TaxTMI 
TaxTMI 
2019 (9) TMI 1441
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....Applicant to be a Financial Creditor of the Corporate Debtor under the Code. b. Directing Respondent No. 2/RP to include the Applicant in the list of financial creditors of the Corporate Debtor. 3. Application bearing IA No. 709/2019 (IA No. 03/2019 AMR) in IA No. 582/2019 is filed by Power Finance Corporation of India on behalf of Original Lenders under Rule 11 of the NCLT Rules, 2016, inter-alia, seeking to implead in the IA No. 582/2019. 4. Application bearing IA No. 714/2019 in IA No. 582/2019 is filed by MAIF Investment India 2 Pte Ltd, inter-alia, seeking to appoint any one firm out of the Big 4 accounting firms to conduct the valuation exercise with regards to the pledged shares. 5. Brief facts of the present case as stated by the Applicant, inter-alia, under the Application bearing IA No. 582/2019 and written submissions, are as follows: a. That the CIRP in respect of the Corporate Debtor i.e., Ind-Bharat Energy (Utkal) Limited (IBEUL) was initiated on 29.08.2019 and the Respondent No. 2/RP i.e., Mr. Udayraj Patwardhan is the RP of the Corporate Debtor. b. That the Applicant submitted its claim in Form C to Respondent No. 2/RP on Septembe....
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....o. 2/RP cannot admit the claim submitted by the Applicant in the absence of adjudication of the said issue. i. That the Hon'ble Supreme Court in Swiss Ribbons Vs. Union of India (Writ Petition (Civil) No.99 OF 2018) has held that a Resolution Professional has been given only administrative powers without any Quasi-Judicial powers and is merely a facilitator of the resolution of the process whose administrative functions are overseen by the Hon'ble Adjudicating Authority. j. That the Respondent No.2 being Resolution Professional is not empowered/authorized to reject claims under IBC. k. That the claim of the Applicant against the Corporate Debtor is in respect of its joint and several liability along with the other IB Group of Entities (which includes the Corporate Debtor) inter alia to redeem the Initial NCDs. and the Additional NCDs (collectively referred to as "NCDs") under the Investment Agreement and to make Coupon Payments and payment of the Accrued Amount, more particularly set out in Schedule of the Form C as amended. l. That the Applicant has subscribed to the NCDs of IBTPL i.e. the holding company of the Corporate Debtor. Upon th....
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....the Promoters, the Company and IBEUL have failed to purchase/redeem the NCDs for such amounts as shall yield the Accrued Return to the Investors within a period of 120 (one hundred and twenty) days from the date that the Investor issues a notice to the Promoters, the Company and IBEUL that it wishes to so Transfer the NCDs;..." p. That the issuance of NCD's and the Additional NCD's were secured in favour of Debenture trustee on behalf of the Applicant under the investment Agreement by way of a deed of hypothecation dated 09.07.2015 and the relevant clauses are as below: Definition of Debenture Outstanding under the DOH: "Debenture Outstandings" shall mean all amounts payable by the Company to the Debenture Holders and the Debenture Trustee in relation to the Debentures pursuant to the terms of the relevant Transaction Documents, including, without limitation: the principal amount of the Debentures and Coupon payable in respect of Debentures, and all monies due and payable by the Company, including interest on subscription monies, indemnities, expenses, fees, interest and penalties, incurred under, arising out of or in connection with the Debenture....
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....amount to a financial debt for the purpose of the Code. The Courts have recognised the claims against the guarantor arising out of the default by the principal debtor, as a "financial debt'. This is borne out of the following judgments: (i) In Export Import Bank of India v. Resolution Professional of JEKPL Private Limited, Company Appeal (AT) (Insolvency) No. 304 of 2017, the National Company Law Appellate Tribunal has held that a person in whose favour a guarantee is given, is a financial creditor of the guarantor under section 5(7) read with Section 5(8) of the Code. (ii) In ICICI Bank Limited and Ors. v. CA Ritu Rastogi and Ors, MANU/NC/1473/2018, the NCLT directed the Interim Resolution Professional to include the creditor to be given place in the CoC by permitting it to join the CIRP initiated against the guarantor. u. That, the National Company Law Tribunal has on several occasions even admitted petitions under Section 7 of the Code at the instance of a creditor against the guarantor of a borrower. These include: (i) Rural Electrification Corporation Limited v. Ferro Alloys Corporation Limited, MANU/NC/0646/2017; and (ii) Baoba....
