Seema Sahni Vs. Punjab National Bank and Ors. - Cancellation of an auction is a subsequent stage in respect of measures under Section 14 of the SARFAESI Act, and, therefore, by no stretch of imagination it can be presumed that a successful auction purchaser does not have a remedy to prefer an appeal under Section 17 of the SARFAESI Act.

HC Delhi (08.05.2023) In Seema Sahni Vs. Punjab National Bank and Ors.  [LPA 417/2023 and C.M. Nos. 23290/2023 & 23291/2023(Neutral Citation Number:2023:DHC:3344-DB)] held that;

• Held that the auction purchaser, if is aggrieved by the action of the secured creditor in forfeiting his money, is entitled to avail the remedy under Section 17(1) of the SARFAESI Act, 2002.

• That the grievance which essentially relates to any of the measures taken under Section 13(4) of the SARFAESI Act, 2002 can be raised before the DRT under Section 17 of the SARFAESI Act, 2002.

• It is, therefore, seen that the remedy under Section 17 is available to an aggrieved person under the SARFAESI Act. In the instant case, the petitioner is essentially aggrieved by the measures being taken under the provisions of the SARFAESI Act.

• The provisions of Section 17 cannot be read so as to exclude the remedy for any person who is aggrieved by the cancellation of the auction sale or any other steps arising thereto which were taken pursuant to the measures under Section 14 of the SARFAESI Act, 2002.

• Cancellation of an auction is a subsequent stage in respect of measures under Section 14 of the SARFAESI Act, and, therefore, by no stretch of imagination it can be presumed that a successful auction purchaser does not have a remedy to prefer an appeal under Section 17 of the SARFAESI Act.

Excerpts of the order; 

# 1. The present LPA is arising out of an order dated 24.04.2023 passed in W.P.(C.) No. 9540/2022 titled Seema Sahni Vs. Punjab National Bank and Ors.

# 2. The undisputed fact of the case reveal that the Appellant before this Court, who was a bidder in an E-Auction conducted on 21.03.2022 in respect of mortgaged property i.e. Duplex dwelling unit on 1st and 2nd floor situated at Ashoka Cresent – 63 (FF-1) and (FF-2), DLF City, Phase-1, Gurgaon, came up before this Court being aggrieved by the action of the Respondent Bank in cancelling the auction process on 31.03.2022.

# 3. The facts further reveal that on 04.03.2022 a notice was published in respect of auction to be conducted by the Respondent Bank, as the Borrowers and Guarantors failed to clear their dues.

# 4. The Appellant, after registration for the process of auction, participated in the Auction scheduled on 22.03.2022, and was declared a successful bidder for sum of Rs. 3,53,00,000/-, and was directed to deposit 25% of the Auction Price.

# 5. The Appellant, in fact, had already deposited Rs. 35,20,000/- as EMD amount and the balance amount of Rs. 53,05,000/- was required to be deposited by 23.03.2022. She was declared as a successful bidder on 23.03.2022. The Appellant deposited 53,05,000/-, meaning thereby, paid the 25% of the total amount in respect of the Auction Property, however, she was informed that the process of auction has been cancelled. The Appellant, in those circumstances, came up before this Court by filing a Writ Petition and prayed for the following reliefs:

• “a. Set aside the impugned order dated 24.04.2023, in WP (C) No. 9450/.2022, passed by the Ld. Single Judge of this Hon’ble Court;

• b. Issue order quashing and setting aside the decision/order dated 31.03.2022 (Annexure P-1) take by the Respondents cancelling the auction process, after the Appellant was successful in the auction and had deposited the 25 percent of the price of the auctioned property; .

• c. Issue of commanding the Respondents to deem the sale of the auctioned property in favour of the Appellant as confirmed and to issue sale certificate in her favour· after accepting the balance 75 percent price of the auctioned property;

• d. To pass such other and further order, which this Hon’ble High Court deem fit and proper in the existing facts and circumstances of the case.”

