9911796707
TMI Blog2019 (9) TMI 1441X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanatory items will be applicable only if the elements of the basic exhaustive definition are present, namely, (i) disbursal of debt and (ii) consideration of the time value of money. Both these elements are absent in the instant case. Admittedly, there has been no disbursal of any debt by the Applicant to the Corporate Debtor against consideration for time value of money - Thus the Applicant s case cannot fall within the definition of Financial Debt as stipulated under section 5(8) which provides that a Financial Debt means a debt along with interest, if any, which is disbursed against the consideration for the time value of money . With regards to the claim submitted by the Applicant herein, the RP has considered the same in the light of the supporting documents submitted by the Applicant as well as the records of the Corporate Debtor available before him. Since, the records of the Corporate Debtor did not reveal any amount due and payable to the Applicant, the RP has rejected the claim of the Applicant. This Adjudicating Authority observes that the RP was not hasty in rejecting the claim of the Applicant herein and the decision was taken after careful verification from records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Debtor is in respect of its joint and several liability inter-alia to redeem the Non-Convertible Debentures (NCDs) under the Investment Agreement dated June 25, 2015. e. That as per the list of creditors as on August 29, 2018 for claims received upto November 27, 2018, updated up to April 25, 2019, the Applicant's claim was shown to be under verification. f. That the Applicant addressed the letter dated November 5, 2018 to Respondent No. 2/RP inter alia providing certain materials, facts and precedents in law, in support of its claims. However, the Applicant has not received any response from Respondent No. 2/RP in this regard. g. That on May 24, 2019, the Applicant received a communication from Respondent No. 2/RP rejecting the claim filed by the Applicant as a financial creditor (Impugned Email). h. That on May 24, 2019, the Applicant received a communication from Respondent No. 2/RP erroneously rejecting the claim filed by the Applicant as a financial creditor on legally untenable grounds, which essentially include: i. Claim is not a financial debt: The Applicant's claim is allegedly not a financial debt as the Corporate Debtor has not admitted the same in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b] "jointly and/or severally" redeem the NCDs held by the Applicant in IBTPL; [c] convert the CCDs into 906,599 equity shares of IBTPL. m. That as per Clause 16.2 of the Investment Agreement, the Corporate Debtor is jointly and severally liable to ensure the performance of the Investment Agreement. The clause 16.2 of the Investment Agreement is extracted below: "16.2 The Promoters, the Company and IBEUL shall be jointly and severally liable to ensure the performance of this Agreement." n. That the Corporate Debtor is jointly and severally liable to pay outstanding amounts due and payable towards NCDs. Respondent No. 2/RP has submitted that the Corporate Debtor has not shown the NCDs as 'contingent liability' in its financial statements. It is submitted that this argument is misplaced, as joint and several liability is in fact a primary liability and not a contingent liability. o. That Clause 17.3 of Investment Agreement clearly fortifies the obligation of the Corporate Debtor to redeem the NCDs as it clearly states that the Investors (which includes the Applicant) will have right to transfer the Equity Securities in the event the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transaction Documents, which covenants are hereby incorporated herein by reference and made a part of this Deed as if such covenants and other relevant provisions were set forth in full herein." q. That the deed of Hypothecation clearly mentions the NCD's issued and the Corporate Debtors obligation to redeem the same. r. That the Corporate Debtor is liable at any rate to redeem the NCD's as a Guarantor and/or Indemnifier under the investment Agreement as per clause 10.7 of the investor Agreement. Clause 10.7 (read with the definition of 'Losses') of the Investment Agreement: "The Company, IBEUL and the Promoters ("Indemnifying Parties") jointly and severally indemnify, defend and hold harmless, promptly on demand at any time and from time to time, each Investor and each of its Related Parties, officers, directors, agents and employees, and (in the case of the occurrence of a Loss as defined under point (vi) of the definition of 'Losses'), the Company (the "Indemnified Parties") from and against, and pay or reimburse the Indemnified Parties for any and all Losses, including without limitation, any Losses arising from any br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f determination of existence of Debt. 6. Resolution Professional filed counter affidavit and written submissions inter-alia stating as under: i. That the claim of the Applicant could not be qualified as 'Financial Debt' as there is no document, including financial statements, which would show that the Corporate Debtor had any liability towards the Applicant; ii. The Claim amount submitted by the Applicant would require reassessment or adjudication by appropriate authority in light of the invocation of pledge by the Applicant which the RP is not empowered. iii. That the Applicant has referred to clauses 16.2 read with 25.4 of the Investment Agreement and has stated that in terms of the said clauses the liability of the Corporate Debtor