Under adjudication is an Application that has been filed by M/s. Baobab Broadband Limited (hereinafter referred to as 'Financial Creditor') under section 7 of the Insolvency and Bankruptcy Code, 2016 r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 against M/s. Gemini Communication Limited (hereinafter referred to as 'Corporate Debtor/Guarantor'). The prayer made is to admit the Application, to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor, declare moratorium and appoint Interim Resolution Professional (IRP) under the Insolvency and Bankruptcy Code, 2016 (I&B Code).
2. Heard the Counsels for the Financial Creditor, and the Corporate Debtor, and perused the pleading including the Written Submissions and typed set of documents filed by the Financial Creditor and Corporate Debtor.
3. The Financial Creditor has claimed an amount to the tune of USD 15,60,000/- which was disbursed during June, 2010 to 26th of March, 2013. Now, the amount claimed to be in default as on date is USD 19,57,441/-, which the Corporate Debtor failed to pay. The detailed computation sheet for outstanding amount (including interest) is enclosed at pages 172 and 173 of the typed set filed with the Application.
4. It has briefly been submitted by the Financial Creditor that a Loan Agreement has been entered among the Financial Creditor viz., M/s. Baobab Broadband Limited, the Borrower, viz., M/s. GCL Infotek, the Corporate Debtor/Guarantor viz, M/s. Gemini Communication Limited and RB DMCC, on 12.06.2010 whereby the Financial Creditor agreed to pay to the borrower viz, M/s. GCL Infotek, the sister concern of the Corporate Debtor/Guarantor a sum of USD 2 Million, and in furtherance of the said agreement more specifically Article 3 thereof (page 183 of typed set filed with the Application), the Corporate Debtor/Guarantor executed the 'Deed of Guarantee' in favour of the Financial Creditor/lender which is placed at pages 190 to 194 of the typed set filed with the Application, to secure the repayment of the loan amount with all interests, costs and charges due from the borrower, viz, M/s. GCL Infotek. Article 3 of the Loan Agreement reads as follows:-
"Pursuant to this Agreement and prior to the first disbursement of the Loan Amount by DMCC on behalf of the Lender to the Borrower, the Guarantor shall subject to applicable laws executed a guarantee deed in favour of the Lender to secure the repayment of outstanding loan amount and all interest, costs and charges due from the Borrower. The Guarantor assures that it has the ability to provide the guarantee in compliance with the provisions of section 372A of the Companies Act, 1956 and the Regulations with respect to overseas Direct Investment by Indian Contract."
5. Pursuant to Article 3 of the Loan Agreement dated 12.06.2010, the Corporate Debtor/Guarantor viz, M/s. Gemini Communication Limited has executed a 'Deed of Guarantee' on 12.06.2010 in favour of the Financial Creditor M/s. Baobab Broadband Limited wherein inter alia the 'Deed of Guarantee' under para Nos. 13, 15 and 18 provides as follows:-
"13. In order to give effect to this guarantee, Baobab shall be entitled to act as if the Guarantor was the principal debtor to RB for all payments under the Loan Agreement hereby guaranteed by the Guarantor as aforesaid.
14 ** ** 15. The Guarantor shall have no right to the benefit of the securities (if any) created by GCL Infotek in favour of Baobab and/or to be created pursuant to the Loan Agreement in connection with the repayment of amounts until all amounts claimed by Baobab from the Guarantor has been fully paid.
16 to 17. ** ** 18. The guarantee hereby given is independent and distinct from any security that Baobab has taken or may take in any manner whatsoever whether it be by way of hypothecation, pledge and/or mortgage and/or any other charge over goods, movables or other assets and/or any other property movable or immovable and that the Guarantor has not given this guarantee upon any understanding faith or belief that Baobab has taken and/or may hereafter take any of other such security and that notwithstanding the provisions of sections 140 and 141 of the Indian Contract Act, 1872 or other section of that Act or any other law, the Guarantor will not claim to be discharged to any extent because of Baobab's failure to take any or other such security or in requiring or obtaining any or other such security or losing for any reason whatsoever including reasons attributable to its default and negligence, benefit of any or other such security or any of rights any or other such security that have been or could have been taken. The Guarantor shall not be entitled to any of the rights or benefits conferred on sureties by sections 133, 134, 135 and 139 of the Indian Contract Act, 1872."
