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TMI Blog2021 (3) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... ode could afford to deviate from the procedure prescribed there under. R1 has not been able to show that the claims of the R2 to R7 were submitted to him electronically as provided under Form A. R2 to R7 have also not been able to show that they furnished their claims as provided under Regulation 8 of the CIRP Regulations in Form C of the Schedule. Item 5 of the Form C mandates the Financial Creditor(s) to furnish the details of the documents by reference to which the debt can be substantiated. It was contended by the Applicant that the so called Corporate Guarantees attracted stamp duty in the State of Maharashtra. But in the absence of the documents itself either in the electronic form or physical form, it would not be appropriate for this Authority to comment whether the documents could attract stamp duty under the Maharashtra Stamp Act, 1958 (Bombay Act No. LX of 1957) - thus, the the irresistible conclusion would be that R1 without proper submission of documents before him and without proper verification admitted R2 to R7 as Financial Creditors of the Corporate Debtor - answered in the negative. Whether, the Corporate Guarantees dated 03/03/2017 executed by the Corporate Debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute/reorganise the Committee of Creditors (CoC) removing Respondent Nos. 2 to 7 and consequential directions thereupon. 2. The facts leading to the Application can be depicted as under. Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated by this Bench by an order dated 15.05.2018 (Admission Order) and Manish Dhirajlal Kaneria was appointed as Interim Resolution Professional (IRP) on 18.05.2018. The IRP published a public announcement on 21.05.2018 inviting claims from the creditors of the Corporate Debtor. Certain shareholders of the Corporate Debtor challenged the Admission Order before the Hon'ble National Company Law Appellate Tribunal (NCLAT) in CA (AT) (Insolvency) Nos. 255-256 & 257-258 & 259-260 of 2018. The Hon'ble NCLAT by an order dated 30.05.2018 inter alia stayed the Admission Order. However, in view of the subsequent developments, the Appellants withdrew the Appeal. The Hon'ble NCLAT by order dated 30.04.2019, permitted the withdrawal of the Appeal and directed this Tribunal to proceed with the matter in accordance with law. 3. Accordingly, the CIRP of the Corporate Debtor was resumed and by order dated 07.05.2019 this Tribunal dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal) Approximately 906 Cr Under Verification 5. The Applicant viz. Doha Bank Q.P.S.C. is a part of the Consortium of Banks/Financial Institutions which had extended a foreign currency loan of USD 250,000,000/- (United States Dollars Two Hundred and Fifty Million) to the Corporate Debtor under a loan agreement dated 19/03/2010. The Consortium by an amendment and restatement agreement dated 05/09/2016 extended the repayment date up to 03/12/2016. The Corporate Debtor could not repay the amount by that date. Hence, by another restatement agreement dated 04/12/2016 the repayment date was extended till 05/06/2017. As on date of the filing of the Application i.e., 29th May 2019 an amount of USD 199,000,000 including interest remained outstanding. 6. The Corporate Debtor is one of the subsidiaries of Reliance Communications Limited (RCOM), the holding/parent company. RCOM and another group entity viz. Reliance Telecom Limited (RTL) availed Rupee Loan Facilities respectively to the tune of ₹ 6015,00,00,000/- & ₹ 735,00,00,000/- under Facility Agreement dated 20/02/2015 from a Consortium of Banks of which the Respondent Nos. 2 to 7 too were the members. The Corporate Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other ECB Lenders, on the date (03/03/2017) when the Guarantees were executed. Besides, the Corporate Debtor did not disclose the Guarantees in its financial statements nor did RCOM in its. The fact of further indebtedness through the Guarantees was never disclosed even when the negotiation for Strategic Debt Restructuring (SDR) was being undertaken by the Joint Lenders Forum (formed on 01/07/2017). The amount under the Guarantees exceeded the Corporate Debtor's paid up capital and free reserves. The Corporate Guarantees were executed while the Corporate Debtor itself was reeling under severe financial stress. 