9911796707
TMI Blog2019 (3) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... n judgment. 2. At the instance of 'IL&FS Financial Services Limited'- ('Financial Creditor'), 'Corporate Insolvency Resolution Process' has been initiated against 'La-Fin Financial Services Pvt. Ltd.'- ('Corporate Debtor') by order dated 28th August, 2018 read with addendum-cum-corrigendum order dated 30th August, 2018. The Appellants have challenged the same on different grounds. 3. 'IL&FS Financial Services Limited'- ('Financial Creditor') filed petition under Section 433(e), (f) and Section 434 of the Companies Act, 1956 on 21st October, 2016, bearing Company Petition No. 847/2016 before the Hon'ble Bombay High Court. The said petition was transferred before the National Company Law Tribunal, Mumbai Bench, Mumbai, pursuant to Notification dated 29th June, 2017 issued by the Central Government under Section 434 of the Companies Act, 2013 read with Section 239 of the 'Insolvency and Bankruptcy Code, 2016' ("I&B Code" for short). 4. On transfer of case records from High Court to National Company Law Tribunal, Mumbai, 'IL&FS Financial Services Limited'- ('Financial Creditor') had filed the application on 25th May, 2017 on the requisite Form-1 as prescribed under Section 7 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring on behalf of the Appellants has challenged the impugned orders mainly on the following grounds: - There is no financial debt and there is no relationship of debtor and creditors between the 'Corporate Debtor' and 'IL&FS Financial Services Limited'- ('Financial Creditor'), for the following reasons: a. The principal documents from which the present controversy emanates are titled "Share Purchase Agreement ('SPA')" and "Letter of Undertaking ('LoU')". b. In the 'SPA', the parties are referred to as purchasers and sellers and the monies paid by the 'Corporate Debtor' to 'Multi Commodity Exchange of India Limited ('MCX')' is referred to as the purchase consideration. c. The 'LoU' only casts an obligation on the 'Corporate Debtor' to offer to purchase the shares of 'MCX Stock Exchange Ltd. ('MCX-SX')' acquired by 'IL&FS Financial Services Limited'- ('Financial Creditor'). d. The 'LoU' executed by the 'Corporate Debtor' at best provided an option to 'IL&FS Financial Services Limited'- ('Financial Creditor') to exit its investment in 'MCX-SX'. This option, at best was a one time option, which, if not exercised within the time period stipulated in the 'LoU' would lapse. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Appellate Tribunal, it was submitted that the Adjudicating Authority wrongly held that the 'IL&FS Financial Services Limited' comes within the meaning of 'Financial Creditor'. 13. It was also contended that the application was barred by limitation and was not maintainable. Reliance has been placed on the decision of the Hon'ble Supreme Court in "B.K. Educational Services Pvt. Ltd. v. Parag Gupta & Associates− (2018) SCC Online SC 1921". 14. It was further submitted that the petition stood abated on 5th February, 2017 in view of the Notification dated 7th December, 2016 issued by the Central Government whereby 'Companies (Transfer of Pending Proceedings) Rules, 2016' were framed, Form-1 as required as per Section 7 of the 'I&B Code' was not filed within a period of 60 days therefrom i.e. by 5th February, 2017. 15. Learned counsel appearing on behalf of the Appellants submits that the impugned order is passed in a manner contrary to settled principles. It was submitted that the order dated 28th August, 2018 signed by single Member and pronounced on the same date cannot be held to be legal and the addendum-cum-corrigendum order signed by both the Members on 30th August, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e price of the 'IL&FS Financial Services Limited'- ('Financial Creditor') share would be higher of (i) the price that would give the 'IL&FS Financial Services Limited'- ('Financial Creditor') an internal rate of return of 15% on its investment; or (ii) the price at which the most recent transaction of 'MCX-SX's equity shares was carried out by the 'MCX Group'. Further, as per the "Letter of Undertaking" dated 20th August, 2009 the 'La-Fin Financial Services Pvt. Ltd.'- ('Corporate Debtor') without the 'IL&FS Financial Services Limited'- ('Financial Creditor') written consent forbidden to issue 'MCX-SX' share to any person(s) at a price below Rs. 35/- per equity share. The 'IL&FS Financial Services Limited'- ('Financial Creditor'), therefore, purchased the share of 'MCX' on 20th August, 2009 at Rs. 36/- per share for total consideration of Rs. 159,12,00,000/- (Rupees One Hundred Fifty-Nine Crore Twelve Lakh Only). 16.4. On 20th November, 2009, the 'IL&FS Financial Services Limited'- ('Financial Creditor') received an 'EOGM' notice from 'MCX-SX' scheduled to be held on 15th December, 2009 for consideration to pass a Special Resolution for "Scheme of Reduction" of the Share Capital o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the 'IL&FS Financial Services Limited'- ('Financial Creditor') for the share extinguished. 16.7. The controversy erupted when the 'IL&FS Financial Services Limited'- ('Financial Creditor') received a letter dated 23rd August, 2010 from the 'MCX-SX' stating inter-alia that 'Financial Technologies India Limited' ('FTIL') had informed 'MCX-SX' that the 'La-Fin Financial Services Pvt. Ltd.'- ('Corporate Debtor') obligations under the 'Letter of Undertaking' had become infructuous on account of the Scheme of Reduction being approved by the Hon'ble High Court. Further, the said letter stated that in compliance of the order of Hon'ble Bombay High Court dated 10th August, 2010 passed in Writ Petition No. 1440/2010, the Board of Directors of the 'La-Fin Financial Services Pvt. Ltd.'- ('Corporate Debtor') has passed a resolution declining to honour any buy-back or other similar arrangement. 16.8. The 'IL&FS Financial Services Limited'- ('Financial Creditor') replied on 10th September, 2010 refuting the wrongful stand taken by 'MCX-SX', denying the contentions of the 'MCX Group', and reiterating that the 'La-Fin Financial Services Pvt. Ltd.'- ('Corporate Debtor') continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e declines to exercise the option, the promissor cannot compel performance. A concluded contract for the sale and purchase of shares comes into existence only when the promisee upon whom an option is conferred, exercises the option to sell the shares. Hence, an option to purchase or repurchase is regarded as being in the nature of a privilege. 