TaxTMI 
TaxTMI 
2018 (12) TMI 1921
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....ed (for brevity 'DHPL'), as a Financial Debt as per the provisions of the Code; a further prayer has been made for issuance of direction to the Resolution Professional to admit the claim of the ICICI Bank as Financial Debt, in respect of the obligations undertaken by the Corporate Debtor under the credit facilities availed by EIIL and DHPL to the extent of INR 240.17 crores and INR 460.58 crores respectively. A consequential relief has also been claimed by seeking direction to the Resolution Professional to revise the list of financial creditors of the Corporate Debtor to include the claims of the ICICI Bank with respect to the facilities granted to EIIL and DHPL amounting to INR 700.75 crores. Thereafter credit the applicant-ICICI Bank in the COC by adding the aforesaid claims and grant it voting share in the COC in proportion to such claims with all consequential benefits arising therefrom. 2. Notice of the application was issued. Reply on behalf of the Corporate Debtor through the Resolution Professional has been filed. The applicant has also filed the rejoinder. 3. In order to put the controversy and issues in their proper perspective few facts may first be notice....
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....rate Debtor at the loan purchase exercise price and the Corporate Debtor is under an obligation to purchase the outstanding EIIL RTL Facility from the applicant. Accordingly, the Corporate Debtor guaranteed the payments to be made by EIIL to the applicant. (b) Non-disposal arrangement - The applicant, the Corporate Debtor and IDBI Trusteeship Service Limited (EIIL Security Trustee) entered into a non-disposal arrangement (Annexure A 6) dated 16.06.2011. According to the terms incorporated in the non-disposal arrangement the Corporate Debtor agreed not to deal with or divest 30% equity share capital of EIIL held by it (N DU Shares), and deposit such number of shares in a designated trust and retention account (NDU). In addition to that, the Corporate Debtor executed an irrevocable power of attorney in favour of the EIIL Security Trustee, authorizing it to, inter alia, sell, transfer, assign, dispose of or encumber the NDU Shares on the terms and conditions specified in the NDU (POA). Afterwards the applicant, the Corporate Debtor and the EIIL Security Trustee entered into a designated account agreement dated 16.06.2011 (Annexure A-7). The Corporate Debtor through said desig....
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....nt obligations under the Restructured Facilities particularly in payment of interest, demand notices dated 20.03.2017 and 13.04.2017 were issued by the applicant to inter alia EIIL and the Corporate Debtor demanding payment under the EIIL RTI Facility and Restructured Facilities (Annexure A-13 & A-14). Despite receipt of aforesaid demand notices, EIIL and/or the Corporate Debtor failed to repay the outstanding amounts to the applicant. On account of persistent defaults, the account of EIIL was classified as an NPA on 28.09.2017 w.e.f. 30.06.2015 by the applicant. 3. Subsequently the applicant exercised its option/ right under the Loan Purchase Agreement to sell the Restructured Facilities at a purchase price of INR 199.5 crores to the Corporate Debtor, vide a loan purchase notice dated 15.11.2017 (Annexure A- 15) on the diverse grounds firstly not to maintain the debt service reserve requirements of INR 6.43 crores by the EIIL including others; secondly not to provide 30% of the equity share capital of EIIL, as security by the Corporate Debtor and lastly not to adhere to the payment schedule under the Restructured facilities. In view of the above, the applicant called upon....
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....24.02.2010 (Annexure A-19). Facilities provided to DHPL : ECB Facility Agreement and DHPL RT1r1 (ii) The applicant sanctioned a rupee term loan facility amounting to INR 270 Crores with a sub-limit of USD 60 million as an external commercial borrowing (ECB Facility), in favour of DHPL to part finance the cost of the aforesaid Project, vide CAL dated 29.03.2011 (DHPL Sanction Letter) (Annexure A-20). Said sanction letter was amended vide an amendatory CAL dated 02.12.2011 (Annexure A-21). (iii) Thereafter the applicant and DHPL entered into an ECB Facility agreement on 07.06.2011 (Annexure A-22). According to the terms incorporated in the aforesaid agreement the applicant undertook to extend a foreign currency loan facility up to USD 60 million (ECB Facility Agreement) to partly finance implementation of the aforesaid Project undertaken by the DHPL. Subsequently terms and conditions of the ECB Facility Agreement was modified through amendment agreements [Annexure A-23 (Colly)] on three tranches. (iv) Thereafter on the request of DHPL term loans aggregating to INR 528,45,00,000 was cumulatively extended by various Banks to it vide a common loan agr....
