National Company Law Appellate Tribunal
Poonam Kachalia & Ors vs Ca Kannan Tiruvengadam & Ors on 30 September, 2022
Author: Ashok Bhushan
Bench: Ashok Bhushan
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Company Appeal (AT) (Insolvency) No. 91 of 2022
[ Arising out of a common order dated 24th November, 2021 passed in
I.A.(IB) No.39/CTB/2019 & I.A.(IB) No. 57/CTB/2019 in TP No.
19/CTB/2021 previously in CP (IB) No. 109/KB/2018 by the Adjudicating
Authority (National Company Law Tribunal, Cuttack Bench]
IN THE MATTER OF:
1. Poonam Kachalia,
Proprietor of Poonam Electricals,
32, Ezra Street, South Block,
Room No. 502, Kolkata- 700 001. .. Appellant No. 1
2. Giri Construction Co. .. Appellant No. 2
Business at Station Para,
P.O. Rajgangpur- 770 017
District: Sundargarh, Odisha
3. M/s Kedarnatgh Agarwal .. Appellant No. 3
Business at Daily Market,
P.O. Rajgangpur,
District: Sundargarh, Odisha-770 017
4. Anjani Arts .. Appellant No. 4
Business at Bagichapara
Post Office/Police Station- Rajgangpur
Sundergar, Pin- 700 017
5. Efficient Roadways, .. Appellant No. 5
Business at 7313, Prem Nagar,
Road No. 2 Near Birla Mill, Shakti
Nagar, Delhi- 110 007
6. Shree Jagannath Carriers Private .. Appellant No. 6
Limited
Business at C-6, Nirmal Market,
Power House Road, Rourkela- 769 001
Odisha
7. Shree Jagannath Engineers Private .. Appellant No. 7
Limited
Business at C-6, Nirmal Market,
Power House Road, Rourkela- 769 001
Odisha
2
Company Appeal(AT)(Insolvency) No. 91 of 2022
8. Sri Balaji Logistic .. Appellant No. 8
Business at Room No. 301a, Sterling
Chamber, 3rd Floor, Poona Street,
Dana Bunder, Masjid, Mumbai- 400
009
9. Toshniwal Industries Private .. Appellant No. 9
Limited
Corporate Office at Industrial Estate,
Makhupara, Ajmer- 305 002
10. Techno Spares & Sales Corporation .. Appellant No. 10
Business at Todi Chamber, 2, Lal
Bazar Street, 3rd Floor, Room No. 305,
Kolkata- 700 001
11. System India .. Appellant No. 11
Business at 9-C, Light Industrial Area,
Bhilai (C.G.)- 490 026
12. Vishesh Enterprise .. Appellant No. 12
Business at 71/A, Netaji Subhas
Road,
Room No. A44,
Kolkata- 700 001
13. Vedvyas Engineering Work .. Appellant No. 13
Busine ss at B.D. Sahu Complex,
Vedvyuas Chowk, Vedvyas,
Rourkela- 769 004
Odisha
14. M/s Sterlite Mental Industries .. Appellant No. 14
Business at Office No. 4, Lehari
Building, 5th Khetwadi Lane,
Mumbai- 400 004
Maharashtra.
15. Tectonics Industrial Enterprise .. Appellant No. 15
Business at Ichapur Road, Dasnagar,
Howrah- 711 105.
Versus
1. CA Kannan Tiruvengadam, .. Respondent No. 1
Official Liquidator of Hari Machines
Limited
3
Company Appeal(AT)(Insolvency) No. 91 of 2022
2. Bank of Baroda .. Respondent No. 2
4, India Exchange Branch,
Ground Floor, Kolkata - 700 001
3. State Bank of India .. Respondent No. 3
Stressed Assets Management Branch
118 13, Shakespeare Sarani,
Nagaland House, 8th Floor
Kolkata -700 071
4. Union Bank of India .. Respondent No. 4
1/1, Camac Street, 1st Floor,
Kolkata - 700 016
5. UCO Bank .. Respondent No. 5
Main Branch Rorkela, Sector-19,
District Sundergarh,
Odisha- 769 005
6. Axis Bank Limited .. Respondent No. 6
Corporate relationship group,
Stressed asset- east A.C. Market
Building, 4th Floor,
1 Shakespeare - 700 071
7. M/s Roshan Engineers, .. Respondent No. 7
Business at Shop NO. GC34, RCMS
Market Complex, STI Chgowk,
Rourkela, District- Sundergarh,
Odisha, Pin- 769 004
8. India Forgings & Engineering Co. .. Respondent No. 8
Private Limited,
Business at 19/1, Camac Street,
Kolkata-700 017
9. M/s Sunshri Engineers, .. Respondent No. 9
Business at Gate No. 1537/10,
Sonawane Wasti, Talawade,
Pune- 412 114,
Maharashtra
10. Soni Rollers Private Limited .. Respondent No. 10
Business at 4, Princep Street,
Kolkatta - 700 072
4
Company Appeal(AT)(Insolvency) No. 91 of 2022
11. Benson Engineers Private Limited, .. Respondent No. 11
Business at Shed No- BN-28 & 29,
Industrial Estatge, Kalunga,
District- Sundergarh, Pin- 770 031
(Osdisha)
12. Shubham Enterprises .. Respondent No. 12
Business at 41, Tarangini Market,
Civil Township,
Rourkela- 769 004
13. Pilania Road Carriers, .. Respondent No. 13
Business at 16-11-19/9 A to D, Shanti
Heights Building, 2nd Floor, Saleem
Nagar, Malakpet, Hyderabad- 500 036
Telengana.
14. Shree Vinayak Transport, .. Respondent No. 14
Business at Radha Krishna Mandir,
Ward No. 9, Anladuba,
P.O./P.S.-Rairangpur Mayubhanj,
Odisha- 757 043
15. Aayush Manufacturers & Financers .. Respondent No. 15
Pvt. Ltd.,
Business at Room No. 602, 6th Floor,
4, Fairlie Place, Kolkata
West Bengal- 700 001
16. Jyotirmoyee International Private .. Respondent No. 16
Limited
Business at Ecospace, Bujksiness
Park, Block-3B, 6th Floor Plot No.
F/11, Action Area-II, Rajarhat,
Newtown Kolkata,
West Bengal- 700 156
17. Khaitan Udyog Pvt. Ltd. .. Respondent No. 17
Business at Room No. 602, 6 Floor,
th
4, Fairlie Place, Kolkata
West Bengal- 700 001
5
Company Appeal(AT)(Insolvency) No. 91 of 2022
18. Navneet Trading & Investment Co. .. Respondent No. 18
Pvt. Ltd.,
Business at Ecospace Business Park,
6th Floor, Block-3B, Premises No.
