Dismissed

M/s Sls Power Corporation ltd., v. M/s. Indian Renewable Energy Development Agency Limited

DRT21 Mar 2025RA/2/2024

Case brief

AI extract

What is this about?

In this Debt Recovery Tribunal appeal, the appellants, legal heirs of a deceased guarantor, sought to quash recovery notices arguing that the principal corporate debtor's debt was fully settled via liquidation and that the deceased guarantor's estate could not be pursued. The Tribunal distinguished reported precedents, held that prior proceedings existed addressing the deceased guarantor, and allo

What did the court decide?

Recovery appeal dismissed; appeal against Demands Notice allowed to be pursued against legal heirs.

M/s Sls Power Corporation ltd., versus M/s. Indian… — Insolvency and Bankruptcy | DRT (2025)

¶1

IN THE DEBTS RECOVERYTRIBUNAI-.I AT HYDERABAD

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DATED THIS THE 2 1 ST DAY OF MARC H 2C25

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PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER

¶4

REcovERy AppERl No.2 or 2C.24

¶5

Irrt C.p.No. t9t /2022

Ir.t

R.p.No.39 t op ZO2O

Ir.t

oA.No.t30r2e20

1.	Smt Chandrakala A.S, W/o.late V.NamaKeerthi, Agedabout48years,Occ: Housewife, R/o.D.No.14, V.M.V.Grapes Garden, KalkereMainRoad, Nearto BharatGas Horamavu, Horamavu,BengaluruSouth, Bengaluru-560043.
2.	Ms.ChaitraN,D/o.late V.NamaKeerthi, Agedabout25years,Occ:Student, R/o.D.No.14, V.M.V.Grapes Garden, KalkereMainRoad, Nearto BharatGas Horama',Lr,Horamavu,BengaluruSouth, Bengaluru-560043.
3. Vers	Ms. ShravaniN,D/o.late V.NamaKeerthi, Agedabout19years,Occ: Housewife, R/o.D.No.14, V.M.V.Grapes Garden, KalkereMainRoad, Nearto BharatGas Horama'ru, Horamavu,BengaluruSouth, Bengaluru-560043. us Appellants/ Petitioners.
1. 2.	Respondent/ Cerlificate Holder Union BankofIndia(formerlyAndhraBank) SAMBranch, Koti,Hyderabad. M/s.SmaatIndiaPvt.Ltd., Regd.Office:#3-9-55419A, Mansoorabad, Hyderabad-
J.	SriM.KarunakarReddy,S/ R/o.Plot No.12, WardNo.8, Karmanghat, Hyderabad-

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Recove ry Ap pe ol No. 2/202 4

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Smt M. Swetha Reddy, W/o. M. Karunakar Reddy, Occ: Business, R/o. plot No.12, Ward No.8, Hanuman Nagar, Karmanghat, Hyderabad - 500 097.

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M/s. KMR Enterprises, Rep. by its Partners Mr. M. Karunar Reddy & Mrs. Swetha Reddy, H.No.6-104, Old Malhar Sahar Estates, Mansoorabad, Hyderabad_6g.

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Namakeerthy Venkappa (Died per LRs) S/o. V.M. Venkatappa, Respondents

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Formerly, Director of M/s. Smaat India pvt Ltd. Certificate Debtors

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Counsel for Appellants : Shn Nikunj Dugar. Counsel for Respondent No.1 : Shri V. Raghu. Respondents No.2 to 6

¶18

.:ORDER:.

¶19

1' This appeal is has arisen against the order dt.t2.r2.2o23, passed by the Ld. Recovery officer in c.P.No.191 0f 2022 in R.p.No.3gI of 2020 in oA.No.13 0f 2020.

¶20

The brief facts, which are leading to file the present appeal, a'e as under,-

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The Appellants herein are the lega-l heirs of late sri Namakeerti Venkappa, Respondent No.6 herein, who was former Director of Respondent No.2 herein and the owner of the appeal schedule property. The Appellants filed c.p.No.191 of 2022 before the Ld. Recovery officer, to quash the Notice dt.18.12.2023 (Form No.26), issued to them and also the Demand Notice dt.13.06.2022 issued in Rp.No.3gr/2020.

