TaxTMI 
TaxTMI 
2024 (10) TMI 400
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....urt-V in IA No.2142 of 2023 (filed by Bank of Maharashtra) (Respondent No.6 herein), whereby the impugned order, the Adjudicating Authority has allowed IA No.2142 of 2023 and directed the RP to reconstitute the Committee of Creditors ("CoC") after excluding the Appellant and other unsecured Financial Creditors. The Appellant aggrieved by the order dated 02.08.2024 has filed this Appeal. 2.Brief facts of the case necessary to be noticed for deciding the Appeal are: (i)The Corporate Debtor - Sudhir Construction Infraspace Pvt. Ltd. was extended Financial Facilities by the Bank of Maharashtra in the year 2018. Cash Credit Limit, Term Loan and the Encashment of Bank Guarantees were extended by Bank of Maharashtra. The Corporate Debtor could not service the Facilities; hence, the account was declared as NPA on 31.12.2019. (ii)The Corporate Debtor was awarded a Hybrid Annuity Model Road Project ("HAM Project") by the Public Works Department ("PWD") in the year 2018. The Corporate Debtor formed a SPV for the purposes of execution of HAM Project namely - M/s Sudhir Constructions Infraspace (Shegaon Palkhi Road) Private Limited ("SPV"). A Concession Agreement was execut....
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....In the minutes of the first meeting, the RP took note of constitution of Committee and gave amount of admitted claims of Bank of Maharashtra, the Appellant and other unsecured Financial Creditors. Apart from Bank of Maharashtra, there were other unsecured Financial Creditors, whose claims were shown to be admitted. Vote share ratio of Bank of Maharashtra was 32.28% and the vote share of the Appellant was 39.16%. (viii)Copy of the minutes was circulated by the RP to the Members of the CoC. The Bank of Maharashtra after receiving the minutes of the meeting, objected to the minutes. The detailed objection dated 10.04.2023 was sent by Bank of Maharashtra to the RP, pleading that claim of unsecured creditors admitted by RP is untenable. It was pleaded that CoC has been formed on the basis of erroneous and fictitious claims, which are not valid in law. It was stated that RP without proper and genuine documents, has constituted the CoC. It was stated that to protect the interest of the Corporate and secured Financial Creditors, the Bank of Maharashtra prayed that minutes be recalled and CoC be reconstituted. The RP proceeded to hold the 2nd meeting of the CoC on 21.04.2023 with t....
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....rity committed error in ousting the Appellant from CoC and directing for reconstitution of the CoC. It is submitted that Adjudicating Authority committed error in holding that Appellant is a 'related party' unsecured Financial Creditor, whereas, the Appellant was not covered by any clauses of Section 5, sub-section (24) of the IBC. It is submitted that findings of the Adjudicating Authority that Appellant is a related party is unsustainable. It is submitted that the Appellant has proved that it was unsecured Financial Creditor by virtue of Loan Agreement and Deed of Guarantee-cum-Indemnity dated 05.08.2022. The Corporate Debtor having executed the Deed of Guarantee-cum-Indemnity Agreement in favor of the lender, i.e. Appellant, ingredients of financial debts were proved. It is submitted that Adjudicating Authority committed error in returning a finding that there was no privity of contract between the Appellant and the Corporate Debtor. The finding of Adjudicating Authority that Loan Agreement and Deed of Guarantee-cum-Indemnity Agreement dated 05.08.2022 was executed with ulterior motive were unfounded. Further, the Adjudicating Authority committed error in directing for forensic ....
