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TMI Blog2022 (6) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... s Power Project Limited, as capital advance in the audited balance sheet as filed by the Registrar of Companies for F.Y. 18 F.Y. 19. This clearly shows that the Vejas Power Project Limited has knowledge that the amount due does not come within the meaning of financial debt , therefore, accounted the amount as a Capital Advance and not as a Financial Loan - It is settled law that under Section 129 of the Companies Act, 2013 financial statements shall give true and fair view of the state of affairs of company and shall comply with the Accounting Standard. Therefore, no contrary stand can be taken by Vejas Power Project Limited. In this case, both sides have clearly functioned as collective through their group companies in order to fulfil the terms of MoU and the transactions as stated by the Petitioner needs to be looked as a part of the transaction under the initial MoU dated 27.07.2010 entered between IL FS Energy Development Company Limited (IEDCL) and Wind World India Limited (WWIL). Thus, the amount that has been disbursed by IFIN do not come within meaning of Financial Debt as defined under Section 5(8) of the IBC. Application dismissed as not maintainable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by the Corporate Debtor vide notice dated 07.02.2018. The Financial Creditor had also invoked the Corporate Guarantee (s) and filed the application under Section 7 of the Code against the Corporate Debtor before this Hon ble Tribunal. The counsel further informed that the date of default of the financial debt is 08.02.2018 and the Petition is stated to be filed within period of limitation. It is a clear case where there is debt and default and the petition is complete. A bare perusal of exhibits makes it clear that the Corporate Debtor was well aware and voluntarily signed documents at all stages and the Corporate Debtor has also admitted its liability in its own reply to the Petition. (e) Thus, the basic requirement for admissions of Section 7 petition has been met and therefore this Petition should be admitted, and IRP as proposed by the applicant to be appointed. 4. Counsel for the Respondent, Corporate Debtor, said that the transactions does not come within the meaning of financial transaction/financial debt and is only facilitative transactions towards advance payment for the completion of supply of Wind power projects as per MOU dated 27.07.2010 between I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of development rights on the IEDCL SPVs. 1.6 As per details in para 1.5 (b) above, WWIL was entitled to receive full payments from the IEDCL SPVs as and when the project milestones were achieved by WWIL from the IEDCL SPVs from time to time. 1.7 However, the IEDCL SPVs faced challenge in raising loans from its lenders to make the payments to WWIL under the purchase orders placed by them on WWIL. Consequently, WWIL was provided with advance by IL FS group in the form of loans from IL FS financial service limited (IFIN), the financial lending arms of IL FS group and IFIN and WWIL entered into loan agreements from time to time to enable WWIL to receive funds advanced in the form of loans in lieu of projects related payments to be made to WWIL by the IEDCL SPVs as detailed in para 1.5 (b) above at market interest rates with a clear understanding that whenever WWIL completes its project obligations under various contract and becomes entitled to payment, vide a letter from WWIL to the respective IEDCL SPVs, these IEDCL SPVs will make payment directly to IFIN and IFIN will square the same against the advance payment made and shown as outstanding loans given by IFIN to WWIL. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Months 17.4.2014 6 45 WWWFMPPL- Wind World Wind Farm MP Pvt Ltd- 100% subsidiary of WWIL Vish Wind 25.3.2014 6 Months 27.9.2014 7 50 WWWFCPL Vish Wind/ Vaayu 28.5.2014 6 Months 30.5.2014 8 100 WWWFMPPL- Wind World Wind Farm MP Pvt Ltd- 100% subsidiary of WWIL Vish Wind/ Vaayu India 30.6.2014 to 26.8.2014 12 Months Remain Unpaid 9 110 WWWFMPPL- Wind World Wind Farm MP Pvt Ltd- 100% subsidiary of WWIL Vish Wind 27.9.2014 to 30.9.2014 12 Months Remain Unpaid Post disbursement of the first four advanced/final payment by way of loans to WWIL, IFIN decided that it would not be any further advance payment by way of loans to WWIL but to WWILs subsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Q3 and Q4 of 2016-17 without any discussion with WWIL. Importantly, had WWIL been allowed to commission the balance capacity under 678.4 MW or an invoicing of Rs. 1255.54 cr, the advance payment by way of (residual) loan of Rs. 210 cr given by IFIN to WWWFMPPL could have been paid/squared in a similar