TaxTMI 
TaxTMI 
2021 (3) TMI 166
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....Mohammad Ajmal, Member Judicial This is an Application by one of the Financial Creditors of the Corporate Debtor (Reliance Infratel Limited) to declare certain Corporate Guarantees as fraudulent and preferential transactions and to set them aside and reconstitute/reorganise the Committee of Creditors (CoC) removing Respondent Nos. 2 to 7 and consequential directions thereupon. 2. The facts leading to the Application can be depicted as under. Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated by this Bench by an order dated 15.05.2018 (Admission Order) and Manish Dhirajlal Kaneria was appointed as Interim Resolution Professional (IRP) on 18.05.2018. The IRP published a public announcement on 21.05.2018 inviting claims from the creditors of the Corporate Debtor. Certain shareholders of the Corporate Debtor challenged the Admission Order before the Hon'ble National Company Law Appellate Tribunal (NCLAT) in CA (AT) (Insolvency) Nos. 255-256 & 257-258 & 259-260 of 2018. The Hon'ble NCLAT by an order dated 30.05.2018 inter alia stayed the Admission Order. However, in view of the subsequent developments, the Appellants withdrew the Appeal. The Hon'b....
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.... Claim Amount Provisionally Admitted 1 Financial Creditors 12687.65 9655.07 1A Financial Creditors (under Verification) 20925.96 Under Verification 2 Operational Creditors being suppliers, vendors and service providers Approximately 1277Cr Under Verification 3 Employees / Workmen Approximately 3 Cr Under Verification 4 Creditors (other than Financial and Operational) Approximately 906 Cr Under Verification 5. The Applicant viz. Doha Bank Q.P.S.C. is a part of the Consortium of Banks/Financial Institutions which had extended a foreign currency loan of USD 250,000,000/- (United States Dollars Two Hundred and Fifty Million) to the Corporate Debtor under a loan agreement dated 19/03/2010. The Consortium by an amendment and restatement agreement dated 05/09/2016 extended the repayment date up to 03/12/2016. The Corporate Debtor could not repay the amount by that date. Hence, by another restatement agreement dated 04/12/2016 the repayment date was extended till 05/06/2017. As on date of the filing of the Application i.e., 29th May 2019 an amount of USD 199,000,000 including interest remained outstanding. 6. The Corporate D....
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....d in breach of the covenants and undertakings recorded under the facility agreement dated 19/03/2010. Execution of the so called Guarantees eclipsed the bona fide rights and interests of the direct lenders of the Corporate Debtor and rather created a preference in favour of lenders of its Parent Company/Group Entity. The Corporate Debtor was already in default in repayment of its loans to the Applicant and other ECB Lenders, on the date (03/03/2017) when the Guarantees were executed. Besides, the Corporate Debtor did not disclose the Guarantees in its financial statements nor did RCOM in its. The fact of further indebtedness through the Guarantees was never disclosed even when the negotiation for Strategic Debt Restructuring (SDR) was being undertaken by the Joint Lenders Forum (formed on 01/07/2017). The amount under the Guarantees exceeded the Corporate Debtor's paid up capital and free reserves. The Corporate Guarantees were executed while the Corporate Debtor itself was reeling under severe financial stress. 8. The Applicant is unaware of the consideration which led to the creation of the Guarantees. The Corporate Debtor was aware of the fragile financial condition of RCOM &....
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....s Hon'ble Court deems fit and proper in the facts and circumstances of the present case. 9. The CoC in its first meeting held on 30.05.2019 decided to replace the IRP with Mr. Anish Niranjan Nanavaty as the Resolution Professional (RP). This Tribunal by order dated 21.06.2019 confirmed the appointment of Shri Nanavaty as the RP. 10. Respondent No. 2 (R2) strenuously objected to the Application and put in a reply. Respondent No. 1 (R1) did not file any reply. Upon his appointment as RP, Shri Nanavaty and his Counsel appeared for R1 and contested the application defending the actions of his predecessor in admitting Respondent Nos. 2 to 7 (R2 to R7) to the CoC as Financial Creditors of the Corporate Debtor. R3 to R7 filed separate replies adopting reply filed by R2. 11. It is the case of the R2 that the Corporate Guarantees could not be unenforceable and non est in law. The Corporate Debtor gave the Corporate Guarantees for the consideration of securing the credit facilities availed by RCOM and RTL. The Applicant thus cannot question their validity. 12. The Applicant having not enclosed the facility agreement dated 19/03/2010 extended by the re-statement agreement dated 04....
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.... the Ld. Counsel appearing from both the sides at length. In our considered opinion the rival contention of the parties give rise to the following issues: I. Whether, the Application is maintainable? II. Whether, the admission of R2 to R7 into the CoC of the Corporate Debtor basing on the Corporate Guarantees dated 03/03/2017 reportedly executed by the Corporate Debtor in their favour is proper?; III. Whether, the Corporate Guarantees dated 03/03/2017 executed by the Corporate Debtor in favour of R2 to R7 and other members of the Consortium are preferential transactions? Issue Nos. II & III 16. These issues being interlinked are taken up together for proper appreciation and convenience. The Petition under Section 9 of the Code was initiated by one of the Operational Creditors of the Corporate Debtor. As already indicated the Petition was admitted on 15/05/2018. Section 13 of the Code requires that upon the admission of the Application inter alia under Section 9, the Adjudicating Authority shall cause a public announcement of the initiation of CIRP published calling for submission of claims under Section 15 of the Code. Regulations 6 of the IBBI (Ins....
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....r. Perusal of the Guarantees in New Delhi cannot be regarded as compliance of Form A & Form C. The statutory Forms require that the Creditor must submit its claim with proof, this itself indicates that the proof so submitted would form part of the RP's records for collation of the claims and for verification of the Adjudicating Authority if the need so arose. As far as the claims of R2 to R7 are concerned such proofs never saw the light of the day nor was it submitted as required under the statute. It is trite that when a statute envisages a particular procedure for an act to be done, the act must necessarily be done in the manner so provided. In this connection the following is instructive. The Hon'ble Apex Court in the case of Shiv Kumar Chadha Etc. v. Municipal Corporation of Delhi: 1993 SCR (3) 522 (= 1993 SCC (3) 161) observed as regards the well-known principle in the following words. "... if a statute requires a thing to be done in a particular manner, it should be done in that manner or not all. This principle was approved and accepted in well-known cases of Taylor v. Taylor. (1875) 1 Ch. D. 426, Nazir Ahmed v. Emperor, AIR 1936 PC 253. This Court has also expresse....
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.... "43. Preferential transactions and relevant time. - 1. Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in section 44. 2. A corporate debtor shall be deemed to have given a preference, if- a. there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and b. the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53. 3. For the purposes of sub-section (2), a preference shall not include the following transfers- ....