TaxTMI 
TaxTMI 
2019 (7) TMI 1823
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....ad made large financial investments with the corporate debtor. 2. Thereafter, four company applications were filed. These are discussed briefly as below : (i) C. A. No. 337/C-2/ND/2018 has been filed by M/s. Phoenix ARC P. Ltd. (in its capacity as trustee of Phoenix Trust FY 16-15) against the inclusion of Spade Financial Services Ltd., as financial creditor in the CoC. The applicant is one of the financial creditors and is also member of the CoC of M/s. AKME Projects Ltd. In this application the following prayers are made : (a) Direct the interim resolution professional/resolution professional for the removal of the name of Spade Financial Services Ltd., from the committee of creditors of AKME Projects Ltd., and not to allow Spade Financial Services Ltd., from either participating or voting or representing in the committee of creditors ; and/or (b) Direct for constitution of the committee of creditors as per pro visions of the Insolvency and Bankruptcy Code, 2016, read with the Insolvency and Bankruptcy (Amendment) Ordinance, 2018 ; (c) Pass appropriate orders against Spade Financial Services Ltd., and its promoters/directors for contravening....
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.... The applicant is one of the financial creditors and is also a member of the CoC of M/s. AKME Projects Ltd. In this application the following prayers are made : (a) Allow the present application and direct the interim resolution professional to reconstitute the committee of creditors in terms of the pro visions of the Insolvency and Bankruptcy Ordinance, 2018 ; (b) Allow the present application and pass directions prohibiting the interim resolution professional from allowing M/s. Spade Financial Services Ltd., to represent, participate and vote in the meeting of committee of creditors ; and (c) Pass any such further order(s) that this hon'ble Tribunal may deem fit in the facts and circumstances of the case. 3. The main issue in these four applications is the challenge by two financial creditors, Yes Bank and Phoenix, regarding the inclusion of Spade Financial Services Ltd., and its whole owned subsidiary AAA Landmark P. Ltd., as financial creditors in the committee of creditors formed in the case of AKME Projects Ltd. The main ground of challenge is that Spade Financial Services Ltd., and AAA Landmark P. Ltd., are companies promoted and managed by ....
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....and its original subscribers were Arun Anand, Shruti Choudhari, Aditya Anand (son of Arun Anand), Vinod Kapur, Poonam Kapur (wife of Vinod Kapur), Tushar Patel and Francy Patel. Subsequently, Joint Investments P. Ltd. (JIPL), acting through Mr. Anil Anand (director of corporate debtor) became a majority shareholder of corporate debtor by purchasing the shares from Mr. Arun Anand. Presently, there are only two shareholders of the CD, namely, Joint Investments P. Ltd. (JIPL) (80 per cent.) and Helmut Nanz (20 per cent.). The major shareholders of JIPL who have more than 5 per cent. shareholding are Anil Nanda (65.60 per cent.) Hari Raj Investment and Consultants P. Ltd. (24 per cent.) and AN Enterprises P. Ltd. (9.60 per cent.). (ii) M/s. Spade Financial Services Ltd. (referred to as Spade) was incorporated on October 21, 1994 and was promoted and managed by Mr. Arun Anand who is the director and majority shareholder. The other directors include his wife and daughter. As on March 31, 2014 the details of its shareholders having more than 5 per cent. shareholding is as follows : Name of shareholders % shareholding Class A Mr. Arun Anand 58.75% Mrs. ....
