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TMI Blog2021 (5) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ssigned as per the Clause 26 of the agreement and consequent upon purchase of the rent receivable contained therein the Applicant Bank has acquired the right of the financial creditor as succession in interest - The rejection of the claim by the Respondent in respect of Term Loan II is hereby set aside and since the claim of the Applicant Bank in relation to Term Loan II qualifies to be a 'financial debt', it is directed that the Respondent to admit the claim of the Applicant Bank in relation to Term Loan II and treat the Applicant Bank as a 'Financial Creditor' in terms of the provisions of IBC, 2016. Application allowed. - IA/322/IB/2020 in CA/1/2017 - - - Dated:- 21-4-2021 - R. Varadharajan, Member (J) And Anil Kumar B., Member (T) For the Appellant : Varun Srinivasan, Advocate for NVS Associates For the Respondents : Party-in-Person ORDER Anil Kumar B., Member (T) 1. This Application has been filed by M/s. IDBI Bank Limited under Section 60 (5) (b) and (c) of the Insolvency and Bankruptcy Code (IBC) 2016 r/w Rule 11 of NCLT Rules of 2016 aggrieved by the action of the Insolvency Resolution Professional (IRP) appointed by this Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly, the Applicant Bank furnished its claim de novo before IRP to the tune of ₹ 37,62,83,845 (Rupees thirty seven crores sixty two lakhs eighty three thousand eight hundred and forty five only). 7. The Learned Counsel for the Applicant Bank submitted that the claims submitted by them relate to sanction of financial assistance comprising of two separate terms loans, wherein, under the Term Loan 1, the Corporate Debtor, viz., M/s. Vasan Health Care Pvt. Ltd., was sanctioned a term loan of ₹ 30,00,00,000/- (Rupees thirty crore only) on 12.03.2013 and a Sanction Letter in lieu of the same was issued with Reference No. 3612/CEiG/VHPL to set up nine new eye care centres located in various cities with charge on future receivables of specific centres including the nine new centers. The said sanction was secured by the personal guarantees rendered by the promoter directors of the Corporate Debtor. Further, the loan was secured by an equitable mortgage on land and building owned by the promoter directors situated at Alwarpet, Chennai. 8. The Learned Counsel for the Applicant Bank submitted that on the other hand, the claim for Term Loan II arose by means of assignment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the said MRA further obligates the Corporate Debtor that it would pay the rent notwithstanding any defect in, breakdown, or non-delivery etc., of the equipment. It is further submitted that in terms of clause 5.2(c), the Corporate Debtor does not have any title to the equipment. Further, in terms of Clause 5.3, Rentworks assigns to the benefit of the Corporate Debtor of all supplier or manufacturer warranties which may be given to it in relation to the equipment. As per Clause 6.2, the Corporate Debtor has only a right to use the equipment and agreed to indemnify Rentworks against any costs, loss or liability it may reasonably incur as a result of removal of the equipment by the Corporate Debtor. Pursuant to Clause II pertaining to termination rents, only Rentworks has the right to terminate in specified circumstances and in case of termination, the Corporate Debtor would pay liquidated damages equal to the aggregate amount of future rentals payable under MRA; the arrangement between Corporate Debtor and Rentworks in the aforementioned manner under the MRA and Rent Schedule together constitute the Rental Documents. 14. The Learned Counsel for the Applicant Bank has fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lessor conveys to the lessee in return for payment or series of payments, the right to use an asset for an agreed period of time the relevant portions of which is reproduced below:- AS-19 5. The classification of leases adopted in this Standard is based on the extent to which risks and rewards incident to ownership of a leased asset lie with the lessor or the lessee. Risks include the possibilities of losses from idle capacity or technological obsolescence and of variations in return due to changing economic conditions. Rewards may be represented by the expectation of profitable operation over the economic life of the asset and of gain from appreciation in value or realization of residual value. 6. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incident to ownership. Title may or may not eventually be transferred. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incident to ownership. 8. Whether a lease is a finance lease or an operating lease depends on the substance of the transaction rather than its form. Examples of situations which would normally le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambit of a financial lease. 21. The Learned Counsel for the Applicant Bank submitted that the classification of lease depends upon the extent to which risks and rewards incidental ownership of the leased asset lie with the lessor or the lessee. It is, hence, submitted that the key criterion to determine the type of lease is whether or not it transfer substantially all the risks and rewards incidental ownership. 22. The Learned Counsel for the Applicant Bank has sought to reproduce Clause 4.6 of the MRA, which reads as follows:- Your obligation to pay rent other moneys under this Agreement is absolute and unconditional irrespective as to the operation, non-operation of the Equipment. Without limitation, your payment obligation will continue notwithstanding any defect in, breakdown, accident, loss, theft or damage to or non-delivery of, the Equipment and you shall not be entitled to withhold the payment of any rent event, if any, Equipment does not function . 23. The Learned Counsel for the Applicant Bank further submitted that Clause 5.2 (a) states You have examined the Equipment before accepting it and have satisfied yourself as to its condition and suitability for y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivables. 27. The Applicant Bank reiterated that the conclusion reached by the Respondent/Interim Resolution Professional is not borne out by the Rental Documents and failure to apply the Accounting Standards to ascertain the true character of the transaction has led to an incorrect conclusion and maintained that they retain the characteristics of Financial Creditor. 28. The Respondent RP has submitted that the IRP/Respondent herein has been taking care of the affairs of the Corporate Debtor as a going concern by ensuring that there is continuing business operations ever since he had been appointed as the Interim Resolution Professional of the Corporate Debtor and caused to publish a Public Announcement dated 04.10.2019 wherein it has been stated that the CIRP period of 180 days has been calculated from the date of the Revival Order dated 03.10.2019, thereby marking the estimated date of closure of the CIRP on 31.03.2020. Consequently, numerous claims had been received by the IRP/Respondent herein connection with the instant Corporate Debtor. 29. The Respondent submitted that Rejection of the Claim of the Applicant partly, was done after a thorough scrutiny of the documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of a borrowing; Explanation. -For the purposes of this sub-clause,- (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 expressions, 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 guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clause (a) to (h) of this clause; 33. On careful examination of the relevant clauses of the Master Rental Agreement (MRA), the transaction takes the form of financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions set out to the Appendix-I hereto. This letter shall form an integral part of the documents to be entered into by you with IDBI Bank . 37. On a careful examination of these documents and relevant portions, we are of the considered view that the amount due to the Applicant Bank constitutes a 'financial debt' which was disbursed to the successor for the time value of money. 38. The contention of the Respondent rejecting the claim of the Applicant Bank do not hold good in view of the reference to the nature of rental agreement which is a financial lease agreement in substance then in form, which is capable of being assigned as per the Clause 26 of the agreement and consequent upon purchase of the rent receivable contained therein the Applicant Bank has acquired the right of the financial creditor as succession in interest. 39. Accordingly, the rejection of the claim by the Respondent in respect of Term Loan II is hereby set aside and since the claim of the Applicant Bank in relation to Term Loan II qualifies to be a 'financial debt', we hereby direct the Respondent to admit the claim of the Applicant Bank in relation to Term Loan II and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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