IIF/11, Action Area-II, Nedwtown,
Rajarhat, Kolkata Paraganas North
West Bengal- 700 156
19. Nobel Consultancy Pvt. Ltd., .. Respondent No. 19
Business at Room No. 602, 6th Floor,
4, Fairlie Place, Kolkata
West Bengal- 700 001
20. Shivshakti Communication & .. Respondent No. 20
Investment Pvt. Ltd.
Business at Room No. 602, 6th Floor,
4, Fairlie Place, Kolkata
West Bengal- 700 001
21. T.R. Investments Private Limited .. Respondent No. 21
Business at Room No. 602, 6th Floor,
4, Fairlie Place, Kolkata
West Bengal- 700 001
Present:
For Appellants: Mr. Vivek Chib, Sr. Advocate with Mr.
Anirudh Wadhwa, Mr. Rohit Sharma & Mr.
Bhargav Thali, Mr. Aditya Mittal, Ms.
Unnati Jhunjhunwala, Advocates
For Respondents: Mr. Rishav Banerjee & Mr. Rajarshi
Banerjee, Advocates for R-1, Liquidator.
Ms. Neha Dutt Tenani, Mr. Soumya Dutta,
Mr. Avishek Guha, Advocates for R-2 to R-
6.
JUDGMENT
[30th September, 2022] 6 Company Appeal(AT)(Insolvency) No. 91 of 2022 (Per Hon'ble Mr. Justice M. Satyanarayana Murthy) The Petitioners/Appellants in I.A.(IB) No.39/CTB/2019 in TP No. 19/CTB/2021 previously in CP (IB) No. 109/KB/2018, filed this Appeal under Section 61 of IBC, aggrieved by the order dated 24.11.2021 whereby the Petition, claiming various reliefs was dismissed by a common order passed by Adjudicating Authority (National Company Law Tribunal, Cuttack Bench) in I. A.(IB) No.39/CTB/2019 & I.A.(IB) No. 57/CTB/2019 in TP No. 19/CTB/2021 previously in CP (IB) No. 109/KB/2018.
2. The Appellants are Operational Creditors of Hari Machines Ltd. (in liquidation) before the National Company Law Tribunal, Cuttack Bench. The Appellants challenged the decision of the Liquidator of the Corporate Debtor admitting the claim of the Respondent Nos. 2 to 6 (Consortium of Banks) for Rs. 399.1 crores. Purportedly arising out of three Guarantee Deeds issued by the Corporate Debtor in favour of Consortium Banks for the loan taken by Pro-Minerals Private Limited (hereinafter referred as 'PMPL'), a related entity of the Corporate Debtor. The Appellants being the Petitioners before the Adjudicating Authority, claimed the following reliefs:
"a) Pass an order rejecting the claim of the consortium bankers namely State Bank of India, Axis Bank Ltd, Union Bank of India, Bank of Baroda and UCO Bank 7 Company Appeal(AT)(Insolvency) No. 91 of 2022 in the liquidation proceedings of Hari Machines Limited;
b) Pass an order directing the respondent to reject the claim of the consortium bankers namely State Bank of India, Axis Bank Ltd, Union Bank of India, Bank of Baroda and UCO Bank in the liquidation proceedings of Hari Machines Limited and to duly amended the list of creditors of Hari Machines Limited in the liquidation proceedings;
c) Ad interim orders in terms of prayers above;
d) Necessary orders as to costs;
e) Such further or other order or orders and/or direction or directions be given as to this Hon'ble Tribunal may deem fit and proper".
3. The grounds for claiming such relief as mentioned in paragraph- IX of the petition are very specific. The liquidation proceeding of Hari Machines Ltd commenced pursuant to the order dated 16.11.2018 passed by NCLT Kolkata and the 1st Respondent had been admitted as Liquidator of Hari Machines Ltd. The Applicants had lodged their claims being Operational Creditor with the Respondent and the claim of the Applicants have been verified and admitted by the Respondent in the liquidation process of Hari Machines Ltd. From the list of claims of Hari Machines Ltd, admitted by the Respondents, the Applicants came to know that the Respondents had admitted the claim of Consortium of Banks comprising State Bank of India, Axis Bank Ltd, Union Bank of India, Bank of Baroda and UCO Bank. The consortium 8 Company Appeal(AT)(Insolvency) No. 91 of 2022 of Banks had lodged its claim with the Respondent No. 1 on the basis of Corporate Guarantee furnished by Hari Machines Ltd. for the loan facility availed by one PMPL from the consortium of Banks. The purported Corporate Guarantee furnished by Hari Machines Ltd. in respect of facility availed by PMPL from the consortium has been rendered void and thus the claim of the consortium ought not to have been admitted by the Respondent in view of the following:
"i. The consortium had lodged its claim with the Resolution Professional of Hari Machines Limited on the basis of the purported corporate guarantee given by Hari Machines Limited in respect of facilities availed of by Pro Minerals Pvt. Ltd. from the consortium. ii. Corporate Insolvency Resolution Process of Pro Minerals Private Limited has commenced on or about 22nd February, 2019.
iii. The resolution professional of Hari Machines Limited and lodged claim for the corporate guarantee amount with the resolution professional of Pro Minerals Private Limited. The resolution professional of Pro Minerals Private Limited rejected the claim of the Resolution Professional of Hari Machines Limited on the ground that he had already admitted the team in favour of the consortium.
iv. On February 22, 2019, the Hon'ble National Company Law Tribunal, Kolkata Bench was pleased, inter alia, to approve the resolution plan of Pro Minerals Private Limited submitted by M/s Essel Mining & Industries Ltd.9
Company Appeal(AT)(Insolvency) No. 91 of 2022 v. It is stated and submitted that the claims of the consortium had been admitted by the Resolution Professional of Pro Minerals Private Limited and provisions for payment of the same had been duly made in the resolution plan of Pro Minerals Private Limited submitted by M/s Essel Mining & Industries Ltd and approved by the Hon'ble NCLT, Kolkata Bench on February 22, 2019.