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....-to-back basis, whereas there was separate and distinct Loan Agreement and Deed of Guarantee-cum-Indemnity was entered and the claim was filed by the Appellant based on Deed of Guarantee-cum-Indemnity. The fact that the Appellant was Operational Creditor under separate Agreement, does not by any stretch of imagination disentitles the Appellant for claiming its right under Deed of Guarantee-cum-Indemnity. Shri Ramji Srinivasan submits that disbursement of the whole loan money is not a sine qua non to qualify as a Financial Creditor. Learned Counsel for the Appellant has referred to Section 5, sub-section (8), sub-clause (i) to support his submission that Appellant is a Financial Creditor. It is further submitted that in any case, the Appellant must be regarded as a Secured Creditor. The learned Counsel for the Appellant has referred to Agreement dated 05.08.2022 Clauses 5 and 6, which deals with 'Security' and 'Guarantee/ Indemnity'. The learned Counsel for the Appellant in support of his submission has relied on judgment of Hon'ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. v Raman Ispat Pvt. Ltd. & Ors. (2023) 10 SCC 60. 6.Shri Abhijeet Sinha learned Senior Counsel....
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....pellant were all created with mala fide intention and were all manufactured after receipt of Notice under Section 7. The CIRP against the Corporate Debtor commenced on debt of Rs.1.25 crores on an Application filed under Section 7 by a friendly unsecured Financial Creditor, which was admitted without any opposition by the Corporate Debtor. The Bank of Maharashtra filed detailed objection on 10.04.2023 and gave all relevant pleading to show that the claim could not have been admitted. It is further pleaded that account of Corporate Debtor was declared as NPA on 31.12.2019 and after the account of Corporate Debtor having been declared NPA, it could not legally execute any Deed of Guarantee-cum-Indemnity. Further, as per the term of the sanctioned Facilities by the Bank of Maharashtra, no liability can be taken by the Corporate Debtor, without obtaining a no objection from Bank of Maharashtra. At no point of time, the Corporate Debtor obtained no objection from Bank of Maharashtra for entering Deed of Guarantee-cum- Indemnity. The Escrow Account, which was maintained in the Bank of Maharashtra itself indicate that between August 2022 to January 2023 against total amount credit was Rs.....
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....Edition, English publication) and Loksatta (Nagpur Edition, Marathi publication) on 06.03.2023 for calling of claims from the creditors of the CD in compliance with Section 13(1)(b), 13(2) and 15 of the Code and Reg 6 of IBBI (CIRP). As per Reg 6(2) of IBBI (CIRP), Reg. 2016, the last date for submission of claims was fixed as 17th March 2023. Thereafter, IRP has received the below claims from various creditors as summarized below: *Claims of the Financial Creditors: Sr. No. Name of Creditor Amount Claimed (Rs.) Claim Admitted (Rs.) Claim under Verification (Rs.)* A. SECUREDFINANCIAL CREDITORS 1 Bank of Maharashtra 165,70,10,987 160,95,10,987 4,75,00,000 B. UNSECURED FINANCIAL CREDITORS 2 Saratvam Creator 195,28,11,699 195,28,11,699 0 3 Spondere Structures 75,68,67,721 75,68,67,721 0 4 Sanguine Engineering Services 60,24,48,287 60,24,48,287 0 5 Mahhesh Bapuraoji Nage 3,57,51,974 3,57,51,974 0 6 Anil Tukaram Savarkar 2,88,64,861 2,88,64,861 0 7 Go Ahead Infra Private Limited 10,1....
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....% vote share, whereas, the Appellant was given 39.15% vote share. The challenge in the IA No.2142 of 2023 filed by the Bank of Maharashtra was to the admission of the claim of Appellant and other unsecured Financial Creditor and their inclusion in the CoC. The application filed by the Bank of Maharashtra was a detailed Application, making various pleadings and grounds. The prayers made in the Application IA No.2142 of 2023 are as follows: "(a)That this Hon'ble Tribunal be pleased to examine the contents of the present Application and after examining the same, be pleased to direct the Resolution Professional to reconstitute the CoC and thereby exclude various 3rd parties as mentioned in the Paragraph 6 as members of CoC. (b)That this Hon'ble Tribunal be pleased to examine the contents of the present Application and after examining the same, be pleased to appoint a third party unbiased forensic transaction to audit the claims of various 3rd parties mentioned in Paragraph 6 of the IA and verify whether they fall under the category of preferential, undervalued, extortionate and fraudulent transactions and hit by provisions of IBC 2016 and the report should be ....
