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TMI Blog2021 (2) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to IndusInd Bank facilities only the term loan amount had been reflected where as in relation to the Corporate Guarantee there had been no murmur on the part of the Applicant while the claim statement was filed initially on 04.05.2017. Thus, in the absence of any primary document/evidence being produced in relation to the Corporate Guarantee as given by the Corporate Debtor in relation to the loan availed by VDHPL, this Tribunal is constrained to uphold the decision of the IRP in rejecting the claim made in asum of ₹ 54.97,35,793/- by the Applicant. The IRP is directed to admit the claim of ₹ 180,92,22,164/- pertaining to assignment agreement dated 29.03.2017 between the IndusInd Bank and the Applicant in the capacity as an Assignee having been kept in abeyance vide his communication dated 06.02.2020, however the decision of the IRP in relation to Corporate Guarantee alleged to have been given by the Corporate Debtor in relation to the loan availed by Vasan Dental Hospital Private Limited and amounting to a sum of ₹ 54,97,35,793/- being the amount claimed stands rejected. Application disposed off. - TA/156/2020 in CA/1/(IB)2017 - - - Dated:- 22-2-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to continue with the said process. 6. Pursuant to the above, the IRP had issued a fresh public announcement calling for claims, as required under the Regulations viz., Insolvency Resolution Process for Corporate Persons Regulations, 2016 (IRPCP) Regulations, 2016. 7. The Applicant has once again submitted the claim in Form C for a sum of ₹ 507,88,68,502/-. The break-up of which is furnished as under:- SI. No. Assignor Banks Acquired by the Applicant under Claims filed (in Rs.) 1 ECL Finance - Loan 1 Assignment Agreement dated 26 September 2018 116,52,51,225 2 ECL Finance - Loan 2 Assignment Agreement dated 26 September 2018 155,46,59,320 3 IndusInd Bank Agreement dated 29 March 2017 180,92,22,164 4 IndusInd Bank Agreement dated 29 March 2017 54.97,35,793 Total (Rupees Five Hundred and Seven Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Tribunal may deem fit in the interest of justice. 13. On its part, the Respondent / IRP has filed a detailed counter. Perusal of the said counter shows that the CIRP was commenced on 21.04.2017 and it continued till 04.05.2017 when it was stayed by the Hon ble High Court of Madras. 14. It is also brought to the notice of this Tribunal that an appeal which was preferred by the Corporate Debtor was also rejected by the Hon ble NCLAT vide its judgment dated 31.05.2017. In the meanwhile, the IRP had received numerous claims both electronically as well as physically. However, there was no cooperation on the part of the Directors of the Corporate Debtor which was also noticed by this Tribunal. 15. Ultimately, the stay granted by the Hon ble High Court of Madras seems to have been vacated by the Division Bench of the Hon ble High Court of Madras only on 05.09.2019. However, the making use of the lapse of time of 2 years and 5 months, lot of documents have been filed with the Registrar of Companies, Chennai for creation of security interest, Board Meetings, purportedly EGMs held and all kinds of loan liabilities confirmed by the Promoters of the Corporate Debtor viz., Dr. A.M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant which was recat is the contention of the IRP that in the absence of any recognition of the debt owed by M/s. Vasan Dental Hospital! Pvt. Ltd. as on 31.03.2016, in its audited accounts, its being the principal debtor of the Corporate Debtor as to how the other Company, viz., M/s. Vasan Health Care Pvt. Limited could have given a guarantee in relation to a non existing loan. The approval in the Board Meeting of the Corporate Guarantee on the part of the Corporate Debtor dated 09.11.2015, it is contended by Learned IRP that there was no Board Meeting held on the said date of the Corporate Debtor and in the circumstances the Applicant is being put to strict proof of the same by the IRP. Since the claim in relation to the Corporate Guarantee also emanates from the Assignment Agreement dated 29.03.2017, the same it is contended by the IRP, has been included only as an afterthought. 19. It is also highlighted by the Respondent further that in the Books of the Corporate Debtor it is not shown as a contingent liability as required to be shown in relation to the Corporate Guarantee, alleged to have been afforded by the Corporate Debtor. The invocation of the principle of doctrine of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear concerned in 2013-2014. Repeated assertion is made by the IRP that the minutes of the Board Meeting or the General Body Meeting of the Corporate Debtor cannot be relied upon as the same have not been maintained in accordance with the applicable law read with Secretarial Standards issued by ICSI. The IRP contends that he has adopted a very unbiased, fair and reasonable yardstick of verifying the claims in respect of all the Financial Creditors be it secured or unsecured Financial Creditors, particularly, in the absence of proper Books of Accounts. 24. Taking into consideration all the above, the IRP sought for the dismissal of the instant Application, as above filed by the Applicant. 25. The Applicant in relation to the response filed by the Learned IRP has chosen to file a detailed rejoinder to the same reiterating the averments as made in the Application. The allegations in relation to the contention raised by the IRP in his counter statement as to delay in the Registration of the Assignment Agreements, it is stated in the rejoinder that the execution of the relevant Assignment Agreements which are under consideration before this Tribunal are as per the relevant provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Debtor has duly acknowledged the same. However, the Respondent has wrongly stated by reading the said financial statement for the year 2015-16, as 2014-15. 