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In the matter of Siemens Financial Services Private Limited v. Manish Lakhotia, [Cp (Ib) No. 119/KB/2023]

NCLT9 Feb 2024CP (IB) No. 119/KB/2023

Case brief

AI extract

What is this about?

The National Company Law Tribunal admitted an application filed by a financial creditor to initiate the insolvency resolution process against a personal guarantor. The court appointed a resolution professional and imposed an interim moratorium upon admission.

What did the court decide?

Appointment of Resolution Professional and imposition of Interim Moratorium under Section 96.

In the matter of Siemens Financial Services Private… — Insolvency and Bankruptcy | NCLT (2024)

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IN THE NATIONAL COMPANY LAW TRIBUNAL KOLKATA BENCH (Court- I) KOLKATA

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CP (IB) No. 119/KB/2023

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A Petition under Section 95(1) of the Insolvency and Bankruptcy Code, 2016;

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In the matter of:

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Siemens Financial Services Private Limited

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…Financial Creditor/Applicant

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Versus

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Manish Lakhotia … Personal Guarantor/Respondent Order pronounced on: 09/02/2024 Coram: Shri Rohit Kapoor : Member (Judicial) Shri Balraj Joshi : Member (Technical)

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Appearances (through video conferencing) :

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For the Financial Creditor/Applicant	: Ms.Tannya Baranwal, Adv. : Ms.Ankita Sengupta, Adv.
For the Personal Guarantor	: Mr.Rishav Banerjee, Adv. Mr.Abhishek Sikdar,Adv. Ms.Sahili Dey,Adv.

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CP (IB) No. 119/KB/2023 Siemens Financial Services Private Limited Vs. Manish Lakhotia

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ORDER

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Per:Balraj Joshi, Member (Technical):

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The Court convened via video conference.

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The present Petition CP (IB) No. 119/KB/2023 is a Petition filed under section 95(1) of the Insolvency and Bankruptcy Code, 2016 (‘ Code’) read with rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution process for Personal Guarantors to Corporate Debtor) Rules, 2019 (‘ Personal Guarantors Rules ’) and regulation 4(2) of IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 (‘ Personal Guarantors Regulations’ ) filed by Financial Creditor Siemens Financial Services Private Limited (‘Petitioner’) is a Non Banking Finance Company registered with the Reserve Bank of India, for initiating the Insolvency Resolution Process (‘ IR Process’ ) against Personal Guarantor Mr.Manish Lakhotia, One of the directors of JMV Polymer Ltd. (CIN: U65990MH2010FTC208099) ( Corporate Debtor ) for debt amounting to Rs. 3,97,98,217/-(Rupees Three Crore Ninety Seven Eight Thousand Two Hundred and Seventeen only).

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The factual matrix of the case is that the Applicant is a Non-Banking Finance Company registered with the Reserved Bank of India and incorporated under the provisions of the Companies Act, 1956 and the “Corporate Debtor” and Personal Guarantor had approached the applicant seeking grant of various financial facility. On the representations made by the “ Corporate Debtor”, the Applicant extended various Credit facilities on 22.07.2019 and granted Cash Credit Facility. As per the Credit Facility, Corporate Debtor was obliged to repay the Principal sum of loan along with interest in accordance with repayment schedule as set out in the agreement. The Deed of Guarantee was

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CP (IB) No. 119/KB/2023 Siemens Financial Services Private Limited Vs. Manish Lakhotia

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executed on 14/08/2019 by the Personal Guarantor. The Corporate Debtor and the Personal Guarantor had failed and/or neglected to make payment as per terms of the said Facility Agreement and consequently, the applicant had classified the account of the (Corporate Debtor as a non-performing asset (NPA) on 12/01/2021.

