TaxTMI 
TaxTMI 
2024 (4) TMI 631
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....ith Mr. Devashish Chauhan , Mr. Paras Mithal , Ms. Gazal Ghai and Mr. Manas Syal , Advocates For the Respondents : Mr. Sumesh Dhawan , Mr. Abhirup Dasgupta , Ishaan Duggal and Ms. Ruchi Goyal , Advocates for R - 1 . Mr. Pulkit Sharma , Advocate JUDGMENT ASHOK BHUSHAN , J. Comp. App. (AT) (Ins.) No. 1590/2023 has been filed by the Appellant who are Financial Creditors of the Corporate Debtor/Satra Properties India Limited (hereinafter referred to as `SPIL'), aggrieved by the order dated 22.11.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench - I) in I.A.1686/2020 in C.P. (IB) No.1632/MB/2019. I.A. No. 1686 of 2020 filed by the Respondent herein, IIFL Home Finance Limited has been allowed and the claim filed by IIFL Home Finance Ltd. in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor has been directed to be admitted as a Financial Debt. 2. Appellants who are the Financial Creditors of the Corporate Debtor aggrieved by the admission of claim of IIFL Home Finance Ltd. as Financial Creditor has come up in this Appeal. 3. Comp. App. (AT) (Ins.) No. 1592/2023 has been filed by Appellant who are Financial Cre....
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.... terms and conditions of the Facility Agreement, the Additional Facility Agreement and the relevant Security Agreement, to the extent provided therein. vii. Amendment Agreement contains acknowledgement by the Corporate Debtors of the outstanding liability which was to be paid with effect from 01.09.2019 as per the repayment schedule. Agreement also provided that parties were at liberty to pursue all recourse and actions available under the applicable laws in the event of non-compliance of the Consent Terms and the Amendment Agreement. viii. On 09.09.2019, a Security Release Agreement was also executed which is not relevant for issues raised in the Appeal. ix. On 20.03.2020, in furtherance of Consent Terms and Amendment Agreement, IIFL, IIHFL, SPDPL and SPIL entered into registered Deed of Security for creation of the additional security i.e., first and exclusive charge by way of registered mortgage on Mortgaged Property. x. SPDPL agreed to provide security to IIFL and IIHFL on behalf of SPDPL and SPIL for payment of secured obligations. SPDPL confirmed that Mortgaged Property is sufficient to discharge the total debt of the Corporate Debtor as an....
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.... harmonious construction of Deed of Security has directed for admission of the claim which is nothing but rewriting the Agreement between the parties. The recital in Deed of Security, Clause G clearly mentioned that after execution of Deed of Security, SPIL/obligor henceforth shall not be liable for the said due and it shall stand discharged from its obligation to make the payment under the Loan Agreement read with Amendment Agreement as well as Consent Terms. Mortgager i.e., SPDPL had represented that mortgage properties are sufficient to discharge the secured obligation of the obligor as and when becomes due. Learned Counsel for the Appellant relying on the Judgment of the Hon'ble Supreme Court in `Shree Ambika Medical Stores & Ors.' Vs. `The Surat People's Cooperative Bank Limited & Ors.', Civil Appeal No. 562 of 2020, submits that Court through its interpreted process cannot rewrite or create a new contract between the parties. 11. Further, reliance has been placed on the Judgment of the Hon'ble Supreme Court in `Venkatraman Krishnamurthy & Anr.' Vs. `Lodha Crown Buildmart Pvt. Ltd.', Civil Appeal No. 971 of 2023 for the proposition that when the parties committed themselves....
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....ance on Section 41 of the Indian Contract Act, 1872, by the Appellant is misplaced since under the Deed of Security, there was no discharge given to SIPL of its liability which stood acknowledged and affirmed by Consent Terms and Amendment Agreement. The Deed of Security was executed for creation of mortgage as additional security and the Adjudicating Authority has rightly read the clauses of Deed of Security to come to the conclusion that SIPL was not discharged from its secured obligation. 15. Section 62 of the Indian Contract Act, 1872, is also not attracted since Deed of Security did not novate the terms of the facility document. 16. The submission of the Appellant that Respondent are taking double benefit is wholly erroneous in the CIRP of SPDPL claim was admitted as other Creditor, in view of the mortgage. It is further submitted that Appellants who are Financial Creditor of the Corporate Debtor having an independent claim cannot be said to be prejudiced by admission of legitimate claim of IIHFL and IIFL. 17. We have considered the submissions of the Counsel for the parties and perused the record. 18. As noted above that after filing of the Petition under Section ....