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...." 12.Before we proceed further, it is relevant to notice certain findings, which have been returned by the Adjudicating Authority in the impugned order while allowing IA No.2142 of 2023. It is necessary to extract various reasons given by the Adjudicating Authority for allowing the Application. We need to briefly notice the various reasons given by the Adjudicating Authority in the impugned order. While noticing the reasons, we shall be extracting the various findings as reflected in the order, which are contained in paragraphs 71, 72, 73, 75, 76, 78 and 81. The reasons given by Adjudicating Authority are as follows: (i) "71. ... It is pertinent to take note that the advance copy of the CP 52 of 2023 was served upon the Corporate Debtor. It is after the service of this advance copy, the Respondent CD got into action and all these Loan Agreement and Deed of Guarantees cum Indemnity Agreement came into existence. The CP was served upon the CD on 4th July 2022. The execution of Deed of Guarantees cum Indemnity Agreement with R2 to R4 are dated 5.08.2022, 9.08.2022, and 16.08.2022 respectively. It deserves to be appreciated that all these documents were executed after the s....
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....ice that the PWD contributes 60% towards the project cost while the SPVs contributes 40% in the Escrow Account. As per the Escrow Account maintained by the Applicant Bank, against total amount of Rs.10,95,000/- credited from the period between August 2022 till January 2023, an amount of Rs.19,73,11,473/- has been paid to R2 from the escrow account maintained by the Applicant Bank. Thus, 19 crores which is disbursed is received back by the Respondent No.2" In paragraph 77, following findings have been returned: (vii) "77. .... It deserves appreciation that the said Respondents have referred themselves (in documents executed between CD and R2 to R4) as Contractors. The Contractors by no means can be referred to as Financial Creditors but Operational Creditors. The MOU/ Agreement dated 18.06.2022 executed between CD and R2 to R4 clearly refer and define R2 to R4 as "EPC Contractor". The relevant paras are reproduced as under For R2 AND M/S. SARATVAM CREATORS (M/s. SC) a Partnership Firm registered under the provision of the Indian Partnership Act 1932 having its registered office at Audumber App., Plot No. 57, Surendra Nagar, Nagpur, Maharashtra- 440015 ....
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....e from the Escrow Account of the CD maintained by the Applicant Bank for the works carried out by him as a Contractor for the CD." 13.The above are the reasons, which have been noted by the Adjudicating Authority for allowing prayer (a) and (b) of the Application. 14.The first submission, which was advanced by the learned Counsel for the Appellant is that findings of the Adjudicating Authority on the record to hold the Appellant as 'related party' are not sustainable, since from the facts and findings as returned in paragraph 79 of the judgment, the ingredients of Section 5, sub-section (24) are not met. Shri Ramji Srinivasan submits that as per the law laid down by the Hon'ble Supreme Court in Phoenix ARC (P) Ltd. vs. Spade Financial Services Ltd. - (2021) 3 SCC 475, the related party must be in praesenti only to attract the bar of becoming Member of the CoC. The three findings in paragraph 79 of the impugned order, it is submitted that the Adjudicating Authority has recorded the Appellant as a related party (i) being a 'guarantor'; (ii) being a 'Electrical Contractor' for other project; and (iii) having received money by it from time to time from the Escrow Account of the C....
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.... Agreement are as follows: "1. The Borrower has taken up a project named Ham Am-85, Improvement to Roads for Shegaon Palkhi Marg in Akola, Washim and Buldhana District joining to (Shegaon Nagzari Paras Nimkarda Gaigaon Akola Goregaon Mazoad Wadegaon Medshi Bramhanwada Dava Rasiod to Loni & Bibi to Kingaon Jattu) Length 82.00 Km (System No. 79181) (Lumprum Tender) on Hybrid Annuity Basis (hereinafter referred to as the said Project). 2.The Lender hereby has lent and agrees to lend an amount of up to Rs.195.00 Crores (Rupees One Hundred Ninety-Five Crores Only) (hereinafter referred to as the "Loan Amount") to the Borrower from time to time as and when required, subject to certain mutually decided terms and conditions as contained herein 3.The Guarantor/Indemnifier has undertaken Guarantee and Indemnity to make good the loss of Lender along with the interest if the borrower fails to repay such amount to the Lender." 16.A separate Deed of Guarantee-cum-Indemnity was also entered on the same date, i.e., 05.08.2022 in favour of the Lender. 17.Now, we come to the claim, which was filed by the Appellant before the IRP, which is filed at Annexure A-9 in the....
