2018 (10) TMI 1798 - Tri - Insolvency and Bankruptcy

Tribunal revises interest calculation for Mahal Hotel claim, addresses CoC concerns and RP allegations

The Tribunal directed the Resolution Professional (RP) to revise Mahal Hotel Private Limited's claim by calculating interest at 24% per annum on the ... Grant of stay on the reconstituted CoC - Demand of interest - Section 5(7) or 5(8) of IBC - HELD THAT:- The Applicant is Financial Creditor. Initially he has filed this Application against Respondent Nos. 1 & 2. Respondent No. 1 is Resolution Professional. He is representing Viceroy Hotels Limited/Respondent No. 2. During pendency of this Application the 3rd Respondent got itself impleaded as Respondent No. 3 and filed counter opposing the Application. Interest is not allowed on monthly rests. Therefore, claiming compound interest is not permissible. A plain reading of interest portion in the clause would go to show purchaser is entitled for interest @ 2% per month. This does not amount that purchaser is entitled for Compound interest. The term should have contained permission to claim interest @ 2% to be compounded on monthly rests when there is no such mention in the interest portion, Respondent No. 3 is not entitled for claiming compound interest. Therefore, the Resolution Professional can be directed to revise the claim made by Respondent No. 3 by calculating the interest on straight line method i.e. 24% p.a. on the outstanding balance and then assess the voting right of R-3 and its associates. This Application can be disposed off with this direction. Application is disposed off by giving direction to Resolution Professional to revise the claim submitted by R-3/M/s Mahal Hotels Private Limited and its associates by calculating interest on the outstanding balance @ 24% p.a. and then assess the percentage of voting share of Respondent No. 3 and its associate companies. Issues Involved:1. Validity of the reconstituted Committee of Creditors (CoC).2. Allegations against the Resolution Professional (RP).3. Admittance of claims by Mahal Hotel Private Limited (R-3).4. Classification of R-3 as a Financial Creditor.5. Calculation of interest on the claim by R-3.Detailed Analysis:1. Validity of the Reconstituted CoC:The Applicant, Asset Reconstruction Company (India) Limited (ARCIL), filed an application seeking a stay on the reconstituted CoC as notified by the RP on 11.07.2018. The Applicant argued that the RP admitted claims from certain creditors, including Mahal Hotel Private Limited (R-3), which reduced the Applicant's voting rights from 50.38% to 35.24%. The Applicant contended that these claims were admitted hastily and in collusion with the Corporate Debtor to dilute its voting strength.2. Allegations Against the Resolution Professional (RP):The Applicant alleged multiple irregularities by the RP, including:- Inaccurate recording of minutes of the 4th CoC meeting.- Unilateral administrative decisions without consulting the CoC.- Mishandling of the Waqf issue, which impacted the value maximization of the Corporate Debtor.- Failure to conduct a forensic audit despite requests.- Collusion with promoters and unsecured creditors to influence the CIRP process.The RP countered these allegations, asserting adherence to the provisions of the Code and Regulations, transparency in CIRP, and denial of any vested interests or collusion. The RP also stated that the claims were processed and verified in a fair manner.3. Admittance of Claims by Mahal Hotel Private Limited (R-3):R-3's claim was based on a Business Transfer Agreement (BTA) dated 02.04.2011, under which it paid a total sum of Rs. 122.22 crores as advance consideration. The BTA was canceled on 22.03.2013, and R-3 sought a refund with interest, leading to a claim of Rs. 401.03 crores. The RP admitted the claim after verification, which was contested by the Applicant as a bogus claim intended to reduce its voting share.The Tribunal examined the BTA and the associated payments, finding that the transaction was genuine and that the Corporate Debtor had acknowledged the debt in its balance sheets, thus not barred by limitation. The Tribunal also considered the unilateral forfeiture of the advance amount by the Corporate Debtor as invalid without the consent of R-3.4. Classification of R-3 as a Financial Creditor:The Applicant argued that R-3 should not be classified as a Financial Creditor under Sections 5(7) and 5(8) of the IBC. The Tribunal, however, found that the amount advanced under the BTA had the commercial effect of a borrowing, thus falling under the definition of financial debt per Section 5(8)(f) of the IBC. Consequently, R-3 was entitled to be included in the CoC.5. Calculation of Interest on the Claim by R-3:The Applicant contested the interest calculation by R-3, arguing that it should be on a straight-line method rather than compounded. The Tribunal referred to Clause 5.3.3 of the BTA, which stipulated an interest rate of 2% per month but did not specify compounding. Therefore, the Tribunal directed the RP to revise R-3's claim by calculating interest at 24% per annum on the outstanding balance using the straight-line method.Conclusion:The Tribunal disposed of the application by directing the RP to revise R-3's claim by calculating interest at 24% per annum on the outstanding balance and reassess the voting share of R-3 and its associates. This decision addressed the concerns regarding the reconstituted CoC, the allegations against the RP, and the classification and interest calculation of R-3's claim.