80. In the present case, there is no contract for the sale and purchase of shares. A contract for the purchase or sale of the shares would come into being only at a future point of time in the eventuality of the party which is granted an option exercising the option in future. Once such an option is exercised, the contract would be completed only by means of spot delivery or by a mode which is considered lawful. Hence, the basis and foundation of the order which is that there was a forward contract which is unlawful at its inception is lacking in substance. (vii) The buy back agreements cannot be held to be illegal as found in the impugned order of the Whole Time Member of SEBI on the ground that they constitute forward contracts. A buy back confers an option on the promisee and no contract for the purchase and sale of shares is made un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to deposit an amount due as on 19th October, 2016 at Rs. 266,39,08,560/- inclusive of interest for clearing the amount due. During the Pendency, the said Petition was transferred to National Company Law Tribunal in terms of Notification dated 29th June, 2017. 16.13. A Legal Notice dated 3rd November, 2015 was issued by the Advocate of 'IL&FS Financial Services Limited' addressed to the 'La-Fin Financial Services Pvt. Ltd.'- ('Corporate Debtor'). In a reply to the said Legal Notice, it was responded on 18th November, 2015 that a suit had already been filed bearing Suit No. 449/2013 in the Hon'ble Bombay High Court pending for adjudication, the issue being subjudice no fresh suit be filed. It was suggested and called upon the 'IL&FS Financial Services Limited' to withdraw the Petition in writing. 17. The amount disbursed by 'IL&FS Financial Services Limited'- ('Financial Creditor') comes within the meaning of 'financial debt' having disbursed against the consideration for time value of money. Section 5(8) of the 'I&B Code' defines 'financial debt' and reads as follows: "5. Definitions. ─ (8) "financial debt" means a debt along with interest, if any, which is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchasing the shares within a specified time along with the payment of 15% accrual on 20th August, 2009. We hold that the amount if disbursed by 'IL&FS Financial Services Limited'- ('Financial Creditor') comes within the meaning of 'financial debt', therefore, the 'IL&FS Financial Services Limited'- ('Financial Creditor') has been rightly claimed to be a 'Financial Creditor' and filed Form-1 under Section 7 of the 'I&B Code'. LIMITATION: - 19. The 'Limitation Act, 1963' is applicable, as held by the Hon'ble Supreme Court in "B.K. Educational Services Pvt. Ltd." (Supra) and also in terms of Section 238A of the 'I&B Code' for filing an application under Section 7, Article 137 of Part II of the 'Limitation Act, 1963' will be applicable, which is as follows: Part II-OTHER APPLICATION Description of application Period of Limitation Time from which period begins to run 137. Any other application for which no period of limitation is provided elsewhere in this division. Three years 20. In the present case, it is not in dispute that right to apply under Section 7 accrues to 'IL&FS Financial Services Limited'- ('Financial Creditor') since 1st December, 2016, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dice no fresh suit be filed. It was suggested and called upon the 'IL&FS Financial Services Limited'- ('Financial Creditor') to withdraw the petition in writing. It is only thereafter on 21st October, 2016, 'IL&FS Financial Services Limited'- ('Financial Creditor') filed application under Sections 433 and 434 of the Companies Act, 1956 showing the due date as on 19th October, 2016. 25. The aforesaid fact shows that there is a continuous cause of action and the 'Corporate Debtor' never raised the question of limitation and on the other hand, a reply vide letter dated 18th November, 2015 intimating that the suit is pending and therefore, to withdraw the petition. There being a continuous cause of action, we hold that the application under Sections 433 and 434 of the Companies Act, 1956 was not barred by limitation and the 'Corporate Debtor' cannot take plea that there is no debt payable in law. 26. Learned counsel for the Appellant referred to Suit No. 449/2013 submitted that there was not a money claim but from bare perusal of the plaint as enclosed at page 647-707 (Exhibit "A" & "B") a Suit was filed by 'IL&FS Financial Services Limited' against 'La-Fin Financial Services Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequently amended by Notification dated 28th February, 2017, it followed by "Companies (Transfer of Pending proceedings) Second Amendment Rules, 2017' made vide Notification dated 29th June, 2017, relevant portion of which reads as follows: "5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.- (1) All petitions relating to winding up under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under subsection (4) of section 419 of the Act, exercising () () . territorial jurisdiction to be dealt with in accordance with Part II of the Code: Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar's case (supra) a three-Judges Bench of this Court emphasized the distinction between "supersession" of a rule and "substitution" of a rule and held that the process of substitution consists of two steps: first, the old rule is made to () () . cease to exist and, next, the new rule is brought into existence in its place." 31. In view of the decision of the Hon'ble Supreme Court in "Zile Singh" (Supra), we hold that the case of the Appellants is covered by the Notification dated 29th June, 2017 and it having filed Form-1 on 25th May, 2017 i.e. immediately after transfer of the case, the petition under Sections 433 & 434 of the Companies Act, 1956 has not abated. 32. In so far as the amended order dated 30th August, 2018 is concerned, under sub-section (2) of Section 420 of the Companies Act, 2013 read with National Company Law Tribunal Rules, it is always open to the Adjudicating Authority to make necessary correction in the order passed by it. It is not in dispute that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