vi. In such circumstances the purported corporate guarantee furnished by Hari Machines Limited has been rendered void and has become non-enforceable. Based on the above grounds, the Petitioners, Appellants herein
4. The Respondent No. 1/Liquidator filed reply admitting about his appointment as a Liquidator for Hari Machines Limited in the liquidation process. In pursuance of the order appointing him as a Liquidator, he made announcement and published in English and regional language with wide circulation at the location of the registered, principal office of the Corporate Debtor and also uploaded in the website of Insolvency and Bankruptcy Board of India. On publication of the announcement, various creditors submitted their claims against the Corporate Debtor before Respondent No. 1. Similarly, Financial Creditors of the Corporate Debtors submitted proof of claim to the Respondent by way of electronic means as prescribed under Form-D of Schedule-II. The Respondent was under
obligation to verify the claims submitted, within 30 days and either admitting or rejecting as a whole or part, as the case may be. It is found 10 Company Appeal(AT)(Insolvency) No. 91 of 2022 that the Applicants claims on account of financial debt in respect of PMPL. The Consortium of Banks, known as Financial Creditors, lodged their claim against the Corporate Debtor under agreement of guarantee dated 31.03.2011 and further amended from time to time executed between the consortium members who are lenders of PMPL and Hari Machines Ltd. On verifying the claims, it was found that the Corporate Debtor executed a Contract of Guarantee in favour of Financial Creditors for the loan sanctioned to PMPL.
5. On 16.11.2018, the Adjudicating Authority appointed Respondent No. 1 as Liquidator and CIRP was initiated against PMPL After undergoing resolution process and after negotiation with the Bankers, a Resolution Plan submitted by Essel Mining & Industries was finalized and approved. Upon approval of CoC under Section 30(4) of IBC, the same was approved by Adjudicating Authority under Section 31 of IBC.
6. As per terms of the Resolution Plan, the Consortium of Banks were to receive a sum of Rs. 37,02,26,590/- as full and final settlement of their debt due and payable by PMPL. In the said Resolution Plan it has been clearly set out that the final settlement with the Financial Creditors are without prejudice to their right to proceed against the guarantors under the relevant Deeds of Guarantee. Such agreement was executed in order to secure the due repayment of the entire dues 11 Company Appeal(AT)(Insolvency) No. 91 of 2022 under the relevant credit facility. A perusal of the contents of the Resolution Plan would make inexplicably clear that by virtue of Resolution Plan, the rights of the creditors, available under the Contract of Guarantee are not extinguished. The Respondent/Liquidator, by following necessary procedure, admitted the claim of the Consortium of Banks in the liquidation process. Liability of the Guarantor is co-extensive with the principal debtor. Since Hari Machines Limited executed a Contract of Guarantee for the principal debtor's loan, disbursed to PMPL upon commission of default by PMPL, right is accrued to the Financial Creditor against both principal debtor i.e., PMPL and guarantor - Hari Machines Ltd. It is further contended that the liability of Hari Machines Ltd is independent in itself as the contract of guarantee is an independent contract.
7. Under IBC, the liability of PMPL is to discharge on approval and implementation of the Resolution Plan by Successful Resolution Applicant, Essel Mining & Industries Limited. The Resolution Plan is already approved by Adjudicating Authority by following appropriate procedure. Therefore, PMPL is discharged under IBC not at the instance of Creditor but, due to operation of law i.e., approval of CoC and followed by Adjudicating Authority after its satisfaction. Therefore, one cannot disregard that the onus of accepting claim and verify the same in accordance with law, is absolutely vested with the Liquidator. 12
Company Appeal(AT)(Insolvency) No. 91 of 2022 The Liquidator is bound to admit the claim. The Liquidator is bound to admit the claim due and payable under law. The settled law is that the Financial Creditor is entitled to proceed against the Guarantor for the same which is not entirely covered under Resolution Plan. Therefore, the Application is devoid of merit and liable to be rejected and is not maintainable. Respondent No. 1/Liquidator further refutes each and every allegation made in the Application and requested to dismiss the Application.
8. Consortium of Banks filed independent counter supporting their claims and order passed by Liquidator while reiterating the contentions raised by the Respondent No. 1 regarding procedure followed by him in the process of liquidation of Hari Machines Ltd. It is further contended that the order dated 16.11.2018 was passed by the Adjudicating Authority under IBC directing initiation of CIRP against the principal debtor, PMPL. The CoC comprising of Respondent Nos. 2 to 6 and others was constituted. Total nine expression of interest were received from which two expressions were accepted namely, M/s Essel Mining & Industries Ltd. and AIC Steel Pvt. Ltd. In the 9th CoC meeting on 10.01.2019, CoC approved the Resolution Plan submitted by M/s Essel Mining & Industries Ltd by 100% voting share, requested the Resolution Professional to submit the Plan for approval. Accordingly, Resolution Professional filed application for approval of 13 Company Appeal(AT)(Insolvency) No. 91 of 2022 Plan and after hearing the parties, Adjudicating Authority by an order dated 22.2.2019 approved the Resolution Plan for PMPL.
9. The Respondents were to receive a sum of Rs. 269,51,45,209/- as full and final settlement of their dues in proportion of their debt but according to the Plan, the amount was received by Financial Creditors with prejudice to their rights to proceed against the Guarantors under Deeds of Guarantee. Therefore, Respondent Nos. 2 to 6 submitted their claim before the Liquidator, who in turn admitted their claims though it reduced the amount payable to other Operational Creditors. The admission of the claim of the Respondent Nos. 2 to 6 is in accordance with law since they reserved the right to proceed against the Guarantors under Deeds of Guarantee, since, Guarantors were discharged from their liability by acceptance in the Resolution Plan by the CoC and approved by Adjudicating Authority.
10. The Respondents also denied various contentions raised by the Appellants while contending that the admission of their claims by the Liquidator/Respondent No. 1 herein is in accordance with law under Section 53 of IBC and requested to dismiss the Application.
11. After filing Reply, the Appellants filed Additional Rejoinder raising two other contentions/grounds which are as follows:
i) Since along with Hari Machines seven other companies also given guarantee to the loan 14 Company Appeal(AT)(Insolvency) No. 91 of 2022 availed by pro minerals Ltd. so as per section 146 of Indian Contract Act 1872 all the guarantors equally liable hence leaving other guarantors accepting the entire claim of consortium Banks is not valid in law
ii) The Hari Machine Company given guarantee to Pro Minerals exceeding his capacity, the facts of other existence of other guarantors were suppressed by the consortium banks and submitted their claims and for non-compliance of certain statutory requirements the loan sanctioned is void."
12. Upon hearing the argument of both the Counsel, the learned Adjudicating Authority dismissed the Application by a common order dated 24th November, 2021.