6. In the light of the above mentioned recitals of the 'Deed of Guarantee', it becomes crystal clear that the 'Deed of Guarantee' is completely independent of any other security or securities comprised in any instrument(s) executed or to be executed by the borrower viz, M/s. GCL Infotek in favour of the Financial Creditor, at the time when proceedings were taken against the guarantor under guarantee for outstanding amount/unrealised amount of loan and the guarantor shall have no right to the benefit of the securities (if any) created by the borrower viz, M/s. GCL Infotek in favour of the Financial Creditor or to be created pursuant to the Loan Agreement in connection with the repayment of amounts until all amounts claimed by the Financial Creditor from the Guarantor has been fully paid. Thus, the guarantee given is independent and distinct from any security that the Financial Creditor has taken or may take in any manner whatsoever whether it be by way of hypothecation, pledge, and mortgage or any other charge so created.
7. The above mentioned documents and the e-mail communications dated 30.05.2013, 05.06.2013, 06.06.2013, 24.06.2013, 28.06.2013.04.11.2013, 05.11.2013, 04.02.2014, 05.02.2014, 18.04.2014, 20.04.2014, 29.10.2014 and 19.11.2014 and a handwritten note dated 04.07.2013 which are placed at pages 197 to 203 of the typed set filed with the Application are sufficient documents on the basis of which it has been ascertained that there is default on the part of the Corporate Debtor/Guarantor in making payment of the outstanding debt.
8. The Corporate Debtor/Guarantor has filed the reply t hrough its Director viz, R. Vijaykumar, who has stated in the reply Affidavit that the Application filed by the Financial Creditor under section 7 of the I&B Code, 2016 is neither maintainable in law nor on facts of the case, and is therefore, liable to be dismissed in limini It has been averred that the Financial Creditor has suppressed the material facts and misrepresented the factual position and the Application is incomplete.
It has also been alleged that the debt arises from guarantee which is conditional on transfer of shares in the Financial Creditor and unless the transfer occurs, the guarantee cannot be invoked. Thus, as per the submissions of the Corporate Debtor, there is neither a debt due nor a default.
The Corporate Debtor/Guarantor has further submitted in the reply Affidavit that the mandatory record from Information Utility has not been furnished and the 'Deed of Guarantee' dated 12.06.2010 on the basis of which the Financial Creditor is claiming monies, is a nullity in the eyes of law, as no sanction/approval of RBI has been taken and the jurisdiction of the Adjudicating Authority is barred by limitation. Based on the above submissions, the Corporate Debtor/Guarantor has prayed to dismiss the Application.
9. The Corporate Debtor/Guarantor in support of its arguments has cited the following judgments along with their ratio decidendi:
Kalra Iron Stores vs. Faridabad Fabricators (P. ) Ltd. 1991 SCC Online Del 338.
- Proof of debt is required to be filed to prove that the company is unable to pay the debts under the requirement of section 433(c) through the records, accounts or Acknowledgements.
2. Tata Iron & Steel Co. Ltd. vs. Omega Cables Ltd.  142 Comp. Cas. 468 (Mad.).
- In the company petition for winding up of a company, first thing to the Petitioner has to prove that the amount due is undisputed.
3. Madhusudan Gordhandas & Co. vs. Madhu Woollen Industries (P.) Ltd (1972) 42 Comp. Cas. 125 (SC).
- Test for winding up.
4. SICAL-CWT Distriparks Ltd vs. Besser Concrete Systems Ltd. (2003) 46 SCL 196 (Mad.) .
- If the very existence of the Guarantee Agreement itself is disputed then the Petitioner should establish the agreement in question in a civil court.
5. Shapoorji Pallonji Finance Ltd vs. Shree Rayalaseema Alkalies & Allied Chemicals Ltd. (2006) 70 SCL 380 (AP) .
- No Clear Admitted Liability and Arbitration Clause.
6. Registrar of Companies vs. Kavita Benefit (P.) Ltd. (1978)48 Comp. Cas. 231 (Guj.) .
- Defining the Word 'Debt' - A sum payable upon a contingency, however, it is not a Debt, or does not become a debt.
- Liability is Praesenti in amount.
7. Hansa Industries (P.) Ltd vs. MMTC Ltd (2005) 124 Comp. Cas. 314 (Delhi) .
- Whether writing constitutes an Acknowledgement or not? It is not enough that a mere reference is made that the debt is due from somebody, it must be admitted that the debt is owed.