manner as were the advance payment by way of loans amounting to Rs. 348 cr were paid off by WWIL and its subsidiaries. Consequently, the 104 MW capacity remains uncommissioned as on date which could not be completed. For the orders of the total capacity of 130.4 MW placed by RWPPL on WWIL, WWIL received Rs. 675.69 cr directly from RWPPL and Rs. 34.71 cr was paid by IEDCL SPVs to IFIN to square the advance payment by way of loan given by IFIN to WWIL directly to IFIN. Similar documentation exists for all other IEDCL SPVs whereby part of the project proceeds were used to clear the loans totalling to Rs. 348 cr. 1.9 WWIL had executed 775.2 MW of capacity for IEDCL SPVs out of 1004 MW and while doing so paid Rs. 348 cr out of Rs.558 cr of advance payment by way of loans to IFIN. Thereafter, a capacity of 228.8 MW was to be executed between 2013 and 2015 with a project price of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the stipulated time and started supplying WTGs and its related material to the project sites. However, WWIL s surprise, the IEDCL SPVs started incashing bank guarantees of an agreegate amount of Rs. 2256 cr from 03rd October, 2016 furnished by WWIL to the IEDCL SPVs without any intimation or discussion with WWIL. 1.19 Meanwhile, post October, 2016 and upto February 2018 due to changes in Government policies for installation of Wind Power projects and the indecisions of IEDCL SPVs to shift either the sites or opt for alternate power sale arrangements like third party sale, even the 104 MW capacity remains uninstalled. 1.20 On the other hand, the grievance of the respondent is that by delaying decisions than cancelling Rs. 685 cr of orders and then even invoking Rs. 256 cr of bank guarantees IEDCL SPVs put WWIL in very precarious situations. Since the IFIN advance payment by way of bridge loans even to WWIL subsidiaries were to be paid only and only by WWIL performing its contractual obligations, WWIL was frustrated in its attempt to commission the projects and ask to pay back the advance payment by way of loan no. 8 and 9. 1.21 Important to note that email dated July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s paying to WWIL they paid directly to IFIN and those loans were squared off. (pg. 713- reconciliation by WWIL). The emails clearly described the transactions as MWEPL is the SPV which paid to IFIN a sum of Rs. 110 cr, which was seen as on account advance in the book of SPV IFIN gave a fresh loan of Rs. 110 cr to WWIL, which sub parked this amount with MWEPL, show the advance which was shown in book of SPV got squared off by an evergreening done by ILFS as it was a circular kind of situation. c. The respondent argued that in the emails shown, no where there was reference to the original borrower which is WWWFMP Private Limited and ILFS clearly described this transaction between WWIL and the rest of the ILFS group. There is not a whisper of any financial debt, any lending for time value of money which is defined under Section 5 (8) and ILFS is coming up within alternative cover up as your SPVs cannot pay and ILFS wants WWIL to not stop the production and continue to deliver the turbines to you and therefore not from the left hand take the payment from right hand of the SPV. The internal funding at pg- 716 is shown to Bench which stated that total pay out to WWIL and not to WWW ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate structure to see how the funds flow can be made so that the supply of wind turbine is not affected. h. He further argued that there is no rejoinder to the reply. Respondent and the Bench did not labour hard on the principle of pleadings and in the affidavit, the respondent has taken a position that these documents which are created are vogues and the real transaction is the supply of wind turbine generators. It is because of the failure of ILFS, Vaayu was forced to take the money from IFIN and circulate within the system and the stand of the respondent remains unchallenged as it has not been denied in the rejoinder and should be considered to be true. i. In the balance sheet of the applicant (volume 5, pg.720) we are concerned with the non-core assets which has been described (pg. 797)- Other Non-current assets 210 crores, which is exactly the principle amount of claimed borrowing, this must be read with the last note on pg. 798 which stated that the BOD on 18.07.2017 has approved the procurement and position of 56 MW s of Wind Power assets being the under lined security against the settlement and it has been classified as capital advance and presented as N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application because the real nature of the transaction is what is recorded in their own financial statements. 