13. Aggrieved by the order, the present Appeal is filed raising same contentions. However, a few specific contentions are relevant for deciding the real controversy between the parties.
a) The Corporate Debtors are discharged as Guarantors of PMPL in terms of applicable provision of the Indian Contract Act and approved Resolution Plan;15
Company Appeal(AT)(Insolvency) No. 91 of 2022
b) Guarantee in favour of Consortium of Bank was issued contrary to law which cannot be enforced to the detriment of the Appellant;
c) The conduct of Consortium of Bank is fraudulent in nature thereby rendering the Guarantee void without prejudice;
d) Acceptance of Consortium of Bank's claim by the Liquidator is in violation of Section 146 of Indian Contract Act.
As learned Adjudicating Authority did not appreciate these contentions in proper perspective, committed a grave error in dismissing the Application filed by the Appellants before the Adjudicating Authority in I.A.(IB) No.39/CTB/2019 in TP No. 19/CTB/2021 previously in CP (IB) No. 109/KB/2018 and requested to set aside the order passed by the Adjudicating Authority dated 24.11.2021.
14. Respondent No. 1 filed Reply in Appeal reiterating the contentions raised in reply submitted in the main Petition. Therefore, the contentions raised in Reply needs no further reiteration.
15. Learned Sr. Counsel for the Appellant reiterated the contentions besides filing Written Submissions raising specific contentions contending that when the claim of Respondent Nos. 2 to 6 i.e., the Consortium of banks was approved, both by CoC of PMPL and 16 Company Appeal(AT)(Insolvency) No. 91 of 2022 Adjudicating Authority, the liability of Guarantor stood discharged and thereby not entitled to make a claim before the Liquidator of Hari Machine Ltd. It is also contended that there was no clause 2.9.5. of Resolution Plan of PMPL reserving the right to proceed against the Guarantor and even if any such reservation is made, it is not binding on the Appellants. It is also contended that as per Section 146 of Indian Contract Act, the Appellants are entitled to be liable only to contribute equally along with other seven Guarantors but the Respondent Nos. 2 to 6 did not proceed against other Guarantors. Therefore, the acceptance of claim of Consortium of Bank by Respondent No. 1/Liquidator is in contravention of law i.e., Section 146 of Indian Contract. Learned Sr. Counsel placed reliance on following four judgements of Hon'ble Apex Court i.e., State Bank of India v. Ramakrishnan1, Lalit Kumar Jain v. Union of India & Ors.2, Ram Kishun & Ors. v. State of Uttar Pradesh & Ors.3, Wolmershausen V. Gullick4
16. Respondent No. 1 also filed Written Submission reiterating contentions while placing reliance on following nine judgments:
Lalit Kumar Jain v. Union of India5, Maharashtra State electricity Board, Bombay v. Official Liquidator, High Court, Ernakulam & 1 (2018) 17 SCC 394 2 (2021) SCC Online SC 396 3 (2012) 11 SCC 511 4 [1893] 2 Ch. 514 5 Transfer Case (Civil) No. 245 of 2020 17 Company Appeal(AT)(Insolvency) No. 91 of 2022 Anr.6, Gouri Shankar Jain v. Punjab National Bank & Anr.7, Harihar Nath & Ors. v. State Bank of India8, Ram Kishun v. State of U.P.9, In Re: Snowdon (1881) 17 CHd. 44, Evix Singapore Pvt. Ltd. v.
Committee of Creditors of Educomp Sales Ltd. 10, Davies v. Evan Humphreyas11, Orchid Barter Private Limited v. Skipper Homes Private Limited
17. Similarly, Respondent Nos. 2 to 6 filed Written Submission along with judgments: Gourshanakr Jain v. Punjab National Bank12, State Bank of India v. V. Ramakrishnan13, Lalit Kumar Jain v. Union of India14
18. Considering relevant contentions, perusing material available, the following points need to be answered by this Appellate Tribunal, are as follows:
i) Whether the Appellants are deemed to have discharged their liability as a guarantor, on approval of claim of Respondent Nos. 2 to 6 in CIRP proceeding of PMPL?
ii) Whether Respondent Nos. 2 to 6 are entitled to proceed against the guarantor i.e., Hari Machine Ltd. without 6 (1982) 3 SCC 358 7 2019 SCC OnLine Cal 7288 8 (2006) 4 SCC 457 9 (2012) 11 SCC 511 10 (2001) SCC Online 707 11 (1840) 6 Meeson Welsby 153 12 (2019) SCC OnLine Cal 7288 13 (2018) Vol 17 SCC 394 14 (2021) 9 SCC 321 18 Company Appeal(AT)(Insolvency) No. 91 of 2022 proceeding against other guarantors, if not, whether the admission of claim of the Respondent No. 2 to 6 by Respondent No. 1 in the liquidation proceeding is liable to be set aside?POINT NO. 1
19. Before deciding real controversy, it is necessary to narrate the admitted facts.
20. The Appellant was one of the guarantors for the loan obtained by PMPL, the accrued liability is to tune of Rs. 2,59,51,45,209/- to the consortium of Banks, executed an Agreement of Guarantee along with other six/seven guarantors. PMPL failed to discharge the loan borrowed from consortium of Banks, thereby filed a petition under Section 6 of IBC to initiate Corporate Insolvency Resolution Process (hereinafter referred 'CIRP'). The petition was allowed and CIRP was initiated. In the process, the consortium of Banks agreed to receive amount of Rs.37,02,26,590/-while reserving their right to proceed against the guarantors for recovery of the outstanding amount in the Resolution Plan, vide clause 2.9.5. Hari Machine Ltd also went to liquidation, appointing 1st Respondent herein as Liquidator under Section 33 of IBC. It is also an admitted fact that the consortium of Banks filed their claim for the balance amount of loan advanced by consortium of Banks to PMPL. The same was admitted by 1st Respondent/Liquidator. Challenging the same, they preferred 19 Company Appeal(AT)(Insolvency) No. 91 of 2022 Application before the Adjudicating Authority to direct the Liquidator to reject the claim of consortium of Banks.