31. The Applicant also highlighted in the rejoinder in relation to the power of the Respondent and it is pointed out that the Respondent has to evaluate the claims of the Applicant on the basis of Claim Forms and supporting documents submitted by it, and not based on the alleged irregularities in the financials of the Corporate Debtor, which, it is claimed by the Applicant to be in breach of his powers under the I B Code, 2016, where under he is authorized only to collate the claims and not to enter into investigative mood for the purpose of adjudicating the claims. 32. In the circumstances, it is sought by the Applicant in the rejoinder that the reliefs as sought in the Application viz., that the claim in a sum of ₹ 507,88,68,502/- is required to be reinstated and thereby admit the entire claim. 33. In response to the rejoinder, the IRP has filed additional submissions to the same and in it the IRP brings to the notice of this Tribunai that at the time of making the initial claim neither on 04.05.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above referred judgement has observed as follows: - 46. The above discussion shows that money advanced as debt should be in the receipt of the borrower. The borrower is obligated to return the money or its equivalent along with the consideration for a time value of money, which is the compensation or price payable for the period of time for which the money is lent. A transaction which is sham or collusive would only create an illusion that money has been disbursed to a borrower with the object of receiving consideration in the form of time value of money, when in fact the parties have entered into the transaction with a different or an ulterior motive. In other words, the real agreement between the parties is something other than advancing a financial debt. A useful elaboration of sham transactions can be found in the opinion of Diplock UJ in Snook vs. London and West Riding Investments Ltd. As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a sham, it is, | think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative 12 [1967] 2 QB 786 PART G 32 word. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,000/- for a period of 60 years. It was difficult to believe that the respondent would have entered into such a transaction in view of his financial position in the year 1921. It was equally not likely that a person dealing in shares who would require ready money would lock up his assets like the property in dispute ina transaction which was such that the mortgage could not be redeemed before the expiry of the period of sixty years. The mortgage, therefore, was executed only with an ulterior purpose, it being wholly fictitious. (emphasis supplied) 48. The IBC has made provisions for identifying, annulling or disregarding avoidable transactions which distressed companies may have undertaken to hamper recovery of creditors in the event of the initiation of CIRP. Such avoidable transactions include: (i) preferential transactions under Section 43 of the IBC; (ii) undervalued transactions under Section 45(2) of the IBC; (iii) transactions defrauding creditors under Section 49 of the IBC; and (iv) extortionate transactions under Section 50 of the IBC. The IBC recognizes that for the success of an insolvency regime, the real nature of the transactions has to be unearthed in or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat disqualification of related parties from being members of the CoC, has also been recommended in the UNCITRAL Legislative Guide on Insolvency law: The insolvency law should specify the creditors that are eligible to be appointed to a committee. Creditors who may not be appointed to a creditor committee would include related persons and others who for any reason might not be impartial. The insolvency law should specify whether or not a creditor s claim must be admitted before the creditor is entitled to be appointed to a committee. In interpreting the legislation, which represents a Parliamentary effort to bring about structural changes in the resolution of corporate insolvencies, the effort of the court must be to aid the fulfilment of the objects of the IBC. 37. It is also relevant to note that the said judgement of the Apex Court also deals with third party assignments at paragraph 93 to 95 and about the acceptance of the claim by the assignees and their eligibility to participate in the COC. 93. in this regard, it is relevant to note the observations in the Insolvency Law Committee Report of 2020 clarifying the eligibility of third-party assignees of the debt of a rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted party in a business capacity with the sole intention of participating the CoC and sabotage the CIRP, by diluting the vote share of other creditors or otherwise, it would be in keeping with the object and purpose of the first proviso to Section 21(2), to consider the former related party creditor, as one debarred under the first proviso. 95. Hence, while the default rule under the first proviso to Section 21(2) is that only those financial creditors that are related parties in praesenti would be debarred from the CoC, those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder. Mr Kaul has argued, correctly in our opinion, that if this interpretation is not given to the first proviso of Section 21(2), then a related party financial creditor can devise a mechanism to remove its label of a related party before the Corporate Debtor undergoes CIRP, so as to be able to enter the CoC and influence its decision making at the cost of other financial creditors. 