14 Oct 2022

Maitreya Doshi vs Anand Rathi Global Finance Ltd. & Anr.


  1. The Appellant was a director of M/S Doshi Holdings Pvt. Ltd. (hereinafter referred to as “Doshi Holdings”); and the Respondent no. 1 is Anand Rathi Global Finance Limited (hereinafter referred to as the “Financial Creditor (FC)”).
  2. The FC disbursed a loan of Rs.6 Crores to M/s Premier Limited, (hereinafter referred to as “Premier”) under Loan-cum-Pledge Agreements (hereinafter referred to as “the Agreements”); and under the same agreements, Doshi Holdings pledged shares held by it in Premier, in favour of the FC, by way of security for the loan.
  3. Premier defaulted on the payments, and the FC called upon Premier to repay the dues. On non-payment, the financial creditor proceeded to call upon both Premier and Doshi Holdings, to pay the entire outstanding loan amount.
  4. On communication of inability to pay dues by Premier, the FC filed a petition to initiate CIRP against both Premier and Doshi Holdings, for the same set of loans arising out of the same loan documents, in NCLT Mumbai, which admitted both the petitions.
  5. The Appellant filed an appeal in the NCLAT under Section 61 of the IBC, against the judgment of the NLCT admitting the petition against Doshi Holdings, which was dismissed by the NCLAT.
  6. The present appeal is under Section 62 of the IBC against the above stated Judgement and Order of the NCLAT.


  1. The Agreements contemplated two distinct transactions under one document, - First, grant of loan to Premier, and Second, creation of the pledge by Doshi Holdings.
  2. The FC granted loans to Premier and no amount under the Agreements was disbursed to Doshi Holdings. Further, the loan was never utilised by Doshi Holdings. The reference to both Premier and Doshi Holdings as the ‘borrower’ in the Agreements was only done for the sake of convenience. The fact remains that Premier was the borrower and Doshi Holdings the pledger, and both represent separate entities.
  3. Since no disbursement had been made to Doshi Holdings, there was no obligation on the part of Doshi Holdings to make any repayment to the FC, and no financial debt was owed by Doshi Holdings to the FC. Further, the NCLT and the NCLAT erred in finding that Doshi Holdings was a borrower by misconstruing the expression ‘financial debt’.
  4. By distinguishing the terms “Contract of Indemnity”, “Contract of Guarantee” and “Pledge” as per the Indian Contract Act, 1872, the appellant contended that creation of pledge of shares of the CD did not and cannot amount to a guarantee and/or indemnity under the definition of financial debt under Section 5(8) of the IBC. Further, relying on Phoenix ARC Pvt. Ltd. v. Ketulbhai Ramubhai Patel[1], it was contended that the pledger of shares of the CD can be best equated with secured debtor and not a FC.
  5. Further, it was alleged that when one bench of the NLCT admitted the petition for initiation of CIRP against Premier, it mentioned in its order that “for the same set of loans, arising under the same loan documents, the same debt/claim against Doshi will not be permissible”, and thus when another bench of the NCLT admitted the petition for initiation of CIRP against Doshi Holdings by a subsequent order, it was in disregard to the order of the previous bench.
  6. Thus, the authorities erred in admitting the petition under section 7 of the IBC against Doshi Holdings.


  1. Doshi Holdings was party to the Agreements in its dual capacity as co-borrower and pledger. Further, the appellant (who was Director of both, Premier and Doshi Holdings) had signed the documents on behalf of Doshi Holdings in its capacity as co-borrower.
  2. Doshi Holdings had acknowledged receipt of monies disbursed under the Agreements by executing loan receipts, and had also issued promissory notes promising repayment of loan to the FC. Also, after Premier defaulted in payment of loan, demand notice was issued to Doshi Holdings to repay the loan in its capacity as co-borrower.
  3. It was emphasised that the sine qua non for an entity to be considered as a Corporate Debtor is that such person/entity should owe a debt to any person and not that a disbursal has to be made to such a person/entity; and Doshi Holdings satisfies the aforementioned criteria.


  1. Prima facie, it appears that Doshi Holdings was a party to the Agreements in its dual capacity of borrower and pledgor of shares.
  2. The NCLT’s finding that Doshi Holdings is also a borrower under the Agreements is a plausible interpretation and shall not be interfered with in an appeal under section 62 of the IBC.
  3. The court relied on its earlier judgement in the case of Lalit Kumar Jain v. Union of India[2], to rule that the approval of a resolution in respect of one borrower cannot discharge a co-borrower.
  4. Thus, when 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.
  5. However, 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. And once the claim of the Financial Creditor is discharged, there can be no question of recovery of the claim twice over.


[1] (2021) 2 SCC 799

[2] (2021) 9 SCC 321