Tribunal Validates Financial Creditor Status in Insolvency; Rejects Challenges

The Tribunal upheld the legality of including claims by Oriental Bank of Commerce and IndiaBulls Housing Finance Ltd. as Financial Creditors in a corporate insolvency resolution process. The Tribunal found that the claims qualified as financial debts due to the invocation of corporate guarantees and the CD's co-borrower status. Requests for reconstitution of the Committee of Creditors, challenges to CoC meetings and voting percentages, and injunctions against the Resolution Professional were dismissed. The Tribunal affirmed the RP's actions as lawful, concluding that the inclusion of the claims was proper and in accordance with the law.

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Issues Involved:
1. Legality of inclusion of claims by Oriental Bank of Commerce and IndiaBulls Housing Finance Ltd. as Financial Creditors based on corporate guarantees.
2. Reconstitution of the Committee of Creditors (CoC) excluding the aforementioned claims.
3. Validity of CoC meetings and voting percentages.
4. Injunctions against the Resolution Professional (RP) from proceeding with the CIRP.

Detailed Analysis:

1. Legality of Inclusion of Claims by Oriental Bank of Commerce and IndiaBulls Housing Finance Ltd.:
The applicant challenged the inclusion of claims by Oriental Bank of Commerce (OBC) and IndiaBulls Housing Finance Ltd. (R3) as Financial Creditors, arguing that these claims, based on corporate guarantees provided by the Corporate Debtor (CD) for third-party debts, do not qualify as financial debts per the Supreme Court's ruling in Anuj Jain IRP for JP Infratech Limited vs. Axis Bank Limited. The RP, however, included these claims after obtaining legal opinions and deliberations within the CoC.

The Tribunal noted that OBC's claim included Rs. 7.54 crores due from the CD as a term loan and Rs. 33 crores due from third parties for which the CD had provided corporate guarantees. The Tribunal found that the corporate guarantee had been invoked on 26/09/2018, making the CD liable as a guarantor. The Tribunal held that once a guarantee is invoked, the guarantor steps into the shoes of the principal borrower, transforming the debt into a financial debt under Section 5(8) of the I&B Code.

Regarding IndiaBulls Housing Finance Ltd., the Tribunal found that the CD was a co-borrower and had mortgaged its property to secure the loan, thus qualifying the debt as a financial debt. The Tribunal concluded that the Supreme Court's ruling in Anuj Jain was not applicable in this case because the CD was a co-borrower, not merely a guarantor.

2. Reconstitution of the Committee of Creditors (CoC):
The applicant requested the reconstitution of the CoC by excluding the claims of OBC and IndiaBulls Housing Finance Ltd. The Tribunal rejected this request, affirming that the inclusion of these claims as financial debts was legal and proper. The Tribunal emphasized that the invoked guarantees and the co-borrower status of the CD justified the inclusion of these claims in the CoC.

3. Validity of CoC Meetings and Voting Percentages:
The applicant sought to set aside all CoC meetings and determine the voting percentages of Financial Creditors in light of the Supreme Court's judgment. The Tribunal found that the RP had acted within legal bounds by including the claims of OBC and IndiaBulls Housing Finance Ltd. and determining the voting percentages accordingly. Therefore, the Tribunal upheld the validity of the CoC meetings and the voting percentages.

4. Injunctions Against the Resolution Professional (RP):
The applicant sought injunctions to restrain the RP from proceeding with the CIRP and from allowing OBC and IndiaBulls Housing Finance Ltd. to participate as Financial Creditors. The Tribunal dismissed these requests, reiterating that the inclusion of these claims was legal and proper, and there was no basis for granting the injunctions.

Conclusion:
The Tribunal concluded that the inclusion of the entire claims of OBC and IndiaBulls Housing Finance Ltd. by the RP was legal and not contrary to the Supreme Court's ruling in Anuj Jain. The application was dismissed, and the CoC's composition and voting rights were upheld as legal and proper. The Tribunal directed the Registry to send e-mail copies of the order to all parties and their counsel.

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