1.25 Without prejudice to above, in any event the assignment agreement cannot be admissible in law for the very fact that as per Section 33 and 35 of Maharashtra Stamp Act,1958 assignment deed cannot be taken in evidence, because the assignment is of Rs. 210 cr and Stamp Duty payable under article 5(4) (h) is 0.2% and Stamp Duty which should have been payable shall be approximately INR 44 lacs as against which they have only paid a stamp duty of Rs. 1 lakh (pg. 194), so this is an under stamped document and therefore it is inadmissible, and it cannot be a basis of Section 7. This is knocked out and it conflict with balance sheet that reflects the true nature of the transaction. 1.26 The Corporate Debtor relied on Swiss Ribbons (P) Ltd. Vs. Union of India, (2019) 4SCC 17, wherein the Hon ble Supreme Court referred to the provisions of IBC enabling this Hon ble Tribunal to discourage fraudulent and/or malicious intent of CIRP under IBC, the Petition deserves to be dismissed. The Corporate Debtor further relied upon Anuj Jain (RP of Jaypee Infratech Ltd.) Vs. Axis Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to these arguments, the petitioner has relied on State Bank of India Vs. Ramakrishnan wherein Hon ble Supreme Court has held that Creditor has remedy with regard to his debt against both the principal debtor as well as the surety. Further relied on Grasim Industries Vs. Agarwal steel wherein Hon ble Supreme Court has held that when a person signs a document properly and understood it and only then affixed his signature, unless there is proof of force or fraud. 6. We have heard counsel for both parties one should notice the background (reason) for disbursement by IFIN in favour of WWIL and thereafter in favour of WWWFMPPL (the so-called principle borrower). 7. IL FS energy development corporation limited (IEDCL) signed a MoU dated 27.07.2010 with Wind World India Limited (WWIL) for WWIL to set up Wind Energy Projects for a total capacity of 1004 MW for IEDCL in a phased manner. Later 100% subsidiaries of IEDCL were incorporated as SPV (IEDCL SPVs) for the purpose of investing in Wind projects. 8. Orders were placed by the IEDCL SPV for the supply, erection and commissioning of wind power projects with wind world (India) limited and purchase orders for transfer of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 to September 2014 by WWIL and its subsidiary due to the increased pace of project activities. Documentations brought on record for all other IEDCL SPVs whereby part of the project proceed were used to clear the advance payment loans paid to WWIL and its subsidiaries. 12. The correspondence, emails and documents shows that the amount disbursed by IFIN to the WWIL and WWWMPPL (subsidiary of WWIL) is by way of advance payment/payment against supply of materials commissioning of the wind turbines and on completion hand over of the wind energy project, though shown as loan. Vaayu Infrastructure LLP and Vishwind Infrastructure LLP are merely the corporate guarantor. 13. The essence of loan agreement is advance payment/project related payment towards supply of material, commissioning of wind turbines/completion of the wind energy project for subsidiary of IL FS. The advance payment for such work is clear as the advance by way of loan amount were adjusted at the time of final payment for the work perform by WWIL and its subsidiaries companies WWWRDPL. The aforesaid fact clearly suggest that the advance payment has been made by IFIN by way of loan to WWIL and its subsidiary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited has knowledge that the amount due does not come within the meaning of financial debt , therefore, accounted the amount as a Capital Advance and not as a Financial Loan . It is settled law that under Section 129 of the Companies Act, 2013 financial statements shall give true and fair view of the state of affairs of company and shall comply with the Accounting Standard. Therefore, no contrary stand can be taken by Vejas Power Project Limited; 17. In this case, both sides have clearly functioned as collective through their group companies in order to fulfil the terms of MoU and the transactions as stated by the Petitioner needs to be looked as a part of the transaction under the initial MoU dated 27.07.2010 entered between IL FS Energy Development Company Limited (IEDCL) and Wind World India Limited (WWIL). Thus, the amount that has been disbursed by IFIN do not come within meaning of Financial Debt as defined under Section 5(8) of the IBC as was held in the matter of Anuj Jain IRP of Jaype Infratech Limited Vs. Axis bank Limited Ors. 2020 SSC Online SC 237. Though, the IFIN or Vejas Power Limited may claim to be a creditor of Wind World India Limited; towards t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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