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NCLAT: Payment Received in one CIRP Lender's Claim Maintainable Against Principal Borrower & Corporate Guarantor
NCLAT: Payment Received in one CIRP Lender's Claim Maintainable Against Principal Borrower & Corporate GuarantorThe National Company Law Appellate Tribunal (NCLAT) on 8 March 2021 held in the matter of SBI (Appellant) v. Animesh Mukhopadhyay (Respondent) that when two Corporate Insolvency Resolution Process (CIRP) is maintainable, claim in both, subject to adjustments on receipts, would...
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NCLAT: Payment Received in one CIRP Lender's Claim Maintainable Against Principal Borrower & Corporate Guarantor
The National Company Law Appellate Tribunal (NCLAT) on 8 March 2021 held in the matter of SBI (Appellant) v. Animesh Mukhopadhyay (Respondent) that when two Corporate Insolvency Resolution Process (CIRP) is maintainable, claim in both, subject to adjustments on receipts, would also be maintainable.
The judgment was passed by a two-member bench of Justice AIS Cheema, Member (Judicial), and Dr. Alok Srivastava, Member (Technical). It held, "Till payment is received in one CIRP, a claim can be maintained in both CIRPs for same amount and representation in Committee of Creditors (CoC) in both CIRPs to the extent of amount due will be justified. This is the reason why Section 60(3) provides for the transfer of proceeding to Adjudicating Authority where already there is a pending proceeding."
The Appellate Tribunal added, "There is no question of looking into Judgments when Section 60 of Insolvency & Bankruptcy Code (Code) is clear and makes the two CIRPs maintainable in such matters. If they are maintainable, claim in both (subject to adjustments on receipts) would also be maintainable."
The factual background of the case is that the Appellant had granted credit facility in the nature of Term Loan to Purple Advertising Services Pvt. Ltd. (Principal Borrower).
Zenith Finesee India Pvt. Ltd. (Respondent No 1/Corporate Guarantor) was the guarantor for securing the dues of the Principal Borrower. Subsequently, the Principal Borrower and the Corporate Guarantor became the Non-Performing Assets (NPAs). As their liability was co-extensive they were jointly liable to pay the outstanding dues to the Appellant bank.
The National Company Law Tribunal (NCLT) received an application from the United Bank of India and the Tribunal initiated CIRP against the Principal Borrower. The Appellant Bank filed its claim before the Resolution Professional and CIRP is pending and the Resolution Plan is being evaluated.
The Appellant contended that it might not get any substantial sum in the CIRP of the Principal Borrower even if any resolution is found. In the meantime, CIRP was initiated against Corporate Guarantor on receiving an application by the United Bank of India.
The Appellant bank filed its claim before the Resolution Professional of the Corporate Guarantor. But the Resolution Professional discussed the claim with the CoC and opined that the claim was not tenable as per the law.
The Appellant approached the NCLT for acceptance of its claim and its inclusion in CoC. The NCLT rejected the pleading of the appellant and held that its claim against the Corporate Guarantor was not admissible as it had filed a claim in the Principal Borrower's CIRP.
An appeal was filed before the Appellate Tribunal and it opined that the NCLT in its order had failed to discuss the provisions of the Code. Considering Section 60 of the Code the NCLAT held that when two CIRPS are maintainable, claim in both (subject to adjustments on receipts) would also be maintainable.
The NCLAT added, "The Adjudicating Authority did not consider the judgment in the matter of State Bank of India v. Athena Energy Ventures Pvt. Ltd. (2020) SCC online NCLAT 774, wherein it had referred to Section 60 of the Code and the amendment made to sub-Section 2."
The NCLAT allowed the appeal and directed the Resolution Professional of the Corporate Guarantor to consider the claim of the Appellant and to appropriately deal with the Appellant as Financial Creditor in the CoC.