21. The Appellants raised several contentions hence, it is necessary to advert to certain provisions of IBC which deal with Resolution Plan, liquidation. Section 33 deals with the initiation of liquidation process and Section 34 deals with appointment of Liquidator and fee to be paid. Whereas, Section 35 deals with the power of the Liquidator. According to Section 35, it is the duty of the Liquidator to verify the claims of all Corporate Debtors, taking into custody of the assets, property, effects and actionable claim of the Corporate Debtor. Section 35 reads as follows:
1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely:--
(a) to verify claims of all the creditors;
(b) to take into his custody or control all the assets, property, effects and actionable claims of the corporate debtor;
(c) to evaluate the assets and property of the corporate debtor in the manner as may be specified by the Board and prepare a report;
(d) to take such measures to protect and preserve the assets and properties of the corporate debtor as he considers necessary;
(e) to carry on the business of the corporate debtor for its beneficial liquidation as he considers necessary;
(f) subject to section 52, to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels in such manner as may be specified;20
Company Appeal(AT)(Insolvency) No. 91 of 2022
(g) to draw, accept, make and endorse any negotiable instruments including bill of exchange, hundi or promissory note in the name and on behalf of the corporate debtor, with the same effect with respect to the liability as if such instruments were drawn, accepted, made or endorsed by or on behalf of the corporate debtor in the ordinary course of its business;
(h) to take out, in his official name, letter of administration to any deceased contributory and to do in his official name any other act necessary for obtaining payment of any money due and payable from a contributory or his estate which cannot be ordinarily done in the name of the corporate debtor, and in all such cases, the money due and payable shall, for the purpose of enabling the liquidator to take out the letter of administration or recover the money, be deemed to be due to the liquidator himself;
(i) to obtain any professional assistance from any person or appoint any professional, in discharge of his duties, obligations and responsibilities;
(j) to invite and settle claims of creditors and claimants and distribute proceeds in accordance with the provisions of this Code;
(k) to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor;
(l) to investigate the financial affairs of the corporate debtor to determine undervalued or preferential transactions;
(m) to take all such actions, steps, or to sign, execute and verify any paper, deed, receipt document, application, petition, affidavit, bond or instrument and for such purpose to use the common seal, if any, as may be necessary for liquidation, distribution of assets and in discharge of his duties and obligations and functions as liquidator;
(n) to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation of the corporate debtor and to report the progress of the liquidation process in a manner as may be specified by the Board; and
(o) to perform such other functions as may be specified by the Board. (2) The liquidator shall have the power to consult any of the stakeholders entitled to a distribution of proceeds under section 53: Provided that any such consultation shall not be binding on the liquidator: Provided further that the records of any such consultation shall be made available to all other stakeholders not so consulted, in a manner specified by the Board.
22. According to Section 36, the Liquidator shall form an estate of the assets as mentioned in sub-section 3 which will be called the 21 Company Appeal(AT)(Insolvency) No. 91 of 2022 Liquidation Estate in relation to the Corporate Debtor. Section 37 deals with power of Liquidator to access to information and Section 38 deals with power of Liquidator to collect claims. However, Section 39 permits Liquidator to verify the claims and Section 40 confers power or the Liquidator either to admit or reject the claims of the Corporate Debtors on verification under Section 39 and shall communicate his decision to the Creditor or Corporate Debtor within seven days of such rejection or admission of the claims. Here, the dispute is admission of claims of the consortium of Banks which resulted in reduction of the share of the Appellants claim, because the consortium of Banks is Secured Creditor.
23. When an order is passed by the Liquidator under Section 40(1) either admitting or rejecting the claim of the Creditors and communicated the decision of admission or rejection of the claims to the Creditors within the specified date, an Appeal against such decision of the Liquidator is provided under Section 42 of IBC which reads as follows:
"A creditor may appeal to the Adjudicating Authority against the decision of the liquidator accepting or rejecting the claims within fourteen days of the receipt of such decision."
24. In the petition it is mentioned that the claim of the consortium of Banks was admitted for balance recoverable. Instead of filing an 22 Company Appeal(AT)(Insolvency) No. 91 of 2022 Appeal, as provided under Section 42 of IBC, against the decision of the 1st Respondent/Liquidator within fourteen days, the Appellants circumventing the law, adopted a different procedure seeking a direction from the Adjudicating Authority against 1st Respondent/Liquidator to reject the claim without availing a statutory remedy available to the Creditor under Section 42 of IBC. Such petition circumventing law is nothing but an abuse of the process of law. In this circumstance, the Adjudicating Authority ought not to have entertained such Application but passed an order against the Appellants, which is now under challenge before this Appellate Tribunal.
25. The major contention of the Appellants is that when Respondent Nos. 2 to 6 accepted the Resolution Plan, being the members of CoC for Rs. 37,02,26,590/-, the liability of guarantors is ceased to exist or the claim against the guarantors, under the Agreement of Guarantee, is extinguished thereby the consortium of Banks is not entitled to put forth claim under Chapter-III, Section 38 & 39 of IBC and 1st Respondent/Liquidator ought to have rejected the claim under Section 40 of IBC.
26. Learned Sr. Counsel for the Appellants has drawn attention of this Tribunal to Sections 133, 134, 135 and 136 of the Indian Contract Act to contend that when once Respond Nos. 2 to 6 agreed to receive 23 Company Appeal(AT)(Insolvency) No. 91 of 2022 Rs. 37,02,26,590/- as approved Resolution Plan by CoC, the Corporate Debtor is deemed to have been discharged. But Section 133 has no relevance to decide the present issue. However, Section 134 deals with discharge of surety by release or discharge of principal debtor by surety. Discharge by any contract between the creditor or principal debtor by which the principal debtor is released or by any or omission of the Creditor, the legal consequence of which is the discharge of the principal debtor. But in the present case, the Respondent Nos. 2 to 6 reserved their right to proceed against the Creditor as per clause 2.9.5, which we extract hereunder.
"All security (including Guarantees) provided by any third party on behalf of the Corporate Debtor (Except any Guarantees provided to the Financial Creditors by the Guarantors in terms of clause 2.9.6) shall stand released without any further action from any person including the corporate debtor, the third party who had provided the security or the person to whom such security was provided;"
27. All sureties (including Guarantors) provided by any third party on behalf of Corporate Debtor (except any Guarantor provided by the Financial Creditor in terms of clause 2.9.6) shall stand released without any further action from any person including Corporate Debtor, third party, who had provided the surety or person to whom such security was provided.