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....) (Annexure A-30), was entered into between DHPL and the consortium of lenders, comprising various Banks including the applicant whereby the applicant agreed to extend the DHPL RTL-2 Facility to DHPL. The terms of the RTL-2 Sanction Letters were modified vide two amendatory CALs dated 27.03.2015 [Annexure A-31 (Colly)]. 2. To secure payment under the abovementioned facilities to DHPL, the following guarantees/ securities were executed by the Corporate Debtor: a. The Deed of Pledge was modified by way of an addendum dated 27.03.2015 to also secure amounts extended under the DHPL RTL-2 Facility. b. The Corporate Debtor executed an undertaking dated 27.03.2015 (Second Promoter Undertaking) (Annexure A-32) as an additional contractual comfort. Through said additional contractual comfort, the Corporate Debtor undertook to inter alia arrange for funding any cost overrun in the Project and shortfall in payment to lenders in the event of termination of the Concession Agreement. 3. Due to failure by the DHPL's to adhere to timelines and milestones, NHAI issued an intention to terminate the Concession Agreement on 23.05.2016. Due to which, the Senior L....
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....ng up their balance claims against inter alia DHPL and the Corporate Debtor. Accordingly, Bank of India issued a letter dated 12.09.2018 to NHAI, annexing DHPL's acceptance to review the settlement proposal, expressing its willingness to negotiate and enter into a full and final settlement. Despite that, till date no settlement has been arrived at between the parties. Copies of the letters dated 06.09.2018 & 12.09.2018 have been placed on record [Annexure A-37 (Colly)]. 4. The Resolution Professional made a public announcement on 15.05.2018 inviting the claims from all and sundry creditors against the Corporate Debtor. Accordingly, the applicant placing reliance on the securities and contractual comforts provided by the Corporate Debtor towards the facilities disbursed by the applicant to the entities/ group related to the Corporate Debtor along with proof claiming that the applicant is a Financial Creditor. The claims were duly filed on 28.05.2018 on the proforma, Form-C (Annexure A-38) prescribed under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process to Corporate Persons) Regulations, 2016. Pursuant to the filing of the claims the Resolution Prof....
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....he Loan Purchase Exercise Price) on its due date, the Purchasing Parties shall on demand, pay to the Lender as Liquidated damages an amount equal to that unpaid amount. " c. That, the intention of the Purchasing Party-EIEL was to enter into a contract of guarantee and that the parties have entered into the Loan Purchase Agreement whereas they could have entered into deed of guarantee/ corporate guarantee as was done in other similar matters of EIEL and ICICI and as is a common practice with the banks to get a corporate guarantee executed. The fact that parties chose to enter into Loan Purchase Agreement instead of a deed of guarantee/ corporate guarantee makes the intention of parties clear that the same was not to be construed as a guarantee per se and should be treated as contractual obligation of EIEL as set out in terms of the Loan Purchase Agreement. d. The judgment of the Hon'ble Bombay High Court rendered in the case of IL&FS Financial Services Limited v. Vandana GZobaZ Limited (2018) 207 Comp Cas 668(Bom),has been distinguished on the ground that there the purchasing party had admitted its liability as the guarantor in its reply affidavit, clarifying i....
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....the Senior Lenders arising out of the termination of the Concession Agreement would come to. The Resolution Professional has no document to arrive at the figures of shortfall in the payments to the Senior Lenders and therefore, it is not possible to admit the claim in respect of the DHPL by anticipating any such amount. Such an approach would be wholly premature for the Resolution Professional to admit the claim and upon submission of documents/ letter from NHAI indicating the termination payments to DHPL and consequently, indicating the shortfall in payments arising to the Senior Lenders therefore, the RP, would be happy to reconsider the claim. d. The pledge agreement cannot be construed as akin to guarantee as every form of security interest cannot fall within the expression 'guarantee'. e. The question concerning the percentage of voting right would be determined after admission of the claim of DHPL and it would be premature to deliberate upon such an issue at this stage. The allocation of voting rights to ICICI would also have bearing on the voting rights of the financial creditors of EIEL and therefore, the voting rights to the applicant cannot be al....
