TaxTMI 
TaxTMI 
2022 (9) TMI 860
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....ndant No. 1 i.e. Akme Projects Limited. He submits that the moratorium qua the defendant No. 1 company is still in operation. He further submits that the plaintiff has already submitted its claims before the RP. 3. Learned counsel appearing for the RP has handed over copy of judgment passed by Hon'ble Supreme Court dated 01.02.2021 in Civil Appeal No.2842/2020 and Civil Appeal No. 3063/2020 to contend that the present suit is not maintainable in view of the aforesaid judgment. 4. Aforesaid judgment passed by Hon'ble Supreme Court discloses the facts that are material in the present case also. 5. National Company Law Tribunal (NCLT) had held that the plaintiff herein i.e. Spade Financial Services Limited ('Spade') along with AAA Landmark Private Limited ('AAA') have to be excluded from the Committee of Creditors ('CoC') formed in relation to the Corporate Insolvency Resolution Process ('CIRP') initiated against AKME Projects Ltd. i.e. defendant No. 1 herein, the Corporate Debtor before Hon'ble Supreme Court. NCLT by its order dated 19.07.2019 excluded both AAA and Spade from the COC upon applications filed by Phoenix Arc Private Limited ('Phoenix') and YES Bank ....
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....cating Authority"). The NCLT had held that AAA and Spade have to be excluded from the Committee of Creditors ("CoC") formed in relation to the Corporate Insolvency Resolution Process ("CIRP") initiated against AKME Projects Ltd. ("Corporate Debtor"). NCLT passed its order dated 19-7-2019 [Hari Krishan Sharma v. AKME Projects Ltd. CP (IB) No. 55/ND/2018, decided on 19-7-2019 (NCLT)] on applications [ CA No. 337 of 2018 and CA No. 338 of 2019 (Phoenix); CA No. 268 of 2018 and CA No. 269 of 2018 (Yes Bank).] filed by Phoenix Arc Pvt. Ltd. ("Phoenix") and YES Bank under Section 60(5)(c) IBC. 2. Phoenix, in Civil Appeal No. 2842 of 2020, submits that though the NCLAT correctly dismissed the appeal filed by Spade and AAA, holding that they are related parties of the corporate debtor and are hence to be excluded from the CoC, there is an erroneous finding that they are financial creditors. In para 11 of its judgment, the NCLAT has observed that: "11. ... admittedly appellants are the financial creditors of the corporate debtor AKME Projects Ltd. ..." It has been submitted that there was never any admission on the part of Phoenix that AAA and Spade are financial ....
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....provides a definition of "financial debt" in the following terms: "(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 de-materialised 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; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; Explanation.-For the purposes of this sub-clause- (i) any amount raised from an allottee under a real estate project shall be deemed to be an ....
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....rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create." (emphasis supplied) Diplock, L.J. also stated: "But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co. v. Maclure and Stoneleigh Finance Ltd. v. Phillips), that for acts or documents to be a "sham", with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a "shammer" affect the rights of a party whom he deceived..." (emphasis supplied) XXXXXXX G.3.4. Spade and AAA 49. Mr Kaul argued that the transactions entered into between the corporate debtor and Spade and AAA are collusive in nature and do not constitute a financial debt. Mr Viswanathan has urged that the eligibility of Spade and AAA as financial creditors has conclusively been determined by the NCLT in its order dated 31 May 2018. We have already concluded that the above order would not operate as res ....
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....the same with the adjudicating authority as mentioned in the Insolvency and Bankruptcy Code." (emphasis supplied) 50. As noted by NCLT, the Memorandum of Understanding dated 12-8-2011, on the basis of which Spade had filed its claim in Form C before the IRP, was signed two years after the commencement of the purported transaction. The execution of the memorandum of understanding was sought to be explained on the basis that a formal document was created for specifying the rate of interest on the ICDs given by Spade to the corporate debtor. However, despite the creation of a formal document, the rate of interest being charged on the ICDs was 12% as mentioned in the claim before the IRP, which is half of the interest rate of 24% stipulated in the memorandum of understanding. During the arguments, Mr Kaul and Mr Sen have also brought to the notice of this Court that the memorandum of understanding is unregistered and unstamped. The IRP in his letter dated 25-5-2018 has noted that as per the ledger provided by Spade, no interest was claimed on the alleged debt and no adjustment was made regarding the payment of principal or interest by the corporate debtor to Spade. It has b....
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....not be split into two parts, an agreement to sell and a side letter were executed on 2510-2012. The agreement to sell was entered to purchase FSI/flats equivalent to 38.3% of the total FSI in relation to specific units identified and allotted in the agreement. Apparently, the sale consideration was re-negotiated and enhanced from Rs 32.80 crores under the development agreement to Rs 86.01 crores under the agreement to sell. Mr Viswanathan has submitted that there was no partnership clause in the agreement to sell. However, Clause 3 of the side letter dated 25-10-2012 shows that the intent of the parties was to continue to co-develop the land. Clause 3 of the side Letter provides: "3. It is agreed that ALPL shall share the cost of the Project in the same ratio as the share of respective development in the Property [i.e. Villas- 50% and other developments (group housing, etc.) - 36.33%]. The cost of the Project shall include: (a) Land cost (b) Licence and approval costs (c) Construction cost (d) Direct project management costs (people at the site) (e) Marketing & sales promotion cost (f) Liaison cost (g)....
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....ith companies in the Anil Nanda Group of Companies, including the corporate debtor and JIPL. This deep entanglement between these individuals was noted by the NCLT and the NCLAT. 61. Admittedly, Mr Arun Anand was in control of Spade and AAA during the relevant period. Further, he held positions in the corporate debtor or the Anil Nanda Group of Companies, which included the corporate debtor. Mr Anil Nanda and Mr Sonal Anand also held positions in the corporate debtor and JIPL during this period. 62. Based on the above, it is not difficult for us to accept the conclusion of the NCLAT that Mr Arun Anand would be a related party of the corporate debtor in accordance with Section 5(24)(h) and Sections 5(24)(m)(i). Mr Viswanathan has tried to refute this argument by relying on the definition of "control" in Arcelor Mittal (India) (P) Ltd. vs. Satish Kumar Gupta (supra). However, it is important to note that the discussion there was in the context of ineligible resolution applicants under subsection (c) of Section 29-A IBC, which specifically prescribes this test. Presently, we have to determine whether the corporate debtor's board, Directors, etc. are accustomed to....
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....nancial creditors, is set aside. Due to the collusive nature of their transactions alleged to be a financial debt under Section 5(8), Spade and AAA cannot be labelled as financial creditors under Section 5(7); (ii). The decision of the NCLAT, inasmuch as it referred to Spade and AAA as related parties of the corporate debtor under Section 5(24), is affirmed. (iii) The decision of the NCLAT, inasmuch as it excluded Spade and AAA from the CoC in accordance with the first proviso of Section 21(2), is affirmed but for the reasons mentioned above. (iv) The appeals are accordingly disposed of. Pending application(s), if any, stand disposed of." 10. Perusal of the aforesaid judgment shows that Hon'ble Supreme Court has given very clear finding that the commercial arrangements between Spade i.e. the plaintiff herein, AAA and the Corporate Debtor i.e. the defendant No. 1 herein, were collusive in nature and that they would not constitute a 'financial debt'. Thus, Hon'ble Supreme Court has held that the plaintiff herein is not the financial creditor of the Corporate Debtor i.e. the defendant No. 1 herein. 11. In view of the aforesaid clear findings by....