An applicant must establish disbursal of funds to qualify as a financial creditor under the Insolvency and Bankruptcy Code.

ORDER

1) This Application/Petition under Section 7 of the Insolvency Bankruptcy Code, 2016 (IBC) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has been filed by Mr.P.L.Srinivas Reddy (Applicant) for initiating Corporate Insolvency Resolution Process (“CIRP”) against M/s.Techtrans Constructions India Private Limited (Respondent)

2) Application:

2.1 It is averred that the Applicant initially approached State Bank of India (SBI), Secunderabad Branch, seeking credit facilities to the tune of ₹4 crore for his business activities by offering mortgage of collateral securities. However, after due diligence, SBI allegedly informed the Applicant that he was ineligible to avail the said credit facilities on account of an adverse CIBIL report.

2.2 It is submitted that during the processing of his request, he came into contact with Mr. H. Ramesh, Chairman and Managing Director of the Respondent Company, who along with officials of SBI insisted that the Applicant provide additional collateral security for the purpose of credit enhancement in respect of loans proposed to be sanctioned to the Respondent. It is alleged that upon the suggestion of SBI, the Applicant entered into a Memorandum of Understanding (MoU) with the Respondent, whereby he offered his immovable property as collateral security and for the loans availed by the Respondent, and the Respondent allegedly agreed to extend certain financial accommodations to the Applicant. It is further alleged that the Applicant was compelled by the Respondent and SBI to sign certain documents.

2.3 According to the Applicant, he became aware of the true nature of the transaction only upon receipt of a legal notice from SBI, demanding an amount of ₹31.17 crore in respect of credit facilities extended to the Respondent. Thereafter, notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) was issued to him, calling upon him to discharge the outstanding liability. Upon failure to comply, a sale notice dated 08.03.2023 under Rule 8(6) of the SARFAESI Rules, 2002 was issued for auction of the mortgaged properties.

2.4 Aggrieved by the actions of SBI, which were alleged to be collusive and intended to usurp his assets, the Applicant approached the Hon’ble High Court of Telangana by way of a writ petition. The Hon’ble High Court directed the Applicant to approach the Debts Recovery Tribunal (DRT). Accordingly, the Applicant filed an application before the DRT challenging the measures initiated by SBI under the SARFAESI Act. The DRT, by way of an interim order, directed SBI not to proceed further, subject to the Applicant depositing a sum of ₹2 crore. It is stated that the Applicant deposited ₹1.5 crore, but was unable to arrange the balance amount.

2.5 In the interregnum, the Applicant filed CP (IB) No.74/94/HDB/2024 before this Adjudicating Authority under Section 94 of the IBC, and vide order dated 27.03.2024, an interim moratorium was declared. The Resolution Professional appointed therein recommended admission of the said petition.

2.6 In the present application, the Applicant claims that a total sum of ₹158,62,47,294/- is due and payable by the Respondent, with the date of default stated as 08.03.2023, along with interest at the rate of 9.75% per annum from the date of filing of the application till realization.

3. Counter:

3.1 The Respondent has contested the maintainability of the present Application on the plea that the Applicant cannot simultaneously assume the position of a borrower and a guarantor. In this regard, reliance is placed on the definition of borrower in Section 2(1)(f) of the SARFAESI Act.

3.2 It is further contended that the present Application is misconceived, not maintainable in law, and vexatious, having been filed with an oblique motive to stall lawful recovery proceedings initiated by SBI under the SARFAESI Act.

3.3 The Respondent has also placed relian