Form-C claim under tripartite arrangement not a financial debt; RP need not admit it; appeal dismissed

NCLAT held that the appellant's Form-C claim did not constitute a financial debt owed by the corporate debtor under the tripartite arrangement, as the loan was sanctioned to and payable by the borrower and the corporate debtor never undertook repayment. The resolution professional was not obliged to accept the claim; prior decrees obtained post-CIRP commencement were irrelevant. The tribunal found no infirmity in the claims admitted by the RP or in the resolution plan approved by the CoC and adjudicating authority and dismissed the appeal.

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ISSUES PRESENTED AND CONSIDERED

1. Whether a creditor that sanctioned and disbursed home loans to individual allottees, and which filed a claim in Form-C relying on sanction letters and tripartite agreements (between bank, allottee and developer), is a "financial creditor" of the corporate debtor within the meaning of Section 5(8) of the Code.

2. Whether clauses in the tripartite agreement (including rights to sell/transfer the allotted unit, appointment as attorney, and a general adoption clause) create a direct liability or an indemnity/guarantee by the corporate debtor such that the bank acquires a right to payment from the corporate debtor (i.e., a financial debt under Sections 3(6), 3(11) and 5(8)(i)).

3. Whether the Resolution Professional was obliged to admit the bank's Form-C claim and whether approval of the resolution plan without admitting that claim renders the approval vulnerable under Section 30(2) of the Code.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Whether the bank is a financial creditor of the corporate debtor

Legal framework: The Code defines "claim" (Section 3(6)), "debt" (Section 3(11)) and "financial debt" (Section 5(8)). Section 5(8)(f) (and its Explanation) treats amounts raised from an allottee under a real estate project as having the commercial effect of borrowing; Section 5(8)(i) covers liabilities as to guarantees or indemnities.

Precedent treatment: The Tribunal's earlier decision in Value Infracon/Axis Bank (referred to in the judgment) held that where loans were advanced to individual homebuyers and the tripartite agreement did not make the developer liable to repay, the lending bank could not be treated as a financial creditor of the developer. The Tribunal in Canara Bank distinguished Value Infracon where specific tripartite clauses expressly obliged the builder to refund advances; Indiabulls Housing Finance v. Rudra Buildwell similarly found no financial debt where disbursement was in favour of the borrower. Recent Supreme Court direction to look at the true nature of the transaction was noted.

Interpretation and reasoning: The Court examined the specific tripartite agreement relied upon in Form-C and focused on whether the agreement contained an express obligation by the corporate debtor to pay the bank. Clauses giving the bank the right to sell/alienate the allotted unit on borrower default, appointment of the bank as attorney, and a clause in which the builder "accepts and binds itself to the terms" were read cumulatively. The Court held these clauses establish security arrangements and permissive rights for enforcement against the allotted unit but do not constitute an undertaking by the corporate debtor to repay the loan or to indemnify the bank against the borrower's default. The absence of an express clause making the builder primarily liable (as in Canara Bank) or an express indemnity/guarantee meant the bank's disbursement remained a loan to the individual borrower, not a loan to the corporate debtor.

Ratio vs. Obiter: Ratio - A lending bank that advances funds to individual allottees does not become a financial creditor of the corporate debtor merely by a tripartite agreement unless the tripartite agreement contains an express liability/obligation by the corporate debtor to repay or indemnify the bank; permissive enforcement rights over allotted units do not, by themselves, convert the lender into a financial creditor of the corporate debtor. Obiter - Observations on the irrelevance of DRT decrees not relied upon in Form-C for admission at CIRP stage.

Conclusion: The bank's Form-C claim, based solely on sanction letters and the examined tripartite agreement, did not establish a financial debt owed by the corporate debtor; therefore the bank was not a financial creditor of the corporate debtor for purposes of the Code.

Issue 2 - Whether tripartite clauses relied upon amount to guarantee/indemnity by the corporate debtor (Section 5(8)(i))

Legal framework: Contract law definition of contract of indemnity (Section 124 Contract Act) and Section 5(8)(i) of the Code which treats liabilities in respect of guarantees/indemnities as financial debt.

Precedent treatment: Canara Bank was distinguished because its tripartite clause expressly required the builder to refund the entire amount advanced by the bank in specified contingencies; Value Infracon held that mere tripartite security or facilitation does not make the developer liable. Global Credit (Supreme Court) was cited for the principle that determination of "financial debt" requires finding the true nature of the transaction.

Interpretation and reasoning: The Court analysed the specific clauses (right to sell, power of attorney, clause where builder "accepts" terms). Clause 41 was held to be a reiteration/adoption of earlier clauses and not an independent indemnity/guarantee. Applying the Contract Act definition, there is no promise by the corporate debtor to "save" the bank from loss caused by conduct of the promisor; the tripartite provisions create enforcement rights against the unit and security, but do not create primary liability of the developer to repay the loan or an indemnity obligation. Thus Section 5(8)(i) is not attracted on the facts before the Court.

Ratio vs. Obiter: Ratio - Clause(s) that merely permit the bank to enforce security or to cancel allotment and effect transfer do not constitute a contract of indemnity or guarantee by the developer; only clauses that expressly render the developer liable to refund/repay will attract Section 5(8)(i). Obiter - Reference to registration of charge with CERSAI (standing alone) only matters if the creditor is otherwise a financial creditor of the corporate debtor.

Conclusion: Tripartite clauses relied on did not amount to a guarantee/indemnity by the corporate debtor; Section 5(8)(i) does not apply to convert the bank's position into a financial debt owed by the corporate debtor.

Issue 3 - Admission of the bank's claim by the RP and validity of resolution plan approval

Legal framework: RP's duty to admit claims under the Insolvency Regulations and adjudicating authority's power to adjudicate IAs challenging claim rejection; Section 30(2) requires compliance with statutory requirements for approval of a resolution plan.

Precedent treatment: The Tribunal's decisions in Value Infracon, Canara Bank and Indiabulls govern when a creditor who financed homebuyers can be treated as a financial creditor of the developer; the judgment applies those precedents to determine whether the RP erred in not admitting the claim.

Interpretation and reasoning: Having found that the bank was not a financial creditor of the corporate debtor on the evidence and the tripartite terms, the RP's rejection of the Form-C claim was lawful. Because the resolution plan was prepared and approved on the basis of admitted claims and there was no statutory non-compliance in the plan approval process, the approval of the resolution plan did not suffer infirmity merely because the bank's unadmitted claim existed. The Court also noted procedural constraint: the bank did not base its Form-C on DRT decrees that existed but were not invoked in Form-C; such decrees could not be relied upon at the CIRP stage where the claim presented was different.

Ratio vs. Obiter: Ratio - Rejection of a Form-C claim is sustainable where the claim fails to establish a right to payment from the corporate debtor; approval of a resolution plan remains valid if based on admitted claims and compliant with Section 30(2). Obiter - The availability of amounts recovered in avoidance applications under Section 66 may be arranged to satisfy lenders' dues subject to the plan/SRA approval.

Conclusion: The RP was not obliged to admit the bank's Form-C claim; the adjudicating authority did not err in rejecting the bank's application or in approving the resolution plan. Appeals challenging both orders were dismissed.

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