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....urity for the repayment of all loan facilities as mentioned above." 18.Another documents, which is part of claim Form, is Annexure-C, which is calculation of interest, which is as follows: "Saratvam Creators Annexure-C Calculations of Interest Borrower Lender Amount Interest Total Claim Amount Sudhir Construction Infraspace Pvt. Ltd. (Shegaon Palkhi Road) Pvt. Ltd. Saratvam Creators 1,95,00,00,000 28,11,699 1,95,28,11,699 Total 1,95,00,00,000 28,11,699 1,95,28,11,699 Calculation of interest Interest Rate 15% Date 03-03-2023 Date Amount no. of days Interest 02-01-2023 1,50,00,000 60 3,69,863 05-01-2023 1,75,00,000 57 4,09,932 16-01-2023 4,70,00,000 46 8,88,493 18-01-2023 3,00,00,000 44 5,42,466 09-02-2023 4,00,00,000 22 3,61,644 14-02-2023 2,90,00,000 17 2,02,603 1....
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....uted by the Corporate Debtor. Clause 3 of Deed of Guarantee-cum-Indemnity as extracted above contains undertaking of Guarantor to make good the loss of lender, if the borrower fails to repay such amount to lender. Thus, there can be no liability of Guarantor, if principal borrower is not liable. We also need to notice the provisions of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the "CIRP Regulations"). Regulation 8, which deals with claim by 'financial creditors provide as follows: "8. Claims by financial creditors. (1)A person claiming to be a 32[financial creditor, other than a financial creditor belonging to a class of creditors, shall submit claim with proof] to the interim resolution professional in electronic form in Form C of the [Schedule-I]: Provided that such person may submit supplementary documents or clarifications in support of the claim before the constitution of the committee. (2) The existence of debt due to the financial creditor may be proved based on - (a)the records available with an information utility, if any; or ....
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....isbursed is only Rs.19,43,13,000 and Adjudicating Authority in paragraph 73, as extracted above has returned a finding that the "The fact of actual disbursement is of merely of Rs.19 crores is not disputed by either of the Respondents and or the RP and it is evident from the FORM C". When actual disbursement claimed in Form-C by the Appellant was only Rs.19,43,13,000/-, on which interest was also claimed, we fail to see on what basis RP admitted claim of Rs.195,28,11,699/-. The admission of claim of Rs.195,28,11,699/- on the face of it unsustainable and is a callous act on the part of the RP. This, we are observing without entering any other aspect, which has been found by the Adjudicating Authority about claim of the Appellant. On the very face of claim in Form-C, the admission of claim of Rs.195,28,11,699 was unsustainable and Adjudicating Authority has not committed any error in ousting the Appellant from the CoC. 26.We have further noticed that from the Escrow Account, which was maintained with the Bank of Maharashtra, which contained contribution of PWD of 60% and 40% contribution by SPV within the period August 2022 to January 2023, an amount of Rs.19,73,11,473/- has been ....
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.... other hand, an "operational debt" would include a claim in respect of the provision of goods or services, including employment, or a debt in respect of payment of dues arising under any law and payable to the Government or any local authority." 42.2. The unique position assigned to a "financial creditor", who plays a crucial role in insolvency resolution process as against the role of other creditors, has been extensively explained by this Court in Swiss Ribbons [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17] , albeit in the context of its differentiation with the category of "operational creditor", in the following : (SCC pp. 68-69 & 83-84, paras 50-51 & 75) "50. According to us, most financial creditors, particularly banks and financial institutions, are secured creditors whereas most operational creditors are unsecured, payments for goods and services as well as payments to workers not being secured by mortgaged documents and the like. The distinction between secured and unsecured creditors is a distinction which has obtained since the earliest of the Companies Acts both in the United Kingdom and in this country. Apart from the above, the nature of....