# 6. A reply was filed before the Learned Single Judge, and it was brought to the notice of the Learned Single Judge that the borrower submitted one time settlement (OTS) proposal which was accepted by the Respondent Bank keeping in view the policy framed by the Reserve Bank of India. The Respondent Bank also informed the Learned Single Judge that the bid offered by the Appellant was for a sum of Rs. 3,53,00,000/- and the proposal of the Borrower for an OTS was accepted at Rs. 3,82,,00,000/-, and, therefore, the same was cancelled resulting in cancellation of the auction process.

# 7. Learned Counsel appearing for the Appellant has vehemently argued before this Court that the auction of the Respondent is contrary to the Provision of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short “SARFAESI Act”), and the same is arbitrary and illegal, and, therefore, the Learned Single Judge has erred in law and fact in dismissing the Writ Petition with a liberty to avail the alternative remedy. The Learned Single Judge in Paragraph 7 to 21 has held has under:

• “7. I have heard learned counsel appearing on behalf of the parties and perused the record.

• 8. The Hon’ble Supreme Court in the case of Agarwal Tracom Pvt. Ltd. (supra) in paragraphs 30 and 31 has held as under:-

• “30. In our view, therefore, the· expression any of the measures referred to in Section 13(4) taken by secured creditor or his authorized officer in Section 17(1) would include all actions taken by the secured creditor under the Rules which relate to the measures specified in Section 13(4).

• 31. The auction purchaser (appellant herein) is one such person, who is aggrieved by the action of the secured creditor in forfeiting their money. The appellant, therefore, falls within the expression any person as specified under Section 17(1) and hence is entitled to challenge the action of the secured creditor (PNB) before the DRT by filing an application under Section 17(1) of the SARFAESI Act “

• 9. It is thus seen that the Hon’ble Supreme Court in unequivocal terms has held that the auction purchaser, if is aggrieved by the action of the secured creditor in forfeiting his money, is entitled to avail the remedy under Section 17(1) of the SARFAESI Act, 2002.

• 10. While considering the decision in the case of Agarwal Tracom Pvt. Ltd. (supra), this court in its decision dated 01.03.2023 in W.P.(C) No.2334/2023 titled Shammy Kumar v. Bank of Baroda and Anr. had an occasion to consider the submissions made by the occupant in a mortgaged property, and while deciding whether the remedy under the provisions of Section 17 of the SARFAESI Act, 2002 would be available to him or not, has held that the grievance which essentially relates to any of the measures taken under Section 13(4) of the SARFAESI Act, 2002 can be raised before the DRT under Section 17 of the SARFAESI Act, 2002.

• 11. In another decision in the case of Sudhakar G Kalambe Vs. Karur Vysya Bank Limited & Anr. in W.P. (C) No.3502/2023 decided on 21.03.2023, a similar grievance was raised by the successful bidder whose bid security was forfeited. This court in terms of paragraphs 3 to 5 has held that the aggrieved person therein had an efficacious remedy in terms of Section 17 of the SARFAESI Act, 2002. Paragraph Nos.3 to 5 of the said decision are reproduced as under:-

• “3. The Hon’ble Supreme Court in the cases of Agarwal Tracom Private Limited v. Punjab National Bank and Ors. and Union Bank of India v. Satywati Tondon and Ors. has held that expression “any person” used in Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2022 (in short, SARFAESI Act) is of wide import. Section 17 takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by action taken under Section 13 (4) or Section 14 of the SARFAESI Act.

• 4. It has also been held that both, the Tribunal and the Appellate Tribunal are empowered under Section 17 and 18 to pass interim orders and are required to decide the matters within a fixed time schedule. It is, therefore, seen that the remedy under Section 17 is available to an aggrieved person under the SARFAESI Act. In the instant case, the petitioner is essentially aggrieved by the measures being taken under the provisions of the SARFAESI Act.

• 5. In view of the above, this court is not inclined to entertain the instant petition, however, the petitioner would be at liberty to take appropriate remedy in accordance with law and there is no reason to believe if such a remedy is taken recourse to, the same would not be decided in accordance with law as expeditiously as possible.”

