AI Drafter 
TaxTMI 
TaxTMI 
2018 (10) TMI 1798
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....6 by the Applicant/Financial Creditor and it was admitted by the Tribunal by an order dated 12.03.2018 to initiate Corporate Insolvency Resolution Process against Viceroy Hotels Limited (Corporate Debtor) and Shri Koteshwara Rao Karuchola (Respondent No.1) was appointed as IRP who was subsequently confirmed as Resolution Professional in the first meeting of Committee of Creditors (CoC) held on 19.04.2018. (2) It is averred that public announcement was given by Respondent No.l on 17.03.2018 inviting claims from creditors and the last date of submission of claims was fixed as on 30.03.2018. The Resolution Professional has conducted four CoC meetings as on the date of Application. (3) It is averred that the Applicant/Financial Creditor was holding 50.38% of the claims and the voting rights in Respondent No.2 Company as per the composition in the 4th CoC Meeting held on 19.06.2018. (4) It is alleged that the Resolution Professional/Respondent No. 1 has not recorded the minutes of the 4th CoC meeting accurately and after detailed email from Applicant on 22.06.2018, the Resolution Professional partly revised the same. Various administrative appointments and dec....
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....e RP to convene a CoC meeting as the Applicant/Petitioner has more than 33% of the voting rights, under Regulation 18 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. But it is alleged that instead of convening the CoC Meeting, RP vide his emails dated 09.07.2018 and 10.07.2018 sought reasons for change of RP. It is further alleged that CoC is not obligated to provide any reasons for change of RP but only needs to secure a resolution by 66% voting shares for replacement of RP as per provisions of Section 27(2) of IBC. Even then, RP has not convened the meeting of CoC. (9) It is alleged that in the meantime, on 09.07.2018, the RP circulated the list of financial creditors after admission of certain purported claims and with this the percentage of claims of Applicant/Petitioner got reduced from 50.38% to 49.21%. (10) It is also alleged that RP further tried to dilute the voting strength of Financial Creditors including the Applicant by admitting the purported claims of certain creditors including one M/s Mahal Hotel Pvt. Ltd. in haste and circulated a revised list of claims and percentage of voting rights vide email dated 11.07.2018. ....
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....jecting for the same without any valid reasons. It is also stated that RP is getting all the information about the Company from the CEO of the Company and the Petitioner/Applicant is trying to control the functioning of the RP for its advantage. (3) It is contended that though RP is bound to control the Company during CIRP. M/s IMAP India (Transaction Advisors appointed by RP in the 3rd CoC Meeting) had taken control of Virtual Data Room (VDR). It is also contended that RP has placed in the VDR the copy of the order passed by Hon'ble DRT in relation to SBI and Canara Bank claims for transparency and acting fairly. But the Applicant is forcing to conceal the particulars of "Lis Pendens" to suit its needs to get indirect benefit without disclosing the complete picture to the probable resolution applicants. It is also contended by the Resolution Professional that he has received 31 Resolution Applications and 26 are shortlisted, which shows the transparency in conducting the CIRP. (4) It is also contended that no other member of CoC has any complaints about the working of the RP except the Applicant/Petitioner. The staff is employed depending upon the volume of w....
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....ng without any valid reasons. The Applicant attended the meeting and participated in the e-voting also. (10) It is the case of Resolution Professional that the CIRP is being conducted in a fair and just manner ensuring that the Company is a going concern and the stakeholders are benefitted. (11) It is the contended that this Application is filed by the Petitioner based on false claims and hence urged the Tribunal to dismiss the Application. 4. Further, Mahal Hotel Private Limited was impleaded as Respondent No. 3 to this Application vide order of this Tribunal dated 29.08.2018. The averments in the reply of Respondent No. 3 in brief are:- (1) It is averred that consequent to entering into a Business Transfer Agreement (BTA) with the Corporate Debtor for acquiring a hotel project of the Corporate Debtor (J.W. Marriot, Chennai) on a slump sale basis on 02.04.2011, Respondent No. 3 was sanctioned loans by various banks and paid the Corporate Debtor a total sum of Rs. 122,22,70,860/- as advance consideration apart from Additional consideration of Rs. 65,00,000/- by one of the associate companies of R-3 i.e. Ganga Industrial Corporation Ltd. and Rs. 11,77,0....
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.... abusing its controlling stake in CoC. (6) It is the case of R-3 that it had first filed its claim on 04.07.2018 which was returned due to procedural technicalities and the same was re-submitted on 10.07.2018 as per the directions of Resolution Professional by electronic means. It is the case of R-3 that its claim was also verified by IPE before reconstitution of CoC. R-3 has relied on Regulation 12(3) of IBBI (IRPCP) Regulations, 2016 that every creditor whose claim is admitted under Regulation 12(2) is to be included in the CoC from the date of admission of such claim. (7) It is the case of R-3 that by virtue of Section 5(7) R/w Section 5(8) it falls under the definition of Financial Creditor. (8) It is further averred that the contention of the Applicant that 5th CoC should be conducted with the members forming part of 4th CoC is not permissible under law and against the provisions of IBC. (9) It is the case of R-3 that outstanding dues payable by Corporate Debtor was brought before the CoC in its 4th meeting as the same is reflected in the minutes of 4th CoC meeting and the Applicant was aware of the dues of R-3 which was reflecting in the bo....
