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2020 (12) TMI 1247 - Tri - Companies LawSeeking appropriate directions against the Resolution Professional to reconstitute the CoC - Section 21 of I B Code - HELD THAT - In Anuj Jain 2020 (2) TMI 1259 - SUPREME COURT JIL which is the Corporate Debtor created mortgage of its properties to the Bank as collateral security of the debt of its holding company JAL and Hon ble Apex Court held that the lenders of JAL could not be categorized as Financial Creditors of JIL for the purpose of the Code. Whereas in Ascot Reality Private Limited 2020 (10) TMI 962 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI the Corporate Debtor given guarantee for repayment of the debt. A careful examination of Anuj Jain 2020 (2) TMI 1259 - SUPREME COURT and Ascot Reality Private Limited 2020 (10) TMI 962 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI shows that the facts in Ascot Reality Private Limited (supra) are akin to the facts in the instant IA and clearly support the decision taken by the Resolution Professional in categorising the respondent No.2 as Financial Creditor and giving voting rights basing on its claims. There are no merits in the application - application dismissed.
Issues Involved:
1. Legitimacy of categorizing STCI Finance Limited as a Financial Creditor of Bohra Pratisthan Pvt. Ltd. 2. Reconstitution of the Committee of Creditors (CoC) as per Section 21 of the Insolvency and Bankruptcy Code (IBC), 2016. Detailed Analysis: 1. Legitimacy of Categorizing STCI Finance Limited as a Financial Creditor: The applicant, 9M Corporation, contested the categorization of STCI Finance Limited (Respondent No.2) as a Financial Creditor of Bohra Pratisthan Pvt. Ltd. under Section 5(7) and Section 5(8) of the IBC, 2016. The applicant argued that the Corporate Debtor (Bohra Pratisthan Pvt. Ltd.) was merely a guarantor for the loan issued to Bohra Industries Ltd., and no financial debt was disbursed against the consideration for the time value of money to the Corporate Debtor by STCI Finance Limited. Thus, the applicant claimed that the transaction did not qualify as a financial debt, making the categorization of STCI Finance Limited as a Financial Creditor illegal and against the provisions of the Code. The Tribunal examined the arguments and referenced the Supreme Court's decision in Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited Vs. Axis Bank Limited, which dealt with whether lenders of a third party (JAL) could be categorized as Financial Creditors of the Corporate Debtor (JIL) based on collateral securities. The Supreme Court in Anuj Jain held that lenders of JAL could not be Financial Creditors of JIL as the transaction did not involve consideration for the time value of money. However, the Tribunal also considered the NCLAT's decision in Ascot Reality Private Limited Vs. Ajay Kumar Agarwal and Ors., which distinguished the Anuj Jain case. In Ascot Reality, the Corporate Debtor had given a guarantee for the repayment of a debt, which was considered a financial debt under Section 5(8)(a) read with (i) of IBC, as the loan advanced carried the element of consideration for the time value of money. The Tribunal found the facts in Ascot Reality to be akin to the present case, where Bohra Pratisthan Pvt. Ltd. had given a guarantee for the repayment of the debt. Thus, it supported the decision of the Resolution Professional in categorizing STCI Finance Limited as a Financial Creditor and granting voting rights based on its claims. 2. Reconstitution of the Committee of Creditors (CoC): The applicant sought directions for reconstituting the CoC as per Section 21 of the IBC, 2016, arguing that the inclusion of STCI Finance Limited as a Financial Creditor was illegal. The CoC initially comprised 9M Corporation with a 6.11% voting share, STCI Finance Limited with 75.90%, and Phosphate India Pvt. Ltd. with 17.99%. Given the Tribunal's finding that the categorization of STCI Finance Limited as a Financial Creditor was legitimate, the request to reconstitute the CoC was rendered baseless. The Tribunal upheld the existing composition of the CoC, dismissing the applicant's plea for reconstitution. Conclusion: The Tribunal dismissed IA No.294/2020, affirming the categorization of STCI Finance Limited as a Financial Creditor of Bohra Pratisthan Pvt. Ltd. and maintaining the current CoC structure. The Tribunal also dismissed IA No.293/2020, which involved identical facts and legal issues, for the same reasons.
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