2020 (9) TMI 52 - AT - Insolvency and Bankruptcy

Prayer for a direction in the name of Resolution Professional to include the Appellant No. 1 in the Committee of Creditors as a secured financial creditor - extension of all benefits of a secured financial creditor - HELD THAT - Appellant No. 1 s claim in purported capacity of Secured Financial Creditor has been rejected way back in the year 2017 and decision in this regard has not been called in question. It is not open to Appellants to raise the same issue in 2020 by filing I.A. No. 62 of 2020. The queer explanation emanating from the Appellants that rejection of its claim as Financial Creditor went un-assailed under the bona fide belief that the interest of Appellant s would be taken care of under the Liberty House Group Resolution Plan is repugnant to reason and cannot provide a lawful excuse for filing of I.A. No. 62 of 2020 under Section 60(5) of the I B Code after a lapse of about three years. Such explanation deserves to be noticed only for being rejecting. This is apart from the fact that the Appellants have not lent any money directly to the Corporate Debtor and the Corporate Debtor did not owe any financial debt to the Appellants except that the pledge of shares was to be executed. There can be no dispute with the preposition of law that creation of pledge of shares by the Corporate Debtor does not tantamount to a guarantee or indemnity. The creation of pledge of shares by the Corporate Debtor is said to be in regard to the money lent to WLD and BRASSCO. The Appellants not having advanced any money to the Corporate Debtor as a financial debt would not be coming within the purview of financial creditor of the Corporate Debtor. Appeal dismissed.

Summary

Issues:
1. Dismissal of I.A. 62 of 2020 in CP (IB) No. 42/Chd./Hry./2017 by the Adjudicating Authority.
2. Appellants' claim as a secured financial creditor.
3. Rejection of the claim by the Resolution Professional.
4. Representation to preserve the pledge of shares.
5. Approval of resolution plan of 'Duccan Value Investor' (DVI).

The Appellants, 'M/s. Vistara (ITCL) Ltd. and Ors.', challenged the dismissal of their I.A. 62 of 2020 by the Adjudicating Authority in CP (IB) No. 42/Chd./Hry./2017. The application sought the inclusion of Appellant No. 1 in the Committee of Creditors as a secured financial creditor under Section 60(5) of the I&B Code. The Adjudicating Authority dismissed the application while approving the resolution plan of 'Duccan Value Investor' (DVI), leading to the appeal. The dismissal was based on the finding that the Appellants had not lent any money to the Corporate Debtor and thus could not be treated as financial creditors. The rejection of the claim by the Resolution Professional in 2017, which was unchallenged, was also noted. The Appellants' argument that their interests were protected under the 'Liberty House Group' resolution plan was deemed unreasonable and overruled.

The Appellants contended that they had requested the Resolution Professional to preserve the pledge of shares in favor of Appellant No. 1. They claimed that the 'Liberty House Group' resolution plan from 2017 recognized and preserved the pledge, which was approved by the Committee of Creditors. However, the Committee of Creditors was reconstituted, and a new resolution plan by DVI was considered. Despite representations to preserve the pledge, the Appellants' claim was not mentioned in the information memorandum. This led to the filing of I.A. No. 62 of 2020, which was rejected alongside the approval of DVI's resolution plan. The Appellants argued that the rejection of their claim as a Financial Creditor was not challenged earlier due to the belief that their interests were safeguarded under the previous resolution plan.

The Appellants' claim as a 'Secured Financial Creditor' was rejected in 2017, and this decision remained unchallenged. The Appellants' attempt to raise the same issue in 2020 through I.A. No. 62 was deemed impermissible. The explanation provided by the Appellants for the delayed challenge was considered unreasonable. It was clarified that the creation of a pledge of shares does not equate to a guarantee or indemnity, and since the Appellants had not directly lent money to the Corporate Debtor, they did not qualify as financial creditors. The essence of financial debt, including interest and time value of money, was found lacking in the transaction between the Appellants and the Corporate Debtor. Consequently, the appeal was dismissed at the initial stage for lack of merit.

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