TaxTMI 
TaxTMI 
2023 (12) TMI 608
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....filed by the Appellant challenging the rejection of its claim by the Resolution Professional. The Adjudicating Authority by the impugned order has rejected IA. 580/2023, aggrieved by which order, this Appeal has been filed. Brief facts of the case necessary to be noticed for deciding this Appeal are : (i) The Appellant, one Aaditri Constructions Private Ltd. (Company) and Radius & Developers Builders LLP executed a Debenture Trust Deed (DTD) in relation to 3,95,00,000 secured optionally convertible debentures having face value of Rs.100/- each aggregating to Rs.395 Crores. (ii) An Agreement dated 29.03.2019 was executed between the Appellant - Debenture Trustee and Radius Infra Holdings Private Ltd. (Corporate Debtor) and the Promoters - Mr. Sanjay Chhabria and Mrs. Ritu Chhabria to provide additional securities to secure the debentures and to pay the entire secured consideration under the Debenture Trust Deed. (iii) A notice dated 28.07.2021 was issued by the Debenture Trustee to the Company calling upon the company to pay the entire amount and forthwith redeem the debentures on account of occurrence of various events of defaults. Company having failed t....
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....unication dated 20.01.2023, the Appellant filed IA. 580/2023. In the application following prayers were made: "PRAYERS: It is therefore prayed that this Hon'ble Tribunal be pleased to: a. quash and set aside the decision of Respondent Nos. 2 and 3 as contained in Respondent No. 1's email dated 20th January 2023 (at Exhibit "O" hereto); b. declare and admit the Applicant as a "financial creditor" of the Corporate Debtor and issue necessary directions for the re- constitution of the Committee of Creditors with the Applicant as a member thereof; c. declare and admit the Applicant as a "secured financial creditor" of the Corporate Debtor and issue necessary directions for the re-constitution of the Committee of Creditors with the Applicant as a member thereof; d. That pending the hearing and final disposal of the present Application, the corporate insolvency resolution process (CIRP) of the Corporate Debtor be stayed; e. For ad-interim n relief in terms of prayer-clause (c) above; f. For costs of the Application against the Respondents: and g. For such further and other reliefs as this Hon'ble ....
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....ated 21.01.2022, the Appellant has made demand to the Corporate Debtor to pay the secured obligations. Learned counsel for the Appellant to buttress his submission has referred to various clauses of the agreement and DTS which we shall refer to while considering the submissions in detail. Learned counsel for the Appellant submits that the Corporate Debtor being Guarantor within the meaning of Section 126 of the Contract Act, the Appellant is the Financial Creditor within meaning of Section 5 Sub-section (8)(i) of the I&B Code. It is further submitted that under the I&B Code there is no jurisdiction vested with the CoC to adjudicate the claim of a Financial Creditor. The order passed by the Adjudicating Authority directing the Resolution Professional to place claim of the Appellant before the CoC for consideration was ex-facie erroneous and patently illegal. The Financial Creditors i.e. Respondent No. 2 and 3 have conflicting interest with the Appellant. They could not be entrusted with any decision regarding the admission the claim of the Appellant. The CoC has no adjudicatory power to sit over the claims of the Creditors. 4. The submission of the learned counsel for the Appella....
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.... appearing for the Respondent No.3 also supported the impugned order and submitted that the Adjudicating Authority has rightly rejected the claim filed by the Appellant. The Resolution Professional has rightly rejected the claim of the Appellant as Financial Creditor. The additional security under the Agreement was subject to settling the existing dues with the existing creditor i.e. L&T Finance Ltd. It is admitted fact that the Corporate Debtor did not settle with L&T Finance Ltd, hence, charge over the Versova Land was never released by L&T Finance Limited and no charge was created in favour of the Appellant. The Clauses of any agreement ought to be read holistically and cannot be read in isolation. It is submitted that the intention of the parties is to be gathered from the language of the instrument. Even if for argument sake it is accepted that Appellant is a security holder, a security holder does not have any right to be admitted as a Secured Financial Creditor in the CoC. No financial debt is owed by the Corporate Debtor of the Appellant. Appellant has no charge over the Versova Land. Appellant is not a secured creditor and the Appeal deserve to be dismissed. 7. We have ....
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....vour of the Debenture Trustee. "Security Providers" shall mean the Obligors and shall also include any other person which has created or agreed to create any Security Interest for or in relation to the Debentures and "Security Provider" means each and any one of the Security Providers. "Secured Obligations" shall mean all present and future obligations and liabilities (whether financial, performance or otherwise, whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Obligors to the Debenture Holders including in connection with the issue and subscription of the Debentures, the Debenture Payments and the creation and maintenance of Security and all costs and expenses incurred in relation thereto under the Transaction Documents. "Security Documents" shall mean: (a) this Deed; (b) Debenture Trustee Agreement; (c) Deed(s) of Mortgage, (d) Personal Guarantee; (e) Corporate Guarantee; (f) Escrow Agreements; (g) Deed of Pledge; and (h) such other document for creating such other Security as may be required by the Debenture Holders/Debe....
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....n of the Debenture Trustee shall be created provided by the Security Providers within 15 (fifteen) Business Days of such communication, from the Debenture Trustee and the Security Providers shall ensure that the necessary documents to be executed in connection therewith are duly executed and registered as required by Applicable Law." Present is a case where in exercise of Clause 7.5 (b), Debenture Trustee entered into Agreement dated 29.03.2019 for additional security. 13. Now we come to the Agreement dated 29.03.2019 to find out its real nature and content. Clause (F), (G) and (I), which are relevant to the present case are as follows: "F. The Company being in need of capital for, inter-alia, undertaking the Sanctioned project and the Second Sanctioned Project and for making the payment of the DMA Deposit, approached the Investor for making an investment in the Company and by and under Debenture Trust Deed dated 3rd August 2018 ("DTD") executed between the Debenture Trustee/ Trustee (on behalf of the Debenture Holders set out therein ("Debenture Holders"), the Company, the Developer and the Promoters read with letter agreement dated 3rd August 2018, it has been agre....
