9911796707
TMI Blog2021 (5) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... unauthorised action of the Resolution Professional (hereinafter referred as "RP") of the Corporate Debtor, whereby, RP has rejected the claim of the Applicant as financial creditor', though, the same was initially included as financial creditor. Consequent upon which, the Applicant would no longer be a part of the Committee of Creditors (hereinafter referred as "CoC"). 2.2 It is further submitted that RP has no adjudicatory power as observed in the case of Swiss Ribbons Private Limited by Hon'ble Supreme Court. 2.3 It is submitted that RP issued a public announcement on 03.09.2020 in terms of Section 13 read with Section 15 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as "IB Code") informing the claims of the creditors and in accordance with the provisions of the Code. In furtherance of the said announcement dated 03.09.2020, the Applicant filed its claim of Rs. 190,03,32,175/- (Rupees One Hundred and Ninety Crores Three Lakhs Thirty-Two Thousand One Hundred and Seventy-Five) under Form C as secured financial creditor of the Corporate Debtor. In view of the fact that, Applicant was the holder of the Cumulative Compulsorily Convertible Debentures (he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant. The said opinion was discussed on 4th CoC meeting held on 10.12.2020. The copy of the same was received by the Applicant/Financial Creditor on 16.12.2020. 2.9 On 16.12.2020, the IRP/RP sent an email to the Applicant stating, inter alia, that in view of the finding in the opinion so sought for, the claim of the Applicant is not a financial debt and the Applicant would not be a financial creditor of the Corporate Debtor and therefore, will not be the part of the CoC. However, no opportunity is provided to the Applicant to respond after sending the legal opinion nor there was any discussion with the Applicant. The copy of the said email dated 17.12.2020 is enclosed as Annexure A-9. 2.10 The Applicant has responded the above said letter of the RP, whereby, the illegalities and the infirmities in the actions of the RP were highlighted and accordingly, the RP was requested to withdraw its illegal actions within 7(Seven) days. However, the letter was responded by the RP on 05.01.2021 and the same is annexed with the application. 2.11 It is submitted that on 16.01.2021, the Applicant is in receipt of the notice for the 5th meeting scheduled for 19.01.2021, wherein, the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it does not provide or postulate or contemplate the Applicant (CCCDs holder) with any right or entitlement to demand repayment of the principle amount. More so, when no interest/coupon is payable on the subject CCCDs, which is necessary factor to classify any claim as financial debt'. It is redeemable at the option of the Corporate Debtor only for the period of 2 years from the date of issuance i.e. from 22.12.2011. 7. It is further submitted that prior to the commencement of Corporate Insolvency Resolution Process (hereinafter referred as "CIRP") against the Corporate Debtor, the maturity date of the subject CCCDs has long expired. Since the CCCDs were to be compulsorily convertible into equity shares of the Corporate Debtor on or after July 1, 2017, it is submitted that in the audited financial statements of the Corporate Debtor, the CCCDs are shown as part of the share capital as well as the long term borrowings. That itself shows that CCCDs was primarily with the purpose to raise capital and not to raise the money by way of loan/debt. It never postulates any payment of interest or repayment of principal, other than for the initial period of 2 years, when the CCCDs cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, on perusal of the Balance Sheet of 31.03.2020 (page No. 174 of the application), it reflects at- "Note-3(b): 10,65,585 CCCDs of Rs. 1000/- each have been issued on 22.12.2011 and the same are convertible into equity shares at the option of holders at any date after 22.12.2013 (refer Note No. 5)". while perusing Note 5 at page 176 of the application, it is shown as "Note-5 NON-CURRENT LIABILITIES - LONG TERM BORROWINGS A. Secured b. Cumulative Compulsory Convertible Debentures (CCCDs)** 10,65,585 (PY-10,65,585) Debentures of Rs. 1000 each." 11. However, on perusal of Annexure R-6 (page 72 of the reply) it is found that Applicant has issued a letter to AMW Auto Component Limited on 28.07.2016, whereby the Applicant confirmed the role over of the CCCDs on or after 01.07.2017 on the request made by the Corporate Debtor (Auto Component Limited) with respect to CCCDs held by Essar Steel India Limited that are compulsorily converted into equity shares of AACL on or after 01.07.2017. All the other terms and conditions of CCCD's will remain same. Admittedly, the same was not converted into equity share till Corporate Debtor went into CIRP. Further, RP in his reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-clauses (a) to (h) of this clause" 13. Evidently, provisions of the IB Code, categorically recognises that a debt disbursed against the time value of money and includes any amount raised by debtors (Corporate Debtor) pursuant to any note purchase facility or the issue of bonds, notes, debentures (CCCD), loan stock or any similar instrument would fall under Financial Debt and accordingly, IB Code define Financial Creditor under Section 5(7), which read as under- "(7) "financial creditor" means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to" 14. It is to be mentioned herein that definition of debenture as prescribed under Section 2(30) of the Companies At, 2013 is stated as under- "2(30) -- debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essentially as an acknowledgment of debt with a commitment to repay the principal with interest (Palmer's Company Law, p. 672, 24th edn.). Reference, in this connection, may be made to British India Steam Navigation Co. v. IRC. A debenture may contain charge only on a part of the assets of the company (Re Colonial Trusts Corporation) or it may not contain any charge on any of its assets (See Speyer Brother v. IRC, and Lemon v. Austin Friars Investment Trust Ltd). A debenture may therefore, be secured or unsecured (Palmer's Company Law, p. 672, 24th edn.). An ordinary debenture has to be distinguished from a 'mortgage debenture' which necessarily creates a mortgage on the assets of a company (see Palmer's Company Law, p. 706). A compulsorily convertible debenture does not postulate any repayment of the principal. Therefore, it does not constitute a 'debenture' in its classic sense. Even a debenture, which is only convertible at option has been regarded as a 'hybrid' debenture by Palmer's Company Law (para 44.07 at page 676). In this connection, reference may be made to the "Guidelines for the Protection of Debenture Holders" issued on January ..... X X X X Extracts X X X X X X X X Extracts X X X X
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