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....utstanding financial debt due to IIFL Home Finance Limited amounting to INR 22,80,76,772. The Parties admit, accept and confirm that this amount is due and payable to IIFL Home Finance Limited. (iv) SPIL shall pay the aforesaid sum of INR 22,80,76,772 to IIFL Home Finance Limited (a group entity of the Financial Creditor) along with interest thereon starting from 1 September 2019, as per the repayment schedule, set out in Annexure II to these Consent Terms, and the same shall be first recovered from Mortgaged Property (defined herein) / the cash flows generated from the Mortgaged Property (defined herein). (v) The Financial Creditor shall not initiate legal proceedings / actions against SPIL and/or its directors and/or its promoters, except as provided in clause 6 of these Consent Terms. The Financial Creditor shall also ensure that IIFL Home Finance Limited does not initiate legal proceedings / actions against SPIL and/or its directors and/or its promoters, except as provided in clause 6 of these Consent Terms. (c) The Parties agree and acknowledge that as on 31 August 2019, SPDPL has an outstanding financial debt due to the Financial Creditor amount to ....
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.... As on 31 August 2019, the Company has an outstanding financial debt due to the IIFL amounting to Rs 148,68,19,504 (Rupees One hundred forty eight crores sixty eight lakhs nineteen thousand five hundred and four). Each Party admits, accepts and confirms that this amount is due and payable by the Company to IIFL. 2.2 The Company shall pay the aforesaid sum of Rs 148,68,19,504 (Rupees One hundred forty eight crores sixty eight lakhs nineteen thousand five hundred and four) to IIFL, along with interest thereon compounded quarterly at 16% (sixteen percent) per annum starting from 1 September 2019, as per the repayment schedule, set out in Schedule I hereto and the same shall be first recovered from Mortgaged Property / the cash flows generated from the Mortgaged Property. 2.3 As on 31 August 2019, the Company has an outstanding financial debt due to IIHFL amounting to Rs 22,80,76,772 (Rupees Twenty two crores eighty lakhs seventy six thousand seven hundred and seventy two). Each Party admits, accepts and confirms that this amount is due and payable by the Company to IIHFL. 2.4 The Company shall pay the aforesaid sum of Rs 22,80,76,772 (Rupees Twenty two crore....
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....NR 20,00,00,000 (Indian Rupees Twenty Crores only) ("IIFHL Loan") executed, inter alia, between the Obligor and IIFL Home Finance Limited (hereinafter referred to as the ("IIFHL loan Agreement") which shall include all accession, amendments, modifications and supplements thereto, including the amendment agreement dated 9 September 2019, executed amongst Obligor, India lnfoline Finance Limited and IIFL Home Finance Limited ("Amendment Agreement 1") and amendment agreement dated (9th September, 2019), executed between SPDPL and India lnfoline Finance Limited ("Amendment Agreement 2"). C. The Obligor in terms of their respective Loan Agreements had defaulted in making the payments/ repayments in respect of the loans pursuant to which the Lenders declared the default under their respective Loan Agreements. D. However, based on the mutual discussions, the Obligor and the Lenders entered into the consent terms dated 9 September 2019 filed in the National Company Law Tribunal, Mumbai Branch ("Consent Terms"), which, inter alia, states that the Obligor shall repay (i) a principal amount of INR 227,84,90,568/- (Indian Rupees [Two Hundred and Twenty Seven Crore Eighty Four ....
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....greement read with Amendment Agreement as well as Consent Terms. H. The Mortgagor through its authorised signatory Mr. Nagendra Angihotri pursuant to the board resolution passed by a majority of its directors dated 28^th February 2020, has been authorized to create the Security and represents that the Mortgagor has the full authority and the title to execute this deed in favour of the Lenders to offer the Mortgaged Properties in terms of this deed. I. Accordingly, the Mortgagor has agreed that the Security to be created on the properties of the Mortgagor, as set out in Recital (E) above shall be by way of a mortgage without possession form being these presents. J. Believing upon the aforesaid representations, confirmation, declarations and covenants as true and correct and the same have been duly accepted by the Lenders and accordingly, in furtherance of the Consent Terms and amendment Agreement to the Loan Agreement, the Lenders have agreed to receive the security of the Mortgaged Properties from the Mortgagor, at the behest of SPIL/Obligor against the debt of SPIL/Obligor to enable the Lenders to satisfy its dues (SPIL's dues) as specified in the co....