• 12. In the instant case, what is being contended by the learned counsel appearing on behalf of the petitioner is that the cancellation of the auction notice would not fall within the measures envisaged under Section 13(4) of the SARFAESI Act, 2002 and therefore, he has no remedy to approach DRT under Section 17 of the SARFAESI Act, 2002.

• 13. I have carefully considered the submissions. In the considered opinion of this court, the aforesaid argument is not acceptable as there is no such embargo under Section 17 of the SARFAESI Act, 2002. The provisions of Section 17 cannot be read so as to exclude the remedy for any person who is aggrieved by the cancellation of the auction sale or any other steps arising thereto which were taken pursuant to the measures under Section 14 of the SARFAESI Act, 2002.

• 14. Since the auction notice was one of the measures resorted to by the secured creditor for recovery of the dues and the petitioner has a grievance with respect to the aforesaid measure, therefore, the remedy under Section 17 of the SARFAESI Act, 2002 is available to the petitioner.

• 15. However, in any case, the writ jurisdiction being equitable and discretionary in nature should not be exercised, unless, there are exceptional circumstances. In view of the same, this court does not consider it appropriate to invoke its powers under Article 226 of the Constitution of India under the facts of the instant case. Reference can also be made to the decisions of the Hon’ble Supreme Court in the cases of Commissioner of Income Tax & Ors. v. Chhabil Dass Aggarwal (2014)1 SCC 603, GM, Sri Siddeshwara Co-op. Bank v. Ikbal & Ors., (2013) 10 SCC 83 and Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311.

• 16. Learned counsel appearing on behalf of the petitioner, at this stage, states that there was an interim order passed by this court on 17.06.2022 directing the parties to maintain the status quo and he apprehends that by the time he approaches the concerned DRT, the respondents would hand over the possession of the mortgaged property to the principal borrower. He, therefore, prays that under the facts of the present case, the order of status quo may be extended for a period of 30 days from today to enable him to take appropriate remedy in accordance with law.

• 17. The said prayer is opposed by the learned counsel appearing on behalf of the respondent(s). Learned counsel appearing on behalf of the respondent-Bank states that in any case, the respondent-Bank would not have any objection in refunding the money but the order of status quo should not be extended beyond today.

• 18. I have considered the submissions made by learned counsel appearing on behalf of the parties and in view of the fact that the order of status quo is in operation since 17.06.2022, this court deems it appropriate to extend the same for a period of 15 days from today.

• 19. Accordingly, the instant petition stands dismissed along with the pending application.

• 20. Needless to state that nothing stated hereinabove shall amount to any expression on the merits or demerits of the case.

• 21. The petitioner is at liberty to take appropriate remedy in accordance with law.”

# 8. This Court has carefully gone through the order passed by the Learned Single Judge.

# 9. The present case is a case where the Borrower, after the process of auction was conducted, submitted an OTS Proposal and the Bank keeping in view the policy framed by the Reserve Bank of India has accepted the same.

# 10. The Borrower in respect of his dwelling house has offered a sum of Rs. 3,82,00,000/-, which was certainly the higher offer than the offer made by the Appellant and the OTS was accepted on 21.03.2022. The Respondent Bank in those circumstances has cancelled the auction.

# 11. Section 17 of the SARFAESI Act certainly provides a remedy to aggrieved person, and as rightly held by Learned Single Judge, cancellation of an auction is a subsequent stage in respect of measures under Section 14 of the SARFAESI Act, and, therefore, by no stretch of imagination it can be presumed that a successful auction purchaser does not have a remedy to prefer an appeal under Section 17 of the SARFAESI Act.

# 12. It is true that writ jurisdiction can be invoked in the matter; however, the writ jurisdiction being equitable and discretionary in nature should not be exercised unless there are exceptional circumstances, as rightly held by the Learned Single Judge.

# 13. In the considered opinion of this Court, the Learned Single Judge was justified in disposing of the Writ Petition with liberty to prefer an appeal. This Court does not find any reason to interfere with the order passed by the Learned Single Judge as the Petitioner does have a remedy of appeal under Section 17 of the SARFAESI Act.

