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TMI Blog2022 (10) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... on in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution etc. The financial claim has been filed by the Appellant(s) for invocation of guarantee dated 31.03.2015 and 30.03.2015, which is specifically mentioned in Form-C. Clause 5.10 in the Purchase Agreement dated 04.03.2015 cannot be read to be any counter-indemnity obligation in respect to guarantee dated 31.03.2015 and 30.03.2015. Since the Guarantee was not even existent when Purchase Agreement dated 04.03.2015 was executed. Thus, pre-condition for applicability of Section 5(8)(h) is not fulfilled in the facts of the present case. When the specific case of the Appellant is on the basis of invocation of the guarantee dated 31.03.2015 and 30.03.2015, the Appellant(s) cannot rely on Clause 5.10 to satisfy the condition of existence of any counter-indemnity obligation in respect of a guarantee. One of the clauses in the Personal Guarantee, i.e. Clause 4.6 under which Guarantor waives in favour of the Security Trustee all the suretyship and other rights, which the Guarantors might otherwise be entitled to enforce, including but not limited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfrastructure Ltd. had given Corporate Guarantee. (ii) In 2014, due to strain on the operations of the Corporate Debtor, caused by several reasons, discussion for implementation of Corporate Debt Restructuring ( CDR ) Scheme took place. The Promoters of the group, i.e., Appellant(s) started exploring the option of introducing another group of Promoters to take over the management and ownership of the Corporate Debtor. A Purchase Agreement dated 04.03.2015 was executed amongst the Pipavav Defence and Offshore Engineering Limited, Reliance Defense Systems Ltd. and Reliance Infrastructure Ltd. According to which, Reliance Group agreed to acquire, control and management of the Corporate Debtor and its subsidiaries. (iii) On 30.03.2015, Master Restructuring Agreement ( MRA ) was executed between Consortium Lenders and the SKIL Group in its capacity as Promoter of the Corporate Debtor (Appellant before us). The securities were furnished to the Consortium Lenders by executing Personal Guarantee by Nikhil Gandhi and Bhavesh Gandhi on 31.03.2015. A Corporate Guarantee was executed by SKIL Infrastructure Ltd. on 30.03.2015 to secure the credit facilities of Rs.10979 crores. The SKIL In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority, respectively. 3. The averments made in above three IAs filed by the Appellant(s) before the Adjudicating Authority were more or less similar. It shall be sufficient to notice the pleadings in Company Appeal (AT) (Insolvency) No.1109 of 2022 for deciding all these Appeal(s). 4. In IA No.423 of 2021, following are the reliefs, which were sought by the Applicant: 4. Reliefs sought: The Applicant respectfully prays that: (a) This Hon ble Tribunal be pleased to quash and set aside the said impugned email dated 28th January, 2021 issued by the Respondent to the Applicant rejecting the Applicant s claim of financial debt under Regulation 8 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 in the corporate insolvency resolution process of the Corporate Debtor; (b) This Hon ble Tribunal be pleased to allow and admit the Applicant s claim of Financial Debt as submitted by the Applicant under Regulation 8 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 in the corporate insolvency resolution process of the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to which claim was submitted before the Resolution Professional. It is submitted that proceeding before Debts Recovery Tribunal has already been initiated on the basis of invocation of the Guarantee and Pledge Shares, hence, the liability is imminent and claim for the said amount was a Financial Claim within the meaning of Section 5(8)(h) of the Code. It is submitted that claim need not be matured and even if a claim is not matured, the creditor is entitled to file claim. The mere fact that no payment has been made by the Appellant(s) (Promoter Guarantors) towards invocation of Securities cannot be a ground for rejection of the claim. It is submitted that the Adjudicating Authority also committed error in rejecting the claim on the ground that no disbursement has been made by the Appellant(s) to the Corporate Debtor, hence, there claim cannot be accepted a Financial Creditors. The Contract of Indemnity is a separate and an independent Contract and under Section 125 of the Contract Act, 1972, the Appellant(s) were entitled to recover from the Promisor all damages which he may be compelled to pay in any suit or any proceedings. It is submitted that in the facts of the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich shall be considered while considering the submission. 10. We need to first recapitulate the nature of transactions, which were entered with the Appellant(s) to find out the nature of the claim. The Appellant(s) before us were the Personal Guarantor/ Corporate Guarantor of the Financial Facilities extended to the Corporate Debtor by Consortium Lenders. A Purchase Agreement dated 04.03.2015 was entered between Pipavav Defence and Offshore Engineering Limited with Reliance Defense Systems Ltd. and Reliance Infrastructure Ltd. wherein the Reliance Group (Acquirer) entered into Agreement of Purchase of sale of shares. Reliance has been placed on Clause 5.10 by the Appellant(s), which provides as follows: 5.10 The Acquirer recognizes that the Found Promoters or any other guarantors as Disclosed to the Acquirer should be discharged from all the guarantees, undertakings and/ or security provided by them in relation to any existing loan and/ or facility availed by the Company and the Subsidiaries. The Acquirer shall make best endeavours to release such guarantees, undertakings and/ or security of the Founder Promoters to the extent Disclosed to the Acquirer (the Disclosed Found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and the Borrower under CDR Documents and shall not be determined by the Guarantor, except in the manner provided therein. Clause 4.2 and 4.5 are also relevant, which is to the following effect: 4.2. To give effect to this Guarantee, the Security Trustee may act as though the Guarantor were the principal debtor. Accordingly, the Guarantor shall not be discharged no shall their liability be affected by any set or things or means whatsoever by which their said liability would have been discharged or affected if he had not been principal debtor. 