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....o be achieved by the Code. 75. Since the financial creditors are in the business of moneylending, banks and financial institutions are best equipped to assess viability and feasibility of the business of the corporate debtor. Even at the time of granting loans, these banks and financial institutions undertake a detailed market study which includes a techno-economic valuation report, evaluation of business, financial projection, etc. Since this detailed study has already been undertaken before sanctioning a loan, and since financial creditors have trained employees to assess viability and feasibility, they are in a good position to evaluate the contents of a resolution plan. On the other hand, operational creditors, who provide goods and services, are involved only in recovering amounts that are paid for such goods and services and are typically unable to assess viability and feasibility of business. The BLRC Report, already quoted above, makes this abundantly clear." (emphasis supplied)" 28.In paragraph 42.3 of Anuj Jain's case the Hon'ble Supreme Court noticed the important features as was highlighted in the Swiss Ribbons that the Financial Creditor is, from the ver....
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.... who could be entrusted with the task of ensuring the sustenance and growth of the corporate debtor, akin to that of a guardian. In the context of insolvency resolution process, this class of stakeholders, namely, financial creditors, is entrusted by the legislature with such a role that it would look forward to ensuring that the corporate debtor is rejuvenated and gets back to its wheels with reasonable capacity of repaying its debts and to attend on its other obligations. Protection of the rights of all other stakeholders, including other creditors, would obviously be concomitant of such resurgence of the corporate debtor." 30.One of the submissions, which has been advanced by learned Counsel for the Appellant that in any view of the matter, the Appellant is a 'secured creditor'. The learned Counsel for the Appellant has relied on Clauses 5 and 6 of the Agreement dated 05.08.2024, which are as follows: "5. SECURITY This loan shall be secured by way of fire and exclusive charge by way for Hypothecation on the Borrower's entire present and future receivables of any kind from the said Project to the extent along with applicable interest and default interest as d....
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....The outstanding dues will be a charge on the assets of the company. Before sale is made, the outstanding dues will be cleared and, (in) the alternative the deed to agreements/sale will specifically mention the outstanding dues and the method of its payment."" 32.In the above case there was categorical finding by NCLT and NCLAT that PVVNL was a 'secured creditor'. Whereas in the present case, the issue that the Appellant is a 'secured creditor' does not appear to have neither raised nor gone into by the Adjudicating Authority. We, thus, are of the view that ends of justice will be served in giving liberty to the Appellant to file a fresh Application seeking its claim to be recognized as a 'secured creditor'. 33.Looking to the facts and sequence of event, the Adjudicating Authority has rightly directed for forensic transaction auditor to investigate the transactions, which were claimed by the Appellant based on Loan Agreement and Deed of Guarantee-cum-Indemnity dated 05.08.2022. 34.We have already noticed that in the claim Form, which was filed by the Appellant before the RP, disbursement was claimed for an amount of Rs.19,43,13,000/-. We have already noticed above that from....
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....to see that how the said case has any relevance in the present case. 38.The third case relied by learned Counsel for Respondent No.7 is judgment of Bombay High Court in (2014) 4(5) Mh. L.J. in royal Power turnkey Implements Pvt. Ltd. vs. Maharashtra Industrial Development Corporation, Mumbai. The above was a case where writ petition was filed by a Company praying for quashing and setting aside the Tender Notice published by Maharashtra Industrial Development Corporation, Mumbai. Paragraph 2 of the judgment, notices as follows: "2. By the instant petition, the petitioner, which is a private limited Company, is praying for quashing and setting aside the tender notice No. 31/2013-14, published by the respondent No. 1 - Maharashtra Industrial Development Corporation, Mumbai (For short, "the MIDC"), and for declaring that the action of the respondent No. 1 in inviting fresh tenders for the work which was already tendered by it, is contrary to the principles of natural justice and fair play." 39.We again fail to see any relevance of the said judgment in the facts of the present case. 40.Learned Counsel for the Bank of Maharashtra has also relied on Sanction Letter dated....