TaxTMI 
TaxTMI 
TaxTMI 
2024 (10) TMI 400
X X X X Extracts X X X X
X X X X Extracts X X X X
....aharashtra) (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 executed between SPV and PWD on 03.01.2019 to carry out the work with....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the same members of the CoC as was earlier constituted. The RP has also filed Report before the Adjudicati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at 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 audit for finding out as to whether there is preferential transaction between the Corporate Debtor and the Appellant. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 appearing for the Bank of Maharashtra refuting the submissions of learned Counsel for the Appellant submits that entire claim ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gainst 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.10,95,00,000/- and an amount of Rs.19,73,11,473/- has been paid to the Appellant. Thus, even if, Rs.19 crores was disbursed to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 10,11,05,600 0 10,11,05,600 8 Supreme Infra Products (Proprietor-Suresh Beoraoji Doifode) 20,56,23,808 0 20,56,23,808 9 Gurudeo Fabrication Pvt.Ltd.(Formerly known as L7 Fabrication Pvt. Ltd.) 11,66,47,699 0 11,66,47,699 10 Areon Multi Projec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibunal 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 placed on record of this Hon'ble Tribunal; (c)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 produce on record the documents based on which the claims of 3rd parties as mentioned in Paragraph 6 have been admitted along with copies of Form C submitted by the said 3rd parties. (d)That this Hon'ble Tribunal be pleased to examine the contents of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 service of the petition upon the CD. This material fact itself is sufficient to cast doubt on intent of executing these documents and intent of the CD. The RP relying upon these Deed of Guarantees cum Indemnity Agreement have admitted the claims of the R2 to R4 as Unsecured Financial Creditors. It is observed that not only did these documents come into existence after the advance service of CP No. 52 of 2023 to the CD, but these documents were also executed against the loan agreement/ sanction letter with the Applicant Bank and without their prior....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ves (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 Hereinafter referred to as EPC Contractor on the SECOND PART which expression shall mean and include the firm, all its Present and Future Partners their heir successors legal representative executors administrative and assignees as of the other Party. For R3 AND M/S. SPONDERE STRUCTURES (M/s. SS) a Partnership Firm registered under the provision of the Indian Partnership Act 1932 having its registered office at Flat No. Saisurbhi Apartments, Hill Top Layout, Ambazari, Shankar Nagar, Nagpur, Maharashtra440015 Hereinafter referred to as EPC Contractor on the SECOND PART which expression shall mean and include the firm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id 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 Corporate Debtor. It is submitted that the above factors are totally alien to the concept of 'related party' and would not constitute any such relationship as understood in law. We have perused the findings recorded by the Adjudicating Authority in paragraph 79, the Adjudicating Authority in the impugned order has not spelt as to under which sub-clause of Section 5, sub- section (24), the Appellant is covered and can be held to be a 'related party'. The Adjudicating Authority's observation that Mr. Anil Sawarkar is related to the Corporate Debtor since the year 2018 and stood 'Guarantor' for the loan availed by the Corporate Debtor from Pusad Urban Co-operative B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubject 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 Appeal. The claim was submitted in Form-C dated 24.03.2023. Clauses 4, 5 and 6, which are relevant for this case, are as follows: "4. Total amount of claim (including any interest as at the insolvency commencement date) Principal: Rs.195,00,00,000/- (Rupees One Hundred Ninety-Five Crores Only) Interest: Rs.28,11,699 (Rupees Twenty-Eight Lakhs Eleven Thousand Six Hundred Ninety-Nine Only). Total Claim: Rs.195,28,11,699/- (Rupees One Hundred Ninety-Five Crores Twenty-Eight Lakhs Eleven Thousand Six Hundred Ninety-Nine Only) The particulars of claim and calculations of interest is attached as "Annexure C". 5. Details of documents by reference to which Loan Agreement dated 05.08.2022....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; 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 17-02-2023 25,00,000 14 14,384 20-02-2023 1,50,000 11 678 27-02-2023 1,31,63,000 4 21,638 Total 19,43,13,000 28,11,699" 19.When we investigate Annexure-C, amount mentioned as Rs.195 crores and interest mentioned as Rs.28,11,699/- and the calculation of interest is on different amount from 01.01.2023 to 27.02.2023 totalling to Rs.19,43,13,000/-. The chart of calculations of interest which is at Annexure- C itself indicate that interest is being charged on the amount, which is Rs.19,43,13,000/-, which is claimed to be disbursed on different dates. Column 6 of the claim form contained following submission: "6. .... Saratvam Creators are fully committed to disburse the total amount of loan as and when required by the Borrower (aforesaid Subsidiary company) for and up to the completion of project..." 