17 June 2024


Supreme Court

Maitreya Doshi vs. Anand Rathi Global Finance Ltd. and Ors.




Factual finding of the Appellate Authority cannot be interfered with in an appeal under Section 62 of the IBC

Present appeal under Section 62 of the Insolvency and Bankruptcy Code 2016, the ‘IBC’, is against a Judgement passed by the National Company Law Appellate Tribunal (NCLAT), dismissing the Company Appeal filed by the Appellant, against an order passed by the Adjudicating Authority (National Company Law Tribunal), NCLT, admitting a Company Petition filed by the Respondent No. 1 - Anand Rathi Global Finance Limited as Financial Creditor, for initiation of the Corporate Insolvency Resolution Process (CIRP) of Doshi Holdings Pvt. Ltd., “Doshi Holdings”, under Section 7 of the IBC. The Appellant is a suspended Director of Doshi Holdings.

It is not in dispute that, the Financial Creditor disbursed loan to the tune of Rs.6,00,00,000 to Premier pursuant to the Loan-cum-Pledge Agreements, executed both by Premier and by Doshi Holdings. Doshi Holdings has been referred to in the agreement as borrower and pledgor. Prima facie, it appears that Doshi Holdings was a party to the Loan-cum-Pledge Agreement in its dual capacity of borrower and pledgor of shares. The Appellate Authority has arrived at the factual finding that, Doshi Holdings is also a borrower under the Loan-cum-Pledge Agreement. The factual finding of the Appellate Authority which was the final fact finding authority ought not to be interfered in this appeal.

The finding of the Appellate Authority that Doshi Holdings is a borrower, is based on its interpretation of the Loan-cum-Pledge Agreements and supporting documents. The interpretation given by the Appellate Authority is definitely a possible interpretation. The interpretation is a plausible interpretation which cannot be interfered with in an appeal under Section 62 of the IBC. The proposition of law which emerges from the judgment is that a pledgor per se may not be a Financial Debtor. However, in this case, the Appellate Authority arrived at a factual finding that Disha Holdings was a borrower. In Lalit Kumar Jain v. Union of India , this Court held that the approval of a resolution plan in relation to a Corporate Debtor does not discharge the guarantor of the Corporate Debtor. On a parity of reasoning, the approval of a resolution in respect of one borrower cannot certainly discharge a co-borrower.

If there are two borrowers or if two corporate bodies fall within the ambit of corporate debtors, there is no reason why proceedings under Section 7 of the IBC cannot be initiated against both the Corporate Debtors. The same amount cannot be realised from both the Corporate Debtors. If the dues are realised in part from one Corporate Debtor, the balance may be realised from the other Corporate Debtor being the co-borrower. However, once the claim of the Financial Creditor is discharged, there can be no question of recovery of the claim twice over. There are no grounds to interfere with the impugned judgment and order of the Appellate Authority. Appeal dismissed.

Tags : CIRP Initiation Legality

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