Dr. Vishnu Kumar Agarwal Vs M/S Piramal Enterprises Ltd. [Company Appeals (AT) (Insolvency) 346/2018] - Synopsis
Team SoOLEGAL 20 Nov 2020

In this particular case, Dr. Vishnu Kumar Agarwal Vs M/S Piramal Enterprises Ltd. [Company Appeals (AT) (Insolvency) 346/2018], Dr. Vishnu Kumar Agarwal is a shareholder of the “All India Advance Society of Advanced Education and Research”. All India Advance Society of Advanced Education and Research is the Principal Creditor and the Respondent that is Piramal Enterprise is the financial borrower. They had entered into a deal in which the principal borrower had taken Rs. 38.00.00.00/-from the financial creditor. There are two guarantors for the sum of income. Sunrise Naturopathy and Pvt Resorts. Ltd. and Institute of Computer Technology Subsystem Pvt. Ltd. are the Corporate Guarantor one and Corporate Guarantor two respectively. The principal burrower had paid Rs. 22 Crores, but the remainder of the balance had been owed. As a result, the Financial Creditor sent two separate notices to the Corporate Guarantors asking them to clear the loan sum or it would file an application in NCLAT to begin the CIRP (Corporate Insolvency Resolution Process). In compliance with Section 7 of the Insolvency and Bankruptcy Code, the Financial Creditor filed two separate applications for CIRP against the two Corporate Guarantors for the same volume of claims. Both submissions were approved by the NCLAT. An appeal was lodged against the inclusion of the same subject-matter of all the applications challenging the acceptance of two different applications for the same number.
The issues before the Bench are that if an appeal must be lodged against the Primary Creditor before filing an application against the Corporate Guarantors and if a corporate insolvency settlement procedure may be launched against two corporate guarantors for the same amount and default.
The Court granted the financial creditor to allow the CIRP to proceed against guarantor 1 without the need to bring charges against the borrower. The ratio behind this is that the guarantors are independent bodies, all of which were insured against the monetary amount. The financial creditor has a legal claim according to Section 3(6) of the Code and is a legitimate creditor according to Section 3(10) of the IBC. The borrower was obliged to refund the loan money and since the balance was insured by two guarantors, the guarantors are now liable to pay as the borrower has defaulted. Pursuant to paragraph (h) of Section 5(8) of the Code, there is a counter-indemnity duty on the guarantors to ensure that the borrower does not default and that if the borrower defaults, the borrower's debt is passed to the guarantors. The Court permitted the CIRP proceedings against guarantor 2 and denied the argument against guarantor 1 as the borrower had confronted all the guarantors with the full sum of the debt arising from the same default. The proceedings against guarantor 2 were permitted, as the adjudicating authority had already begun the insolvency proceedings. The Court denied the argument against guarantor 1 as if the creditor had been allowed to bring an action against all of them; the creditor would have earned double the money that he deserved, and that would have been a wrong decision.

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