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.... Respondent No. 3 surfaced that all the allegations were being raised by the Applicant only because of its reduction in voting strength. It is the case of Applicant that all Financial Creditors have raised objections to the manner in which such claims of Respondent No. 3 and its associate companies were admitted by Resolution Professional. (f) It is the case of Applicant that proposed Respondent No. 3 as well as the RP failed to understand the amount paid under the subject transaction between Respondent No. 3 and the Corporate Debtor does not have the commercial effect of borrowing and that the nature of transaction envisaged under the BTA is a slump sale of an asset and the amount paid therein is referred to as sale consideration. (g) The Applicant further denies the allegations made by Respondent No. 3 that they are one of the Resolution Applicants and there in an apparent conflict of interest. It is the case of Applicant that there is no bar that a member of CoC cannot become a resolution Applicant. 6. I have heard the Counsels for Applicant, Counsel for Resolution Professional and Counsel for R-3. The Applicant is Financial Creditor. Initially he has filed ....
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....ation (c) the alleged claim if true, the claimant/Respondent No. 3 shall not be admitted into CoC on the ground Respondent No. 3 is a financial creditor (d) the claim, even if it is true, Respondent No. 3 cannot be termed as Financial Creditor and thus he should not have been included in the CoC (e). The claim even if it is true the Respondent No. 3 cannot proceed against the Corporate Debtor as there is no provisions for refund of the earnest money (f) the claim cannot be admitted for the reason that alleged Business Transfer Agreement was cancelled by Respondent No. 3 and Corporate Debtor was nowhere responsible for rescinding the Business Transfer Agreement. Therefore, the Corporate Debtor cannot be held responsible to return the earnest money/advance. On the other hand, the contention of the Learned Counsel that Corporate Debtor cannot forfeit the advance/earnest money. The unilateral act in the Balance Sheet forfeiting the amount does not absolve the Corporate Debtor from liability. The debt due by Corporate Debtor is not barred by limitation. The unconditional acknowledgements of liability given by Corporate Debtor give rise to fresh cause of action. The debt due to Responden....
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....ent No. 3 and other Companies and Resolution Professional clandestinely admitted the claim of Respondent No. 3 and assigned voting right to Respondent No. 3 at 27.13%. 15. The Learned Counsel for Applicant strongly contended that Resolution Professional erroneously admitted the claim. There is no proof before Resolution Professional to admit the claim of Respondent No. 3. 16. Further Learned Counsel contended the claim was not admitted in accordance with CIRP Regulations, 2016. All relevant documents are not filed. Counsel contended Resolution Professional ought not to have included R-3 in CoC. 17. Respondent No. 3 relied upon the copy of the BTA marked as Exhibit-A in the reply. It is dated 02.04.2011. The entire claim of Respondent No. 3 is based on this primary-document i.e Business Transfer Agreement. The Corporate Debtor agreed to sell its property situated in Chennai to Respondent No. 3. In pursuance of the same, Corporate Debtor and Respondent No. 3 entered into Business Transfer Agreement. The case of Respondent No. 3 that an amount of Rs. 122,22,70,860/- was paid as advance consideration. Further an amount of Rs. 65 crores was paid to the Corporate Debtor by one o....
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....ument came into existence long prior to initiation of CIRP against the Corporate Debtor. Secondly, there is evidence to show the amount received towards advance was also shown in the accounts of Corporate Debtor particularly in the Balance sheet for the year 2013-14. The Corporate Debtor is a listed company. In the balance sheet for the year 2013-14 the Corporate Debtor was stated to have forfeited the advance amounts. There is no doubt that Corporate Debtor has forfeited the advance amount. However, the 3rd Respondent questioned the right of the Corporate Debtor to forfeit the advance amount in its Books of Account. So the documents go to show advance was paid to the Corporate Debtor in pursuance of BTA. It cannot be said that the transaction is not a genuine transaction. 21. The next question for consideration whether Corporate Debtor had right of forfeiting advance amount unilaterally without the consent of Respondent No. 3. In this connection, learned Counsel for Respondent No. 3 relied on the decision of Hon'ble Apex Court reported in Sugauli Sugar Works (P.) Ltd. (supra) wherein Hon'ble Apex Court held a Debtor cannot get rid of its liability by unilaterally making....
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....ons of Section 25 of Indian Contract Act. 24. The next contention raised by the Learned Counsel that Applicant cannot be treated as Financial Creditor. The Applicant does not fall in any of the category of Section 5(7) or 5(8) of IBC. Counsel contended R-3 is only an Operational Creditor or Creditor. He will not come under the definition of Financial creditor. On the other hand, the Learned Counsel for R-3 relied on Section 5(8)(f) which reads as follows: 5(8)(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; By entering into BTA it pre-supposes a commercial transaction. The amount advanced is in respect of sale. Therefore, advance amount given to the Corporate Debtor in terms of BTA is a financial debt and therefore R-3 is entitled to be included in the CoC. 25. The contention of the Learned Counsel for Applicant that interest claimed by R-3 is against the provisions of BTA. The Resolution Professional wrongly admitted the claim as far as the interest is concerned. Counsel contended interest is to be claimed on straight line method but not on compounding line meth....