TaxTMI 
TaxTMI 
2021 (5) TMI 116
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....bmitted that pursuant to an Application moved by an Operational Creditor under Section 9 of IBC, 2016 as against the Corporate Debtor, an Order came to be passed by this Tribunal on 21.04.2017, initiating Corporate Insolvency Resolution Process (CIRP) as against the Corporate Debtor and the Respondent herein had been appointed as the Interim Resolution Professional (IRP). 4. It is seen that vide an Order dated 04.05.2017 passed in Company A. No. 463/2019 in CP/267/2015, in the matter of M/s. Vasan Health Care Pvt. Limited (VHCPL) the Hon'ble High Court of Madras had ordered an interim stay on the operation of the said Order dated 21.04.2017 passed by this Tribunal in CA/1(IB)/CB/2017 declaring commencement of CCIRP against the Corporate Debtor viz., M/s. Vasan Health Care Pvt. Limited (VHCPL). Subsequently, by virtue of another Order dated 05.09.2019 passed in CA/273/2019 in CP/267/2015 the Hon'ble Madras High Court was pleased to vacate the interim stay and the matter was remanded to this Tribunal for adjudication. Consequently, the Respondent/Interim Resolution Professional moved an Application before the Hon'ble NCLT seeking a revival of the Order dated 21.04.2017 a....
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....licant/Financial Creditor, the Respondent admitted the Applicant as a Financial Creditor for the outstanding amount of Rs. 14.42 crore in respect of Term Loan-1, however, vide letter dated 07.02.2020, the Respondent had rejected the claim of the Applicant Bank as a Financial Creditor for the Term Loan-2. 10. The Learned Counsel for the Applicant Bank submitted that Rent works is a company incorporated under the Companies Act, 1956 having its registered office at Windsor House, Off CST Road, Kalina, Santacruz (East), Mumbai - 400 098. Rent works is in the business of providing equipment on lease. 11. The Learned Counsel for the Applicant Bank submitted that there was a Master Rental Agreement (MRA) entered into between Rentworks and the Corporate Debtor, which defines the broad contours subject to which Rentworks would provide the equipment lease. A copy of the Master Rent Agreements dated 29.06.2011 is also filed along with the typed set. 12. The Learned Counsel for the Applicant Bank has explained the characteristics of the transaction envisaged in the said MRA, whereby Corporate Debtor identified the equipment that would be required by it for its business and signed a Rental S....
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....fect to its Purchase of Rent Receivables. Rentworks intimated the Corporate Debtor about the assignment by a notification of Assignment Letter. The promoters of the Corporate Debtor, namely, Dr. A.M. Arun and his wife Mrs. Meera Arun executed Deed of Guarantee in favour of the Applicant on 23.08.2013 and an undertaking dated 12.09.2013 to pay the rent instalments. 16. The Learned Counsel for the Applicant Bank submitted that in the above background, the Applicant/Financial Creditor filed its claim as a Financial Creditor for the amount due from the Corporate Debtor, prima facie, it is submitted that the claim filed by this Applicant/Financial Creditor, successor in interest of Rentworks, should have been accepted without further enquiry on the ground that the transaction between Rentworks and the Corporate Debtor unequivocally contemplates a definite return of 11.25% as found in para 7 of the Rental Schedule. It is, therefore, submitted that the above would lead to the conclusion that the acquisition of equipment by Rentworks is in the nature of financial arrangement against consideration for the time value of money. It is, however, submitted that for the funding by Rentworks for ....
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....economic life of the asset even if title is not transferred; (d) at the inception of the lease the present value of the minimum lease payments amount to at least substantially all of the fair value of the leased asset; and (e) the leased asset is of a specialised nature such that only the lessee can use it without major modifications being made. 9. Indicators of situations which individually or in combination could also lead to a lease being classified as a finance lease are: (a) if the lessee can cancel the lease, the lessor's losses associated with the cancellation are borne by the lessee; (b) gains or losses from the fluctuation in the fair value of the residential fall to the lessee (for example in the form of a rent rebate equalling most of the sales proceeds at the end of the lease); and (c) the lessee can continue the lease for a secondary period at a rent which is substantially lower than market rent". 19. The Learned Counsel for the Applicant Bank submitted that from a perusal of the above, the situations that would normally lead to a lease being classified as a finance lease are: that the lease term is for a major part of the economic life of the asset ev....
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....ssor in interest of Rentworks on five grounds as explained below:- (i) The Respondent refers to the confirmation from Rentworks and the Corporate Debtor stating that the transaction was only in the nature of an operational debt and not classified/treated as a loan or finance transaction by the respective parties. (ii) The mere accounting treatment adopted by the entities or their statutory auditors is not a reliable method to ascertain the nature of transaction vis-à-vis the Accounting Standards. (iii) The error can be rectified even post facto by passing suitable accounting entries and reporting the impact of the revision in the form of a foot note or Notes on Accounts. (iv) As far as Rentworks is concerned, it had done a back-to-back transaction with the Applicant/Financial Creditor within a few days of the transaction; (v) The profit accrued in this transaction would have been captured in its books of accounts. 26. The Applicant Bank has stated that the Respondent IRP has not examined the Rental Documents in arriving at a clear conclusion and submitted that based on the grounds four and five, Respondent/Interim Resolution Professional had taken a view that sect....
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.... under a generic Master Rental Agreement ("MRA') dated 29.06.2011 and thereafter the Rent Charges Receivables by RWIPL from Corporate Debtor were SOLD to various interested parties for a certain sum of money and RWIPL, in turn ASSIGNED THEIR RENT RECEIVABLES IN FAVOUR of those parties. The parties are Siemens Financial Services Private Limited, Axis Bank, L & T Finance, Reliance Commercial Finance Limited and this Applicant as well (i.e.,) IDBI Bank Limited. The Respondent RP has sought to reproduce the wordings in the "Notification of Assignment Letter" for the purpose of easy reference. 31. Both the parties were heard in detail. On the perusal of the documents submitted by the parties and submissions made during the course of hearing, this Adjudicating Authority makes the following observations: 32. As per the definition of the expression financial debt in subsection 8 of Section 5 of IBC, 2016 which is as follows:- (8) "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptan....
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.... of the Corporate Debtor. ii. The documents evidencing purchase of rental agreement dated 10.09.2013 by the IDBI Bank, the Applicant from Rentworks India Private Ltd., 35. In this context, the relevant portion of the Master Rental Agreement between the Rentworks India Private Ltd., and Vasan Healthcare Private Limited is reproduced below: "26. Agreement and Agency 26.1 We may sell or assign either absolute or by way of security all or any of our rights and/or obligations under the Agreement and/or to the Equipment to any other person. Upon such assignment, you acknowledge that: a) We shall be entitled to transfer all Rental related information to such person; and b) Where applicable, you will recognise the person as the new owner of the Equipment and that you will hold the Equipment on behalf of the person subject to the terms and conditions of this Agreement. 26.2 You shall not assign any of your obligations or rights hereunder to a third party". 36. Further the first paragraph of the relevant document towards rental receivables by IDBI Bank from Rentworks India Private Ltd., is cull out and reproduced it. "We refer to our Sanction Letter Ref. No. IDBI/NPT/CBG/13-1....