# 14. Resultantly, no case for interference is made out in the matter and, therefore, the present Writ Petition stands dismissed accordingly.

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Naresh Kumar Aggarwal Vs. CFM Asset Reconstruction Pvt. Ltd. - When acquisition of assets by Asset Reconstruction Company is made as per Section 5(1), deeming provision contained in Sub-section (2) of Section 5 shall come into play and the Asset Reconstruction Company shall be deemed to be Lender for all purposes.

NCLAT (16.05.2023) In Naresh Kumar Aggarwal Vs. CFM Asset Reconstruction Pvt. Ltd.  [Company Appeal (AT) (Insolvency) No.470 of 2023] held that;

• When acquisition of assets by Asset Reconstruction Company is made as per Section 5(1), deeming provision contained in Sub-section (2) of Section 5 shall come into play and the Asset Reconstruction Company shall be deemed to be Lender for all purposes.

• As a consequence of such default, the status of the guarantor metamorphoses into a debtor or a corporate debtor if it happens to be a corporate person, within the meaning of Section 3(8) of the Code.

Excerpts of the order; 

This Appeal by Shareholder of the Corporate Debtor has been filed challenging the order dated 28.02.2023 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Court IV by which order Section 7 application filed by the Respondent – CFM Asset Reconstruction Pvt. Ltd. has been admitted. Brief facts of the case necessary to be noticed for deciding this Appeal are:

i. State Bank of India sanctioned various credit facilities in favour of Action Ispat and Power Private Limited (Principal Borrower). In the year 2013, Master Restructuring Agreement was executed between the State Bank of India and several other Banks with the Principal Borrower. The Corporate Debtor – M/s Nikhil Footwear Pvt. Ltd. executed a Deed of Guarantee on 30.09.2013 in favour of SBICAP Trustee Company Ltd. Another Master Restructuring Agreement was executed on 29.06.2016.

ii. Company Petition CP (IB) No.1096 of 2018 was filed by the State Bank of India against the Principal Borrower which was admitted on 23.03.2022.

iii. The State Bank of India entered into an agreement on 18.01.2021 with Respondent No.1 assigning debt owned by the Principal Borrower.

iv. Respondent No.1 filed Company Petition (IB)/106/PB/2022. Notice was issued. Corporate Debtor appeared and filed its reply to Section 7 application. Rejoinder affidavit was also filed by the Financial Creditor.

v. The Adjudicating Authority after hearing both the parties, by the impugned order dated 28.02.2023, admitted Section 7 application. Aggrieved by the order this Appeal has been filed by the Appellant – Shareholder of the Corporate Debtor.

# 2. Learned counsel for the Appellant challenging the order admitting Section 7 application submits that application filed by Respondent No.1 on the basis of unregistered Assignment Agreement dated 18.01.2021 was not liable to be admitted. The Assignment Agreement being an unregistered agreement, there was no valid assignment in favour of Respondent No.1, so as to entitle him to initiate proceedings under Section 7 of the I&B Code. The Deed of Guarantee was executed in favour of the SBICAP Trustee Company and can only be enforced by security trustee. The SBICAP Trustee Company entered into agreement with the Corporate Debtor on behalf of six lenders. The Adjudicating Authority having already commenced Corporate Insolvency Resolution Process (CIRP) against the Principal Borrower vide its order dated 23.03.2022 by admitting Section 7 application filed by the State Bank of India, on the basis of same debt on same set of facts, filing of present application under Section 7 by Respondent No.1 was a malafide attempt to initiate CIRP on same debt and on same facts. Two applications under Section 7 for same set of claim amount and default cannot be initiated simultaneously.

