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TMI Blog2021 (7) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... eeking direction against Respondent No. 1 (Resolution Professional) to constitute the Committee of Creditors in accordance with Section 21 of IBC. 2. The brief facts of the case as presented and argued by the Appellant are that the Appellant 9M Corporation, which is a proprietorship concern, is a financial creditor of the Corporate Debtor (Bohra Pratisthan Private Limited-hereinafter referred to as "BPPL"). The Appellant has claimed that the Committee of Creditors was constituted by the Respondent No.1, i.e. the Resolution Professional, in pursuance to the order of admission dated 5.8.2019 passed on the Section 7 application filed by the Appellant against the Corporate Debtor BPPL, and the first meeting of the Committee of Creditors (hereinafter called the "COC") was held on 4.9 2019. The Appellant has claimed that in the first meeting of the COC, the Resolution Professional determined the voting percentage of each member of the COC as follows: - 9M Corporation (Appellant) 6.11% STCI Finance Limited (Respondent No. 2) 75.90% Phosphate India Private Limited (Respondent No.3) 17.99% The Appellant has further stated that the claim filed by STCI Finance Limited was based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take the form of "financial debt" within the meaning of section 5(8) of the IBC. She has pointed out that there is no disbursal of any amount against the consideration for time value of money by Respondent No. 2 to the Corporate Debtor, and therefore such a debt cannot take the form of a financial debt. She has further argued that the root requirement for a creditor to become a financial creditor for the purpose of Part II of IBC is that there should be a financial debt owed to the financial creditor. In the instant case Respondent No. 2 has advanced facility to a third party, namely Bohra Industries Limited (BIL) and taken a security towards the loan advanced to BIL from the Corporate Debtor Bohra Pratisthan Private Limited (BPPL). 8. The Learned Counsel for Appellant has also cited the judgment of this tribunal in Amrit Kumar Agarwal versus Tempo Alliances Private Limited, Company Appeal AT (Insolvency) No. 1005 of 2020 to emphasize that mere obligation to pay dues does not bring liability within the ambit of section 5(8) of the IBC to make such debt a financial debt. She has urged that in the present matter there may be remedies available for the secured creditor for recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of disbursement has been fully complied with. Applied to the context of the instant case, the Learned Counsel has urged that under the Loan Agreement dated 21.12.2017 and the guarantee given therein, the Corporate Debtor has irrevocably and unconditionally guaranteed and undertaken to pay to Respondent No.2, without demur and merely upon demand by Respondent No.2, all and every sum of money owed by BIL to STCI Finance Limited in respect of the said loan facility, as between the guarantor (Corporate Debtor) and STCI Finance Limited (creditor) and the Corporate Debtor shall be deemed to be the principal debtor for all the monies in respect of the loan (refer pp. 443 and 446, of the Appeal Paperbook, Annexure IV). 13. The Learned Counsel for Respondent No.1 BPPL (Corporate Debtor), through the Resolution Professional, has argued that the definition of "financial debt" is an inclusive definition and it includes those amounts too, for which guarantee or indemnity has been given for the amount of any liability under section 5 (8)(i) of the IBC. He has further added that in the instant case, both conditions of the definition of financial debt are present, i.e. there is disbursement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is an admitted position, that there is disbursement of debt against the consideration for the time value of money by the creditor STCI Finance Limited to the Borrower BIL and the Corporate Debtor BPPL vide Letter of Intent dated 15.11.2017 and the Terms and Conditions for the Sanction of Corporate Term Loan of Rs. 24 crores (pp 138-149 of Appeal Paperbook). The True Copy of the Resolution passed by the Executive Committee of BIL (the Borrower) on 8.12.2017 is attached at pp. 150-152 of the Appeal Paperbook. The Loan Agreement executed by and between BIL (The Borrower) and STCI Finance Ltd. (the Lender) is attached at pp. 154-200 of the Appeal Paperbook) and Loan Summary Schedule, Schedule I is attached at pp. 233-239. The Security and Guarantees offered on behalf of the Borrower is at Schedule I on pp. 235-236of Appeal Paperbook, Vol. II. We reproduce the sections relating to "Security‟ and "Guarantees‟ from Loan Summary Schedule (Schedule I) attached at pp. 235-236 on Appeal Paperbook, Vol. II for appreciation of the properties/assets offered therein:- Security a. Residential plot situated in Plot No.3-A and 53-B, Ambamata Scheme, Ayurvedic College Chouraha to Mah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arantor for the loan provided by STCI Finance Ltd. and Bohra Industries Ltd. 21. The relevant section 3(11) and section 5(8) of the IBC, which define "debt‟ and "financial debt‟ are relevant to the discussion here. They are extracted hereunder: - "Section 3(11): - "debt‟ means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt." "Section 5(8) :- "financial debt" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes - (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility nor its de-materialized equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n our view, remains an essential part even in respect of any of the transactions/dealings stated in clauses (a) to (i) of Section 5(8), even if it is not necessarily stated therein. 47. As noticed, the root requirement for a creditor to become financial creditor for the purpose of Part II of the Code, there must be a financial debt which is owed to that person. He may be the principal creditor to whom the financial debt is owed or he may be an assignee in terms of extended meaning of this definition but, and nevertheless, the requirement of existence of a debt being owed is not forsaken." 23. Later, in the same judgment Anuj Jain (supra), in Para 50.1 a distinction is made very categorically and logically between a creditor who is having security interest over the assets of the Corporate Debtor as against a financial creditor who has stake in the Corporate Debtor's growth, and why inclusion of creditors who only hold security interest over the assets of the corporate debtor as financial creditor would be detrimental to the financial health of the corporate debtor. This paragraph 50.1 is extracted below- "50.1 Keeping the objectives of the Code in view, the position and ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribunal, which in Para 25 deals with this issue very comprehensively and cogently:- "25. Before us, the learned counsel for the Appellant has tried to read Para 43 of the judgment in the matter of Anuj Jain (supra) to insist that Hon'ble Supreme Court has held that the requirement of disbursement against consideration of time value of money is essential ingredient and this should be read in the context of a guarantee also. At the same time, it has also been argued that Section 5(8)(i) is not a standalone provision. We refer to observations made by Hon'ble Supreme Court in this very judgment of Anuj Jain (supra) in Para 44.1.5 which reads as follows:- "44.1.5. For taking into comprehension the ratio of Pioneer Urban (supra) and for its application to the question at hand, appropriate it would be to recount the basic principles expounded and explained by a three-judge bench in the case of Haryana Financial Corporation and Anr. V. Jagdamba Oil Mills and Anr. MANU/SC/0056/2002 : (2002) 3 SCC 496 that the observations of the Court in a judgment are always required tio be read in the context in which they appear. This Court has said, - "19. Courts should not place reliance on de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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