4.5. The Guarantor s liability under this Guarantee shall not be discharged until and unless the Outstandings have been paid or discharged. For the avoidance of doubt, notwithstanding that the Guarantor may have paid all amounts due under this Guarantee, the Guarantor shall remain liable to the Security Trustee if, as a result of applicability of provisions of Applicable Laws, the Security Trustee is obligated to refund all or part of the payments made by the Guarantor and consequently the Outstandings under this Guarantee are still outstanding. Another clause, which needs to be noticed is Clause 4.6, under which Guarantor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Corporate Debtor. In light of the above, please note that as per Clause 4.2 of the Guarantee dated 31st March 2015 ( Deed of Guarantee ), you have agreed that you shall neither be discharged nor shall your liability be affected by any act or thing or means whatsoever by which your said liability would have been discharged or affected if you had not been principal debtor. Further as per Clause 13 of the Deed of Guarantee, the said guarantee shall remain in force and effect until the discharge in full of the Outstandings. In light of the above, since (i) your liability under the Deed of Guarantee is of principal debtor, (ii) the Deed of Guarantee being co-extensive and co-terminus; (iii) you not being entitled to the benefit of subrogation vis- -vis securities or otherwise until all the monies due to the Finance Parties under the restructured Facilities are fully repaid/ paid in accordance with Clause 3.6 of the Deed of Guarantee; and (iv) in the absence of any financial statements provided to us to show that any payments have been made by you pursuant to any order from the competent court directing you to pay the amount under the guarantee, we reiterate that we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Share Pledge Agreement dated 20.04.2015. To answer the issue as to whether the claim of the Appellant(s) was a claim of Financial Creditor, we need to look into relevant provisions of the Code. Section 3(6) defines the claim and Section 3(10) defines the creditor , which are to the following effect. 3(6) claim means (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured; (10) creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder; 16. Financial Creditor is defined in Section 5, sub-section (7) in following words: 5(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; 17. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 Pioneer Urban Land and Infrastructure Limited and Anr. vs. Union of India and Ors., wherein in paragraph 68, following has been laid down: 68. Thus, in order to be a debt , there ought to be a liability or obligation in respect of a claim which is due from any person. Claim then means either a right to payment or a right to payment arising out of breach of contract, and this claim can be made whether or not such right to payment is reduced to judgment. Then comes default , which in turn refers to non-payment of debt when whole or any part of the debt has become due and payable and is not paid by the corporate debtor. The learned counsel for the petitioners relied upon the judgment in Union of India v. Raman Iron Foundry [Union of India v. Raman Iron Foundry, (1974) 2 SCC 231], and, in particular relied strongly upon the sentence reading : (SCC p. 243, para 11) 11. Now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a court or other adjudicatory authority. 19. The above was a case where various Writ Petitions were filed challenging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of IBC. In the above context, after examining the facts of the case as well as earlier judgments of the Hon ble Supreme Court in Pioneer Urban Land in paragraph 46, following was laid down with regard to essentials for Financial Debt and Financial Creditors : 46. Applying the aforementioned fundamental principles to the definition occurring in Section 5(8) of the Code, we have not an iota of doubt that for a debt to become financial debt for the purpose of Part II of the Code, the basic elements are that it ought to be a disbursal against the consideration for time value of money. It may include any of the methods for raising money or incurring liability by the modes prescribed in clauses (a) to (f) of Section 5(8); it may also include any derivative transaction or counter-indemnity obligation as per clauses (g) and (h) of Section 5(8); and it may also be the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in clauses (a) to (h). The requirement of existence of a debt, which is disbursed against the consideration for the time value of money, in our view, remains an essential part even in respect of any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on Clause 5.10 of Purchase Agreement and submitted that Clause 5.10 contain counter-indemnity obligation of the Acquirer and the Corporate Debtor. The learned Counsel for the Appellant(s) has relied on following sentence in the Clause 5.10 In the interim, the Acquirer and the Company agree to promptly reimburse and indemnify on demand the Founder Promoters for any loss suffered by the Founder Promoters on account of enforcement of any Disclosed Founder Promoter Guarantees or any other guarantors as Disclosed to the Acquirer provided by them to the Lenders (in respect of a loan/ facility in favour of the Company and/ or its subsidiaries) . 