# 3. Learned counsel for the Respondent refuting the submissions of learned counsel for the Appellant submits that the Respondent is an Asset Reconstruction Company. The agreement executed by State Bank of India is in accordance with Section 5 of the SARFAESI Act, 2002. Assignment of the financial debt by Bank or Financial Institution in favour of Asset Reconstruction Company can be effected in accordance with the statutory scheme provided in Section 5 of the SARFAESI Act. Section 5 of the SARFAESI Act does not contemplate Assignment of financial debt by registered document. The Respondent No.1 is a Financial Creditor and is fully entitled to initiate Section 7 application. Section 7 application against another Corporate Guarantor i.e. Micro Stock Holding Pvt. Ltd. has already been admitted on an application filed by Respondent No.1 in C.P. (IB) No. 108/2022 by order dated 11.05.2022 which was passed on the same assignment. The submission of the Appellant that simultaneously CIRP against Principal Borrower and Corporate Guarantor cannot be initiated is without any basis. The liability of the Corporate Guarantor is co-extensive with the Principal Borrower. The Financial Creditor is fully entitled to initiate Section 7 proceedings both against the Principal Borrower and the Corporate Guarantor. The Deed of Guarantee executed by the Corporate Debtor provides that the Guarantor shall pay to the Lenders the principal amount along with interest in case of default by Action Ispat. Pursuant to the Assignment Agreement, the MCA has also modified the charge of the Corporate Debtor in favour of the Respondent No.1, which were earlier registered in favour of SBICAP. Learned Adjudicating Authority has rightly initiated proceedings under Section 7 against the Corporate Debtor.

# 4. We have considered the submissions of learned counsel for the parties and perused the record.

# 5. The Assignment Agreement dated 18.01.2021 was entered between the State Bank of India as Assignor and Respondent No.1 as Assignee. The Assignment Agreement provides that Assignee is a securitization and asset reconstruction company registered in pursuant to Section 3 of the SARFAESI Act, 2002. The State Bank of India by the Assignment Agreement has assigned the loan together with all its rights, title and interest in the financing documents and any underlying security interests, pledges and/or guarantees in respect of such loans to the Assignee. The submission which has been pressed by learned counsel for the Appellant is that the Assignment Agreement being unregistered document could not have been relied by the Adjudicating Authority for admitting Section 7 application.

# 6. There are two reasons due to which we are unable to accept the submission of learned counsel for the Appellant. Firstly, against another Guarantor i.e. Micro Stock Holding Pvt. Ltd., Respondent No.1 filed Section 7 application being C.P. (IB) No. 108/2022 which has been admitted by the order dated 11.05.2022 by the Adjudicating Authority. Section 7 application filed by the Respondent No.1 against another guarantor – Micro Stock Holding Pvt. Ltd. was based on the same Assignment Agreement dated 18.01.2021. A copy of the order dated 11.05.2022 has been brought on the record of the appeal at page 1652 of the paper book. The Assignment Agreement dated 18.01.2021 was relied by the Financial Creditor and has been referred to by the Adjudicating Authority in Para 5 of the order. The Order dated 11.05.2022 initiating Section 7 application has not been reversed or modified and still in force. Secondly, the Assignment Agreement dated 18.01.2021 being in accordance with Section 5 of the SARFAESI Act, 2002, the Respondent No.1 has to be deemed to be lender and is thus entitle to exercise all rights which were vested in the lender. Section 5 of the SARFAESI Act, 2002 provides as follows:

• “5. Acquisition of rights or interest in financial assets. – 

• (1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any asset reconstruction company  may acquire financial assets of any bank or financial institution—

• (a) by issuing a debenture or bond or any other security in the nature of debenture, for consideration agreed upon between such company and the bank or financial institution, incorporating therein such terms and conditions as may be agreed upon between them; or

• (b) by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and conditions as may be agreed upon between them.

• (1A) Any document executed by any bank or financial institution under sub-section (1) in favour of the asset reconstruction company acquiring financial assets for the purposes of asset reconstruction or securitisation shall be exempted from stamp duty in accordance with the provisions of section 8F of the Indian Stamp Act, 1899 (2 of 1899):

• Provided that the provisions of this sub-section shall not apply where the acquisition of the financial assets by the asset reconstruction company is for the purposes other than asset reconstruction or securitisation.

• (2) If the bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the asset reconstruction company, such asset reconstruction company shall, on such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets.