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....h enhanced value of Rs. 43.06 crores. The price per square feet was taken as Rs. 2,740 whereas the CD sold at lower per square feet rates before and even after this ATS. Thus, the applicants have stated that the price charged in the agreement to sell was taken at a higher rate than other transactions done before and after the date of agreement to sell and this indicates that the agreement was not at a fair price and indicates other con siderations. 5. Connection between Mr. Arun Anand and the CD. Mr. Anil Nanda is the director and major shareholder of JIPL, the company holding 80 per cent. of the CD's share. The corporate debtor is a part of Anil Nanda Group of Companies (TANG). The details of employment of Mr. Arun Anand in executive positions in companies where Mr. Anil Nanda held managerial positions and also companies promoted and managed by Mr. Anil Nanda is as follows : Years Positions held Company 1. 1979-1993* Various Positions Including General Manager Escorts Ltd. 2. 1993-1995 General Manager (Finance) Nanz Foods Products Ltd. 3. 1996 General Manager GI Power Corporation Ltd. 4. 1996-2003 Various....
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....was further continued with the corporate debtor vide letter dated March 30, 2012. It is further pertinent to point out that prior to that date, Spade Financial Services Ltd., was rendering consultancy services to the corporate debtor with effect from June 1, 2009. ► On account of the fact that Mr. Arun Anand was the Group CEO of the Anil Nanda Group, he would fall within the ambit of section 5(24)(b) of the IBC, 2016 being a key managerial person. Even otherwise, both Mr. Arun Anand and Spade Financial Services Ltd., on account of their being CEO/Strategic Advisor/Consultant at the relevant time would fall within the ambit of a related party in terms of section 5(24)(h) and section 5(24)(m)(i) of the IBC, 2016. ► Both Mr. Anil Nanda and Mr. Arun Anand were the directors of Federal Mogul Goetze (India) Ltd., while Mr. Anil Nanda was the director of the said company from April 7, 1997 to January 22, 2007 and Shri Arun Anand was the managing director from September 24, 2002-September 24, 2007. This clearly established a close nexus between the three entities. (CD, Spade and AAA). ► Mr. Arun Anand is closely related to one of the directors o....
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....is submitted that AAA Landmark P. Ltd., and Spade Financial Services P. Ltd., are related parties to the corporate debtor, which fact has been concealed both from the interim resolution professional as well as this hon'ble Tribunal. It is also submitted that the Spade Financial Services Ltd., and its fully owned subsidiary AAA Landmark P. Ltd., filed a suit bearing C. S. (Comm.) No. 234 of 2017 for recovery of an amount of Rs. 41,21,32,702 which has also been concealed before this hon'ble Tribunal. In the said suit pending before the hon'ble Delhi High Court, Spade Financial Services Ltd., and owned subsidiary AAA Landmark P. Ltd., have tried to show that they are entitled to receive payments against the alleged ICDs sanctioned to the corporate debtor. This leads to only one conclusion that the corporate debtor and AAA Landmark P. Ltd., and Spade Financial Services P. Ltd., are hand in glove with each other. ► It is stated by the applicants that the contention put forth by AAA Landmark P. Ltd., and Spade Financial Services P. Ltd., that they were no longer related party to the corporate debtor at the time of filing of the petition or the initiation of CIR....
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....was/is able to exert any influence in terms of financial or business decisions as he never had financial authority, administrative authority nor was a signatory to any contract nor a signatory with a bank/financial institution on behalf of the CD during his tenure of professional services as is verifiable from record. * Both AAA and Spade never held any shares of the CD nor any of the companies belonging to TANG and there is no common director between Spade/AAA on one hand and any Anil Nanda Group companies on other hand, ever. * The holding company of the CD, JIPL, holds shares equivalent to 1.45 per cent. voting rights in Spade. * Mr. Sonal Anand was only a non-executive director of the CD and he was never in employment of the CD or held shares in CD. Further, Sonal Anand was never in employment nor was a director or shareholder in either Spade or AAA. * The audited balance-sheets of the CD duly reflected the ICDs of Spade as well as the interest being paid thereon at the time of grant of such facilities and the facilities must have been granted and were granted after detailed due diligence of CD thus with full knowledge of the ICDs and transac....