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In this factual conspectus, the applicant prays for initiation of insolvency resolution process, against the respondent/guarantor. Form B is at page 18 Form C is at page “11 to 17” of the application. Rule 7(3) of the IB (Application to Adjudicating Authority for Insolvency resolution Process for Personal Guarantors to Corporate Debtors) Rules 2019, requires a copy of the Petition/Application to be served on to the guarantor and the Corporate Debtor. An affidavit of service in this regard shall be filed by the Financial Creditor. The application is complete as required under Section 95 read with rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution process for Personal Guarantors to Corporate Debtor) Rules, 2019

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It is to be noted that Hon’ble Supreme Court in the judgement of Dilip B. Jiwrajka V/s Union of India & Ors. in WP(civil)No. 1281 of 2021 dated 09.11.2023 has upheld the Constitutional Validity of the Sections 94 to 100 and the Conclusion of the Judgments inter-alia are as follows: i.No judicial adjudication is involved at the stages envisaged in Sections 95 to Section 99 of the IBC;

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ii. The resolution professional appointed under Section 97 serves a facilitative role of collating all the facts relevant to the examination of the application for the commencement of the insolvency resolution process which has been preferred under Section 94 or Section 95. The report to be submitted to the adjudicatory authority is recommendatory in nature on whether to accept or reject the application;

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CP (IB) No. 119/KB/2023 Siemens Financial Services Private Limited Vs. Manish Lakhotia

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iii. The submission that a hearing should be conducted by the adjudicatory authority for the purpose of determining ‘jurisdictional facts’ at the stage when it appoints a resolution professional under Section 97(5) of the IBC is rejected. No such adjudicatory function is contemplated at that stage. To read in such a requirement at that stage would be to rewrite the statute which is impermissible in the exercise of judicial review;

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iv. The resolution professional may exercise the powers vested under Section 99(4) of the IBC for the purpose of examining the application for insolvency resolution and CP/IB/337/AHM/2020 12 of 17 to seek information on matters relevant to the application in order to facilitate the submission of the report recommending the acceptance or rejection of the application;

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v. There is no violation of natural justice under Section 95 to Section 100 of the IBC as the debtor is not deprived of an opportunity to participate in the process of the examination of the application by the resolution professional; vi. No judicial determination takes place until the adjudicating authority decides under Section 100 whether to accept or reject the application. The report of the resolution professional is only recommendatory in nature and hence does not bind the adjudicatory authority when it exercises its jurisdiction under Section 100;

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vii. The adjudicatory authority must observe the principles of natural justice when it exercises jurisdiction under Section 100 to determine whether to accept or reject the application; CP/IB/337/AHM/2020 13 of 17

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viii. The purpose of the interim moratorium under Section 96 is to protect the debtor from further legal proceedings; and

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ix. The provisions of Section 95 to Section 100 of the IBC are not unconstitutional as they do not violate Article 14 and Article 21 of the Constitution.

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The Applicant has proposed name of Insolvency Professional for appointment as Resolution Professional. In view of the above , Mr.Sushanta Kumar Choudhury, IBBI Registration No. IBBI/IPA-003/IP-N00292/2020-21/13238 ,

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CP (IB) No. 119/KB/2023 Siemens Financial Services Private Limited Vs. Manish Lakhotia

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Email [email protected] Mobile No. 9007016008 , is hereby appointed as Resolution Professional, Subject to his possessing a valid AFA , in exercise of the power conferred under section 97 of the IBC, 2016 on this Authority. The Resolution Professional is directed to file declaration within seven days from the date of receiving this Order to the effect that he fulfils all the requirements for being appointed as Resolution Professional in the matter.

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The Resolution Professional shall exercise all the powers as enumerated under section 99 of the IBC, 2016 read with the Rules made thereunder and as brought out in the judgment of Hon’ble Supreme Court (Supra) He is directed to make the recommendations for acceptance or rejection of this Application within the stipulated time as envisaged under section 99(1) of the IBC, 2016. The RP shall give a copy of the report under sub-section (7) of section 99 of IBC, 2016 to the Applicant, as soon as the same is filed before this Authority.

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8. It is made known to everyone that on filing this Application by the Applicant/ Creditor the interim-moratorium commences in terms of section 96(1)(a) of IBC, 2016. The relevant section is reproduced below:

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96 . Interim- moratorium. -

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(1) When an application is filed under section 94 or section 95 –

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(a) an interim-moratorium shall commence on the date of the application in relation to all the debts and shall cease to have effect on the date of admission of such application; and

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(b) during the interim-moratorium period -

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(i ) any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed; and

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(ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt.

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The Counsel on record for the Applicant is hereby directed to serve the copy of this order along with copy of the Application and documents on the Resolution

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CP (IB) No. 119/KB/2023 Siemens Financial Services Private Limited Vs. Manish Lakhotia

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Professional by all available modes for information and compliance. Proof of service shall be filed with this Bench for record.

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List this matter on 20.03.2024 for further consideration.

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The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

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