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ii) The contentions raised by the Appellants herein before the Ld. Recovery Officer are that, Respondent No.2 availed credit facilities from the 1.r Respondent Bankznd as a security the Respondent No.6, during his lifetime, the appeal schedule property in favour of

¶23

the 1't kl r, as there were delays in making payme and itors, the Operational Creditor of -t *il"ftm'frt" K Clobal, filed an application vide cp(IB)

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¶25

Recovery Appeol No.2/2024

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No.91/91HDBl2or9, u/s.9 of the Insolvency and Bankruptcy code, 20L6, before the Honble NCLT, Hyderabad, for initiating corporate Insolvency Resolution process (cIRp) against Respondent No.2 and the Hon'ble NCLT vide order dt.03.0g.201g admitted the said application and appointed Interim Resolution Professiona-t (lRP) for initiation of CIRp against Respondent No.2. Later on, when the Resolution professional had invited ciaims from the creditors of Respondent No.2, the l"t Respondent Bank herein filed its claim amounting to Rs.55,67,g 4,Tgo / -. subsequently, the Hon'ble NCLT issued order dt.06.06.20 19 for Iiquidation of Respondent No.2. Thereafter, official Liquidator issued Sale Notice dt.18.10.2019, fixing the sa_le of the 2na Respondent company on 06'rl'2079 and the 2"a Respondent company was sold as a going concern for an amount of Rs.4,39,oo,ooo/-. The successfur bidder obtained title and ownership rights of the 2.d Respondent company. In the said liquidation process, the 1"r Respondent Bank received a paynent of Rs.4,38,5o,4to1- towards its share and as a complete and final settlement of all its outstanding dues.

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iii) The chief Manager of the 1"t Respondent Bank issued a letter dt.og.o4.2o2o to the Sub-Registrar office at shamshabad, communicating the successful recovery of roan amount by the r,t Respondent Bank, signifying complete satisfaction and release of all charges it held against the mortgaged properties of 2nd Respondent company. similarly, the l"t Respondent Bank has a-lso issued a letter dt.o7.o7.2027 to the Registrar of companies, explicitly stating that a1l charges created against 2nd Respondent company stands satisfied of Rs.57,26,O0,OO0/-.

¶28

iu) After issuance of Demand Notice dt.1s.06.2o22 agatnst the deceased Respondent No.6 and thereafter another Notice in Form No.29 dt.18.12.2023 to the Appellants herein, who are the LRs of the deceased

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Respondent tgg them to pay balance dues of Rs.58,92,

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o.sQ1 l2O2O, the Appellants filed

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CP.No.19 the Ld. Recovery Officer challengiiig'the said frotices. Howeyeil, t d. Recovery Officer vide order a rF$m -: ;l

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Recove ry Appeol No. 2 /2024

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dt.12.12.2o23, dismissed the said Cp.No.191 /2022 holding that the Appellants are not entitled for the relief sought therein.

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v) Aggrieved by the said dismissar order dt.r2.r2.2o23, the Appelrants herein filed the present Recovery Appeal on the grounds that, the lna Respondent Company successfully settled its debt through liquidation process, where assets were sold and the proceeds, which were disbursed in the liquidation process, were duly acknowledged by the 1"t Respondent Bank and the definitive nature of this settlement is highlighted by the Balk's acceptance of Rs.4,3g,so,41o/- towards final settlement of the dues of the 2"a Respondent company. It is arso contended that the guarantor's liability is co-extensive with that of the principa-l borrower and since the 1"t Respondent Bank has concruded the loan in the liquidation process and by issuing No objection certificate and by releasing the charges. So, there are no remaining debts or roans to be recovered from Respondent No.2 and consequentry, there are no outstanding dues to be recovered from the guarantors. So, the Appellants contend that, Ld. Recovery officer in his order dt.12.t2.2023 in CP'No' 19I /2022 has failed to acknowledge settlement, including the issuance of full satisfaction memo by 1", Respondent Bank and as such the said order dt.r2.r2.2023 is liable to be set-aside.