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Company Appeal(AT)(Insolvency) No. 91 of 2022
28. As seen from the clause, the acceptance of Resolution Plan is such permitting the creditor i.e., Consortium of Banks, Respondent Nos. 2 to 6 to proceed against the sureties to recover un-discharged loan amount by the principal debtor. When there is a contract to the contrary, the Respondent Nos. 2 to 6 are entitled to proceed against the Guarantors since the clause specifically excluded the Guarantor provided by the Financial Creditor in terms of clause 2.9.5. In subsequent clause 2.9.6, the rights of the Financial Creditor are reserved. Therefore, the alleged discharge of principal debtor would not absolve the Guarantors from their liability to discharge the debt due to the Creditors i.e., Respondent Nos. 2 to 6. This view is fortified by the Judgment of the Hon'ble Supreme Court in the matter of "State Bank of India vs. V. Ramakrishnan" referred supra. Paragraph-22 of the judgement reads follows:
..
"22. Section 31 of the Act was also strongly relied upon by the Respondents. This Section only states that once a Resolution Plan, as approved by the Committee of Creditors....
Section 31 is one more factor in favour of a personal guarantor having to pay for debts due without any moratorium applying to save him."25
Company Appeal(AT)(Insolvency) No. 91 of 2022
29. The judgment is directly on issue involved in the present case governing the provisions of IBC.
30. The Hon'ble Apex Court in the case of "Lalit Kr. Jain vs. Union of India" referred supra, held in paragraph -111 as follows:
111. In view of the above discussion, it is held that approval of a resolution plan does not ipso factor discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee.
As held by his court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process i.e., by operation of law, or due to liquidation or insolvency proceeding, does not of an independent contract.'
31. The IBC legislation is subsequent to the Indian Contract Act and as such it will prevail over the provision of Indian Contract Act. In view of the principle laid down in "State Bank of India vs. V. Ramakrishnan" and "Lalit Kr. Jain vs. Union of India" referred supra, the Guarantors are not absolved from their liability since Consortium of Banks, i.e., Respondent Nos. 2 to 6 reserved their right in the Resolution Plan to proceed against the Guarantors for recovery of the balance amount of loan.
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Company Appeal(AT)(Insolvency) No. 91 of 2022
32. During hearing, learned Sr. Counsel for the Appellants drawn attention of this Tribunal to the judgments of "State Bank of India vs. V. Ramakrishnan" and "Lalit Kr. Jain vs. Union of India"
besides two other judgments of Hon'ble Apex Court in the matter of "Ram Kishun & Ors v. State of U.P. and Ors" referred supra.
33. "Wolmershausen V. Gullick" [1893] 2 Ch. 514, referred supra of 1893 of Chancery Division, which is in consonance with Section 134 of Indian Contract Act. But the judgment of "Wolmershausen Vs. Gullick" cannot be relied on, as the judgments of the Hon'ble Apex Court is against the contention of the Appellants. Therefore, by applying lead judgments of "State Bank of India vs. V. Ramakrishnan" and "Lalit Kr. Jain vs. Union of India", we are unable to accept the contention of the Appellants since learned Adjudicating Authority rightly relied on "Ram Kishun & Ors v. State of U.P. and others", Calcutta High Court decision in "Gouri Shankar Jain Vs. Punjab National Bank" reiterating the same principle and decided the point, and the findings recorded by the Adjudicating Authority are free from any legal infirmities warranting no interference by this Appellate Tribunal. Hence, the finding of the Adjudicating Authority is hereby affirmed by holding the point against the Appellants and in favour of the Respondents.
27
Company Appeal(AT)(Insolvency) No. 91 of 2022 POINT NO. 2:
34. The major contention of the Appellants is that the Guarantee Agreement were executed by seven Guarantors for the loan obtained by PMPL from Respondent Nos. 2 to 6. But the Respondent Nos. 2 to 6 filed their claims in the liquidation process before the Liquidator in Hari Machines Ltd, leaving the other sureties. Thereby the amount payable to the Appellants herein is reduced to maximum extent as the Respondent Nos. 2 to 6, being the secured creditor for getting more amount. No doubt, Section 146 of Indian Contract Act, which deals with co-sureties liability where two or more persons are co-sureties for the same debt or duty, either jointly or severally and whether under the same or different contracts, and whether with or without the knowledge of each other, the co-sureties, in the absence of any contract to the contrary, are liable, as between themselves to pay each in equal share of the whole debt or of that part of it which remains unpaid by the principle debtor. This means that every surety or guarantor are liable to contribute equally for discharge of the debt of the principal debtor to the creditor. In the instance case, the Respondent Nos. 2 to 6 are proceeding against these Appellants, who are independent Guarantors for the loan obtained by Corporate Debtor PMPL, leaving other Guarantors. This contention was strongly refuted by the learned Counsel for the Respondents on the ground that it is the prerogative of the Creditor to proceed against all or any of the sureties including principal debtor and one surety cannot direct the 28 Company Appeal(AT)(Insolvency) No. 91 of 2022 creditor to proceed against any of them or all of them. Therefore, it is for the Respondent Nos. 2 to 6 to recover the amount from either of the sureties or from principal debtor or against all in terms of Section 140 of Indian Contract Act since the liability of sureties is co-extensive with that of the principal debtor. The Adjudicating Authority adverted to Sections 140 and 146 of Indian Contract Act and decided this issue against the Appellants.
35. Learned Sr. Counsel for the Appellants had drawn the attention of this Tribunal, the decision of the Hon'ble Apex Court in the matter of "Ram Kishun & Ors v. State of U.P. and others" where Hon'ble Supreme Court had an occasion to decide the prerogative of the Creditors to proceed against the all or any of the sureties and principal debtor. The Hon'ble Supreme Court held that the liability of sureties is co-extensive with that of the principal debtor. In case when there are more than one surety, the liability is divided to all for any unpaid amount. Thus, each surety is liable to pay equally to discharge the unpaid debt in view of Section 146 of the Indian Contract Act. There is no dispute to settled position of law.
36. In view of provision of Section 128 of the Indian Contract Act, Guarantors/Sureties liability is co-extensive with that of principal debtor. The Surety does not have a right to dictate the terms to the 29 Company Appeal(AT)(Insolvency) No. 91 of 2022 Creditors as to how he should render a party of his remedies against the principal debtor.
In Pitt v. Purssord15 it was held that, where one of two persons, who, as sureties for a third, signed together with the principal a joint and several promissory note, on the note becoming due, paid the amount, although no demand had been made or action brought against him by the holder, that such payment could not be considered voluntary, and that he might use his co-surety for contribution.
In Muthusami Naidu v. Rayalu Naidu16 the Madras High Court was of the view that the defendant having undertaken by the hypothecation bond B-I to discharge the promissory notes was bound to contribute the money to the plaintiff.