is joint and several to the Applicant under the Investment Agreement. The said clauses 16.2 and the relevant sub-clause 25.4 (which provides obligation with respect to the redemption of the NCDs) are reproduced hereunder: "16.2 The Promoters, the Company and IBEUL shall be jointly and severally liable to ensure the performance of this Agreement." ... "25.4 Upon the occurrence of a Specified Event of Default, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute the board of directors of IBTPL as well as the Corporate Debtor. However, there is nothing in the said clauses 16.2 or 25.4 that provides that the Corporate Debtor had undertaken the liability to redeem the NCDs or for that matter any financial liability towards the Applicant. v. That even as per clause 10.7, there is no indemnity obligation on the Corporate Debtor. If anything, essentially, it is the Promoters (which term does not include the Corporate Debtor) who had undertaken this indemnity obligation to indemnify the Applicant. vi. It is submitted that the said clause 17.3 states the right to the Applicant to transfer the securities held by them to any person (including a competitor), particularly, upon failure of the obligation to redeem NCDs by the Promoters, IBTPL and, allegedly, by the Corporate Debtor. vii. That as regards the purported joint and several liability of the Corporate Debtor as is being claimed by the Applicant, without prejudice to what is stated above, it is pertinent to mention that as per the Indian Accounting Standard - 37 ("IND AS 37"), where an entity is jointly and severally liable for an obligation, the part of the obligation tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the written submissions filed by concerned parties. 8. The point for consideration before this Adjudicating Authority is whether the claim of the Applicant is to be admitted as a Financial Debt and the Applicant is to be included in the CoC or not. 9. The claim of the Applicant is based on the Investment Agreement dated 24.06.2015. Relying on the said agreement, the Applicant claimed that the Corporate Debtor is, jointly and severally, liable to redeem the NCD's and additional NCD's that were secured by a pledge of shares of IND-Bharat Thermotek Pvt Ltd (holding Company of the Corporate Debtor) and the Corporate Debtor herein under the Share Pledge Agreement dated 09.07.2015. However, Schedule I of the said share pledge Agreement shows the name of IBIPL and IBTPL as Pledgors, the Corporate Debtor has not been shown as Pledgor. 10. The Applicant relied on Clause 16.2 of the Investment Agreement as extracted below: "16.2 The promoters, the Company and IBEUL shall be jointly and severally liable to ensure the performance of this Agreement" 11. The language as seen in Clause 16.2 of the Investment Agreement clearly shows that the obligation of the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pledge Agreement was against any disbursal of Loan to the Corporate Debtor. In other words, there is no privity of Contract between the Applicant and the Corporate Debtor in respect of any funds flowing from the Applicant to the Corporate Debtor in connection with the issuance of NCD's by IBTPL. It has been held in Akshay Jhunjhunwala vs. UoI AIR 2018 CAL 139 that a Financial Creditor is a Creditor whose claim arises out of a transaction in liquidity entered into by such creditor with Company. Further, the definition of Financial Debt in Section 5(8) of the Code is an exhaustive one as it uses both the expressions 'means' and 'includes'. When both words 'means' and 'includes' are used, it is to be regarded as an exhaustive explanation of the things intended to be caught in the net of the Section (Ramnatha Aiyer's Advance Law Lexicon, 5th Edition, Vol 3, Pg. 3225). Section 5(8) defines a 'Financial Debt' to mean 'a debt along with interest, if any, which is disbursed against the consideration for the time value of money' and then gives the exhaustive explanation of the things intended to be caught in the net of the definition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; [Explanation.- For the purposes of this subclause,-(i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expression, "allottee" and "real estate project" shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development Act, 2016 (16 of 2016);] (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a gua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ... for the purpose of collating information relating to assets, financial operation of Corporate Debtor or financial position of Corporate Debtor, including the liabilities as on the date of initiation of resolution process as per the section 18(1), it is the duty of the Resolution Professional to collate all the claims and to verify the same from the records of assets and liabilities maintained by the Corporate Debtor. "(Emphasis supplied by us). 21. With regards to the claim submitted by the Applicant herein, the RP has considered the same in the light of the supporting documents submitted by the Applicant as well as the records of the Corporate Debtor available before him. Since, the records of the Corporate Debtor did not reveal any amount due and payable to the Applicant, the RP has rejected the claim of the Applicant. This Adjudicating Authority observes that the RP was not hasty in rejecting the claim of the Applicant herein and the decision was taken after careful verification from records of assets and liabilities maintained by the Corporate Debtor. 22. In view of the foregoing discussion, the Application bearing IA No. 582/2019 is dismissed. Further this Adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