¶37

J. The 1"t Respondent Bank filed its Counter denying all the adverse allegations made in the appeal. The contentions of the 1.t Respondent Bank, in brief, a,e as under,-

¶38

Late Namakeerthy venkappa, who was one of the Directors 6f thg fnrr Respondent company, mortgaged his immovabre property to secure the loans availed by the 2"a Respondent company. The 1"t Respondent Bank took all steps under the sARFAESI Act, before the DRT and also before the Hon'ble NCLT to recover the outstanding dues. The Hon,ble NCLT, Hyderabad y g'.d&OO.ZOl9 has ordered for liquidation of Respond Company and in the liquidation proceedings and after sale of .-^r.. 2"a Respondent Cdmpany as a going concern 6^{uvrrusr lt} drrLl irl and afterLc:I

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payment of amount by thq-.successful bidder and distribution of the amounf to the Sta]<e holders as per their share etc., the 1"t Respondent

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¶41

pecovery Appeot No.2/2024

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Bank received an arnount of Rs.4,3B,so,4tol- and the said amount is not at all towards full and final settlement dues in the loan account. After receipt of the said amount, the branches of the l.t Respondent Bank intimated the SRo, Ranga Reddy East and sRo Saroornagar that the auction paFnent (liquidation amount) in total has been received and that the property mortgaged to the Bank has to be re-conveyed. Insofar as the letter addressed to the Registrar of Companies (ROC) is concerned, the same is in regard to receipt of the auction amount (liquidation amount) in total and for lifting of charges created against Respondent No.2 Company, which has been sold as a going concern an6 necessarily the charges are to be lifted both at Sub-Registrar Offices and ROC with respect to Respondent No.2 Company. The 1.t Respondent Bank has only settled the claim as against Respondent No.2 company (due to liquidation) but at no point of time has released the Respondents No.3 to 5 herein and deceased Namakeerthy Venkappa from payment of balance outstanding dues. The loan account of Respondent No.2 Company is still alive as is evident from the extract of statement of account.

¶43

ii) The Appellants misconstrued the word 'final settlement, whereas the same was intended for raising the attachment as against Respondent No.2 company. As per the amended Sec.14(3) of the Insorvency & Bankruptcy Act, 2OO3, the personal guarantors to the corporate debtor would be liable and can be proceeded with and there is no bar for the sarne. The said debt can be recovered both und.er the SARFABSI Act by sale of the secured assets so also under the RDB Act.

¶44

iii) At no point of time, the Appellants have revealed. factum of death of Defendant No.S in oA i.e., Mr. N. venkappa, except in the present proceedings. There was no knowledge to the 1"t Respondent Bank either about the death of Mr. N. venkappa or about the legal heirs except by way of claim Petition 41gtr the Appellants. The orders dt.t2.t2.2o23 passed by the in CP.No.191 of 2023 are backed up by factual a laid down by the Honble ,^l"t prayed for the dismissal of I the pr'^.' ',i',tt ?,,Ir$l$'n , ,;

¶45

¶46

Recovery Appeol No.2/2024

¶47

During the course of arguments, ld. counsel for the Appellants, apart from reiterating the version of the Appellants as stated supra, contended that, it is a settled law that, once the debt stands discharged against the principal debtor, the same stands discharged against the surety as well and in the present case since the debt against the 2"a Respondent company has been discharged, sarne also stands discharged in respect of the guarantors and so, the 1"t Respond.ent Bank cannot proceed against the Appellants. He further contended that, the proceedings initiated against a person while he was alive would automatically stand abated immediately after his death and the only course open to the bank was to initiate proceedings by issuance of a fresh notice to the legal heirs of the borrower/guarantor, as the case may be. He further contended that, a person must be alive against whom any enquiry or recovery proceedings are initiated and as soon as a person dies, he/she breaks all his connections with the worldly aflairs and no punitive action can be taken against a dead person. In support of his contentions, Ld. Counsel has placed his reliance on the following judgments:-

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Decision of the Hon'ble supreme court in the case of ,,sgnd.icate Bank us. Pamidi Somaiah (died) a.nd anr.", reported in A.p.L.J. 122 (HC);

