TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 588
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....ikhil Suri, Mrs. Madhu Suri, Ms. Jyoti Suri, Ms. Nikita Thapar, Ms. Komal Gupta, Ms. Mahima Aggarwal, Advocates. For the Respondent : Ms. Prachi Johri, Advocate. JUDGMENT ASHOK BHUSHAN, J. These three Appeal(s) have been filed against common judgment dated 28.06.2022 rejecting I.A Nos.257, 423 and 427 of 2021 filed by the Appellant(s) respectively in CP(IB)418/AHM/2018. By the impugned order, the Adjudicating Authority has rejected the claim of the Appellant(s) to be declared as Financial Creditors of the Corporate Debtor. 2. Brief facts of the case necessary to be noted for deciding these Appeal(s) are: (i) The Corporate Debtor - Reliance Naval Engineering Ltd. (Earlier known as Pipavav Defence and Offshore Engineering Limited) is a company engaged in business of defence and commercial shipbuilding, ship repair, offshore engineering activities and operating dry docks in India etc. The Appellant(s) in these Appeal(s) were the Promoters of the Corporate Debtor. The Corporate Debtor was extended various facilities by several Banks and Financial Institutions with regard to which Nikhil Gandhi and Bhavesh Gandhi had given Personal Guarantee, whereas Appellant SKIL Infrastructure....
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....ed by Adjudicating Authority vide order dated 15.01.2020. Public announcement was made by IRP on 20.01.2020, in pursuance of which, all the Appellant(s) filed their claims in Form-C dated 27/28.02.2020. The Appellant Nikhil Gandhi in Appeal No.1109 of 2022 filed its Form-C for a total amount of claim of Rs.9182,60,85,077.46/-; Appellant SKIL Infrastructure Ltd., Appellant in Appeal No.1122 of 2022 filed its Form-C for a total claim of Rs.9625,83,61,954/- and Appellant Mr. Bhavesh Gandhi in Appeal No.1155 of 2022 filed its claim in Form-C dated 28.02.2022 for an amount of Rs.9182,60,85,077.46. (vi) The Resolution Professional after receiving the claims by the Appellant(s) vide email dated 12.03.2022 and 23.05.2020 sought information and documents in order to verify the claims. The Appellant(s) replied the email vide their emails dated 27.05.2022 and 29.07.2020. The Resolution Professional vide email dated 28.01.2021 intimated the Appellant(s) that their claims filed in Form-C as Financial Creditors cannot be accepted. The Appellant(s) aggrieved by the rejection of their claims as Financial Creditors filed I.A Nos.257, 423 and 427 of 2021 before the Adjudicating Authority, respecti....
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....urther and other reliefs as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the present case." 5. Aggrieved by the impugned order dated 28.06.2022, rejecting the claim filed by the Appellant(s), these Appeal(s) have been filed. 6. We have heard Shri Shikhil Suri, learned Counsel appearing for the Appellant(s) and Ms. Prachi Johri, learned Counsel appearing for Resolution Professional. 7. The learned Counsel for the Appellant(s) challenging the impugned order submits that Appellant(s) being Financial Creditors, their claim deserve admission by the Resolution Professional. The learned Counsel for the Appellant(s) relying on Clause 5.10 of the Purchase Agreement dated 04.03.2015 submits that both Acquirer (Reliance Group) and the Corporate Debtor has undertaken to indemnify the Promoter Guarantor (Appellant(s) herein) for any loss suffered by Founder Promoters on account of enforcement of any Disclosed Founder Promoter Guarantees given by the Appellant(s) dated 31.03.2015 and 30.03.2015 having been invoked by Security Trustee by letter dated 17.03.2018. The Appellant(s) have suffered loss, with regard to which claim was submitted before the Resolutio....
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....Financial Debt'. In order to be 'Financial Creditor', there has to be a debt due or debt owed to the Appellant(s) by the Corporate Debtor. Under the Personal Guarantee, there is a specific clause that until all the monies due to the Finance Parties under the Restructured Facilities are fully repaid/ paid in accordance with the Personal Guarantee, Personal Guarantors are not entitled for any benefit of subrogation vis-a-vis securities or otherwise. No amount has been disbursed by the Appellant(s) to the Corporate Debtor. Rejection of claim is due to insufficient document to corroborate the claim of the Appellant(s). Even as per Clause 5.10 relied by the Appellant(s) of the Purchase Agreement, any claim can be made by the Appellant(s) only when loss is suffered by them. It is an admitted case of the Appellant(s) that no payments have yet been made by the Appellant(s) towards invocation of the Guarantee. Hence, there is no question of accepting that the Appellant(s) are 'Financial Creditors'. 9. The learned Counsel for both the parties have relied on various judgments of Hon'ble Supreme Court, this Tribunal and High Court, which shall be considered while considering the submission. ....