8. The Applicant is unaware of the consideration which led to the creation of the Guarantees. The Corporate Debtor was aware of the fragile financial condition of RCOM & RTL and was well aware that they were not in a position to repay the Corporate Debtor upon invocation of the Guarantees. The reluctance and failure of the Corporate Debtor and Respondent Nos. 2 to 7 in making the Guarantees available to the Applicant and failure to show them in the financial statements smack of a conspiracy to defraud the ECB Lenders. The IRP overlooked these relevant facts and mechanically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Upon his appointment as RP, Shri Nanavaty and his Counsel appeared for R1 and contested the application defending the actions of his predecessor in admitting Respondent Nos. 2 to 7 (R2 to R7) to the CoC as Financial Creditors of the Corporate Debtor. R3 to R7 filed separate replies adopting reply filed by R2. 11. It is the case of the R2 that the Corporate Guarantees could not be unenforceable and non est in law. The Corporate Debtor gave the Corporate Guarantees for the consideration of securing the credit facilities availed by RCOM and RTL. The Applicant thus cannot question their validity. 12. The Applicant having not enclosed the facility agreement dated 19/03/2010 extended by the re-statement agreement dated 04/12/2016 could not claim that the Corporate Guarantees were in violation of the facility agreement. The few terms of the facility agreement could not be read in isolation. The whole of the document needs to be considered vis-a-vis the validity of the Corporate Guarantees. R2 and other Consortium Lenders in whose favour the Corporate Guarantees were executed, were not aware of the facility agreement by the ECB lenders. Thus the Applicant has no locus standi to challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor in favour of R2 to R7 and other members of the Consortium are preferential transactions? Issue Nos. II & III 16. These issues being interlinked are taken up together for proper appreciation and convenience. The Petition under Section 9 of the Code was initiated by one of the Operational Creditors of the Corporate Debtor. As already indicated the Petition was admitted on 15/05/2018. Section 13 of the Code requires that upon the admission of the Application inter alia under Section 9, the Adjudicating Authority shall cause a public announcement of the initiation of CIRP published calling for submission of claims under Section 15 of the Code. Regulations 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) provides that Insolvency Professional within 3 days of his appointment shall make a public announcement, in Form A, appended to the Schedule. Form A inter alia calls upon the creditors of the Corporate Debtor to submit their claims with proof within 14 days from the appointment of the Interim Resolution Professional at the address mentioned against the entry No. 10. The Form also provides the means by which the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is trite that when a statute envisages a particular procedure for an act to be done, the act must necessarily be done in the manner so provided. In this connection the following is instructive. The Hon'ble Apex Court in the case of Shiv Kumar Chadha Etc. v. Municipal Corporation of Delhi: 1993 SCR (3) 522 (= 1993 SCC (3) 161) observed as regards the well-known principle in the following words. "… if a statute requires a thing to be done in a particular manner, it should be done in that manner or not all. This principle was approved and accepted in well-known cases of Taylor v. Taylor. (1875) 1 Ch. D. 426, Nazir Ahmed v. Emperor, AIR 1936 PC 253. This Court has also expressed the same view in respect of procedural requirement of the Bombay Tenancy and Agricultural Lands Act in the case of Ramachandra Keshav Adke v. Govind Joti Chavare, AIR 1975 SC 915." Therefore, a statutory mandate requires strict compliance. In the instant case such compliance is squarely lacking. 19. The Code is a self-contained legislation (Per Innoventive Industries Limited V/s. ICICI Bank: (2018) 1 SCC 407) which provides specific procedure for collation of claims. Neither the RP nor any authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to have given a preference, if- a. there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and b. the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53. 3. For the purposes of sub-section (2), a preference shall not include the following transfers- a. transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee; b. any transfer creating a security interest in property acquired by the corporate debtor to the extent that- i. such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest and was used by corporate debtor to acquire such property; and ii. such transfer was registered with an information utility on or b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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