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ii) Decision of the Honble Madras High court in the case of ,,s. suhanin Banu & ors us. IndianBank & ors.", reported. in (2o1o scc online Mad 6s66 = (2Ot 1) 1 CWC 4a8;

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iii) Decision of the Honble High court of Judicature for Rajasthan in s.B. Civil Writ Petition No.324 /2O10, decided on 14.02 .2O2a;

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iv) Decision of the Honble High Court of Kerala in the case of "Emmey Jose

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and others Vs. Indian Benk',, reported in 2Ol4 SCC Online Ker 28826: and

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v) Decision court for the State of Telangana at ffir.Ion

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Hyde in 20*17.'SCC Online Hyd 836. ,1. .'.'t u" ..

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1. Per contr$ ilfi. corrrset for the 1"t Respondent Bank, while reiterating the

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version ofltrte t., f$ptfiiHeiit Bank, as stated supra, further contended that,

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Recovery Appeol No.2/2024

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after receipt of proceeds in the liquidation proceedings of the corporate debtor, the l"t Respondent Bank is entitled to recover the balance of the dues in the loan account from the personal guarantors to the corporate debtor and there is no bar for said recovery. He contended that, since sri N. venkappa, who stood as guarantor for the credit facilities availed by )"a Respondent Company, d.ied, the l"t Respondent Bank is entitled to proceed against his estate lying in the hands of his legal heirs i.e., the Appellants herein. In support his contentions, Ld' counsel for the 1"t Respondent Bank placed his reliance on the following decisions:-

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Decision of the Hon,ble Supreme Court in Transferred Case (Civil)

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No.245/2O2O -^*Lalit Kumar Jain Vs. (Inion of Indiad & ors" with other writ petitions, decided, on 2I.OS.2O2J,;

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ii) Decision of the Hon'ble supreme court in the case of ,,MaitregaDoshi vs. Anand Rathi Global Finance Ltd"., & arlr.,,, reported in 2022 scc online SC 1276; and

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iii) Decision of the Honble supreme court in wp (civil) No.12gr of 2o2r _ "Dilip B Jiwrajka vs. union of India,' and other batch matters, decided on 09.11 .2023.

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I have considered the rival submissions and perused the Judgments relied upon by both the Ld. Counsels.

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Now, the points that arise for consideration are,_

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whether the Appellants have established *y grounds for setting aside
the impugned order dtJ 2.r2.2023, passed by the Ld. Recovery officer in
C.P.No.191
7 of 2O2O in OA.No.13 of 2O2O?
ii) To
fP B
Point No.(i): *
I 1 ilm
B. The undispu of the Respondent herein availed credit
facilities from
to secure the said credit facilities,

¶67

¶68

Recovery Appeol No.2/2024

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Respondent No.6 herein, who was one of the Directors of the 2,0 Respondent company, created mortgage over the schedule property in favour of the l"t Respondent Bank' As the 2"a Respondent company committed default in repayrnent of the loan amount, the 1"t Respondent Bank herein filed oA.No.13 of 2o2o for the recovery of debt from the defendants i.e., Respondents No.2 to 6 herein and the said oA was allowed by this Tribunal vide order dt.16.o3.2o2o and Recovery Certificate for Rs.5B,g2,9O,TO4l_ was issued. Thereafter, Ld. Recovery officer initiated recovery proceedings in Rp.No.3g1 l2o2o by issuing Demand Notice dt.1l.06.2020 to the certificate Debtors for the recovery of Recovery certificate amount. At this stage, the Appellants herein, claiming themselves as legal heirs of Respondent No.6 herein, filed cp.No.1g1 /2022 challenging the Demand Notice dt.11 .06.2020, issued to Respondent No.6 on the grounds, which are similarly raised in the present appeal. Ld. Recovery officer dismissed the said cP.No. lg1l2o22 vide order dt.12. 72.2023 holding that the Petitioners are not entitled to the relief sought for. Aggrieved by the said order dt'].2'12'2023, the Appellants filed the present appeal contending that, Ld' Recovery officer has lailed to consider the letter dt.og.o4 .2o2o issued to SRo shamshabad and Saroornagar and another letter dt.oz .o7 .2021 issued to Roc, Hyderabad, by the l"t Respondent Bank, wherein it is stated by the Bank that they have realized its loan amount and is fully satisfied and hence they are releasing the charges created against the mortgaged properties of Respondent No.2 company, and as such the I"t Respondent Bank cannot proceed further for recovery of any debt.