In Hitchman v. Stewart17 the Court held that when one of several sureties has paid the principal debt, and some of the co-sureties are insolvent, he is entitled as against the solvent sureties to be repaid their numerical shares of what he has paid, with interest from the time of payment, although the instrument does not contain any express indemnity so as to carry interest as on a speciality. And the insolvent sureties must pay their own costs of being brought before the court to the final hearing of the cause.
15 151 E.R 1152 16 AIR 1924 Mad 848 17 61 E.R. 907 30 Company Appeal(AT)(Insolvency) No. 91 of 2022 In Davies v. Evan Humphreys18 the Court relying on Ex parte Gifford19 observed that sureties stand with regard to each other in a relation which gives rise to this right amongst others, that if one pays more than his proportion, there shall be a contribution for a proportion of the excess beyond the proportion which, in all events, he is to pay, and that unless one surety should pay more than his moiety, he would not pay enough to bring an assumpsit against the other and if a surety pays a part of the debt only and less than his moiety, he cannot be entitled to call on his co-surety who might himself subsequently pay an equal or greater portion of the debt, in the former of which cases, such cosurety would have no contribution to pay, and in the latter he would have one to receive. In truth, therefore, until the one has paid more than his proportion, either of the whole debt, or of that part of the debt which remains unpaid by the principal, it is not clear that he ever will be entitled to demand anything from the other, and before that, he has no equity to receive a contribution, and consequently no right of action, which is founded on the equity to receive it. Thus, if the surety, more than six years before the action, have paid a portion of the debt, and the principal has paid the surety within six years, the Statute of Limitations will not run from the payment by the surety, but from the payment of the residue by the principal, for until the latter date it does not appear that the surety has paid more than his share.
18 151 E.R. 361 19 6 Ves/ 805 31 Company Appeal(AT)(Insolvency) No. 91 of 2022 In Re Snowdown20, the Court of Appeal held that a surety is not entitled to call upon his co-surety for contribution until he has paid more than his proportion of the debt due to the principal creditor.
In Stirling v. Burdett21, the Chancery Division held that interest and premiums constituted one debt, that, until the plaintiffs had paid more than their due proportion of the entire debt, they could not call on the defendants to contribute; and that it was immaterial that the plaintiffs had paid more than their share of the part which had become due.
In Dering v. Earl of Winchelsea22, the Court of Chancery held that the Doctrine of Contribution amongst sureties is not founded in contract, but is the result of general equity on the ground of equality of burthen and benefit. Therefore, where three sureties are bound by different instruments, but for the same principal and the same engagement, they shall contribute.
In Wolmershausen v. Gullick23 the Chancery Division while deciding the rights of contribution of principal, surety and co-surety held that a surety against whom judgment has been obtained by the principal creditor for the full amount of the guarantee, but who has paid nothing in respect thereof, can maintain an action against a co-surety to compel him to contribute towards the common liability; and for this purpose the allowance of a claim by the principal creditor against the estate of a deceased surety is equivalent to a judgment; and where 20 (1881) 17 Ch.D. 44 21 [1911] 2 Ch. 418 22
29. E.R. 1184 23 [1893] 2 Ch. 514 32 Company Appeal(AT)(Insolvency) No. 91 of 2022 the principal creditor is a party to the action, the surety may obtain an order upon the co-surety to pay his proportion to the principal creditor. Where the principal creditor is not a party, he may obtain a prospective order directing the co-surety, upon payment by the surety of his own share, to indemnify him against further liability.
In Robinson v. Harkin24 the Chancery Division held that the principle established in Wolmershausen v. Gullick25 that the Statute of Limitations does not begin to run against a surety suing a co-surety for contribution until the liability of the surety is established, applies equally to the case of a trustee claiming contribution against his co-trustee in respect of a liability incurred form loss occasioned to the trust estate by their joint default. In such case, therefore, time does not begin to run as between the co-trustees until the claim of the cestui que trust has been established against one of them.
In Pendlebury v. Walker26 the Court considered the liability of co-sureties and held that where the default of the principal renders all the co-sureties responsible, all are to contribute and then the law superadds that they should all contribute equally if each is surety to an equal amount; and if not equally, then proportionately to the amount for which each is a surety.
Thus, from the law declared by various Courts in England, Supreme Court of India and judgments of Madras High Court, it is abundantly clear that when one 24 [1896] 2 Ch. 415 25 160 E.R. 1072 26 160 E.R. 1072 33 Company Appeal(AT)(Insolvency) No. 91 of 2022 surety discharged the liability of the principal debtor to the creditor, the other sureties are liable to contribute equally based on the Principle of Equity, till the surety paid part or whole of the debt due to the creditor by the principal debtor, the question of claiming right of contribution against the co-surety does not arise. The judgments of England referred supra, though not binding precedent under Article 141 of Constitution of India, they are of greater persuasive value, since the principles of Indian Contract Act are borrowed from England. The judgements of foreign Courts are having highest persuasive value though not binding precedent, as those judgments are not the law declared by the Apex Court under Article 141 of Constitution of India.
In "Forasol v. ONGC"27 the Apex Court observed that the English decision are of high persuasive value and our Courts should be cautious enough whether the rule laid down can be applied by them in the context of our laws and legal procedure and the practical realities of litigation in our country. Where law is laid down by Supreme Court and reiterated in numerous subsequent judgments, a wider proposition of law laid down in foreign judgment is not acceptable in view of the judgment rendered in "BSES Ltd. v. Fenner India Ltd."28 Thus, the judgments of foreign courts though not fall within the ambit of Article 141 of Constitution of India, the Courts in India can draw the principle laid down in those judgments subject to similarity in the provisions of 27 1984 (Supp.) SCC 263 28 (2006) 2 SCC 728 34 Company Appeal(AT)(Insolvency) No. 91 of 2022 the Act i.e. if the provisions of a particular enactment in India and Foreign Countries are in Pari materia, however no precedent value can be attached to such judgments though they have higher persuasive value.
Therefore, in view of the law declared by the Apex Court in the judgments referred supra, the judgments of Foreign Courts are having greater persuasive value and the Court may accept the principles laid down in those judgments when the principles are borrowed from those countries. Consequently, the principles laid down in the judgments referred supra are having greater persuasive value and this Court can follow those principles. In any view of the matter, in the present facts of the case, the claim of consortium of Banks was admitted in CIR of PMP. For the rest of the asset, the claim is admitted by Respondent No. 1 in liquidation process of Hari Machines Ltd. But the Adjudicating Authority relying on the principle laid down in Ram Kishun and others case, concluded that The Appellants herein are liable to discharge the debt and admit claim of Consortium of Banks is in consonance of Sections 140, 146 of Indian Contract Act. But, the Adjudicating Authority did not distinguish the right of surety against the debtor and right of surety against co-sureties under Sections 140 & 146 of the Indian Contract Act and when it would arise more particularly when a decree making all respondents liable jointly and severally.