• (2A) If the bank or financial institution is holding any right, title or interest upon any tangible asset or intangible asset to secure payment of any unpaid portion of the purchase price of such asset or an obligation incurred or credit otherwise provided to enable the borrower to acquire the tangible asset or assignment or licence of intangible asset, such right, title or interest shall vest in the asset reconstruction company on acquisition of such assets under sub-section (1).”

# 7. Section 5 Sub-section (1) begins with non-obstante clause with the words “Notwithstanding anything contained in any agreement or any other law for the time being in force…”. Section 5 is an enabling provision to empower the Asset Reconstruction Company to acquire financial assets in the manner provided in Sub-section (1). The Assignment Agreement dated 18.01.2021 was in accordance with Section 5(1)(b) i.e. by entering agreement with State Bank of India. Sub-section (2) of Section 5 contains a deeming clause. Sub-section (2) provides that Asset Reconstruction Company on such acquisition be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company. When the legislature uses the deeming fiction it is always for purpose and object.

# 8. Hon’ble Supreme Court had occasion to consider provision of Section 43 of the Indian Contract Act, 1872 which contains the deeming provision and on fulfilling the ingredients as provided in the statute, legal fiction will come into play, irrespective whether the transaction was in fact intended or even anticipated to be so. We may refer to Para 22.2.1, 22.2.2 and 22.3 of the judgment of the Hon’ble Supreme Court in “Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited vs. Axis Bank Ltd. & Ors., (2020) 8 SCC 401”, which is to the following effect:

• “22.2.1. As regards construction of a deeming fiction, this Court pointed out the basic and settled principles in the following:

• “88. In every case in which a deeming fiction is to be construed, the observations of Lord Asquith in a concurring judgment in East End Dwellings Co. Ltd. v. Finsbury Borough Council: 1952 AC 109 (HL) are cited. These observations read as follows:
  (AC pp. 132-133)

• “If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it…. The statute says that you must imagine a certain state of affairs. It does not say that, having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.”

• These observations have been followed time out of number by the decisions of this Court. (See, for example, M. Venugopal v. Divisional Manager, LIC: (1994) 2 SCC 323 at page 329).

• ***                     ***                       ***

• 94. Although a deeming provision is to deem what is not there in reality, thereby requiring the subject-matter to be treated as if it were real, yet several authorities and judgments show that a deeming fiction can also be used to put beyond doubt a particular construction that might otherwise be uncertain. Thus, Stroud’s Judicial Dictionary of Words and Phrases (7th Edition, 2008), defines “deemed” as follows:

• “Deemed”- as used in statutory definitions “to extend the denotation of the defined term to things it would not in ordinary parlance denote”, is often a convenient device for reducing the verbiage or an enactment, but that does not mean that wherever it is used it has that effect; to deem means simply to judge or reach a conclusion about something, and the words “deem” and “deemed” when used in a statute thus simply state the effect or meaning which some matter or things has-the way in which it is to be adjudged; this need not import artificiality or fiction; it may simply be the statement of an indisputable conclusion.”

• 22.2.2. In Pioneer Urban, this Court further extracted extensively from the decision in Hindustan Cooperative Housing Building Society Limited v. Registrar, Cooperative Societies and Anr.: (2009) 14 SCC 302 on various features of the processes of construction of different deeming provisions in different contexts. Some of the relevant parts of such extraction (as occurring in paragraph 95 of Pioneer Urban) read as follows (in SCC at pp. 524):

• “ ‘… The word “deemed” is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible.’ (Per Lord Radcliffe in St. Aubyn v. Attorney General:1952 AC 15 (HL), AC p. 53)

• 14. ‘Deemed’, as used in statutory definitions [is meant]

• ‘to extend the denotation of the defined term to things it would not in ordinary parlance denote, is often a convenient devise for reducing the verbiage of an enactment, but that does not mean that wherever it is used it has that effect; to deem means simply to judge or reach a conclusion about something, and the words “deem” and “deemed” when used in a statute thus simply state the effect or meaning which some matter or thing has — the way in which it is to be adjudged; this need not import artificiality or fiction; it may simply be the statement of an undisputable conclusion.’ (Per Windener, J. in Hunter Douglas Australia Pty. v. Perma Blinds: (1970) 44 Aust LJ R 257)

• 15. When a thing is to be “deemed” something else, it is to be treated as that something else with the attendant consequences, but it is not that something else (per Cave, J., in R. v. Norfolk County Court: (1891) 60 LJ QB 379).

