2018 (9) TMI 1297 - AT - Insolvency and Bankruptcy

Tribunal includes EXIM Bank and Axis Bank as Financial Creditors under I&B Code

Export Import Bank of India And Axis Bank Limited Versus Resolution Professional JEKPL Private Limited, Edu Smart Services Private Limited And DBS Bank Limited

The Tribunal determined that both EXIM Bank and Axis Bank qualify as 'Financial Creditors' under the I&B Code based on the guarantees provided by the ... Corporate Insolvency Resolution Process - Whether the ‘Axis Bank Ltd.’ was also ‘Counter Corporate Guarantor’, comes within the meaning of ‘Financial Creditor’ as defined under Section 5(7) & (8) of I&B Code? - Held that:- Section 25 provides the duties of Resolution Professional. As per Section 25(2)(e), the Resolution Professional is required to maintain an updated list of all the claims. Aforesaid fact also suggests that the maturity of a claim or default of debt are not the guiding factors to be noticed for collating or updating the claims. The matter can be looked from another angle. It is only in case of ‘debt’ and ‘default’, a ‘Financial Creditor’ or ‘Operational Creditor’, may file applications under Section 7 or 9. The ‘Corporate Applicant’ has also right to file application under Section 10 for initiation of Corporate Insolvency Resolution Process against itself, if it has defaulted to pay the ‘debt’. It does not mean that the persons whose debt has not been matured cannot file claim. The ‘Financial Creditors’ or ‘Operational Creditors’ or ‘secured or unsecured creditors’ all are entitled to file claim. Therefore, we hold that maturity of claim or default of claim or invocation of guarantee for claiming the amount has no nexus with filing of claim pursuant to public announcement made under Section 13(1)(b) r/w Section 15(1)(c) or for collating the claim under Section 18(1)(b) or for updating claim under Section 25(2)(e). For the purpose of collating information relating to assets, finances and operations of Corporate Debtor or financial position of the Corporate Debtor, including the liabilities as on the date of initiation of the Resolution Process as per Section 18(1), it is the duty of the Resolution Professional to collate all the claims and to verify the same from the records of assets and liabilities maintained by the Corporate Debtor. EXIM Bank Matter - Held that:- Admittedly, JEKPL has given the ‘Counter-Indemnity Obligation’ by way of Guarantee (Counter Guarantee) and thereby it falls within clause (h) of Section 5(8). Such ‘Counter-Indemnity Obligation’ in respect of Counter Guarantee has been given by JEKPL as the EXIM Bank disbursed the debt against the consideration for the time value of money in favour of the Principal Borrower (JENV).In view of the said provision we hold that EXIM Bank come within the meaning of ‘Financial Creditor’ as defined under Section 5(7) r/w Section 5(8) of the I&B Code. The claim of EXIM Bank having been wrongly rejected by the Adjudicating Authority by impugned order the said order is set aside. Axis Bank - Held that:- Having held that the ‘Export Import Bank of India’ is ‘Financial Creditor’ in relation to ‘JEKPL Pvt. Ltd.’ (Corporate Debtor) and ‘Axis Bank Limited’ is ‘Financial Creditor’ in relation to ‘Edu Smart Services Pvt. Ltd.’ (Corporate Debtor), we hold and direct respective ‘Resolution Professionals’ and ‘Adjudicating Authorities’ to treat the Appellant Banks as members of their respective Committee of Creditors, who in their turn are directed to hold meeting of Committee of Creditors in accordance with law and reconsider/consider the Resolution Plan(s) submitted in each Corporate Insolvency Resolution Process which are in accordance with Section 30(2) of the I&B Code. Both the ‘Committee of Creditors’ now cannot go for rebidding, the respective Resolution Plans, having already been opened. All the appeals are allowed with aforesaid observations and directions. Issues Involved:1. Whether the EXIM Bank qualifies as a 'Financial Creditor' under the I&B Code.2. Whether the Axis Bank qualifies as a 'Financial Creditor' under the I&B Code.3. Relationship between invocation of Corporate Guarantee and claim of a Financial Creditor.4. Validity of moratorium on