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....in a manner and using valuation methodologies prescribed by the Investor. All costs in this regard shall be borne by the Company. Such purchase/redemption shall be completed within 7 (seven) days of the Investors exercising the option to require the Company and IBPIL to complete such purchase hereunder, in the event that such sale is completed subsequent to the expiry of the Investment Period, then the reference to IRRR of 22% (twenty two per cent) mentioned above shall be deemed to be an IRR of 24% (twenty four per cent); and/or (f) The Investors shall have the right to reconstitute the board of directors of the Company and IBEUL and appoint all the directors on the board of directors of the Company and IBEUL in addition to the Investor Directors. The Promoters shall cause all their nominee directors to resign and to appoint the nominees of the Investor as directors of the Company and IBEUL. Forthwith upon the election of such right and the resignation of the Promoters' nominee directors, the Promoters shall cease to be liable to the Investors for any of the obligations of the Promoters hereunder" iv. That from the above clauses, it is clear that what the Cor....
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....f shares of IBTPL as well as of the Corporate Debtor under the Share Pledge Agreement dated July 09, 2015. Admittedly, the said pledge of shares has been invoked (though not realized) and such invocation of pledge has not been disputed by either the Investors or the promoters of the Corporate Debtor. Therefore, even assuming (but not admitting) that the Claim of the Applicant was a financial debt, in light of the fact that security has been enforced, the RP could not have quantified how much debt is due post the enforcement of the security. x. That it is an admitted position that the Investors (i.e. the Applicant and MAIF-I) had invested moneys in IBTPL in order to buy-out the existing investors (3i and PFS) and to complete the development of the Project, as defined in the Application which is also captured in clause 3.7 of the Investment Agreement. Therefore, the intent is clear that the Applicant was coming in place of the existing shareholders of IBTPL and not as lenders and that all the moneys that were advanced was supposed to give the Investors the equity participation in the Project. xi. That under clause 5.1.1 of the Facility Agreement, the Corporate Debto....
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....ertinent to note that the said investment agreement simply referred the Corporate Debtor as a party to the Agreement and the CD was neither referred to as a promoter nor was included in the promoters group. 13. Even under Clause 17.8 of the Investment Agreement, it is only the Company and promoters who had undertaken to adhere to the terms and conditions of the NCDs and CCDs in all respects including their redemption/conversion as per respective terms. No such undertaking has been given by the Corporate Debtor herein. 14. With regard to the reliance placed by the Applicant on the Deed of Hypothecation dated 04.07.2015, it is observed that one of the conditions on which the Debentures have been issued is that the Hypothecator (CD) shall create first ranking hypothecation over all the hypothecated properties in favour of Debenture trustee to secure the obligation of the Company in relation to the Debentures under the terms of the Investment Agreement. 15. The said deed of Hypothecation states that hypothecated properties shall mean the receivables which are being hypothecated and hypothecation shall refer to the security interests being created by the hypothecator. In the ab....
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.... a debt along with interest, if any, which is disbursed against the consideration for the time value of money". 18. It is pertinent to note here that majority of the facts in the instant Application have already been dealt and adjudicated upon by Hon'ble NCLAT in the matter of MAIF Investments India Pte Ltd vs. Ind-Barath Energy (Utkal) Limited in Company Appeal (AT) (Insolvency) No. 597 of 2018 and the Hon'ble NCLAT has held as under; "20. The questions arise for consideration in this appeal is: (i) Whether the Appellant is a 'Financial Creditor' of the 'Corporate Debtor'? and; (ii) Whether the debt of the Appellant stands paid as held by the Adjudicating Authority? 21. Section 3(11) defines 'debt' means: "3. Definition-- (11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; 22. Section 5(7) defines 'Financial Creditor' whereas Section 5(8) defines 'Financial Debt', which reads as follows: "5. Definitions.-- (7) "financial creditor" means any person to whom a financial debt is owed and ....
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....ny similar instrument, comes within the meaning of 'financial debt'. Therefore, from the aforesaid fact, we find that there is a disbursal of Rs. 102 Crores in favour of the 'Corporate Debtor' and the 'OCDs' originally met is against time value of money and per se, constitute 'financial debt' in the light of Section 5(8)(c) of the 'I&B Code'." 19. On perusal of the judgment of Hon'ble NCLAT referred Supra, it is clearly discernible that Hon'ble NCLAT has allowed MAIF - I to be a part of CoC of the Corporate Debtor on the basis of the finding that there has been disbursal of amount of Rs. 102 Crores in favour of Corporate Debtor herein by way of OCDs by MAIF I. As against the case of MAIF - I which had direct investment in Corporate Debtor of 1 Equity Share and OCDs worth Rs. 102 Crores, the Applicant herein has not disbursed a single penny to the Corporate Debtor. All the funds from the present Applicants have been invested into IBTPL, which is the holding Company of the Corporate Debtor. Therefore, following the guidance contained in the Judgement of the Hon'ble NCLAT in aforecited case, it can be concluded that the A....