• ‘When a statute gives a definition and then adds that certain things shall be “deemed” to be covered by the definition, it matters not whether without that addition the definition would have covered them or not.’ (Per Lord President Cooper in Ferguson v. McMillan : 1954 SLT 109 (Scot))

• 16. Whether the word “deemed” when used in a statute established a conclusive or a rebuttable presumption depended upon the context (see St. Leon Village Consolidated School District v. Ronceray: (1960) 23 DLR (2d) 32 (Can)).

• ‘…. I … regard its primary function as to bring in something which would otherwise be excluded.’ (Per Viscount Simonds in Barclays Bank Ltd. v. IRC: 1961 AC 509 at AC p. 523.)

• “Deems” means “is of opinion” or “considers” or “decides” and there is no implication of steps to be taken before the opinion is formed or the decision is taken.’ [See R. v. Brixton Prison (Governor), ex p Soblen: (1963) 2 QB 243 at QB p. 315.]’”

• 22.3. On a conspectus of the principles so enunciated, it is clear that although the word ‘deemed’ is employed for different purposes in different contexts but one of its principal purpose, in essence, is to deem what may or may not be in reality, thereby requiring the subject-matter to be treated as if real. Applying the principles to the provision at hand i.e., Section 43 of the Code, it could reasonably be concluded that any transaction that answers to the descriptions contained in sub-sections (4) and (2) is presumed to be a preferential transaction at a relevant time, even though it may not be so in reality. In other words, since sub-sections (4) and (2) are deeming provisions, upon existence of the ingredients stated therein, the legal fiction would come into play; and such transaction entered into by a corporate debtor would be regarded as preferential transaction with the attendant consequences as per Section 44 of the Code, irrespective whether the transaction was in fact intended or even anticipated to be so.”

# 9. Following the law laid down by the Hon’ble Supreme Court in the above case, when acquisition of assets by Asset Reconstruction Company is made as per Section 5(1), deeming provision contained in Sub-section (2) of Section 5 shall come into play and the Asset Reconstruction Company shall be deemed to be Lender for all purposes. As a Lender, the Respondent No.1 was fully entitled to exercise its right to initiate proceeding under Section 7.

# 11. A perusal of the above observation indicate that although the application was held to be NBFC, however, there was no case that applicant was Asset Reconstruction Company. Assignment in the above case was not in favour of any Asset Reconstruction Company. Hence, the observation made in the judgment upholding the view of the Adjudicating Authority that document was unregistered hence the Resolution Professional rightly ignored the claim, does not lend any support to the case of the Appellant in the present case. The present is a case of an Asset Reconstruction Company where for acquisition of asset by an Asset Reconstruction Company an particular manner and procedure is prescribed and when asset is acquired as per provisions of Section 5 of SARFAESI Act, deeming section will come into play, as noted above.

# 13. Learned counsel for the Appellant further submits that the State Bank of India could not have been filed the Section 7 application because guarantee was executed by the Corporate Debtor in favour of SBICAP. SBICAP is Trustee Company on behalf of all the lenders. State Bank of India having assigned its debt to the Respondent No.1, it was open for the State Bank of India to exercise its rights as per the financial documents including Guarantee Deed. The guarantee executed by the Corporate Debtor in favour of SBICAP as Trustee Company of all six lenders, lenders has full entitlement to initiate proceedings under Section 7. As noted above, the Section 7 proceeding has already been initiated against another Guarantor i.e. Micro Stock Holding Pvt. Ltd., which order is still subsisting. We, thus, are of the view that argument of the Appellant that application under Section 7 by Respondent No.1 – Assignee of the State Bank of India was not maintainable, cannot be accepted.

