Section 7 application for insolvency resolution was dismissed as it was filed with malicious intent, while the corporate debtor was found not liable under the guarantee due to lack of authorization in renewals.

COMMON ORDER

PER: BENCH

1. The present Application i.e. (IB)-612(ND)/2022 has been filed by State Bank of India, the Applicant/Financial Creditor before this Adjudicating Authority under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 , (“Adjudicating Authority Rules”), for initiating the Corporate Insolvency Resolution Process (“CIRP”), against M/s. L. R. Builders Private Limited, the Respondent/Corporate Debtor on the ground that the Corporate Debtor has defaulted to pay the outstanding principal amount of Rs. 70,79,21,383.34/-, interest (till 14.03.2022) amounting to Rs. 127,24,73,499.39/- and penal interest (till 14.03.2022) amounting to Rs. 5,77,43,512.74/-, totalling to Rs. 203,81,38,395.47/-.

2. The Respondent/Corporate Debtor filed a reply affidavit to the Section 7 Application on 29.09.2022 and also filed an application i.e. IA- 4749(ND)/2022 under Section 65 of IBC, 2016 read with Rule 11 of the National Company Law Tribunal Rules, 2016 (“NCLT Rules”) on the ground that the Applicant Bank/Financial Creditor has filed the Section 7 application for initiating the CIRP fraudulently with malicious intent and therefore sought dismissal of the application filed under Section 7 of the Code.

3. The prayers made in IA-4749(ND)/2022 are as follows:-

“A. Allow the present application and dismiss the Petition filed by the Petitioner bank under section 7 of the IBC;

B. Initiate action against the erring officials of the Petitioner Bank including Ms. Uttara Mahto (Chief Manager), Mr. Sudhir Kumar (AGM), Mr. S.V. Sarvanan (Ex-AGM), and other officials involved, under Section 65 of the IBC and all other enabling provisions in this regard for filing the main petition to initiate insolvency resolution process proceedings fraudulently with malicious intent for a purpose other than for the resolution of insolvency and impose exemplary cost/fine as stated therein;

C. Any other order(s) as may be deemed fit in the interest of justice.”

4. The Hon’ble High Court of Delhi vide order dated 12.03.2024 directed this Adjudicating Authority to hear the application filed under Section 65 of the Code prior to the main Section 7 application.

5. For better appreciation of the case in hand, we deem it appropriate to refer to the facts and submissions made by the Applicant as well as the Respondent/Corporate Debtor in the application filed under Section 7 of IBC, 2016 before proceeding to deal with the application filed under Section 65 of the Code.

6. Submissions of the Applicant/Financial Creditor in Section 7 Application:-

The case of the Applicant as stated in the present Section 7 application is as under:-

I. M/s. L.R. Builders Private Limited, the Corporate Debtor herein having its registered office at 8233, LR Complex, Rani Jhansi Road Near Filmistan Cinema, New Delhi-110006, is a Corporate Guarantor to the facilities availed by P.P. Jewellers (Delhi), the Borrower, from the Applicant Bank. P.P. Jewellers (Delhi) is engaged in the business of manufacture and export of gold jewellery, diamonds, precious metals, stones, gems, etc.

II. In December 2011, the Borrower namely, PP Jewellers (Delhi) - a partnership firm approached e-SBBJ (since merged with State Bank of India w.e.f 01.04.2017) for credit facility of INR 60 Crores, considering the request, the Applicant acceded to the request of Borrower and sanctioned credit facilities vide, sanction letter dated 20.12.2011.

The credit facility is as follows:

III. That vide Board Resolution dated 20.12.2011, the Corporate Debtor passed a resolution for providing corporate guarantee and equitable mortgage of its immovable properties in favour of the Applicant bank and authorized its Directors, to execute the requisite documents in favour of the Applicant bank.

IV