Substance over form in insolvency: secured financing may be treated as a loan, and belated information memorandum changes are barred.

The real character of a transaction in insolvency proceedings may be determined from the entire documentation and surrounding circumstances, not merely its form. On that basis, the arrangement was treated as a loan secured by mortgage rather than a completed sale, with the flats regarded as security for debenture exposure. The text also indicates that, once the committee of creditors has approved a resolution plan, a secured creditor who participated in the process cannot later seek to amend the information memorandum to exclude assets. A belated alteration at that stage was rejected as inconsistent with the statutory resolution framework and potentially prejudicial to similarly placed stakeholders.

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Issues: (i) Whether the transaction documents and surrounding circumstances showed that the money paid by the issuer company was a loan transaction secured by mortgage, and not a completed sale transaction. (ii) Whether 205 flats could be excluded from the information memorandum and the resolution professional could be directed to amend it after the committee of creditors had already approved the resolution plan.

Issue (i): Whether the transaction documents and surrounding circumstances showed that the money paid by the issuer company was a loan transaction secured by mortgage, and not a completed sale transaction.

Analysis: The documents were read as a whole, along with the flow of funds, the amended debenture trust deed, the offer to purchase arrangement, and the mortgage deeds. The Court held that the real nature of the arrangement had to be tested on substance and not merely on the form of the documents. It relied on the absence of a registered sale deed, the statutory position that a contract for sale does not by itself create an interest in immovable property, and the circumstances showing that the consideration was linked to security, buy-back, and repayment obligations. The record also supported the conclusion that the parties had structured the transaction to secure the debenture exposure rather than effect an outright sale.

Conclusion: The transaction was held to be a loan transaction and not a genuine sale transaction, and the flats were treated as security for the debenture holders.

Issue (ii): Whether 205 flats could be excluded from the information memorandum and the resolution professional could be directed to amend it after the committee of creditors had already approved the resolution plan.

Analysis: The Information Memorandum is prepared to support the resolution process, but once a resolution plan has been approved by the committee of creditors, the process is governed by statutory timelines and the plan acquires binding force. The Court held that a secured creditor who had participated in the process and voted in favour of the resolution plan could not, at a belated stage, seek modification of the Information Memorandum. It also noted that excluding the flats would prejudice similarly placed stakeholders and that the impugned direction had proceeded on the established security documentation and the nature of the transaction.

Conclusion: The exclusion of 205 flats from the corporate debtor's assets was set aside and the request to alter the Information Memorandum at that stage was rejected.

Final Conclusion: The connected appeals challenging exclusion of the 205 flats succeeded, while the cross-appeal seeking inclusion of the remaining units and reduction of voting rights failed, leaving the impugned order reversed to the extent of exclusion of the 205 flats.

Ratio Decidendi: In insolvency proceedings, the real character of a transaction may be determined from the entire set of documents and surrounding circumstances, but once the committee of creditors has approved a resolution plan, belated attempts to alter the information memorandum are impermissible and contrary to the statutory resolution framework.

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