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.... based on the confirmation in writing by the lenders and the Founder Promoters that the lender have recovered such amount of dues by way of enforcement of the security/ securities." 11. It is the Appellants' case that Consortium Lenders were discussing to restructure the corporate debt and implementation of CDR Scheme in relation to original loan transaction. A Master Restructuring Agreement was entered on 30.03.2015 for restructuring the debt to secure the payment under the Master Restructuring Agreement and securities were executed. The Appellant - Nikhil Gandhi and Bhavesh Gandhi, the Promoters of the Corporate Debtor executed Deed of Personal Guarantee in favour of a Security Trustee (IL&FS Trust Company Limited). We need to notice certain clauses of Deed of Personal Guarantee. Under Clause 31. It was provided as follows: "3.1 The Guarantor acknowledges that this Guarantee shall be a continuing guarantee in favour of Security Trustee till the full and final discharge of the Outstandings by the Guarantor (to the satisfaction of the Security Trustee) and the full discharge of all obligations of the Guarantors and the Borrower under CDR Documents and shall not be determined by ....
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....rantee." 13. Similarly, notice of Sale of Pledge Share was also issued on 21.03.2018 by Security Trustee. 14. The claim was filed in Form-C by the Appellant(s) relying on the aforesaid documents. The copy of the Deed of Personal Guarantee, Purchase Agreement and relevant letters were all part of the Claim Form. It is also relevant to notice that email dated 28.01.2021 by which the claim of the Appellant(s) as Financial Creditors has been rejected, which is to the following effect: "Dear Mr. Gandhi, This is with reference the captioned subject. At the outset, we reiterate contents of my email dated 23rd June 2020. Upon perusal of your letter dated 29th July 2020, we understand that in your letter you have acknowledged that no payment has been made by you with respect to the guarantee given for the borrowings of the Corporate Debtor and certain lenders have initiated against you before the Debts Recovery Tribunal, Ahmedabad to recover the debt of the Corporate Debtor/ invoked the guarantee furnished by you and have called upon to make payment of the debt owed to the Corporate Debtor. In light of the above, please note that as per Clause 4.2 of the Guarantee dated 31st Mar....
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....nt of the amount of debt has become due and payable and is not paid by the corporate debtor. Also, we reiterate that you have not provided any financial statements showing that either the debt has been disbursed by you or any debt that has not been paid by the Corporate Debtor in accordance with Regulation 8(2)(iii) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Therefore, in light of the above, we are unable to admit your claim filed on 27th February 2020 for INR 91,826,085.077.46." 15. From the sequence of events as noted above, it is clear that Appellant(s) were Promoters of the Corporate Debtor, who had entered into Purchase Agreement with Reliance Group, where Reliance Group had undertaken to discharge on the security of the Appellant(s), which admittedly had not yet taken place. After the loan restructuring, a Personal Guarantee dated 31.03.2015 was executed by Nikhil Gandhi, Bhavesh Gandhi and Corporate Guarantee has been issued by SKIL Infrastructure Ltd. along with Share Pledge Agreement dated 20.04.2015. To answer the issue as to whether the claim of the Appellant(s) was a claim of Financial Cr....
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....Real Estate (Regulation and Development) Act, 2016 (16 of 2016);] (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clause (a) to (h) of this clause;" 18. The learned Counsel for the Appellant(s) has relied on Section 5(8)(h) of the Code to support the claim of the Appellant(s) as a 'Financial Creditor'. The learned Counsel for the Appellant(s) has also placed reliance on two judgments of the Hon'ble Supreme Court to support his submission of 'Financial Creditor', i.e., (2019) 8 SCC 416 - Pioneer Urban Land and Infrastructure Limited and Anr. vs. Union of India and Ors., wherein in paragraph 68, following has been laid down: "68. Thus, in order to be a "debt", there ought ....
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....the functions of an explanation to a section. Let us address all of these arguments." 20. The next judgment, which is relied by Appellant(s) is judgment of Hon'ble Supreme Court is Anuj Jain, Interim Resolution Professional for Jaypee Infratech Ltd. vs. Axis Bank Ltd. - (2020) 8 SCC 401. The above was a case where Corporate Insolvency Resolution Process ("CIRP") was commenced against the Corporate Debtor namely Jaypee Infratech Limited (JIL). Another holding Company namely - Jaiprakash Associates Ltd. (JAL) filed its claim as a 'Financial Creditor' on the strength of the mortgaged created by the Corporate Debtor as collateral security of the debt of its holding company JAL. In the above case, the Hon'ble Supreme Court had occasion to consider the ingredients and conditions to be fulfilled for declaring a creditor as 'Financial Creditor'. The Hon'ble Supreme Court in para 33.1 noted the issue as to whether the lenders of JAL could be categorized as Financial Creditors of JIL for the purpose of IBC. In the above context, after examining the facts of the case as well as earlier judgments of the Hon'ble Supreme Court in Pioneer Urban Land in paragraph 46, following was laid down with ....