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....ise howsoever (hereafter collectively referred to as "RIHPL Security") shall be deposited by RIHPL in Company Escrow Account being a designated escrow bank account being escrow account no. 57500000084708 in the name and style of "AADITRI CONSTRUCTIONS PVT LTD ESCROW ACCOUNT opened with HDFC Bank, Bandra East - Kalanagar Branch ("the Account"). which will be solely operated by the Trustee and which amount will be and remain as security for due repayment and discharge of the Debenture Payments and the Secured Obligations and due performance of all the terms and conditions of the Transaction Documents to the satisfaction of the Debenture Trustee and the Debenture Holders; (b) RIHPL will deposit the RIHPL Security directly in the Account; (c) No change or amendment will be made by the Promoters or RIHPL to the constitution documents of the RIHPL or the operation of the Account, without the prior written consent of the Debenture Trustee who shall act on the instructions of the Debenture Holders; (d) No encumbrance or charge or third party rights shall be, directly or indirectly, created by the Promoters to the Shares or the RIHPL Security: (e) Neither....
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....y only upon the Secured Obligations being fulfilled to the satisfaction of the Debenture Trustee provided that no Event of Default has occurred under any of the Transaction Documents. 6. It is agreed between the Parties that upon the occurrence of an Event of Default, and without prejudice to the other rights and remedies of the Debenture Trustee, the Debenture Trustee on the instruction of the Majority Debenture Holders shall be entitled to enforce the RIHPL Security in such manner as the Debenture Trustee deems fit and shall be entitled to do all acts, deeds, matters and things necessary for this purpose." 20. As noted above, principal issue between the parties is true nature and content of Agreement dated 29.03.2019 and whether it can be read as Deed of Guarantee or not. It can be read as deed of guarantee is the prime submission advanced by learned counsel for the Appellant. We may now notice certain judgments of Hon'ble Supreme Court which has been relied by learned counsel for the Appellant in support of his submission. Hon'ble Supreme Court in "Prakash Roadlines Pvt. Ltd. vs. Oriental Fire & General Insurance Co. Ltd., (2000) 10 SCC 64" has laid down that a docum....
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....itional Security. 23. We also notice the judgment of Hon'ble Supreme Court in "State of Orissa vs. Titaghur Paper Mills Co. Ltd., 1985 (Supp) SCC 280", where again the same preposition which was laid down in Orient Paper Mills case has been reiterated in following words in Para 120 of the judgment: "120. It is true that the nomenclature and description given to a contract is not determinative of the real nature of the document or of the transaction thereunder. These, however, have to be determined from all the terms and clauses of the document and all the rights and results flowing therefrom and not by picking and choosing certain clauses and the ultimate effect or result as the Court did in the Orient Paper Mills case." 24. Another preposition which is well settled is that documents has to be read as whole, which principle has been reiterated by the Hon'ble Supreme Court in "Super Ployfabriks Ltd. vs. Comm. Of Central Excise Punjab, (2002) 11 SCC 398", where following has been laid down in Para 8 : "8. There cannot be any doubt whatsoever that a document has to be read as a whole. The purport and object with which the parties thereto entered into a contract....
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.... and personal guarantee. The security being not found sufficient, on the same date an Unattested Pledge Agreement was also executed in which Mahananda Suppliers Ltd. and Sungrowth Share and Stocks Ltd. came forward to support the Borrower and all of them pledged their security which was mentioned in the Schedule appended with the Agreement. On the basis of said Unattested Pledge Agreement, the Financial Creditor filed a Section 7 application, which application came to be rejected. An appeal was filed in this Tribunal contending that all the Pledger having jointly and severally being liable to pay the dues, the amount can be recovered from the Pledgers. It was contended that Pledge Agreement is basically a guarantee extended to the Financial Creditor on behalf of the Borrower. The Arguments have been noticed in Para 11 of the judgment, which are as follows: "11. It is further submitted that in Clause 6.2 pertaining to the remedies it can enforce any or all of the security, in part or whole as mentioned in this Agreement and/or the Facility Agreement, to realize either in part or entire amount of the Borrower's Dues and/or invoke any guarantee provided under the Facility....
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....erfered by the Hon'ble Supreme Court by its order dated 18.11.2022. 30. The submission of the Appellant that the Committee of Creditors has no jurisdiction to adjudicate on the claim submitted by the Appellant needs no consideration in the facts of the present case since fact remains that the Resolution Professional has already refused to admit the claim of the Appellant which was communicated vide email dated 22.06.2022 and after the Committee of Creditor's meeting dated 27.12.2022 again by email dated 20.01.2023. The Resolution Professional having not admitted the claim of the Appellant and communicated its rejection, it is not necessary for us to enter into the submission of the Appellant that Committee of Creditor's decision prima facie not accepting the claim of the Appellant was without jurisdiction. In any event, an application has already been filed by the Appellant before Adjudicating Authority questioning the decision. It is decision of the Adjudicating Authority which has approved the decision of the Resolution Professional rejecting the claim of the Appellant, which require scrutiny. There can be no doubt that it is the Adjudicating Authority who is entrusted with ju....