2021 (7) TMI 512 - AT - Insolvency and Bankruptcy

Seeking to constitute the Committee of Creditors in accordance with Section 21 of IBC - It is claimed by the Appellant that BPPL has furnished a collateral security to Respondent No. 2 STCI Finance Limited - STCI Finance Ltd. is financial creditor as defined in Section 5(7) and Section 5(8) of the IBC or not - HELD THAT - The liability arising out of guarantee for any of the items referred in sub-clause (a) to (h) is Financial Debt. The requirement for a debt to be a financial debt and such a creditor to be a financial creditor has been explained very succinctly by Hon ble Apex Court in ANUJ JAIN VERSUS AXIS BANK LTD. 2020 (2) TMI 1259 - SUPREME COURT where it was held that the root requirement for a creditor to become financial creditor for the purpose of Part II of the Code, there must be a financial debt which is owed to that person. He may be the principal creditor to whom the financial debt is owed or he may be an assignee in terms of extended meaning of this definition but, and nevertheless, the requirement of existence of a debt being owed is not forsaken. In order to differentiate between the nature and purpose of mortgage‟ and guarantee‟ with respect to a loan, the Hon ble Apex Court proceeds to clarify in Anuj Jain by holding that a mortgagee as a creditor shall be a secured creditor‟ but not a financial creditor‟ - The Appellant‟s reliance on Anuj Jain in support of his claim is, therefore, found to be out-of-context from the facts of the instant case. We may look at the ASCOT REALTY PRIVATE LIMITED VERSUS AJAY KUMAR AGARWAL, ORIENTAL BANK OF COMMERCE -SUBSTITUTED BY PUNJAB NATIONAL BANK, INDIA BULLS HOUSING RESPONDENT FINANCE LIMITED, FULLERTON INDIA CREDIT COMPANY LIMITED, SWARNA TECHNOLOGY PRIVATE LIMITED, ESKAY ENCLAVE PRIVATE LIMITED, YUTHIKA TRADING COMPANY PRIVATE LIMITED, PANDEY CHEMICAL PRIVATE LIMITED, ACTUAL DRESSES, GM DRESSES, KRYSTAL DRESSES, QUEEN DRESSES, RDH TECHNOLOGIES PRIVATE LIMITED 2020 (10) TMI 962 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI where it was held that The matter cannot, of course, be settled merely by treating the ipsissima verba of Wiles, J., as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished Judge. Looking to the detailed exposition of Anuj Jain and Ascot Realty in the aforementioned paragraphs and the facts of the present case, we are of very clear and unambiguous view that on the basis of Corporate Guarantee given by BPPL for the loan provided by STCI Finance Ltd. (Respondent No. 2) to BIL; STCI Finance Ltd. is a financial creditor in the Corporate Insolvency Resolution Process of the Corporate Debtor BPPL - there are no error in the Impugned Order. Appeal dismissed.

Summary

Issues Involved:
1. Whether STCI Finance Ltd. qualifies as a financial creditor under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Whether the Committee of Creditors (COC) was constituted correctly in accordance with Section 21 of the IBC.
3. Applicability of judgments from previous cases to the current case.

Detailed Analysis:

1. Qualification of STCI Finance Ltd. as a Financial Creditor:
The core issue is whether STCI Finance Ltd., which provided a loan to Bohra Industries Limited (BIL) with Bohra Pratisthan Private Limited (BPPL) acting as a guarantor, qualifies as a financial creditor under Section 5(8) of the IBC. The Appellant argued that STCI Finance Ltd. does not meet the definition of a financial creditor as there was no "disbursal against the consideration for the time value of money" to BPPL. The Appellant cited the Supreme Court judgment in Anuj Jain v. Axis Bank Limited, which emphasized that a financial creditor must have disbursed funds against the consideration for the time value of money. However, the Tribunal found that the corporate guarantee provided by BPPL for the loan to BIL does confer the status of a financial creditor to STCI Finance Ltd., as per Section 5(8)(i) of the IBC.

2. Constitution of the Committee of Creditors (COC):
The Appellant contended that the Resolution Professional did not constitute the COC correctly, as STCI Finance Ltd. was incorrectly included as a financial creditor. The Tribunal examined the Loan Agreement and the Deed of Guarantee, which clearly indicated that BPPL provided a corporate guarantee for the loan given by STCI Finance Ltd. to BIL. The Tribunal referred to Section 5(8) of the IBC, which includes liabilities arising from guarantees as financial debts. Therefore, the inclusion of STCI Finance Ltd. in the COC was deemed appropriate.

3. Applicability of Previous Judgments:
The Appellant argued that the judgment in Anuj Jain (supra) should apply, asserting that the security interest provided by BPPL does not qualify as financial debt. However, the Tribunal found that the Anuj Jain case dealt with a mortgage and not a corporate guarantee. The Tribunal also referred to the judgment in Ascot Realty Private Limited v. Ajay Kumar Agarwal, which upheld the inclusion of claims based on corporate guarantees as financial debts. The Tribunal clarified that the context and facts of each case are crucial in determining the applicability of previous judgments. It concluded that the corporate guarantee provided by BPPL for the loan to BIL qualifies STCI Finance Ltd. as a financial creditor.

Conclusion:
The Tribunal dismissed the appeal, affirming that STCI Finance Ltd. is a financial creditor under the IBC due to the corporate guarantee provided by BPPL. The COC was constituted correctly, and the Appellant's reliance on the Anuj Jain judgment was found to be out of context. The Tribunal upheld the Impugned Order and found no error in its constitution or the inclusion of STCI Finance Ltd. in the COC. There was no order as to costs.