10. The Financial Creditor has filed the Rejoinder wherein all the pleas/objections taken by the Corporate Debtor/Guarantor have been controverted and has submitted that since the debt is due and payable, and the same is not interdicted by some law, the same is payable and it is of no matter that the debt is disputed so long as the debt is due. The Financial Creditor has relied upon paras 29 and 30 of the judgment of the Hon'ble Supreme Court delivered inInnoventive Industries Ltd. vs. ICICI Bank Ltd (2017) 84 taxmann.com 320/143 SCL 625.
11. In relation to the issue that has been raised by the Corporate Debtor/Guarantor that the record of default maintained by the Information Utility has not been produced, the Counsel for the Financial Creditor has referred to Section 7(3)(a) of the I&B Code, 2016 and has submitted that the said provision alternatively provides for production of other record or evidence of default as may be specified. The record/evidence that has been mentioned in preceding paragraph is sufficient to ascertain the existence of default on the part of the Corporate Debtor/Guarantor.
12. On the issue that there is no sanction/approval of RBI due to which the 'Corporate Guarantee' in question is not enforceable is stated to be wholly vague and baseless because as per Article 3 of the Loan Agreement, the Corporate Debtor/Guarantor assured the Financial Creditor of its ability to provide such Guarantee in accordance with the applicable law and regulations. Therefore, the Corporate Debtor/Guarantor cannot hide itself behind its own failure to obtain any required approval to wriggle out of its liability or consequences of default.
13. It has further been stated that the failure on the part of the Corporate Debtor/Guarantor to obtain such approval, does not impinge upon the validity of the Guarantee issued. The Financial Creditor has relied upon the judgment of Hon'ble High Court of Delhi given inSRM Exploration (P.) Ltd. vs. N & S & N Consultants SRO 2002 (129) DRJ 113 (DB). The Financial Creditor has also controverted the objection with regard to the period of limitation by relying upon the rulings given by Hon'ble NCLAT in Neelkant Township & Construction (P.) Ltd. vs. Urban Infrastructure Trustee Ltd. [CA (AT) No. 44 of 2017] , wherein the Hon'ble NCLAT has held that I&B Code, 2016 does not suggest that the Limitation is applicable to the Code.
14. In view of the facts and circumstances and the legal position stated above, the rulings relied upon by the Corporate Debtor/Guarantor are not applicable to the case on hand. Therefore, the objections raised by the Corporate Debtor/Guarantor stand rejected. The application of the Financial Creditor is complete in all respect. The Financial Creditor has also proposed the name of IRP after seeking consent in Form 2 which is placed at page 169 of the typed set filed with the Application.
15. In the light of the discussion made above and after examining the record, this Adjudicating Authority has ascertained the existence of a default on the part of the Corporate Debtor/Guarantor. The Financial Creditor has fulfilled all the requirements of law and has also proposed the name of IRP after obtaining the written consent in Form-2. Therefore, CP/699/(IB)/CB/2017 is admitted and the commencement of the Corporate Insolvency Resolution Process is ordered which ordinarily shall get completed within 180 days, reckoning from the day this order is passed.
16. Ms. Aishwarya Mohan Gahrana is hereby appointed as IRP, as has been proposed by the Financial Creditor. There is no disciplinary proceeding pending against the IRP as evidenced from Form-2. The IRP is directed to take charge of the Respondent Corporate Debtor's management immediately. She is also directed to cause public announcement as prescribed under Section 15 of the I&B Code, 2016 within three days from the date the copy of this order is received, and call for submissions of claim in the manner as prescribed.
17. The moratorium is hereby declared which shall have effect from the date of this Order till the completion of corporate insolvency resolution process, for the purposes referred to in section 14 of the I&B Code, 2016. It is hereby ordered to prohibit all of the following, namely:
(a) The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration
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panel or other authority; (b) Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) Any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. 18. The supply of essential goods or services of the Corporate Debtor/Guarantor shall not be terminated or suspended or interrupted during moratorium period. The provisions of sub-section (1) of section 14 shall not apply to such transactions, as notified by the Central Government. 19. The IRP shall comply with the provisions of sections 13(2), 15, 17 & 18 of the I&B Code. The Directors of the Corporate Debtor, its promoters or any person associated with the Management of the Corporate Debtor are/is directed to extend all assistance and cooperation to the IRP as stipulated under section 19, so that she could discharge his functions under section 20 of the I&B Code, 2016. 20. The Financial Creditor and the Registry are directed to send the copy of this Order to IRP, so that she could take charge of the Corporate Debtor's assets etc., and make compliance with this Order as per the provisions of I&B Code, 2016.