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....bmission of the Appellant that debt of SIPL was stand discharged by virtue of Deed of Security is based primarily on Clause G of the Deed of Security. For ready reference, Clause G of the Deed of Security is reproduced herein: "G. The Mortgagor agreed that the Security will be created for the benefit and in favour of the Lenders or an on behalf of the Obligor. The Mortgagor hereby represents, declares and confirms to the Lenders that Mortgaged Properties including the units/premises to be constructed by utilizing the 2,00,000 lakh sq. ft FSI is sufficient to discharge the total debt of SPIL/Obligor as and when it becomes due and accordingly on execution of this deed/agreement i.e. in compliance of the consent terms (read with the extension letter dated 17.01.2020) as well as the Amendment Agreement, and as such SPIL/Obligor henceforth shall not be liable for the said dues (as specified in the consent terms) and shall stand discharges from its obligations to make the repayment under the Loan Agreement read with Amendment Agreement as well as Consent Terms." 34. The Consent Term between the parties dated 09.09.2019, in para 2(a) clearly contemplated creation for first and....
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....rties unto and to use and benefit of the Lenders absolutely UPON TRUST and subject to the powers and provisions herein declared and contained herein and in the Financing Documents." 37. We now come to Clause G which is sheet anchor of the submission of the Appellant. Appellant relies on following words in the latter part of Clause G i.e., "on execution of its Deed/Agreement i.e., in compliance of the Consent Terms (read with extension letter 17.01.2021) as well as the Amendment Agreement, and as such SPIL/obligor henceforth shall not be liable for the said dues under the Consent Terms and shall stand discharge from its obligation to make the repayment under the Loan Agreement read with Amendment Agreement as well as Consent Term". 38. It is relevant to notice that above stipulation in Clause G has been made in wake of earlier statement, which is contained in the earlier part of Clause G i.e., "the mortgager hereby represent declares and confirms to the lenders that Mortgaged Properties including the units/premises to be constructed by utilising the 2,00,000 sq. ft. FSI is sufficient to discharge the total debt of SPIL/obligor as and when becomes due". The second part of Claus....
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....ract Act, 1872. Learned Counsel for the Appellant has further relied on Section 62 of the Indian Contract Act, 1872, which is as follows: " 62. Effect of novation, rescission, and alteration of contract. - If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract, need not be performed. Illustrations (a) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted. (b) A owes B 10,000 rupees. A enters into an arrangement with B and gives B a mortgage of his (A's) estate for 5,000 rupees in place of the debt of 10,000 rupees. This is a new contract and extinguishes the old. (c) A owes B 1,000 rupees under a contract. B owes C 1,000 rupees B orders A to credit C with 1,000 rupees in his books, but C does not assent to the arrangement. B still owes C 1,000 rupees, and no new contract has been entered into." 46. We have already noted the relevant Clauses of Consent Terms and Amendment Agreement and Deed of Security. We have a....
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....9;s Coop. Bank Ltd., (2020) 13 SCC 564, it was observed that, through its interpretative process, the Court cannot rewrite or create a new contract between the parties and has to simply apply the terms and conditions of the agreement as agreed between the parties. Again, in GMR Warora Energy Ltd. vs. Central Electricity Regulatory Commission, (2023) 10 SCC 401, it was observed that Courts cannot substitute their own view of the presumed understanding of commercial terms by the parties, if the terms are explicitly expressed. It was held that the explicit terms of a contract are always the final word with regard to the intention of the parties." The Hon'ble Supreme Court in the above case held that NCDRC could not have ignored the binding covenants in the Agreement and ought not to have given its own logic and rationale to decide as to whether future course of action of the parties should be. In paragraph 22 of the Judgment following has been held : "22. On the above analysis, we have no hesitation in holding that the NCDRC overstepped its power and jurisdiction in ignoring the binding covenants in the Agreement and in introducing its own logic and rationale to decide as ....