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2024 (4) TMI 631 - AT - Insolvency and BankruptcyAcceptance of claim as Financial Creditor - mutually agreed settlement arrived at - whether by virtue of Deed of Security dated 20.03.2020 SPIL was discharged from its obligation of the financing document, Consent Term, and Amendment Agreement and no claim of Financial Debt of the Financial Creditor survived after Deed of Security dated 20.03.2020? - HELD THAT - The Consent Term between the parties dated 09.09.2019, in para 2(a) clearly contemplated creation for first and exclusive charge by way of registered mortgage in respect of 2,00,000 sq. ft. carpet area in favour of IIFL and IIFL Home Finance Ltd. as additional security in respect of the loan extended by the Financial Creditor. The Deed of Security dated 20.03.2020 is clearly in reference to Consent Term paragraph 2(a) and i.e., a Deed of Additional Security - Clause E of the Deed of Security clearly referred to creation of first ranking mortgage and charge over the property described in Clause 4.1 and Schedule 3. Clause F also referred to same obligation by mortgagor to execute this indenture/deed in favour of the lender on behalf of the obligor/SPIL as security for the payment of the secured obligation payable to the lenders in accordance with the Consent Terms and this Amendment Agreement. The present is case where from the Mortgaged Properties debt and dues of SPIL has not been discharged and SPIL is claiming discharge only on basis of execution of Security Agreement dated 20.03.2020, which is unacceptable. When all the Clauses E, F, G, I and J are read, it is clear that the Deed of Security was nothing but additional security by creating a mortgage of the assets i.e., 2,00,000 sq. ft. carpet area in the Project - The submission of the Appellant that Deed of Security discharged its obligation under the financial documents cannot be accepted. The deed of security was not an Amendment Agreement to the financial documents, Consent Terms or Amendment Agreement already executed. There is no applicability of Section 41 in the present case, since the Deed of Security dated 20.03.2020, cannot be read as discharge by the lenders to the obligations of SIPL. SIPL, who continued to be responsible for repayment which were never discharged from its obligation. The Deed of Security does not novate the terms of the facility document. Facility document were amended by the Amendment Agreement which recorded that terms of the Loan Agreement and Additional Laon Agreement shall be amended only to the extent provided therein. Deed of Security was executed as the additional security document and is not novation of financial documents or Consent Term. The Judgment of the Hon ble Supreme Court in VENKATARAMAN KRISHNAMURTHY AND ANOTHER VERSUS LODHA CROWN BUILDMART PVT. LTD. 2024 (2) TMI 1154 - SUPREME COURT was on its own facts and present is not a case where Adjudicating Authority has created any terms of Agreement for the parties. The Adjudicating Authority has after noticing the relevant Agreement between the parties have only interpreted them in the facts and backgrounds of the case. The Judgment of the Hon ble Supreme Court in Venkatraman Krsihnamurthy Anr. thus is clearly distinguishable and has no application in the present case. The Adjudicating Authority did not commit any error in allowing the application. The Adjudicating Authority has rightly held that the Security Agreement was to provide for Additional Security only - thus, no error has been committed by the Adjudicating Authority, in directing for admission of the claim of the Financial Creditors. Appeal dismissed.
Issues Involved:
1. Whether the Deed of Security dated 20.03.2020 discharged SPIL from its financial obligations. 2. Applicability of Section 41 and Section 62 of the Indian Contract Act, 1872. 3. Whether the Adjudicating Authority correctly admitted the financial claims of IIFL and IIFL Home Finance Ltd. Summary: Issue 1: Whether the Deed of Security dated 20.03.2020 discharged SPIL from its financial obligations. The Appellant, a Financial Creditor of SPIL, challenged the admission of IIFL Home Finance Ltd.'s claim as a Financial Creditor based on the Deed of Security dated 20.03.2020. The Appellant argued that SPIL was discharged from its obligations to IIFL and IIFL Home Finance Ltd. upon the execution of the Deed of Security, which created a first and exclusive charge on 2,00,000 sq. ft. carpet area of the project "Satra Hills." The Adjudicating Authority held that the Deed of Security was an additional security and did not discharge SPIL from its obligations. The Tribunal affirmed this view, stating that the Deed of Security was not an amendment to the financial documents or Consent Terms but an additional security document. Issue 2: Applicability of Section 41 and Section 62 of the Indian Contract Act, 1872. The Appellant contended that under Section 41 of the Indian Contract Act, 1872, the acceptance of performance from a third person (SPDPL) discharged SPIL from its obligations. The Tribunal rejected this argument, stating that the Deed of Security did not discharge SPIL from its obligations. Additionally, the Appellant argued that Section 62, which deals with novation, rescission, and alteration of contracts, applied. The Tribunal held that the Deed of Security did not novate the terms of the facility documents but was an additional security document, hence Section 62 was not applicable. Issue 3: Whether the Adjudicating Authority correctly admitted the financial claims of IIFL and IIFL Home Finance Ltd. The Adjudicating Authority had allowed the applications filed by IIFL and IIFL Home Finance Ltd. to admit their claims as Financial Creditors in the CIRP of SPIL. The Tribunal upheld the Adjudicating Authority's decision, stating that the claims were legitimate and the Deed of Security was intended to provide additional security, not to discharge SPIL's obligations. The Tribunal dismissed both appeals, affirming the orders dated 22.11.2023 and 05.12.2023, which directed the admission of the financial claims. Conclusion: The Tribunal concluded that the Deed of Security dated 20.03.2020 did not discharge SPIL from its financial obligations, and the Adjudicating Authority correctly admitted the financial claims of IIFL and IIFL Home Finance Ltd. The appeals were dismissed.
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