TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 546
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....handover the same once done at a location specified by the Applicant at that time, at the cost of the Corporate Debtor. d. To direct the 2nd Respondent to include the lease rental amount of Rs. 1,20,30,748.03/- per quarter from 29.08.2018 till the date of the handover of the scheduled equipment in the manner specified in relief (iii), as the Insolvency Resolution Process Costs ("CIRP costs") under Section 5(13) of the IBC r/w Regulation 31 of the CIRP Regulations, 2016. e. In the alternative to reliefs (iii) and (iv) above, in the event that the 2nd Respondent is unable to deliver possession of the scheduled equipment in the manner specified in relief (iii) above, direct the 2nd Respondent to include the current market value of the scheduled equipment as CIRP costs (including the lease rental amount of Rs. 1,20,30,748.03/- per quarter from 29.08.2018 till the date of inclusion of the current market value of the scheduled equipment as CIRP costs). 2. Brief facts as stated by the Applicant are as under:- a. That the Applicant sanctioned a financial lease of Rs. 40,00,00,000/- to the Corporate Debtor in accordance with the sanction letter dated 30.07.2011. The Applicant and the....
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....d schedule. Hence, the Applicant is at liberty to exercise all its rights under the Lease Agreement. h. That the Applicant filed its proof of claim for an amount of Rs. 66,58,04,020.16/- on 12.09.2018 with the RP. That the claim filed by the Applicant includes the lease termination price that the Applicant is entitled to as per the Lease Agreement. The claim amount includes the following: Sl. No. Particulars Amount 1 Future Rentals Rs. 446,856,355.53 2 Residual Value Rs. 59,000,284.60 3 Gross Foreclosure Value (1+2) Rs. 505,856,640.13 4 GST @ 5% Rs. 25,292,832.01 5 Total Foreclosure Value including GST (3+4) Rs. 531,149,472.14 6 TCS @1% Rs. 5,311,494.72 7 Total Foreclosure Value (5+6) Rs. 536,460,966.86 8 Overdue Rentals till 29th Aug 2018 Rs. 108,276,732.30 9 ODC till 29th Aug 2018 including GST Rs. 21,066,321.00 10 Total Dues (7+8+9) Rs. 665,804,020.16 i. That the Applicant through its Letter dated 21.11.2018 requested RP for handing over of the scheduled equipment. The Applicant f....
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....gements for removal of the equipment and to bear the cost of the same. The Resolution Professional also informed to levy a charge of Rs. 1 Lakh per day if the Applicant failed to remove the equipment within the stipulated time. o. That the Applicant replied to the aforesaid email on 18.09.2019 and brought to the notice of the RP that the reclassification of the Applicant as an Operational Creditor was erroneous and based on a misinterpretation of the order of the NCLT. The Applicant pointed out that the equipment is not in a working condition and that the railway tracks are damaged without which the equipment cannot be transferred. p. That as per Clause 18 of the Lease Agreement, it is the Lessee's obligation to ensure that the equipment is handed over in the same operating order and condition as originally delivered to the lessee and at a place notified by the Lessor at the cost of the Lessee. The Applicant called upon the Resolution Professional to reconsider its stand. However, Resolution Professional through its email dated 05.10.2019 reiterated its earlier stand. 3. Counsel for the Respondent No.2/RP filed counter and written submissions inter-alia stating as under:- ....
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....e same." i. As a result of classification of Applicant's claim as 'operational debt', it was imperative that the amount towards the lease rentals outstanding until the insolvency commencement date (i.e. 29.08.2018) is admitted as 'operational debt'. j. As per the order dated 17.07.2019, after verification of the documents, the RP admitted the claim of the Applicant as 'operational debt' after making adjustments of the following amounts that have already been paid by the Corporate Debtor to the Applicant: i. Rs. 5,90,00,284/- towards security deposit paid by the Corporate Debtor to Applicant in terms of clause 1.2.10 of the Lease Agreement. This was duly admitted by the Applicant in its letter dated 03.08.2016; ii. Rs. 5,00,00,000/- being the amount paid by the Corporate Debtor to the applicant under the Settlement Agreement dated 28.03.2017. k. That the order dated 17.07.2019 is silent upon returning/handing over the Scheduled Equipment back to the Applicant. However, this Adjudicating Authority held that the Applicant has the ownership on the Scheduled Equipment and the Corporate Debtor does not have any right of ownership in the scheduled Equ....
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....nt filed its written submissions inter-alia stating as under:- a. That the principle of res-judicata is not applicable to the present case. The Applicant has questioned the action of the 2nd Respondent in reclassifying the applicant as an Operational Creditor, reducing the claim amount and the manner in which the 2nd Respondent has asked the applicant to take delivery of the equipment and refused to include further lease amounts as CIRP costs. The aforesaid actions have been taken by the 2nd Respondent through its email dated 11.09.2019, after the passing of the order by the NCLT on 17.07.2019. Hence, there is no question of the application being barred by the principle of res-judicata. b. That whether a lease is a financial lease or not has to be determined through the terms of the lease itself and not through the manner in which the lease rentals were paid or the manner in which the lease was terminated. The Lease Agreement entered into between the parties is clearly in the nature of a financial lease and the parties have themselves described it as a financial lease. In fact, the RP has also understood it to be a financial lease while admitting the claim of the Applicant. c....
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....s decision with respect to the differential amount. The direction of the NCLT to reconsider is only with respect to the differential amount of 5 Crores and cannot be the basis for the arbitrary reduction of the claim amount to Rs. 12,73,69,756/-. h. That the liability to return the equipment rests solely with the Lessee and it is clear from the presentation of L&T to the CoC that the equipment is not in a workable condition and as the railway tracks are damaged the equipment cannot be shifted till the necessary repair works are carried out. The RP has not disputed the above factual position. The Lease Agreement obligates the RP to return the equipment in a 'workable condition' The RP is contractually bound to carry out the necessary repairs before handing over the equipment. i. That the action of the RP is unilaterally seeking to impose a penalty of Rs. 1 Lakh per day if the Applicant does not remove the equipment within seven days is high-handed and smacks of arbitrariness and mala-fides. The RP does not have the authority to impose a penalty on the Applicant. j. That the RP cannot unilaterally decide to stop, inclusion of lease rentals in the CIRP costs on the prete....
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....trial Finance Corporation, the Supreme Court, while distinguishing a finance lease and an operating lease, held: "A finance lease is one where the lessee uses the asset for substantially the whole of its useful life and the lease payments are calculated to cover the full cost together with interest charges. It is thus disguised way of purchasing the asset with the help of a loan." 9. In the case in hand, it is observed that the lease Agreement was entered into between the Applicant and Corporate Debtor on 24.09.2011 but the lease, for the period of 144 months, took effect only from 04.05.2016, the date on which the scheduled equipments were installed at the agreed site. Therefore, the equipments could have been used by the Corporate Debtor only from 04.05.2016. Further, termination notice dated 27.10.2016 was issued by the Applicant terminating the lease for the occurrence of an event of default by Corporate Debtor. Hence, it observed that the lessee has not used the leased assets substantially the whole of its useful life and, therefore, has not acquired the risks and rewards incidental to the ownership of the leased assets. This Adjudicating Authority, therefore, finds that t....