TaxTMI 
TaxTMI 
2020 (10) TMI 546
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.... working condition after carrying out the necessary repairs and 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 Corporat....
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....nd to exercise all rights under the Lease Agreement. g. Admittedly, the Corporate Debtor defaulted in making payments as per the agreed 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 &nb....
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....t of the CoC. The admitted claim amount was arbitrarily deducted to Rs. 12,73,69,756/- as Operational debt. The Resolution Professional called upon the Applicant to take possession of the asset within 7 days and to make arrangements 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 Prof....
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.....07.2019 passed by this Adjudicating Authority. h. In paragraph 7 of the order dated 17.07.2019, this Adjudicating Authority had directed the RP "to reconsider its decision with respect to the differential amount and to verify from the books of accounts of the Corporate Debtor to decide on the issue of admitting the 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 ....
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....iable for any further 'lease rentals' post 11.09.2019. As an owner of the Scheduled Equipment, the Applicant has failed to exercise due diligence in taking delivery of the Scheduled Equipment and the Corporate Debtor cannot be made to pay for the same. Reiterating the above, counsel for the Corporate Debtor prayed to dismiss the present Application. 4. Counsel for the Applicant 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 ....
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....ase Agreement for default of the Corporate Debtor, the Lessor will be entitled to the Lease Termination Price which includes all the amount of lease rentals for the entire lease period, i.e., 12 years. g. That the Adjudicating Authority in its order dated 17.07.2019 had specifically noted that the RP had already admitted a sum of Rs. 60,68,03,736.16/- out of the claim of Rs. 66,58,04,020.16/- and directed the RP to reconsider its 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....
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....ation as to whether all the risks and rewards have been transferred. It is relevant to quote the following observations of Hon'ble Apex Court in this regard: In Association of Leasing and Financial Services Company v. Union of India, the Supreme Court observed that in case of finance lease the lessee could use the asset for its entire economic life and thereby, acquires the risks and rewards incidental to the ownership of such assets. Further, in Asea Brown Boveri Ltd v. Industrial 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. ....
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.... it is stated that it would be 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. However, the Applicant herein itself has waived Clause 18 vide its letter dated 21.11.2018, written to the RP wherein it has made a request to permit Applicant to remove the Equipment from the premises of the Corporate Debtor, the cost of which was to be borne by the Applicant itself. Therefore, the applicant cannot insist on execution of Clause 18 in its original form. 11. Considering these facts and circumstances, this Adjudicating Authority, to put to rest the controversy surrounding this issue, hereby directs the RP to get the railway track repaired as soon as possible for transportation of Equipment in 'as is' condition. However, minor repair only, if any, required for smooth transportation of the Equipment, may be carried out. The cost for repair of Railway track shall be borne by the Corporate Debtor but the cost of removal and transportation of the impugned Equipment will be borne by the Applicant as proposed by it in i....