BIL was admitted into CIRP in a petition bearing order dated 07.08.2019 passed by the Tribunal. The Respondent issued a demand notice on 25.08.2020 to the Appellant regarding unpaid dues of BIL, in terms of Rule 7(1) of the IBBI (Application to Adjudicating Authority for Insolvency Resolution Process for Personal guarantor to CD) Rules, 2019 (Rules). The said notice was delivered to the Appellant on 19.09.2020 alongwith computation of the amount of default and other particulars but the appellant did not make any response to the demand notice. 

The respondent, after 14 days from the date of service of demand notice, filed the petition under Section 95 in prescribed from C on 09.03.2021 and delivered its copy to the Appellant on 29.08.2020. The total debt for which the personal guarantee was given by the Appellant in respect of the CD including interest as on 25.08.2020 was Rs. 70,73,95,918.49/-.

The Appellant did not file any submissions till the date of hearing of the said application. The Tribunal recorded in para 7 of its order dated 16.07.2021 that “based on the submissions made by the Applicant and the documents produced and placed on record before this bench, the bench does not doubt in its mind that there is a default on the part of the personal guarantor by not fulfilling the debt owed to the CD, i.e. Bohra Industries Limited, as per the Deed of Guarantee entered between the parties through the Deed of Guarantee dated 05.09.2017.”

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The Tribunal confirmed the appointment of the RP and directed him to make the recommendations with reasons in writing for acceptance or rejection of the Application within the stipulated time as envisaged under the provisions of Section 99 of the Code and further directed him to provide a copy of the report drawn under sub-section 7 of Section 99 to the creditor as soon as the same is filed before the Tribunal and in terms of Rule 9 of the Rules shall provide copy of application with copy of the order to IBBI for its records.

Counsel for the Appellant has vehemently argued that the Tribunal has committed an error in deciding in para 7 of the order dated 16.07.2021 that the Appellant has committed a default. It is further submitted that having been biased with the said finding, the RP has recorded its finding in para 14 of the report dated 23.07.2021 that the default has already been held to have been committed by the Appellant, therefore, the impugned order suffers from non-application of mind. In this regard, he has relied upon a decision of the Court rendered in the case of Mr. Ravi Ajit Kulkarni Vs. State Bank of India, CA (AT) contending that observation in regard to default at the stage of acting on the application filed under Section 95 is unwarranted because the consideration for default has to be made in terms of Section 100 of the Code.

On the other hand, counsel for the respondent has argued that the issue which has been raised during the course of hearing has not been raised in the appeal. It is also submitted that observation made in para 7 of the order dated 16.07.2021 is not the sole criteria for the RP to conclude that the Appellant was in default while submitting its report dated 23.07.2021. It is further submitted that in paragraphs 4 to 13 of the report show the independent finding recorded by the RP to conclude that there is a default on the part of the Appellant regarding nonpayment of dues of the Respondent which were claimed by way of a demand notice. He has also submitted that the repayment plan as submitted by the Appellant has already been rejected by the creditors by 100% vote and the.

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RP has filed its report concerning the same before the Tribunal.

There is no dispute that the Appellant stood as a guarantor for the loan availed by the CD. A supplementary deed of guarantee was executed on 05.09.2017. There is also no dispute that the CD has already been admitted into CIRP. The Respondent Bank has proceeded under law by applying Section 95 through the RP appointed by it.

The Respondent served a demand notice dated 25.08.2020 on the Appellant about the unpaid debts of the CD in terms of Rule 7(1) of the Rules and evidence has been led that the said notice was duly delivered to the Appellant on 19.09.2020 to which there is no response to deny its liability. The application under Section 95 was filed after the expiry of 14 days after the date of service of demand notice and was duly served upon the Appellant who did not file any response.

 The Tribunal  confirmed the appointment of the RP and ordered the RP to make recommendation as prescribed under Section 99 of the Code but in para 7 of the order dated 16.07.2021, has observed that there is a default on the part of the Appellant for not fulfilling its promise in regard to the debt owed by the CD.

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The Appellant acknowledged the existence of debt and stated that he has not made any payment in capacity of  guarantor towards the debt due by the CD of the Respondent Bank Section 99(2) provides that the debtor has to prove repayment of the debt claimed as unpaid by the creditor by furnishing evidence of electronic transfer of the unpaid amount from the bank account of the debtor, evidence of encashment of a cheque issued by the debtor or a signed acknowledgment by the creditor accepting receipt of dues whereas in the present case the Appellant categorically denied to have made payment which was sufficient to hold that there is a default.

A three-member bench of Justice Rakesh Kumar Jain, Naresh Salecha, Member (Technical) and  Indevar Pandey, Member (Technical) viewed that since the Respondent Bank has already received 25.1 Cr. out of 68.5 Cr. is concerned, it is suffice to mention that the remaining amount of claim of the Respondent still exist which is more than the threshold.

To Read the full text of the Order CLICK HERE

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