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2023 (9) TMI 191 - AT - Insolvency and BankruptcyRejection of claim - ambit and scope of Reconciliation of accounts - claim relating to Bank Guarantees issued by JAL invoked by the Lenders of JIL is the amount which need to be adjusted/deducted from the amount payable to JIL or not - Mutually settlement of claim. What is the ambit and scope of Reconciliation of accounts between JAL JIL as per directions of the Supreme Court in Jaypee Kensington Judgment 2021 (3) TMI 1143 - SUPREME COURT ? - HELD THAT - The Adjudicating Authority rightly came to the conclusion that the determination was of the amount which was receivable by JIL/Homebuyers of JIL - a very wide submission made by Shri Krishnan Venugopal on behalf of the JAL that reconciliation required adjustment of claims of both JAL and JIL, cannot be accepted - the purpose was to refund Rs.750 Crores to JAL and from the said amount, the amount payable to JIL was to be retained. The Hon ble Supreme Court has further confined the determination to only the accounts concerning the amounts advanced to JAL by JIL towards construction contracts . It is true that extent of liabilities discharged by JAL towards the above was also to be taken care of, for which purpose reconciliation was directed. Thus, the limited scope was with regard to advance given by JIL to JAL towards the construction contract. How much liabilities have been discharged by JAL was possible by reconciliation of the financial statements of both JIL and JAL which was done by Grant Thornton appointed by the Adjudicating Authority. Ambit and scope of reconciliation of account between JAL and JIL was concerning the amounts advanced to JAL by JIL towards construction contracts and extent of liabilities discharged by JAL. The reconciliation was not to find out what amount was payable to JAL by JIL. Whether the claim of Rs.212 Crores relating to Bank Guarantees issued by JAL invoked by the Lenders of JIL is the amount which need to be adjusted/deducted from the amount payable to JIL? - HELD THAT - It is clear that the amount of Rs.212 crores related to the Bank Guarantees invoked by the lenders of JIL was the amount not referable to any advance given by JIL to JAL for construction purpose. The amount of Rs.212 crores is already claimed by JAL in CIRP of JIL as is clear from the claim filed by JAL in Form B, as extracted above. When the JAL has already filed its claim in the CIRP process of JIL which includes Rs.212 crores towards invocation of Bank Guarantees, there is no occasion for deducting the said amount from the amount of Rs.750 crores deposited by JAL. The treatment of amount of Rs.212 crores has to be as per the IBC proceeding - the finding of the Adjudicating Authority that JAL is entitled to retain amount of Rs.212 crores out of Rs.750 crores is unsustainable. The amount of Rs.212 crores which is related to the invocation of Bank Guarantees cannot be subject matter of reconciliation process. Whether RA Bill for construction amounting to Rs.49.63 Crores payable by JIL to JAL should have been deducted from amount payable to JIL? - Whether the Facility Management Bills raised by JAL on JIL of Rs.2.33 Crores ought to have been deducted from the amount to be paid to JIL? - Whether amount of Rs.1.19 Crores towards providing Hospitality Services ought to have been deducted from the amount payable to JIL? - HELD THAT - While considering Point No.1 opined that reconciliation between accounts of JAL and JIL was not for purpose of finding out amount which is payable to JAL from JIL rather the determination was towards the amount which is receivable by JIL out of the advance given to the JAL regarding construction - RA Bill for construction amounting to Rs.49.63 Crores payable by JIL to JAL could not be deducted from amount payable to JIL - The Facility Management Bills raised by JAL on JIL of Rs.2.33 Crores could not be deducted from the amount to be paid to JIL - Amount of Rs.1.19 Crores towards providing Hospitality Services could not be deducted from the amount payable to JIL. Whether the Adjudicating Authority on account of mutually settled amount totaling to Rs.12.26 Crores ought not to have added amount of Rs.6.13 Crores in the amount receivable by JIL? - HELD THAT - The amount payable to JAL was not to be taken into consideration and amount payable to JIL was only to be taken into consideration. As per mutual resolution, Rs.6.13 crores was receivable by JIL. The said amount has rightly been included in the amount payable to JIL in Para 110 of the order of Adjudicating Authority. We do not find any merit in the submission