Rohit Nath @ Rohit Rabindra Nath vs KEB Hana Bank Ltd

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2021 Supreme(Mad) 2968

IN THE HIGH COURT OF JUDICATURE AT MADRAS
SANJIB BANERJEE, SENTHILKUMAR RAMAMOORTHY, JJ.
Rohit Nath @ Rohit Rabindra Nath - Petitioner
Vs.
KEB Hana Bank Ltd No.29, Bannari Amman Towers, 4th Floor, Dr.Radhakrishnan Road, Mylapore, Chennai 4 – Respondent
C.R.P.(PD) No.1289 of 2021
Decided On : 28-07-2021

Advocates:
Advocate Appeared:
For the Petitioner: Ms.Iyengar Shubaranjani Ananth
For the Respondent: Mr.P.Vinod Kumar

Headnote:
Companies Act, 1956 - Insolvency and Bankruptcy Code, 2016 - Section 95(1), 2, 243, 179, 60, 238 - Companies Act, 2013 - Section 60, 408 - Recovery of Debts and Bankruptcy Act, 1993 - section 3 (1) - Contract Act, 1872 - Section 128 - Loan - Unpaid Debt - Whether an individual, in his capacity as a guarantor in connection with credit facilities granted by a bank or financial institution to a corporate entity, may be proceeded against by way of insolvency proceedings under Section 95(1) of Insolvency and Bankruptcy Code, 2016 before an appropriate Debts Recovery Tribunal - Whether as a guarantor or otherwise, be seen to be a corporate debtor or a corporate person within definitions ascribed to such expressions in Code – Held, Section 95(1) of Code, in its ordinary form, allows a creditor to initiate an insolvency resolution process - It does not specify as to who debtor may be - Petitioner seeks to send Court on a wild goose chase by seeking to take advantage of perceived anomaly upon Code, like Companies Act, 2013, being notified and implemented in stages - That Section 95(1) of Code applies to any debtor, other than debtors against whom an insolvency resolution process may be initiated under other specific provisions, is apparent - Rule as embodied in Section 128 of Act of 1872 will apply in equal measure to a guarantor who has furnished a guarantee in connection with any credit facilities obtained by a corporate entity - Accordingly, petition is found to be completely devoid of merit and nothing but a kite-flying exercise to waste time and dodge inevitable - For all of petitioner’s efforts, petitioner will pay costs assessed at Rs.50,000/- to respondent bank which respondent bank will be entitled to recover in course of insolvency resolution process initiated before appropriate Debts Recovery Tribunal – Petition dismissed.

ORDER :

SANJIB BANERJEE, CJ.

There is no merit in the petition and the entire exercise has been a complete waste of time by an admitted defaulter who tends to believe that it is a right of an Indian citizen to obtain a loan in the name of a corporate entity and not show up at the time of repayment.

2. A yarn is sought to be spun out by referring to judgments which are utterly irrelevant in the context, provisions of the erstwhile Companies Act, 1956 and the salutary principle that all matters pertaining to a single transaction should be consolidated and taken up by one adjudicatory forum. Every trick to throw wool over the Court's eyes is resorted to in an irreverent attempt to prey on the Court's perceived ignorance of the tenets of corporate law.

3. Shorn of the irrelevant and the rubbish, the main issue involved is whether an individual, in his capacity as a guarantor in connection with credit facilities granted by a bank or financial institution to a corporate entity, may be proceeded against by way of insolvency proceedings under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 before an appropriate Debts Recovery Tribunal.

4. In this case, a notice was issued on February 18, 2020 by the respondent bank under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019. The notice was in accordance with Form B prescribed in the said Rules of 2019. The notice was addressed to the petitioner. It indicated the total quantum outstanding and appended all documents in support of the details set out in the prescribed form. To boot, the notice enclosed copies of the deeds of personal guarantee dated July 27, 2016, October 26, 2016, February 21, 2017 and June 5, 2017 and, in addition, other documents and deeds of indemnity.

5. In its fourth paragraph, the notice required the noticee "to unconditionally pay the unpaid debt in full within fourteen days from the receipt of this letter ...". Over the next few words in the said paragraph, the issuing bank put the noticee on notice that appropriate "insolvency resolution process, under the Code" would be initiated against the noticee.

6. Rule 7 of the said Rules of 2019 provides for an application by a creditor in certain circumstances. The entirety of the such Rule must be seen:

"7. Application by creditor: -

(1) A demand notice under clause (b) of sub-section (4) of section 95 shall be served on the guarantor demanding payment of the amount of default, in Form B.

(2) The application under sub-section (1) of section 95 shall be submitted in Form C, along with a fee of two thousand rupees.

(3) The creditor shall serve forthwith a copy of the application referred to in sub-rule (2) to the guarantor and the corporate debtor for whom the guarantor is a personal guarantor.

(4) In case of a joint application, the creditors may nominate one amongst themselves to act on behalf of all the creditors."

7. As is evident from the first sub-rule, the notice is to be issued in Form B which is prescribed as a part of the Rules. There is no dispute that the prescribed form was adhered to. Again, it is selfevident that the noticee was aware of the intent and purpose of the notice and what the relevant notice obliged the noticee to do. True to the conduct of an Indian defaulter, the noticee responded with a settlement suggestion. Indeed, the response to the notice was of such quality that the petitioner herein has been ashamed to include it as a part of the disclosed documents. However, what has been included with the documents filed is the bank's response of February 18, 2020 to the petitioner's earlier offer of settlement. The bank's response of February 18, 2020 in such regard refers to the meagre payment that had been made by the borrower and reiterated the bank's stand to proceed against the borrower, the guarantor and the secured assets.

8. It is in such circumstances that the insolvency pro