¶70

¶71

Admittedly, the 2"a Respondent company was sord in auction as a going concern in the liquidation proceedings and the 1"t Respondent Bank has received an amount of Rs.4,38,5o ,4ro /- towards its share in the said liquidation proceedings. Since the 2.0 Respondent Bank was sold as a going concern, the 1"t Respondent Bank has addressed letters dt.09.04.2020 and O7.O7.2O21 to the concerned SRO and ROC stating that as per the Hon,ble NCLT orders, the auction pa5rment was received and the charges created against M/s.M/s. Rvt.^{Ltd., (Respondent No.2 Company) (Respondent No.2 Company) No.2 Company) Company)stands}

¶72

against M/s.M/s. Rvt.^{Ltd., (Respondent No.2 Company) (Respondent No.2 Company) No.2 Company) Company)stands} satisfied for re-conveyance of the Company property and the for lifffi of ch ainst the 2"a Respondent Company. The afores 'r#,... i""rffiby the [#h pondent Bank are only in respect of the : ?1ilrR?m^";;i 13 . AER *)iiIi

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¶74

pecovery Appeol No.2/2024

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property mortgaged/charges created in respect of 2"d Respondent Company but not in respect of other properties mortgaged/charges created by mortgagors / guarantors.

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10' I have also perused the decisions relied upon by the Ld. Counsel for the l"t Respondent Bank. ln^*Lalith Kumar Jain Vs. Union of India", cited supra, the Honble Supreme Court has held as under,_

¶77

"111. In uiew of the aboue discussron, l/ ls held_ that approual of a resolution plan does not ipso facto d"ischarges a personoi guoroito, (of a corporate debtor) of her or his tiabiliiies ,id., the iontract of guarantee. As held bg this court, the release or d.ischarge of a principal borrotaer from the debt otued bg it to its creditoi, ag'on inuoluntary process, i.e., by operation of liw, or due to liquii.ati\n or insoluencg proceeding, does not absolue the sureta/ guaiantor of his contra.ct.,, or her liabititg, *ni"i "@t

¶78

In "Maitreya Doshi vs. Anand Rathi Global Finance Ltd., & anr.,,, the Hon'ble Supreme Court has held as under,-

¶79

"37. If there are tu.to borrouters or if two corporate bod.ies fail within the ambit of corporate d.ebtors, there ii no ,.o"on ihy proceedings under Section 7 of the IBC cannot be initiated againit both the corporate Debtors. Needless to mention, the same amount cannot be realized from both the corporate Debtors. If the dues are realized in part from one corporate Debtor, the bilance may be realized from ttrc other corporate Debtor being the co-borriwer. Howeuer, once the claim of the Financial creiitor is discharged, there can be no question of recouery of the craim twice ouer.',

¶80

The Recovery Certificate issued by this Tribunal in OA.No. 13l2O2O in favour of the l"t Respondent Bank is for an arnount of Rs.SB,g2,go,To4l-with future interest from date of filing of OA tlll reaJization. Admittedly, the 1.t Respondent Bank has received only Rs..4,38,s0,401 l- frorn the sale of 2na Respondent company in liquidation proceedings as against the total dues of Rs.58,92,9o,7o41- with future intdrest. So, as per the judgment of Honble Supreme court in "Lalith Kumar Jain vs. {Jnion of Ind.ia,', cited supre, the lst Responde d to proceed against the guarantors/certificate

¶81

debt 12. The ppellants is that, as per the decision of the h::ffi.,":Y Hon ntol q'\fis"t6.dicat for Rajasthan in S.B. Civil Writ Petition i'u ('?'r" ^€ffi

¶82

^€ffi

¶83

¶84

Recovery Appeol No.2/2024

¶85

No.324/2010, decided on 14.02.2024, a person must be alive against whom any enquiry or recovery proceedings are initiated and as soon as a person dies, he/she breaks atl his connections with the worldly afrairs and no punitive action can be taken against a dead person. By relying on the said decision, the Appellants contend that since, Respondent No.6 had died, no recovery proceedings can be initiated against him.