invocation of Corporate Guarantee during the Corporate Insolvency Resolution Process.Detailed Analysis:EXIM Bank Vs. Resolution Professional, JEKPL Private Limited:Issue 1: Qualification of EXIM Bank as a 'Financial Creditor'The JEKPL Pvt. Ltd. initiated Corporate Insolvency Resolution Process under Section 10 of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The EXIM Bank, which had disbursed a loan to Jubilant Energy N.V. (JENV), Netherlands, claimed to be a 'Financial Creditor' based on a 'Counter Corporate Guarantee' provided by JEKPL. The Resolution Professional rejected EXIM Bank's claim, which was affirmed by the Adjudicating Authority. The core question was whether EXIM Bank, with a 'Counter Corporate Guarantee' from JEKPL, qualifies as a 'Financial Creditor' under Section 5(7) read with Section 5(8)(h) of the I&B Code.The EXIM Bank argued that the loan and the guarantees provided by JEKPL and JEPL (Corporate Guarantor) made it a 'Financial Creditor'. The Resolution Professional and the Committee of Creditors contended that the 'Counter Corporate Guarantee' did not meet the criteria under Section 5(8) as it was not disbursed against the consideration for time value of money directly to JEKPL.The Tribunal found that the 'Counter Corporate Guarantee' provided by JEKPL was indeed a guarantee for the loan disbursed to JENV, making EXIM Bank a 'Financial Creditor'. The Tribunal emphasized that the 'Counter Corporate Guarantee' amounts to a 'Guarantee' under Section 5(8)(h), thus qualifying EXIM Bank as a 'Financial Creditor'.Axis Bank Limited vs. Edu Smart Services Private Limited & Anr:Issue 2: Qualification of Axis Bank as a 'Financial Creditor'DBS Bank Limited initiated the Corporate Insolvency Resolution Process against Edu Smart Services Pvt. Ltd. Axis Bank submitted its claim based on a 'Corporate Guarantee' provided by Edu Smart Services Pvt. Ltd. The Resolution Professional rejected the claim, stating that the 'Corporate Guarantee' could not be invoked during the moratorium period.The Tribunal examined whether Axis Bank, as a 'Counter Corporate Guarantor', qualifies as a 'Financial Creditor' under Section 5(7) and Section 5(8) of the I&B Code. Axis Bank argued that the terms of the Master Restructuring Agreement and the Corporate Guarantee established it as a 'Financial Creditor'. The Committee of Creditors contended that the claim was contingent and not due at the commencement of the insolvency process.The Tribunal noted that the Corporate Guarantee allowed the lenders, including Axis Bank, to act as if the Guarantor (Edu Smart Services Pvt. Ltd.) was the 'Principal Debtor'. The Tribunal held that Axis Bank qualifies as a 'Financial Creditor' and the claim should be considered during the Corporate Insolvency Resolution Process.Issue 3: Relationship between Invocation of Corporate Guarantee and Claim of a Financial CreditorThe Tribunal clarified that the maturity of a claim or the invocation of a guarantee is not relevant for filing a claim during the Corporate Insolvency Resolution Process. The right to payment, whether matured or unmatured, is sufficient to constitute a claim under Section 3(6) of the I&B Code. The Tribunal emphasized that the duties of the Resolution Professional include collating and updating all claims, irrespective of their maturity status.Issue 4: Validity of Moratorium on Invocation of Corporate GuaranteeThe Tribunal addressed the argument that the moratorium under Section 14 prevents the invocation of Corporate Guarantees. It clarified that the moratorium does not affect the right to file claims based on guarantees provided before the commencement of the insolvency process. The Tribunal held that the claims based on guarantees should be included in the Corporate Insolvency Resolution Process, regardless of the moratorium.Conclusion:The Tribunal concluded that both EXIM Bank and Axis Bank qualify as 'Financial Creditors' under the I&B Code. The respective Resolution Professionals and Adjudicating Authorities were directed to include these banks in the Committee of Creditors and reconsider the Resolution Plans accordingly. The appeals were allowed, and the orders rejecting the claims of EXIM Bank and Axis Bank were set aside.