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.... (a) to (h). 22. Reverting to the facts of the present case, it is clear that the disbursal was made by CDR Lenders to the Corporate Debtor and the Appellant(s) before us were Personal Guarantors/ Corporate Guarantors to guarantee the repayment of Financial Facilities extended to the Corporate Debtor. We fail to see as to how the Guarantors will become a 'Financial Creditor' of the Corporate Debtor. The Appellant(s) who were Promoters of the Corporate Debtor had given guarantee for repayment of the debt and the relevant clauses of the Personal Guarantee we have already noticed above. Coming back to Section 5(8)(h), which is the sheet anchor of submission of Appellant(s) to be covered under Clause (h), the requirement is "any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution" etc. The learned Counsel for the Appellant during his submission has categorically relied on Clause 5.10 of Purchase Agreement and submitted that Clause 5.10 contain counter-indemnity obligation of the Acquirer and the Corporate Debtor. The learned Counsel for the Appellant(s) has relied on fol....
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....ate Limited. In the above case, the Appellant has come up with a case that it had advanced to the Respondent an amount of Rs.91,47,864/-. This Tribunal considered the definition of 'Financial Debt' and has upheld the finding of the Adjudicating Authority that Appellant was not 'Financial Creditor'. In paragraphs 29, 30 and 31 following has been observed: "29. For coming within the definition of 'Financial Debt' as defined under sub-section (8) of Section 5, the Claimant is required to show that (i) there is a debt alongwith interest, if any, which has been disbursed and (ii) such disbursement has been made against the 'consideration for the time value of money'. Thereby, if the Claimant claims to be 'Financial Creditor' he will have to show that debt is due which he has disbursed against the 'consideration for the time value of money' and that the borrower has raised the amount directly or through other modes like credit facility or its de-materialised equivalent, note purchase facility or the issue of bonds, notes, debentures, loan stock or any other similar instrument. The amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or ....
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.... of India had filed their claim as 'Financial Creditor' in the CIRP of one JEKPL Ltd. The claim was rejected by the Adjudicating Authority against which Appeals were filed. Axis Bank had filed their claim in the CIRP of Corporate Debtor - Edu Smart Services Private Limited. We may first notice the case of the Axis Bank. The Axis Bank had filed claim in Form-C on the basis of Corporate Guarantee executed by Edu Smart Services Private Limited in favour of the Security Trustee. The Corporate Guarantee was invoked and claim was filed. In the above case, both Export Import Bank of India and Axis Bank had disbursed the amount and to secure the amount, the Corporate Guarantee was given, which was invoked. It was Financial Creditor who has filed their claim, which was accepted by this Tribunal holding it to be 'Financial Debt'. The learned Counsel for the Appellant(s) referred to paragraphs 53 to 56, where this Tribunal laid down following: "53. Duties of Interim Resolution Professional have been prescribed under Section 18 and as per clause (b) therein the Interim Resolution Professional is required to receive and collate all the claims submitted by creditors to him pursuant to the publ....
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....iled. The claim can be filed even if it is unmatured claim. In the facts of the present case, the Personal Guarantee and the Corporate Guarantee both were invoked and in the present case, the claim was founded by the Appellant(s) on the basis of Clause 5.10, which specifically provided for indemnification by Acquirer of the Corporate Debtor in event of suffering loss by Guarantor. Hence, on the facts of the case, it is clear that no loss has been suffered by the Appellant(s), since no payments have been made. Thus, it was rightly held by Adjudicating Authority that under Clause 5.10 also, the case is not covered. The judgment of this Tribunal in above case, was not a case where Guarantors have filed any claim as a 'Financial Creditor'. Rather, in the above case, Financial Institutions, who had disbursed the amount had filed the claim on the basis of Guarantee against CIRP of the Guarantor. Thus, in the facts of that case, this Tribunal held that both Export Import Bank of India and Axis Bank were 'Financial Creditors'. Whereas, present is a case, which is not filed by Financial Institutions as Financial Creditor, rather it is Promoters of the Corporate Debtor, who have extended the....
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....nd I am not prepared to extend the principle of that case beyond the facts proved there and for the decision of which it was necessary. The facts of that case were that one Supdu used to deposit monies with defendant No. 2. After the death of Supdu, defendant No. 2 withdrew Rs. 5,000 from Supdu's khata and lent them to defendant No. 1 on a mortgage bond in his own favour. The plaintiffs, who were the sons of Supdu, protested against this and after some correspondence, defendant No. 2 passed a promissory note for Rs. 5,000 in favour of the plaintiffs. The plaintiffs then filed a suit to recover Rs. 5,000 and interest from defendant No. 1 by sale of the mortgaged property and in case of deficit prayed for a decree against the estate of defendant No. 2 which was in the hands of his sons, defendant No. 2 having died during the pendency of the suit. On these facts the Court held that the plaintiffs could not sue the defendants in anticipation that the proceeds realised by the sale of the mortgaged property would be insufficient and there would be some deficit left. The Court construed the promissory note as an indemnity given by defendant No. 2 to the plaintiffs in case any loss was....