38. From the above decision of the Apex Court it is quite e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of the claim by the creditors and of his best estimate. A combined reading of Regulation 7 to Regulation 14 falling under Chapter IV of IRCP Regulations, 2016 dealing with proof of claims makes this position clear, particularly in relation to the role of IRPs and the claimants Regulation 10, 12 and Regulation 14 of the IRCP Regulations, 2016 which for ready reference are extracted below:- 10. Substantiation of claims. The interim resolution professional or the resolution professional, as the case may be, may call for such other evidence or clarification as he deems fit from a creditor for substantiating the whole or part of its claim. **** 12. Submission of proof of claims. (1) Subject to sub-regulation (2), a creditor shall submit [claim with proof] on or before the fast date mentioned in the public announcement. [(2) A creditor, who fails to submit claim with proof within the time stipulated in the public announcement, may submit the claim with proof to the interim resolution professional or the resolution professional, as the case may be, on or before the ninetieth day of the insolvency commencement date.] (3) Where the creditor in sub-regulation (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve regulations it is seen that the IRP is having a power ta re-constitute the COC based on his decisions, including by way of addition of claims as well as by revision of claims admitted previously based on additional information thereby connoting that he has the power to revise the claimant from one class to another class for example, from a4 financial creditor as originally admitted to an Operational creditor or vice versa or even based on bonafide additional information thereby resulting in complete exclusion of a claim previously admitted and the claim forming part of the COC, be it as a financial creditor or as an operational creditor. Thus from the combined reading of the Regulations contained in Part IV of IRCP Regulations, 2016 as well as the forms prescribed thereunder, it is seen that while the onus is placed upon the claimants, irrespective of the category under which their claim may fall, a full and complete disclosure of the claim is required to be made and in its absence, the IRP may await for the claimant to satisfy with sufficient documents and proof in relation to the claim so made or to admit the claim according to his best estimate and upon additional informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a seat in the COC by a related party through indirect means. The regulations as framed by the IBBI also do not subscribe to such a view as brought forth in Dugar s case (supra) as the term used, is to the satisfaction of the Resolution Professional. Thus, taking into consideration the above discussions we are unable to subscribe to the submissions of the Applicant that the IRP has exceeded in the exercise of his duties as given under the provisions of IBC read with attendant Regulations, in dwelling in effect to the documents based on which the claim is made. 41. In relation to issues raised by the Learned IRP about Assignment Deeds:- The IRP in relation to Assignment Deed executed between the Applicant on the one hand and IndusInd Bank Limited on the other has sought to raise questions about its legality. 42. Under the provisions of IBC, 2016 a financial creditor as defined under Section 5 (7) of the Code includes a person to whom such debt has been legally assigned or transferred to. Hence it is evident from the above definition of a financial creditor that an Assignee of the financial debt is also entitled to approach this Tribunal as such, provided the assignmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been manipulated by the parties to foist an unsustainable claim taking into consideration the impasse in the CIRP of the Corporate Debtor initiated by this Tribunal on 21.04.2017 which due to the intervention of the Hon ble High Court came to be stayed vide its order dated 04.05.2017 and which came to be vacated only on 05.09.2019. In the meanwhile, it is the contention of the IRP that making use of the impasse, the parties to the assignment agreements have managed to register the Assignment Agreements thereby giving it a semblance of legality. To counter the above argument of the IRP, Learned Senior Counsel for the Applicant points out that Section 23 of the Registration Act, 1908 itself provides a time window of 4 months from the date of execution of a document for its registration and further under Section 77 of the Companies Act, 2013, the registration in favour of the Assignee can be registered with the approval of the Registrar of Companies within a period of 300 days of such creation and in the circumstances the IRP cannot have any issues in relation to the same. About this aspect we are in concord with the stand taken by the Applicant as the compliance with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s dated 29.03.2017 and 26.09.2018, both the Assignment Agreements, it is also required to be seen that they have also been entered into for a valuable consideration as reflected in the respective Assignment Agreements itself. The post facto authorisation by way of resolution in relation to Assignment Agreement dated 29.03.2017 cannot also be considered as an issue in view of the resolution produced in any case pointing out that the acts of the agent, even if it be without authorisation, has been subsequently ratified by the respective Principals prior to the document being submitted for Registration. 