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....on of CIRP and hence Spade and AAA Landmark are not related parties within the meaning of section 5(24) of the Code. 8. Similar replies have been filed by Spade and AAA Landmark to C. A. No. 268/ND/2018, C. A. No. 269/ND/2018, C. A. No. 337/ND/2018 and C. A. No. 338/ND/2018 in the matter of Yes Bank Ltd., and Phoenix ARC P. Ltd. It is stated that Spade and AAA Landmark P. Ltd., do not fall within the definition of related party in terms of section 5(24) of the IBC, as their directors and holding company ceased to have any connections with the CD long before initiation of CIRP. 8.1 AAA Landmark P. Ltd., has also alleged that the applicant Yes Bank Ltd., is acting in cahoots with the ex-management. It is also stated that the IRP has not been able to discharge his duty in an appropriate manner due to ill health as recorded in the meeting of the CoC vide order dated January 1, 2018. 9. C. A. No. 224/ND/2018 has been filed on June 8, 2018 by Mr. Anil Nanda, the suspended director of the corporate debtor. In this application he is questioning the legality of the first CoC meeting on June 1, 2018 where the CD's representative was asked to leave and another financial creditor,....
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....d party" ? 11. The terms financial creditor and financial debt are defined under section 5(7) and (8) of the Code. These definitions are reproduced below for ready reference : "5. (7) 'financial creditor' means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to ; (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 acceptance credit facility or its dematerialised equivalent ; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument ; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed ; (e) receivables sold or discounted other than any receivables sold on non-recourse basis ; ....
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....dited to the account of Arun Anand, director of CD, by consent. The above facts show that the transaction pertaining to giving of inter corporate deposits by Spade to CD appears to be collusive, as the MOU for the same has been signed more than two years after the beginning of the transaction, and the rate of interest actually stated to be charged is half of the interest mentioned in the memorandum of understanding, as also a major portion of the ICD was credited to the account of Arun Anand, director of Spade. Thus, it is seen that the entire amount was not disbursed to the CD as well as there is variation in the consideration for the time value of money as per the memorandum of understanding and claim filed before the IRP. Accordingly, this transaction does not qualify as a financial debt as defined under section 5(8) of the Code, and Spade Financial Ser vices Ltd., does not qualify as a financial creditor under section 5(7) of the Code. 11.2 The details of transaction and entered by CD with AAA Landmark have been discussed in detail in paragraph 4.3 above. It is seen that as regards to the same property the parties entered into several agreements over a period of 3 y....
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....) Act, 2018, with retrospective effect from June 6, 2018 reads as follows : "Provided that a financial creditor or the authorized representative of the financial creditor referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related party of the corporate debtor, shall not have any right of representation, participation or voting in a meeting of the committee of creditors." The term "related party" has been defined in section 5(24) in relation to a corporate debtor and in section 2(24)(a) in relation to an individual. These definitions are reproduced below for ready reference : "5. (24) 'related party', in relation to a corporate debtor, means- (a) a director or partner of the corporate debtor or a relative of a director or partner of the corporate debtor ; (b) a key managerial personnel of the corporate debtor or a relative of a key managerial personnel of the corporate debtor ; (c) a limited liability partnership or a partnership firm in which a director, partner, or manager of the corporate debtor or his relative is a partner ; (d) a private company in which a directo....
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....; (c) a person who is a trustee of a trust in which the beneficiary or the trust includes the individual, or the terms of the trust confers a power on the trustee which may be exercised for the benefit of the individual ; (d) a private company in which the individual is a director and holds along with his relatives, more than two per cent of its share capital ; (e) a public company in which the individual is director and holds along with relatives, more than two per cent of its paid-up share capital ; (f) a body corporate whose board of directors, managing director or manager, in the ordinary course of business, acts on the advice, directions or instructions of the individual ; (g) a limited liability partnership or a partnership firm whose partners or employees in the ordinary course of business, act on the advice, directions or instructions of the individual ; (h) a person on whose advice, directions or instructions, the individual is accustomed to act ; (i) a company, where the individual or the individual along with its related party, own more than fifty per cent. of the share capital of the company or controls the ....