23. When we look into Section 5(8)(h), the counter-indemnity obligation has to be in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument. The financial claim has been filed by the Appellant(s) for invocation of guarantee dated 31.03.2015 and 30.03.2015, which is specifically mentioned in Form-C. Clause 5.10 in the Purchase Agreement dated 04.03.2015 cannot be read to be any counter-indemnity obligation in respect to guarantee dated 31.03.2015 and 30.03.2015. Since the Guarantee was not even ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote purchase facility or the issue of bonds, notes, debentures, loan stock or any other similar instrument. 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 can also be referred to by the Creditor to claim that there is a financial debt due to him which has been disbursed against the consideration for the time value of money . To show that there is a debt due which was disbursed against the consideration for the time value of money , it is not necessary to show that an amount has been disbursed to the Corporate Debtor . A person can show that the disbursement has been made against the consideration for the time value of money through any instrument. For example, for 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 for which only the market value of such transaction shall be taken into account, it is not necessary to show that amount has been disbursed. The disbursement against the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rim Resolution Professional have been prescribed under Section 18 and as per clause (b) therein the Interim Resolution Professional is required to receive and collate all the claims submitted by creditors to him pursuant to the public announcement made under Section 13 r/w Section 15. The claim of the parties should be as on the date of initiation of the Corporate Insolvency Resolution Process (date of order of admission and moratorium). Any person who has right to claim payment, as defined under Section 3(6), is supposed to file the claim whether matured or unmatured. The question as to whether there is a default or not is not to be seen. 54. Therefore, stand taken by the respondents that the claim has not been matured cannot be ground to reject the claim. 55. Section 25 provides the duties of Resolution Professional. As per Section 25(2)(e), the Resolution Professional is required to maintain an updated list of all the claims. Aforesaid fact also suggests that the maturity of a claim or default of debt are not the guiding factors to be noticed for collating or updating the claims. The matter can be looked from another angle. It is only in case of debt and default , a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat both Export Import Bank of India and Axis Bank were Financial Creditors . Whereas, present is a case, which is not filed by Financial Institutions as Financial Creditor, rather it is Promoters of the Corporate Debtor, who have extended the Personal Guarantee and the Corporate Guarantee who have filed their claims, which has rightly been rejected. 27. Another judgment which is relied by the learned Counsel for the Appellant of this Tribunal is Andhra Bank vs. M/s Hammerle Textile Ltd. (2018) SCC OnLine NCLAT 883, where again this Tribunal held that it is not necessary that all the claims submitted by the creditor should be a claim matured on the date of initiation of Resolution Process. There can be no quarrel with the proposition laid by this Tribunal in the above case, however, in the facts of the present case, we have held that the ingredients as required under Section 5(8) for declaring a Claimant as Financial Creditor are not satisfied. The claim of the Appellant(s) is not a financial claim. 28. The learned Counsel for the Appellant(s) as well as Respondent have placed reliance on a judgment of Justice Chagla in (1942) Indian Law Reports 670 Ganjanan Moreshwar Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation that the proceeds realised by the sale of the mortgaged property would be insufficient and there would be some deficit left. The Court construed the promissory note as an indemnity given by defendant No. 2 to the plaintiffs in case any loss was caused to them by his unauthorised meddling with their money. As pointed out in the judgment, it was open to the plaintiffs to repudiate the mortgage transaction altogether and claim the whole of the amount from defendant No. 2, leaving him to file a suit against defendant No. 1 to recover the mortgage amount; but the plaintiffs chose to accept that mortgage transaction and to treat defendant No. 2 as their benamidar and, therefore, all that they claimed to recover from defendant No. 2 was the loss, if any, that they might suffer in consequence of the mortgage transaction. It is, therefore, clear that if the plaintiffs recovered their full claim from the mortgaged property, defendant No. 2 would not be liable at all and, therefore, till the mortgaged property was sold and the deficit, if any, ascertained it was impossible to say whether the plaintiffs had suffered any loss which defendant No. 2 could be called upon to indemnify. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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