¶86

I have perused the said decision of the Hon'ble High Court of Rajasthan. As per the facts of the said case, notices were issued to the Petitioners therein, who are the legal heirs of the deceased, for recovery of the amount, without holding any enquiry during the life-time of the mother of the Petitioners. Upon challenge by the Petitioners therein against the said action, the Hon'ble High Court held that, no disputed amount can be recovered from the legal representatives of the deceased person until and unless any enquiry is conducted against the deceased and the sarne cannot be done now because the petitioners were not aware about the irregularities or illegalities committed by their mother.

¶87

14, In the present case, Respondent No.6 herein is a party to oA.No.13/2o2o and he was arrayed as Defendant No.5. The said oA.No. l3l2o2o was a-llowed by this Tribunal on 16.O3.2020 and Recovery Certificate carne to be issued. So, it cannot be said that, no inquiry is initiated against Respondent No.6 for recovery of the outstanding dues, during his life-time. Since there is no intimation about the death of Respondent No.6, Ld. Recovery officer had issued Demand Notice dt.r3.06.2022 in recovery proceedings i.e., Rp.No.39l/2022 to certificate Debtors, including Respondent No.6. The Appe[ants herein filed cP.No.l9l12o22 before the td. Recovery officer, chailenging the Demand Notice dt.13.06.2022, issued to Respondent No.6 contending that Respondent No.6 had died on 09.o8.2022 and that they are theJegal-heirs of the deceased Respondent No.6. Ld. Recovery officer by passing a reasoned order dt.12. 12.2023 dismissed t ll2022 holding that the petitioners .t are not entitled to the r ince the said Respondent No.6, stood as guarantor fr tli,&. credit facilities availed by 2"a Respondent Comp &h a"o di* $roperty, during his life-time,

¶88

after his death, R.ttdillffilq& i" e',[u.a to recover the debt by proceeding against ftstate,^includingthS -.n"figaged^property, \ring^{in the} W*ffi

¶89

¶90

Recovery Appeol No.2/2024

¶91

hands of his legal heirs i.e., Appellants herein. Accordingly, Ld. Recovery Officer has issued Notice to the Legal Representatives dt.18.12.2023 in Form No.29, under Rule 85 of the Second Schedule to the Income Tax Act, 196l, calling upon the Appellants herein to deposit the balance Recovery Certificate amount.

¶92

So, considering all the facts and circumstances, I hold that, Ld. Recovery Oflicer has properly considered the material placed before her and passed a reasoned order. The aforesaid decisions relied upon by the Ld. Counsel for the Appellants are not applicable to the facts and circumstances of the present case. I see no ground warranting interference of this Tribunal with the impugned order dt.12,12.2o23, passed by her in cP.No.l9l12022. So, the impugned order dt.12.12.2o23 is sustainable. Accordingly, this point is answered against the Appellants.

¶93

Point No.(il):-

¶94

i6. In the result, the present Recovery Appeal is dismissed. No costs.

¶95

Communicate a copy of this order to the parties concerned. and a copy be also forwarded to the Id. Recovery Officer.

¶96

(Dictated to the Priuate Secretary, transctibed by him, corrected-, signed and pronounced bg me in the open courr on this the 21,t day of March, 2025).

¶97

sd/(G. GOPTCHAND) PRESIDING OFFICER

¶98

ff-w- hN
: z 1 t{An ?$15 I
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¶99

Itri:l

¶100

Asst R6giltftlt DRT.',^HYOFR.4BID"

M/s Sls Power Corporation ltd., v. M/s. Indian Renewable Energy Development Agency Limited

Case brief

What is this about?

What did the court decide?

M/s Sls Power Corporation ltd., v. M/s. Indian Renewable Energy Development Agency Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

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