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....er may deliver to any or all of the Purchasing Parties a Loan Purchase Notice: i. Any Default, subject to any cure period wherever applicable as per the terms of the Facility Agreement; ii. Any Invocation Event; iii. If, in the opinion of the Lender, any of the Contractual Comforts become unenforceable or imperfect, or any of the terms therein are breached by any of the Purchasing Parties; iv. Any other default by the Borrower or the Purchasing Parties under the Transaction Documents. b. Any Loan Purchase Notice shall specify: 1. the relevant Loan Purchase Event; ii. Loan Purchase Exercise Price (as calculated in accordance with Clause 5 (Settlement of Loan Purchase Right); iii. the name of all the Purchasing Party (ies) who will, either jointly or severally, fulfil the required obligations under the Loan Purchase Right; and iv. the Loan Purchase Settlement Date, which shall be a business day falling not less than ten days after the delivery of that Loan Purchase Notice." 11. A perusal of the aforesaid clause would show that the applicant has the right to sell the whole or part of the outstanding EIIL RTL Fa....
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.... A copy of the Loan Purchase Notice dated 15.1 1.2017 is already on record which discloses various grounds including non-maintenance of the debt service reserve requirements of INR 6.43 crores by the EIIL and others, failure to provide 30% of the equity share capital of EIIL, as security by the Corporate Debtor and lastly non-adherence to the payment schedule under the Restructured facilities. The applicant called upon the Corporate Debtor to purchase the Restructured facilities and pay the loan purchase exercise price within 10 days from the date of the Loan Purchase Notice. On its failure to purchase the Restructured facilities and pay the aforesaid amounts, the applicant issued a recall cum invocation of guarantee notice dated 27.11.2017 to EIIL and the Corporate Debtor calling upon them to pay the entire outstanding arnount under the Restructured facilities as on 31.10.2017 which amounts to INR 198.8 crores together with interest and other charges. Despite Recall cum Invocation Notice, the Corporate Debtor failed to repay the outstanding dues under the Restructured facilities to the applicant. The applicant vide a letter dated 24.05.2018 issued to EIIL and th Corporate Debtor, ....
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....i High Court has resulted in withdrawal of the writ petition by offering to avail alternate remedies. The Hon 'ble Delhi High Court also directed the NHAI to keep its settlement offer open for a period of 45 days commencing from 25 September 2018 and the period stand expired. Copy of the orders dated 02.08.2018 & 10.08.2018 have been placed on record [Annexure A-36 (Colly)]. Some efforts for settlement were made but till date no settlement has been arrived at. It is in these circumstances that the claim with respect to DHPL is also sought to be raised before the Resolution Professional. 17. The question of law which arises for consideration is whether the undertaking of the Corporate Debtor to purchase the loan in part or whole in pursuance of clauses 2 and 4.2 of the Loan Purchase Agreement (Annexure A/ 5) amounts to guarantee within the meaning of Section 126 of the Contract Act and; whether the Corporate Debtor by executing the Promoter's undertaking, deed of pledge and undertaking dated 27.03.2015 as an additional contractual comforts providing that the Corporate Debtor undertook to arrange for funding any cost overrun in the project and shortfall in payment to lende....
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....e Corporate Debtor. If that be so then the Resolution Professional was not justified to decline the claim made by the applicant. 19. We also draw support from the view taken by the Division Bench of Hon 'ble Bombay High Court in the case of IL&FS Financial Services Limited v. Vandana GZobaZ Limited (supra). In that case the Company Judge has admitted the Company Petition filed under the old Section 433 (e), 434 read with 439 of the Companies Act, 1956 by accepting the event of default in somewhat similar facts and circumstances. In that case also the default has occurred and the option under the Agreement was exercised by the Lender. Placing reliance on Section 126 of the Contract Act, the Division Bench proceeded to observe as under:- The legal position can be clearly noted from Section 126 of the Contract Act which defines a contract of guarantee to mean a contract to perform the promise, or discharge the liability, of a third person in case of his default. It is well settled that a contract of guarantee involves principally three parties namely the creditor, the surety and the principal debtor, where liability may be actual or prospective. Thus necessarily ....
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....andana GZobaZ Limited (supra). The aforesaid judgment has been distinguished by the Resolution Professional on unwarranted ground that there was admission of its liability by the Purchasing Party as a guarantor in the reply filed by it. However, the judgment does not proceed on the assumption of admission but has discussed the legal issues whether the agreement before the Hon 'ble Bombay High Court was to be construed as a deed of guarantee or not. Therefore, we are unable to accept the objection raised and hereby reject the same. 22. The last objection is in respect of facilities provided to DHPL that Non-Disposal Undertaking was not to be treated as security interest and every form of security interest was not to be construed akin to guarantee and therefore, it could not be treated as a guarantee. Again, the argument proceeds on fallacious assumption. It may be true that every security interest would not be a guarantee but in the present case as already held that 'NonDisposal Undertaking' coupled with other would amount to Guarantee. Therefore, we are unable to accept the submission. 23. Another submission made by learned counsel for the Resolution Professional ....