TaxTMI 
TaxTMI 
2025 (1) TMI 834
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.... IA No. 5300 / 2023 Mr. Krishnendu Dutta, Sr. Advocate with Mr. Palesh Taing , Advocates for SREI Infrastructure JUDGMENT ASHOK BHUSHAN , J. These two IAs (IA Nos.3169 & 5300 of 2023) have been filed by Infrastructure Leasing & Financial Services Ltd. ("IL&FS") praying for certain directions. We proceed to notice pleadings and prayers in both IAs. IA No.3169 of 2023 2. This Application has been filed by IL&FS seeking direction from the Tribunal to approve the decision of New Board to collapse/ unwind the transactions whereby IL&FS Financial Services Ltd. ("IFIN") has provided loans to third parties ("Third Party Borrowers"), which further lent such loan amounts to certain IL&FS group entities. In paragraph 1 of the Application, following has been stated: "1. The present Application is being filed on behalf of Infrastructure Leasing and Financial Services Limited ("IL&FS") seeking inter alia necessary directions from this Hon'ble Appellate Tribunal to approve the proposal of the New Board to collapse/unwind transactions whereby IL&FS Financial Services Limited ("IFIN") has provided loans to third parties ("Third Party Borrowers") which further lent such loan amounts to c....
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....the speed for execution required to ensure the Final Resolution is achieved. 7.3. The New Board continues its efforts in unravelling the intra-group borrowings and believes that large parts of the IL&FS Group were, in the past, operated as a single enterprise with no boundaries of legal entities and separate managements. This appears to be one of the key governance shortcomings that has led to a large contagion impact on creditors of the IL&FS Group. For instance, on a preliminary analysis of the financial statements and records of IFIN for the last 3 financial years, it is noticed that IFIN had outstanding loans and investments to companies in the IL&FS Group of Rs. 5,728 Crore, Rs. 5,127 Crore, and Rs. 5,490 Crore in FY16, FY17 and FY18 respectively. Prima facie these appear to be significantly in excess of permissible norms, in all of the 3 years. If this is applied for calculation of capital adequacy, IFIN would have significant negative capital adequacy in each of these 3 years. Further, we note from records available Interlocutory Application Nos.3169 & 5300 of 2023 in Company Appeal (AT) No.346 of 2018 5 that loans to one of the companies in the IL&FS Group in excess of R....
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....Cr) 1. IFIN Empower India Ltd. 178.25 Sikar Bikaner Highway Limited 29.91 2. IFIN Srinagar Sonmarg Tunnelway Limited 147.06 3 IFIN Avance Technologies Limited 155.88 Srinagar Sonmarg Tunnelway Limited 157.48 4. IFIN Beigh Constructions Co. Pvt. Ltd. 218.81 ITNL 216.98 5. IFIN Kalyan Sangam Infratech Ltd. 104.93 ITNL 260.66 6. IFIN Sangam Business Credit Ltd. 157.05 ITNL 7. IFIN /GHV Hotel (India) Private Limited 106.31 Srinagar Sonamarg Tunnelway Limited 108.99 8. IFIN Wavell Investment Private Limited 104.07 ITNL 104.85 9. IFIN Attivo Economic Zone (Mumbai) Pvt. Ltd. 115.33 ITNL 207.83 10. IFIN Sahaj E- Village Ltd. (now known as E-Village Kendra Ltd.) 93.77 11. IFIN Attivo Economic Zone (Mumbai) Pvt. Ltd. 203.39 Fagne Songadh Expressway Limited 208.01 12. IFIN Vistar Financers Pvt Ltd 163.40 Chenani Nashri Tunnelway Limited 207.81 13. IFIN Sahaj E- Village Ltd. (now known as E-Village Kendra Ltd.) 292.10 Gujarat Integrated Maritime Complex Pvt. Ltd. 251.38 14. IFIN Bharat Road Network Limited 74.15 Sealand Ports Pvt. Ltd. 100.49 15....
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....the "Proposal to Unwind/Collapse the Subject Transactions with the Third Party Borrowers" IFIN reserves its right to recover such sums from the Third Party Borrowers which they may have received from the Final Borrower and/or retained as part of the routing transactions, but which were either not ultimately paid to IFIN (including but not limited to interest which may have been received) and/or may result in wrongful gains to the Third Party Borrower upon collapse of the Subject Transaction. STEP 2: MUTUAL DISCHARGE/ RELEASE OF CLAIMS IFIN, the Third Party Borrower as well as the Final Borrower will enter into the necessary documents enabling mutual discharge/ release of obligations arising out of the Subject Transactions STEP 3: INTIMATION TO THE CLAIMS MANAGEMENT AUTHORITY The Claims Management Authority will be intimated about the aforesaid accounting entries/ discharge of obligations resulting in the CMA recognising the claim of IFIN against the Final Borrower. STEP 4: NECESSARY INTIMATION TO THE RBI Necessary intimation will be provided to RBI about collapsing/ substitution of the Subject Transactions, subject to orders of this Hon'ble Appellate Tribunal." 6. ....