46. Taking into consideration, all of the above aspects as well as legal position of law we are of the view that the Assignment Agreements dated 29.03.2017 and 26.09.2018 perse cannot be assailed in the instant case on technicalities by the IRP in view of the position of law in this regard. 47. In relation to transactions reflected in the Assignment Agreement and admissibility of the Claim made thereunder:- Having held as above in relation to the Assignment Agreements dated 29.03.2017 and 26.09.2018 we proceed to consider the debt underlying these assignment agreements and whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aster General Terms Agreement between IndusInd Bank and the Corporate Debtor 324 - 347 6 03.03.2016 Term Loan Agreement between IndusInd Bank and the Corporate Debtor 348 - 354 7 03.03.2016 Agreement for Cash Credit / Overdraft between IndusInd Bank and the Corporate Debtor 355 - 360 8 03.03.2016 Deed of Hypothecation by the Corporate Debtor in favour of IndusInd Bank 361 - 379 9 03.03.2016 Deed of Hypothecation by the Corporate Debtor in favour of IndusInd Bank 380 - 397 10 25.04.2016 Request for sanction of facilities by the Corporate Debtor to the IndusInd Bank 398 - 399 11 01.05.2016 To 28.02.2017 Statement of Account maintained with the IndusInd Bank from 01.05.2016 to 28.02.2017 400 - 403 12 15 Nos. of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 55 Crores 499 - 503 11 01.10.2015 Board Resolution of the Corporate Debtor approving the Loan of ECL Finance for ₹ 55 Crores 485 - 486 12 01.10.2015 Board Resolution of Vasan Medical Center (India) Pvt. Ltd as a pledgor 487 - 488 13 07.10.2015 Loan Agreement executed between the Corporate Debtor and ECL Finance in respect to sum of ₹ 55 Crores 505 - 555 14 07.10.2015 Demand Promissory Note executed by the Corporate Debtor through its Director for Loan amount of ₹ 55 Crores 557 16 07.10.2015 Undertaking cum Indemnity to pay the Differential Stamp duty executed by the Corporate Debtor 558 - 560 17 31.10.2017 Loan recall notice issued by ECL Finance to Corporate Debtor 561 - 562 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the banker shows that the same has been squared off due to the said loan account of the corporate debtor being sold to the ARC, i.e. the applicant herein. In the circumstances there cannot be any issue. Further it is also seen vide filing dated 31 st July 2020, additionally that it has also been brought to the notice of this Tribunal that the corporate debtor vide Note No.T as contained in the Notes on accounts has recognised the fact of assignment and the relevant financial statement has also been taken on record by the IRP for the year ended 31.03.2018. Thus taking into consideration the loan documents filed as well as the statement of accounts as issued by IndusInd Bank at face value as an evidence, the amount claimed in a sum of ₹ 180,92,22,164/- is required to be admitted by the IRP. 51. However, in so far as the amount claimed of ₹ 54.97,35,793/- in relation to the Corporate Guarantee alleged to have been given by the Corporate Debtor VHPCL to the amount borrowed by Vasan Dental Hospital Private Limited, we are not in a position to direct the IRP to admit the claim for the reason that the Applicant nor the IRP has produced the document, namely the agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimant by the Assignor vide Assignment Agreement dated 29.03.2017. Debt II - Credit facility of ₹ 105 Crore by ECL Finance Ltd. (Assignor) comprising of ₹ 50 Crore disbursed on 21.01.2015 and ₹ 55 Crore disbursed on 12.10.2015. - Both assigned vide Assignment Agreement dated 26.09.2018 to the claimant. In support of claim made in Serial No.4 as above documents annexed Annexure 1 to Annexure 12 (Annexure 12 repeated twice; Hence in both the claim forms annexure tallies) Assigned vide Assignment Agreement dated 29.03.2017. SI.No.6 Details about the transaction classified as Debt 1 and Debt II as above given in SI.No.5 Debt II - confirmation of balance - 28.02.2018 ₹ 100,40,43,084/- (principal ₹ 55 Crore) ₹ 76,41,24,648/- (principal - ₹ 50 Crore) Gives details only about debt transaction pertaining to IndusInd Bank disbursal. SI.No.8 Details of Security documents given in relation to Debt I and Debt II Only in relation to loan availed fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 for a consideration and Claims have been lodged for ₹ 271.99 Cr/-. out of which we have admitted a debt in relation to the Loan - 1 which was assigned along with accrued interest of 38% totalling upto 7119.72 Cr/-. The rest of the Claim amount which basically is ECL Loan - 2 of ₹ 55 Crore having been taken back by them on the dates of disbursement itself stands REJECTED . 55. However, from the counter filed by the respondent as well as the e typed set filed there with we are unable to discern any document in support of the above grounds of rejection of the IRP. On the other hand overwhelming evidence have been produced by the Applicant as tabulated in paragraph supra of the loan of ₹ 55 crore being availed and the acknowledgement by way of balance confirmation on the part of the corporate debtor dated 12.03.2018. in relation to of the said loan as well in a sum of ₹ 100,40,43,084/- as on 28.02.2018 by the Corporate Debtor. Thus considering the overwhelming evidence produced by the Applicant to sustain the claim made in relation ECL Finance Loan II having been assigned to it in a sum of ₹ 155,46,59,320/- is required to be admitted by the IRP. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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