20.At this stage, we may consider the submission of the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. (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 (b)other relevant documents, including - (i)a financial contract supported by financial statements as evidence of the debt. (ii)a record evidencing that the amounts committed by the financial creditor to the corporate debtor under a facility has been drawn by the corporate debtor. (iii)financial statements showing that the debt has not been 33[paid]; or (iv)an order of a court or tribunal that has adjudicated upon the non-payment of a debt, if any." 24.When we investigate Regulation 8, sub-regulation (2), which provides that existence of debt due to the Financial Creditor may be proved based on- (a) the records available with an information utility, if any, or (b) other relevant documents, including the record evidencing that the amounts committed by the Financial Creditor to the Corporate Debtor under a facility has been drawn by the Corporate Debtor. Further, sub-regulation (b) (i) refers to a financial contract supported by financial statements as evidence of the debt. Thus, financial statements need to be brought on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 40% contribution by SPV within the period August 2022 to January 2023, an amount of Rs.19,73,11,473/- has been paid to the Appellant. Whereas amount credited in Escrow Account was only Rs.10,95,00,000/- as per the finding returned in paragraph 76 by the Adjudicating Authority. The details of the Escrow Account were filed by the Bank of Maharashtra before the Adjudicating Authority as part of its Application, which has also been brought on the record along with additional affidavit filed by the Bank of Maharashtra. Respondent No.2 has received back more amount than the amount it disbursed to the SPV. The claim of the financial debt of the Appellant raises questions and doubts. The present is a case where disbursement as claimed by the Appellant is not to the Corporate Debtor, but to the SPV and the claim was filed by the Appellant based on Loan Agreement and Deed of Guarantee-cum-Indemnity. 27.The Hon'ble Supreme Court in Anuj Jain IRP for J.P. Infra vs. Axis Bank Ltd. and Ors. - (2020) 8 SCC 401 had occasion to consider nature of financial debt, which need to be proved within the meaning of Section 5, sub- section (8) of the IBC. Various ingredients of the financial debt, which ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....both in the United Kingdom and in this country. Apart from the above, the nature of loan agreements with financial creditors is different from contracts with operational creditors for supplying goods and services. Financial creditors generally lend finance on a term loan or for working capital that enables the corporate debtor to either set up and/or operate its business. On the other hand, contracts with operational creditors are relatable to supply of goods and services in the operation of business. Financial contracts generally involve large sums of money. By way of contrast, operational contracts have dues whose quantum is generally less. In the running of a business, operational creditors can be many as opposed to financial creditors, who lend finance for the set-up or working of business. Also, financial creditors have specified repayment schedules, and defaults entitle financial creditors to recall a loan in totality. Contracts with operational creditors do not have any such stipulations. Also, the forum in which dispute resolution takes place is completely different. Contracts with operational creditors can and do have arbitration clauses where dispute resolution is done pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the Swiss Ribbons that the Financial Creditor is, from the very beginning, involved in assessing the viability of the Corporate Debtor who can, and indeed, engage in restructuring of the loan as well as reorganization of the Corporate Debtor's business where there is financial stress. It was held that Financial Creditor is not only about in terrorem clauses for repayment of dues, but it also has the unique parental and nursing roles too. In paragraph 42.3, following was held: "42.3. The enunciation a fore mentioned illuminates the reasons as to why at all a financial creditor is conferred with a major, rather pivotal, role in the processes contemplated by Part II of the Code. It is the financial creditor who lends finance on a term loan or for working capital that enables the corporate debtor to set up and/or operate its business; and who has specified repayment schedules with default consequences. The most important feature, as this Court has said, is that a financial creditor is, from the very beginning, involved in assessing the viability of the corporate debtor who can, and indeed, engage in restructuring of the loan as well as reorganisation of the corporate debtor's ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nterest and default interest as defined in the agreement. 6.GUARANTEE / INDEMNITY: 6.1The Guarantor / Indemnifier unconditionally and irrevocably agree and undertakes to repay the amount granted by the Lender to the Borrower as and when demanded by Lender without any delay, demur or objection. .... (see the whole provision) 31.The learned Counsel for the Appellant in support of his submission has also relied on judgment of the Hon'ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. (supra). In the above case, Paschimanchal Vidyut Vitran Nigam Ltd. ("PVVNL") has got assets of Corporate Debtor attached by District Magistrate and Tahsildar against the outstanding electricity dues of the PVVNL. In the liquidation proceedings, the Liquidator filed an application seeking a direction to the District Magistrate and Tahsildar to release the property from attachment, to enable its sale and after realization of value for distributing the proceeds in accordance with the provisions of the IBC. The Application was allowed by the NCLT and Appeal filed by PVVNL before this Tribunal was also dismissed. Challenging the aforesaid order, the Appeal was filed in the Hon'ble Supreme Court a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w Account, maintained by the Bank of Maharashtra, the Appellant received the amount of Rs.19,73,11,473/-. As noted above, the initial Agreement between the Appellant and the SPV dated 18.06.2022 was as EPC Contractor, whereas EPC Contractor the Appellant had to carry out the contract and he was also obliged to arrange for finances. It was only subsequently on 05.08.2022, the Loan Agreement was entered by the Appellant, SPV and the Corporate Debtor. Since Adjudicating Authority has directed for transaction audit report, we are of the view that after receipt of the transaction audit report, the Appellant be given liberty to file a fresh Application for its claim as secured creditor/ Financial Creditor, which Application need to be considered afresh based on materials, which may come on record in transaction audit report. The transaction audit report will throw considerable light on the nature of transaction, which is claimed to be entered on 05.08.2022 by the Corporate Debtor, SPV and the lender - Appellant. 35.We may also notice few cases, which have been relied by Respondent No.7 in is written submissions. The first case relied by Respondent No.7 is judgment of United States Court....