TaxTMI 
TaxTMI 
2024 (5) TMI 1153
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....hereinafter referred as 'IBC') filed by Vajra IOT Private Limited (formerly known as Green Ark Enersol Pvt. Ltd.) (hereinafter referred as 'Operational Creditor' or 'OC') against the M/s Navayuga Infotech Private Limited (hereinafter referred as the 'Corporate Debtor' or 'CD') was admitted on 16.09.2022 and Corporate Insolvency Resolution Process (hereinafter referred to 'CIRP') was initiated against the M/s Navayuga Infotech Private Limited. Consequent to admission into CIRP of the Corporate Debtor, Mr. Kotoju Vasudeva Rao was appointed as the Interim Resolution Professional (hereinafter referred to as 'IRP'). The IRP issued public announcement inviting claims from the Creditors and upon collation and verification of the claims, constituted the Committee of Creditors (hereinafter referred to CoC') on 04.11.2022. In the 1st CoC meeting, the IRP informed that only two claims have been received, one from the Operational Creditor and other from the Deputy Director, Employee's State Insurance. 3. Subsequently on 11.11.2022, the IRP received a claim from Shubham Corporation Private Limited, the Appellant herein. The IRP after verifying the same, approved the claim as Financial Debt, in....
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....s share subscription money. v) As per the 'clean slate principle', on resolution of the Corporate Debtor all liabilities/obligations are wiped clean if the Corporate Debtor is taken over by a resolution applicant and therefore, the Appellant's claim will be as a Financial Creditor. vi) The said order has been made by Ld. NCLT in an IA filed by the IRP on the objections of the Operational Creditor and no opportunity of hearing was given to the Appellant, which is against the principles of natural justice. vii) The Appellant was granted only a debenture certificate and no rights of shareholder was granted to it. viii) The Corporate Debtor has not objected to treatment of CCDs as debt and both the parties to the DSA are ad idem as to the status of unmatured CCDs. ix) The mode of discharge of a debt/liability does not change the character of the debt/liability. CCDs, like debentures are an acknowledgement of debt, remains a debt/liability till converted into shares and are distinct from shares. x) In making these submissions, the Ld. Counsel for the Appellant relied upon the decisions in the case of "Commissioner of Wealth Tax, Madras v. Spencer & Co. Ltd., reported in (197....
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....his Tribunal about similar proceedings in the case of other CCD holders stating that "during the course of pendency of the said Application bearing IA No. 1384/2022, the RP herein has received two more claims, similar to the claim from the Appellant herein arising in relation to Compulsory Convertible Debentures (CCD) in Form C. The claim from one Mr. Manav Morada was received on 20.12.2022 for an amount of Rs.124,41,40,380/- (Rupees one hundred twenty four crores forty one lakhs forty thousand three hundred eighty only), after due verification by the RP, same was admitted on 31.12.2022 and an Application was filed before the Hon'ble NCLT Hyderabad Bench with a prayer to take on record the updated summary of claims and re-constitute the COC vide I.A. No. 73/2023. It is humbly submitted that another claim in Form C from one Mr. S.B. Puri, a CCD holder for Rs. 4,73,715 (Rupees Four Lakhs Seventy Three Thousand Seven Hundred and Fifteen only) was received on 07.01.2023, after due verification by RP, same was admitted on 04.02.2023. Accordingly, an Application was filed before Hon'ble NCLT vide IA. No. 290/2023 with a prayer to take on record the updated summary of claims and r....
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....eting the business expenditure and other corporate purposes. As on the date the outstanding principal amount of the advance is Rs.110,85,44,770/-("Advance Amount"). This is to further inform you that we express our inability to repay the Advance Amount and therefore we propose to offer you issuance of Zero Coupon Compulsory Convertible Debentures (CCDs) for the equivalent amount received as unsecured loan from SCPL. Request you to kindly consider the offer and communicate to us your response in connection with the same." 8.4 The said offer for issuance of Zero Coupon CCDs was accepted by the Appellant vide letter dated 14.02.2020 which is at page 86 of the Appeal Paper Book. The acceptance of the said offer is reproduced below for ready reference: "This is to inform you that we have considered the offer made by your Company for issuance of Zero Coupon Compulsory Convertible Debentures (CCDs) as against the outstanding principal amount of the advance Re 110.85,44,770/-("Advance Amount") made by us. We hereby inform you that we accept the offer made by you in your Request letter Dated 3 February, 2020 for issuance of Zero Coupon Compulsory Convertible Debentures (CCDs) for ....
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....ook, according to which CCDs shall be of face value of Rs. 10/- and shall be freely transferable. The CCDs can be converted into equity shares at any time before the expiry of 10 years from the date of allotment of CCDs and if no such option is exercised, such CCDs will automatically be converted to equity shares as per conversion formula given in clause 2.3 of the Annexure. The equity shares allotted on conversion of the CCDs shall carry the right to receive all dividends and other distributions and shall rank pari passu with the existing equity shares of the Company. On conversion of CCDs into equity shares, the Appellant will be eligible for rights proportional to its shareholding and as mutually agreed with the Company. The relevant clause 2.1 of Annexure A is reproduced below for reference : "2. Conversion of the CCDs 2.1 Option to convert CCDs into Equity (a) Subject to other conditions of this Annexure A, SCPL shall have right or option to exercise its right of conversion into equity shares at any time before the expiry of 10 years from the date of allotment of CCDs. (b) If SCPL has not exercised its option to convert such CCDs into equity shares, such CCDs shall ....
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....nts which are not very relevant for the issue involved in this case, as these judgments were not rendered under IBC. Similar issue was examined by this Tribunal in the case of M/s IFCI Limited vs Sutanu Sinha, Company Appeal (AT) (CH) (Ins.) No. 108/2023 vide order dated 05.06.2023. The said judgment has been upheld by the Hon'ble Supreme Court of India in Civil Appeal No. 4929/2023 vide judgment dated 09.11.2023. Since this is the latest judgment under IBC by the Hon'ble Apex Court, we shall be guided by it in our decision. While delivering the said judgment the Hon'ble Supreme Court has noted as under: "1. Commerce has evolved. The documents forming the base of commerce have also evolved and created a hybrid nature of documents. Thus, what was earlier labelled as a debenture, now has hybrid versions such as partly convertible debentures, optionally convertible debentures and Compulsorily Convertible Debentures (CCDs). We may note that traditionally debentures were treated as a floating security with a covenant for payment on a specified date." 8.12.2 In the aforesaid case, the Appellant IFCI had filed claim as a debtor before the RP who had rejected the claim on the grounds t....
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....ins from all sides involved in the process of drafting a contract. It is even preceded by opportunities of seeking clarifications and doubts so that the parties know what they are getting into. Thus, normally a contract should be read as it reads, as per its express terms. The implied terms is a concept, which is necessitated only when the Penta test referred to aforesaid comes into play. There has to be a strict necessity for it. In the present case, we have really only read the contract in the manner it reads. We have not really read into it any "implied term" but from the collection of clauses, come to a conclusion as to what the contract says. The formula for energy charges, to our mind, was quite clear. We have only expounded it in accordance to its natural grammatical contour, keeping in mind the nature of the contract." 23. The effect of the aforesaid is that a contract means as it reads. It is not advisable for a Court to supplement it or add to it. It is an unfortunate scenario where the appellant is being left high and dry as there is nothing which it can recover from the sponsor company, there being no assets and funds. While in the ICTL it is being treated as a share....