2022 (6) TMI 312 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt or not - existence of debt and dispute or not - HELD THAT - It is very clear from the document placed by the Respondent that the essence of transaction as entered between the parties herein is advance payment/final payment towards supply of materials, commissioning of wind turbines/ completion of wind energy project for subsidiaries of IEDCL. The advance/progressive payments for such work is clearly authored by ILFS group and the loan amount were adjusted at the time of final payment for the work performed by WWIL and its subsidiary company WWWRDPL. The aforesaid facts clearly suggest that the payment has been made by IFIN to WWIL and its subsidiary towards supply of material and for rendering services - The Corporate Debtor herein is merely the corporate guarantor along with another Vishwind Infrastructure LLP as co-guarantor. The amounts assigned by IFIN to the Financial Creditor have been accounted for by Vejas Power Project Limited, as capital advance in the audited balance sheet as filed by the Registrar of Companies for F.Y. 18 F.Y. 19. This clearly shows that the Vejas Power Project Limited has knowledge that the amount due does not come within the meaning of financial debt , therefore, accounted the amount as a Capital Advance and not as a Financial Loan - It is settled law that under Section 129 of the Companies Act, 2013 financial statements shall give true and fair view of the state of affairs of company and shall comply with the Accounting Standard. Therefore, no contrary stand can be taken by Vejas Power Project Limited. In this case, both sides have clearly functioned as collective through their group companies in order to fulfil the terms of MoU and the transactions as stated by the Petitioner needs to be looked as a part of the transaction under the initial MoU dated 27.07.2010 entered between IL FS Energy Development Company Limited (IEDCL) and Wind World India Limited (WWIL). Thus, the amount that has been disbursed by IFIN do not come within meaning of Financial Debt as defined under Section 5(8) of the IBC. Application dismissed as not maintainable.

Summary

Issues Involved:
1. Whether the transactions in question qualify as 'financial debt' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Whether the assignment agreement is admissible in law.
3. Whether the petition under Section 7 of the IBC is maintainable.

Issue-wise Detailed Analysis:

1. Whether the transactions in question qualify as 'financial debt' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC):

The petitioner, Vejas Power Project Limited, filed an application under Section 7 of the IBC against Vayu Infrastructure LLP for initiating Corporate Insolvency Resolution Process (CIRP) for default in repayment of Rs. 2,68,88,44,690/-. The petitioner argued that IL & FS Financial Services Limited provided financial assistance to Wind World Wind Farm (MP) Private Limited, and the Corporate Debtor stood as a corporate guarantor. The financial creditor invoked the guarantee and filed the application under Section 7, claiming that the debt and default were clear and the petition was complete.

The respondent, Corporate Debtor, contended that the transactions were not financial debts but facilitative transactions for advance payments towards the completion of wind power projects as per a Memorandum of Understanding (MoU) between IL & FS Energy Development Company Limited and Wind World India Limited. The respondent provided a detailed background of the transactions, explaining that the payments were made as project advances for the supply, erection, and commissioning of wind power projects.

The Tribunal found that the essence of the loan agreements was advance payments towards the supply of materials and commissioning of wind turbines, and the amounts disbursed by IFIN were adjusted against the final payments for the work performed by WWIL and its subsidiaries. The Tribunal concluded that the amounts disbursed by IFIN do not come within the meaning of 'financial debt' as defined under Section 5(8) of the IBC.

2. Whether the assignment agreement is admissible in law:

The respondent argued that the assignment agreement could not be admissible in law because it was under-stamped as per the Maharashtra Stamp Act, 1958. The Tribunal noted that the assignment deed was indeed under-stamped and therefore inadmissible as evidence. This further weakened the petitioner's case.

3. Whether the petition under Section 7 of the IBC is maintainable:

The Tribunal noted that the amounts assigned by IFIN to the Financial Creditor were accounted for as 'capital advance' in the audited balance sheet of Vejas Power Project Limited. This indicated that the Financial Creditor was aware that the amount due did not qualify as 'financial debt.' The Tribunal emphasized that under Section 129 of the Companies Act, 2013, financial statements must give a true and fair view of the company's state of affairs and comply with accounting standards. The Tribunal concluded that the transactions were part of a broader arrangement under the initial MoU and did not constitute financial debt under Section 5(8) of the IBC.

The petition was dismissed as not maintainable, as it was filed for recovery rather than for a resolution process, which is the objective of the IBC.