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TMI Blog2024 (10) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor was also part of the Share Purchase Agreement entered with two shareholders of the Corporate Debtor. The Appellants could not acquire any shareholding of the Corporate Debtor since according to its own case the Share Purchase Agreement could not be given effect to in view of attachment of land by the Enforcement Directorate (ED) on 04.02.2020. The Appellant has referred to Settlement Award dated 19.04.2021 where it was agreed between the parties that the Appellants would be liable to pay the amounts due towards repayment of the loan amount received by Varutha Developers Private Limited (VDPL) within 360 days of the variation of the ED order, whereunder the Land had been attached by the ED. Provisional attachment has been confirmed by the Adjudicating Authority under the PMLA Act. Section 7 application has been filed by the SREI Equipment Finance Limited challenging default on part of the Corporate Debtor in repayment of loan of Rs.300 crores. The Appellant s case itself is that it has undertaken to pay the loan of the Corporate Debtor. Thus, the Appellant is not disputing the debt and default committed by the Corporate Debtor in repayment of loan. The debt and defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 and a sale certificate was issued. (iii) The land was provisionally attached by the Enforcement Directorate (ED) by order dated 04.02.2020 which was later confirmed by the Adjudicating Authority under PMLA Act, 2002 vide order dated 27.08.2021. (iv) As a result, the transaction has not fructified and the Appellants initiated arbitration proceeding owing to the failure of shareholders of the Corporate Debtor to honour their obligations in which a Settlement Award dated 19.04.2021 was passed. Despite several reminders by the Appellant VIF and IRF failed to honour their obligation. (v) Section 7 application was filed by SREI Equipment Finance Limited against the Corporate Debtor on default being committed in repayment of loan of Rs.300 Crores which was disbursed by SREI Equipment Finance Limited to the Corporate Debtor. Section 7 application was filed in the year 2023 by Administrator of SREI Equipment Finance Limited appointed by order dated 04.10.2021. (vi) In Section 7 application notices were issued to the Corporate Debtor. The Corporate Debtor was set ex-parte by order dated 08.05.2023. The Adjudicating Authority on 14.05.2023 reserved the order on Section 7 application. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any error in admitting Section 7 application. The debt and default is admitted fact which is clear from assertion of the Appellants that Appellants were ready to clear the debt by paying Rs.299 crores to the Corporate Debtor. In so far as submission of the Appellant that they have obtained Settlement Award in arbitration proceeding on 19.04.2021, it is open for the Appellants to execute the Settlement Award. The submission of the Appellant that in view of the pendency of Section 66 application against the loan facility, Section 7 application ought not have been proceeded, has no merit. Section 7 application was filed on account of there being debt and default and resolution of insolvency of the Corporate Debtor was necessitated in view of the default committed by the Corporate Debtor. It is submitted that Section 66 application is for different purpose and object and mere pendency of Section 66 application cannot be an impediment for filing an application under Section 7. It is submitted that both the Section 7 application as well as Section 66 application has been filed by the Administrator. The filing of Intervention Application was belated attempt on behalf of the Appellant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further it is evident from Clause 2.10.1 (a) of the Agreement that the Loan Facility shall be repaid in bullet at the end of 9 months from the Initial Disbursement Date. It is further noted that that the said Clause as amended by clause 4.2.1 (page 133 of the Application) and clause 4.4 (Page 134 of the application) of the Amendatory and Supplementary Loan Agreement stipulates that the Loan facility was required to be repaid in bullet by the Corporate Debtor to the Financial Creditor on October 31, 2021. 18. Further, it is evident from the CIBIL Report of the Corporate Debtor at pages 163- 168 as Annexure F to the Application that the Corporate Debtor has availed Credit Facility Details as Borrower (relevant page at 166 of the application) from the Financial Creditor od Rs. 300 Crore. Hence, the CIBIL Report clearly exhibits the existence of Debt by the Corporate Debtor. Also the MCA master data on charges also shows a charge by SREI for Rs.300 Crores against the Corporate Debtor. 21. Since the existence of debt has been borne out from the agreement as also the registration of the Charges with MCA, and also that the debt has not been paid back in the stipulated time i.e. by Octobe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. (emphasis supplied) 8. The submission of the Appellant is that the transaction which is sham or collusive can only create an illusion that money has been disbursed to a borrower. The present is a case where there is no dispute raised that money has not been disbursed. The disbursement of money is not an issue raised. The filing of Section 7 application by the Administrator of SEFL was on the basis that loan was sanctioned and in pursuance of the loan amount was disbursed. Copy of the Statement of Account was also filed along with the Section 7 application which also indicate that amount was disbursed. The observation made by the Hon ble Supreme Court in Para 48 of the judgment in Phoenix ARC Private Limited vs. Spade Financial Services Limited Ors. that where a transaction is sham or collusive, it would only create an illusion that money has been disbursed to a borrower is not applicable in the present case. Present is a case where disbursal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata, Sector 62, Gurugram, Haryana ( Said Land ) by Varutha. Varutha purchased the Said Land under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2003 ( SARFAESI ) proceedings by way of auction from SIFL as the Sald Land was mortgaged with SIFL as a security for certain loan facilities extended by SIFL. 11. The above facts makes it clear that the debt and default is not denied only by the Corporate Debtor but the Appellants also. We fail to see any valid ground on which Appellants can question order of Adjudicating Authority admitting the Section 7 application. 12. The Appellant has every right or jurisdiction to enforce his Settlement Award. Appellant has also brought on the record application filed by Appellant for execution of award dated 19.04.2021 before the District Judge Cum Presiding Officer Special Commercial Court, Gurugram, Haryana. 13. In view of the facts and sequence of events, as noticed above, we are of the view that there being debt and default against the Corporate Debtor, which is an admitted fact, no error has been committed by the Adjudicating Authority in admitting Section 7 application. It is always open for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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