# 14. Now, we come to last submission of learned counsel for the Appellant that application under Section 7 having admitted against the Principal Borrower, it was not open for the Respondent No.1 to file application against the Corporate Guarantor since two simultaneous proceedings under Section 7 cannot be proceeded with. Learned counsel for the Appellant has placed reliance on judgment of this Tribunal in “2019 SCC OnLine NCLAT 542, Dr. Vishnu Kumar Agarwal vs. Piramal Enterprises Ltd.”, where in Para 32 following observations have been made by this Tribunal:

• “32. There is no bar in the ‘I&B Code’ for filing simultaneously two applications under Section 7 against the ‘Principal Borrower’ as well as the ‘Corporate Guarantor(s)’ or against both the ‘Guarantors’. However, once for same set of claim application under Section 7 filed by the ‘Financial Creditor’ is admitted against one of the ‘Corporate Debtor’ (‘Principal Borrower’ or ‘Corporate Guarantor(s)’), second application by the same ‘Financial Creditor’ for same set of claim and default cannot be admitted against the other ‘Corporate Debtor’ (the ‘Corporate Guarantor(s)’ or the ‘Principal Borrower’). Further, though there is a provision to file joint application under Section 7 by the ‘Financial Creditors’, no application can be filed by the ‘Financial Creditor’ against two or more ‘Corporate Debtors’ on the ground of joint liability (‘Principal Borrower’ and one ‘Corporate Guarantor’, or ‘Principal Borrower’ or two ‘Corporate Guarantors’ or one ‘Corporate Guarantor’ and other ‘Corporate Guarantor’), till it is shown that the ‘Corporate Debtors’ combinedly are joint venture company.”

# 15. The above judgment was delivered by this Tribunal on 08.01.2019. We may notice a subsequent judgment of Hon’ble Supreme Court in “Laxmi Pat Surana vs. Union of India & Anr., (2021) 8 SCC 481”. The Hon’ble Supreme Court had occasion to consider the right to proceed against Guarantor in aforesaid case. Hon’ble Supreme Court has held in the above judgment that Section 7 is an enabling provision which permits the Financial Creditor to initiate CIRP against a Corporate Debtor. The Corporate Debtor can be the Principal Borrower as well as the Corporate Guarantor. The Hon’ble Supreme Court held that right or cause of action would enure to the lender to proceed against the Principal Borrower, as well as the guarantor in equal measure referred to in Para 23, which is to the following effect:

• “23. Indubitably, a right or cause of action would enure to the lender (financial creditor) to proceed against the principal borrower, as well as the guarantor in equal measure in case they commit default in repayment of the amount of debt acting jointly and severally. It would still be a case of default committed by the guarantor itself, if and when the principal borrower fails to discharge his obligation in respect of amount of debt. For, the obligation of the guarantor is coextensive and coterminous with that of the principal borrower to defray the debt, as predicated in Section 128 of the Contract Act. As a consequence of such default, the status of the guarantor metamorphoses into a debtor or a corporate debtor if it happens to be a corporate person, within the meaning of Section 3(8) of the Code. For, as aforesaid, expression “default” has also been defined in Section 3(12) of the Code to mean non-payment of debt when whole or any part or installment of the amount of debt has become due or payable and is not paid by the debtor or the corporate debtor, as the case may be.”

# 16. The scheme of I&B Code, in view of law laid down by the Hon’ble Supreme Court in “Laxmi Pat Surana vs. Union of India & Anr.”, we are not persuaded to follow judgment of this Tribunal in Dr. Vishnu Kumar Agarwal (Supra).

# 17. It is further relevant to notice that no submission have been advanced regarding debt or default. Debt and default by the Corporate Debtor is an admitted fact which has not been questioned or contested. The Adjudicating Authority having returned the finding that there exist financial debt and default, no error has been committed by the Adjudicating Authority in admitting Section 7 application. We, thus, do not find any error in the impugned order admitting Section 7 application. There is no merit in the Appeal. Appeal is dismissed.

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