37. In view of the law laid down by the Hon'ble Apex Court and other Courts, a Creditor may proceed against one or all Guarantors and principal debtor for recovery of the amount. Therefore, the contention 35 Company Appeal(AT)(Insolvency) No. 91 of 2022 of the learned Sr. Counsel for the Appellants is without any merit and liable to be rejected.
38. Learned Counsel for the Respondent Nos. 2 to 6 placed reliance on the same judgment but needs no further consideration.
39. Learned Counsel for Respondent No. 1/Liquidator has pointed out that the Appellants have no right to direct the Creditor/Respondent Nos. 2 to 6 to proceed against any one Guarantor, more particularly, when the Respondents reserved the right to appropriate claim against the Guarantor and proceed in accordance with law. The Hon'ble Supreme Court in the matter of "Lalit Kr. Jain vs. Union of India" has held in paragraphs 111 and 104 that the approval of the Resolution Plan does not absolve the surety/guarantor of his or her liability, which arises out of independent contract. In "Maharashtra State Electricity Board Bombay Vs. Official Liquidator, High Court, Ernakulam & Anr." referred supra laid down a similar principle as in "Lalit Kr. Jain vs. Union of India". The Hon'ble Apex Court in "Harihar Nath & Ors. Vs. State Bank of India & Ors."29, paragraph-23 held that it is open to the Creditor to recover the amount in the manner it deems fit. Thus, it is upto the Financial Creditor to decide which Corporate debtor is to be proceeded against Guarantors of such Contract of Guarantee, is an 29 (2006) 4 SCC 457 36 Company Appeal(AT)(Insolvency) No. 91 of 2022 unlimited guarantee and the liability of the Corporate Debtor is not limited one. Even in the judgment of the Hon'ble Apex Court in the matter of "Ram Kishun & Ors v. State of U.P. and others" reiterated that the sureties do not have right to dictate the terms to the Creditor as to how the Creditor should make the recovery.
40. In view of the principle laid down in the above judgments, it is for the Creditors to decide the mode of recovery by proceeding either against one or other or all Guarantors of this choice. At best, the Appellants may recover the amount, if any, paid in excess of their share under the Agreement of Guarantee in absence of contract to the contrary, any such Creditor may proceed against other Guarantor for recovery of amount, if any, paid in excess of their share. Therefore, the contention that the Respondent Nos. 2 to 6 Consortium of Banks cannot proceed against the Appellants is not based on any law. However, the Hon'ble Apex Court in the case of "Lalit Kr. Jain vs. Union of India" in paragraph-24 noted the judgment of "Kaupthing Singer & Friedlander Ltd." and where the UK Supreme Court noted the principle wherein it was held as follows:
"The function of the rule is not to prevent a double proof of the same debt against two separate estates (that is what insolvency practitioners call 'double dip"). The rule prevents a double proof of what is in substance the same debt being made against the same 37 Company Appeal(AT)(Insolvency) No. 91 of 2022 estate, leading to the payment of a double dividend out of one estate. It is for that reason sometimes called the rule against double dividend. In the simplest case of suretyship (where the surety has neither given nor been provided with security, and has an unlimited liability) there is a triangle of rights and liabilities between the principal debtor (PD), the surety (S) and the creditor (C). PD has the primary obligation to C and a secondary obligation to indemnify S if and so far as S discharges PD's liability, and the secondary right of obtaining an indemnity from PD. C can (after notice) proceed against either or both of PD and S. If both PD and S are in insolvent liquidation, C can prove against each for 100p in the pound but may not recover more than 100p in the pound in all."
41. In view of the law laid down in the above judgments, Respondent Nos. 2 to 6 are not getting any double benefit on the other hand they are loosing part of the claim even after admission of claim in the liquidation process of Hari Machines Ltd, thereby the reduction in the claim of the Petitioner/Appellant on account of admission of the claim of the Respondents is not sufficient ground to reject the claim of Respondent Nos. 2 to 6.
42. Therefore, we find absolutely no error in the order passed by the Adjudicating Authority, warranting interference by this Tribunal while 38 Company Appeal(AT)(Insolvency) No. 91 of 2022 exercising the power under Section 61 of IBC since the order is free any illegality.
43. The Adjudicating Authority recorded its findings based on the material. Hence the finding of the Adjudicating Authority is hereby affirmed. Accordingly, the point is answered in favour of the Respondents and against the Appellants
44. Though no plea was raised initially by the Petitioners/Appellants in the petition filed under but in the Rejoinder the Appellants improved its case by manifold and prayed the Adjudicating Authority to adjudicate upon these contentions. One of such contentions of the Agreement of Guarantee does not contain the signature of authorised person of PMPL thereby the Respondent Nos. 2 to 6 cannot recover the amount.
45. The Adjudicating Authority adverting to Section 295(2) of Companies Act, rejected the claim of the Appellants since it is not without any factual foundation in the pleadings.
46. Learned Counsel for the Respondents also pleaded that the Guarantees were obtained by playing fraud but did not disclose the details of fraud as required to be pleaded in terms of settled law, more particularly, when a special plea like fraud, mistake, misrepresentation etc. is raised. However, the Adjudicating Authority, 39 Company Appeal(AT)(Insolvency) No. 91 of 2022 with an intention not to leave any stone unturned, adverted to Section 17 of Indian Contract and found that no fraud in obtaining Guarantee Agreement from the Corporate Guarantors and the findings does not warrant interference by this Tribunal. At the same time, the Appellants themselves admitted about execution of Agreement of Guarantee in favour of Consortium of Bank for the loan obtained by Corporate Debtor but pleaded fraud at a later stage, when they admitted execution of Agreement of Guarantee, they cannot be allowed to approbate or reprobate.
47. On perusal of the entire record including the order of the Adjudicating Authority, we find no merit in the case and it deserves to be dismissed. In view of the forgoing, we find that the Appeal is devoid of merit and liable to be dismissed.
In the result the Appeal is dismissed.
[Justice Ashok Bhushan] Chairperson [Justice M. Satyanarayana Murthy] Member (Judicial) [Mr. Barun Mitra] Member (Technical) NEW DELHI Akc