of Appellant and no error is committed by the Adjudicating Authority in adding amount of Rs.6.13 crores in the amount receivable by JIL - Adjudicating Authority on account of mutually settled amount totalling to Rs.12.26 Crores has not committed any error in adding amount of Rs.6.13 Crores in the amount receivable by JIL. Whether direction of the Adjudicating Authority in paragraph 111 directing for payment to JIL/Home-Buyers of JIL of Rs.649.52 Crores with proportionate interest is unsustainable? - HELD THAT - It is not the case of the JIL that mobilization advance was given by JIL to JAL which carried any interest nor it is submission of JIL that Interest Free Maintenance Deposit carries interest. When the amount which was receivable by JIL as found by Adjudicating Authority did not carry any interest, direction by the Adjudicating Authority to pay said amount alongwith proportionate interest was uncalled for - the direction issued by the Adjudicating Authority in Para 111 for payment of proportionate interest is unsustainable. Whether JIL is entitled for amount of Rs.70.89 Crores towards Land Swap Deal and the Adjudicating Authority has wrongly rejected the said claim? - HELD THAT - Even though as per the financial statement of JIL, the amount of Rs.70.89 crore was payable as Trade Receivables the same cannot be part of the reconciliation process which is confined to the advance made by JIL to JAL towards construction contracts. Sub-lease Deeds were executed by JIL to discharge the liability of JAL to its lenders which transaction has rightly been treated by Grant Thornton to be outside the realm of reconciliation process - there are no error in the order of Adjudicating Authority rejecting claim of Rs.70.89 crore of JIL towards Land Swap Deals - JIL is not entitled for amount of Rs.70.89 Crores towards Land Swap Deal and the Adjudicating Authority has rightly rejected the said claim. Appeal disposed off.
Issues Involved:
1. Scope of Reconciliation of Accounts 2. Adjustment of Rs. 212 Crores Bank Guarantees 3. Adjustment of Pre-CIRP Dues (Rs. 49.63 Crores, Rs. 2.33 Crores, Rs. 1.19 Crores) 4. Mutually Settled Amount of Rs. 12.26 Crores 5. Payment of Proportionate Interest 6. Claim of Rs. 70.89 Crores towards Land Swap Deal 7. Reliefs to the Appellants Summary: Scope of Reconciliation of Accounts: The Supreme Court directed reconciliation of accounts between JAL and JIL concerning amounts advanced by JIL to JAL towards construction contracts and the extent of liabilities discharged by JAL. The reconciliation was not to determine what amount was payable to JAL by JIL. Adjustment of Rs. 212 Crores Bank Guarantees: The claim of Rs. 212 Crores related to Bank Guarantees issued by JAL and invoked by the lenders of JIL was not to be adjusted from the amount payable to JIL. This amount is already claimed by JAL in the CIRP process of JIL and should be treated as per IBC proceedings. Adjustment of Pre-CIRP Dues: The claims of Rs. 49.63 Crores (RA Bills), Rs. 2.33 Crores (Facility Management Bills), and Rs. 1.19 Crores (Hospitality Services) were pre-CIRP dues. The reconciliation process was not meant to determine these claims, which should be addressed in the CIRP process. The Adjudicating Authority erred in considering these amounts for reconciliation. Mutually Settled Amount of Rs. 12.26 Crores: The Adjudicating Authority correctly included Rs. 6.13 Crores (half of Rs. 12.26 Crores) in the amount receivable by JIL as it was mutually resolved to be shared equally between JIL and JAL. Payment of Proportionate Interest: The direction of the Adjudicating Authority to pay JIL/Home-Buyers of JIL Rs. 649.52 Crores with proportionate interest was unsustainable. The Supreme Court had declared that the amount of Rs. 750 Crores along with accrued interest was the asset of JAL, and there was no direction to pay interest to JIL/Home-Buyers. Claim of Rs. 70.89 Crores towards Land Swap Deal: The claim of Rs. 70.89 Crores by JIL was related to a Land Swap Deal and was not part of the construction contracts. The Adjudicating Authority rightly rejected this claim as it was outside the scope of reconciliation. Reliefs to the Appellants: - Company Appeal (AT) (Ins.) No. 302 of 2023: Partly allowed by setting aside the direction to pay proportionate interest to JIL. Other prayers were rejected. - Company Appeal (AT) (Ins.) No. 507 of 2023: The findings on issues (a), (d), and (e) in favor of JAL were unsustainable. The Adjudicating Authority's direction in Paras 109, 110, and 111 was affirmed except for the direction to pay proportionate interest.
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