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....lso been filed and an additional affidavit has also been filed by SIFL. Reply has also been filed by Respondent Nos.2 (Empower India Ltd.) and 3 (Avance Technologies Ltd.) as well as Respondent No.11 (Bharat Road Networks Ltd.) IA No.5300 of 2023 9. This IA has been filed by IL&FS, praying for setting aside the order/ letter dated 12.09.2023 issued by IRP of Attivo Economic Zone (Mumbai) Pvt. Ltd. ("Attivo") rejecting the claim of the Applicant, which was already admitted in the Corporate Insolvency Resolution Process ("CIRP"). 10. The Applicant submits that the Applicant is a Financial Creditor of Attivo. On an Application filed by the Applicant, CIRP against Attivo commenced, in which Respondent - Bimal Kanti Choudhuri was appointed as IRP. The claim was filed by IL&Fs, which was about Rs.593 crores and the IRP has admitted the claim to the extent of Rs.593,36,20,259/- and the Applicant was allocated share of 39.14% in the CoC. It is pleaded that on the 'Resolution' to approve the IRP as RP, the Applicant has voted against the IRP. It is pleaded that Applicant informed the IRP about filing of IA No.3169 of 2023 before the Appellate Tribunal and requested the IRP not to procee....
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....d. It is to be noted that in Company Appeal (AT) No.346 of 2018, we have already passed an order permitting collapse of various transactions, where Agreements was entered between IL&FS and third party borrowers. In the affidavit filed on behalf of the Applicant dated 07.08.2024, reference to order passed by this Tribunal on 19.07.2024 has been made, where with regard to certain third party borrowers, IL&FS was directed to be recognized as Lender. In IA No.3169 of 2023, in paragraph 14, under heading "Step 2" it is stated that the third party borrower as well as the final borrower will enter into the necessary documents enabling mutual discharge/ release of objections arising out of the subject transactions. Thus, this Tribunal by order, where on the basis of document entered between parties for mutual discharge/ release of the obligation, orders have been passed with regard to different third party borrowers accepting the settlement agreed and necessary directions have been issued with respect to three of the third party borrowers for recognizing IFIN as the Lender. In the reply, which has been filed by SIFL, objection has been raised with regard to collapse of the Agreement with r....
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....ntities ought not to be permitted in so far as Fagne, CNTL, GIMCO and SPPL are concerned." 14. With respect to paragraph-8 of the Application - IA No.3169 of 2023, where details of entities, third party borrowers given, it was reiterated by SIFL that to IL&FS entities namely - Fagne, GIMCO, SPPL and CNTL, money was advanced by SIFL and third party borrowers namely - Attivo Economic Zone (Mumbai) Pvt. Ltd.' Vistar Financers Pvt. Ltd.; Sahaj E-Village Ltd.; Bharat Road Network Ltd. and Giridhan Projects Pvt. Ltd. have not advanced any amount to IL&FS entities as alleged by the Applicant. 15. Shri Ramji Srinivasan, learned Senior Counsel appearing for the Applicant referring to Fagne Songadh Expressway Limited submits that IFIN has advanced Rs.110 crores to Attivo on 23.08.2017 and on the same date SIFL had also lent Rs.110 crores on same date. Similarly, on 31.03.2018, IFIN advanced money of Rs.195 crores to Attivo and SIFL claims to have advanced to ITNL (Fagne) on 29.03.2018 Rs.200 crores. The submission of SIFL that amount which has been advanced by IFIN to Attivo is not routed through SIFL is wholly incorrect. Similar dates and figures has been given with regard to Sahaj, GIMC....
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....on is admitted and proceedings are going on. The pleadings in paragraph 19, clearly mentions that IA No.3169 of 2023 in no manner to effect the proceedings or investigations being carried out with regard to subject transactions. We, thus, are of the view that as on date direction for collapsing the Agreement with regard to Respondent Nos.8 to 12 in the Application, cannot be issued. However, we make it clear that direction permitting collapsing of the Agreement, shall have no bearing or effect on any pending proceedings, including proceedings under Section 7, or any other proceedings, pending before the NCLT. It shall be open for the Adjudicating Authority to examine any averments or pleadings made by the parties with regard to third party transactions and it is open for the Adjudicating Authority to come to a conclusion with regard to third party transactions and to issue any directions or orders as may be deemed fit. 18. In view of foregoing discussions and reasons, we are of the view that for issuing any directions as prayed by the Applicant with regard to Respondent Nos.8 to 12, a deeper and thorough consideration is required with regard to transactions with third party borrow....
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....td. C.P. (IB) 43/KB/2022 ("Admission Order") has allowed the application filed under Section 7 of the Insolvency and Bankruptcy Code, 2015 ("Section 7 Petition") on behalf of IL&FS Financial Services Limited ("IFIN"), whereby Corporate Insolvency Resolution Process for Attivo economic Zone (Mumbai) Pvt. Ltd. ("Corporate Debtor") has been initiated. It is pertinent to note that IFIN has the significant voting rights in the Committee of Creditors of the Corporate Debtor, with IFIN holding 39.14 %. 2. Pursuant to the aforesaid, the New Board in its meeting dated May 30, 2023_with a view to find a solution to the various complexities arising out of loan transactions undertaken between IFIN and some third party borrowers took a decision to unwind/ collapse such transactions, subject to orders of the Hon'ble National Company Law Appellate Tribunal, New Delhi. 3. Thereafter, IL&FS approached the Hon'ble National Company Law Appellate Tribunal, New Delhi by way of an application filed on July 18, 2023, being I.A. 3169 of 2023, seeking a relief to inter alia collapse certain transactions whereby IFIN has provided loans to certain third parties, which includes the transaction with ....