9911796707
TMI Blog2024 (10) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... mited - the Corporate Debtor. Applicant has come up in this Appeal aggrieved by order dated 20.12.2023. Brief facts of the case necessary for deciding this appeal are: (i) The Appellants entered into a Share Purchase Agreement dated 17.05.2019 with Vision India Fund (VIF) and Infra Resurrection Fund (IRF), the shareholders of Varutha Developers Private Limited (Corporate Debtor). Under which Share Purchase Agreement, the Appellants were required to pay Rs.1 Crore as share purchase consideration towards value of the shares to VIF and IRF and sum of Rs.299 Crore to the Corporate Debtor towards repayment of debt of Rs.300 Crores availed by the Corporate Debtor from SREI Equipment Finance Limited for purchasing 9.26 acres of land situated at Sector 62, Gurugram. (ii) SREI Infrastructure Finance Limited (SIFL) invited bids for 9.26 acres of land situated at Sector 62, Gurugram. Corporate Debtor -VDPL submitted its bid and declared as Successful bidder on 09.08.2019 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 vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Section 7 application could not have been proceeded with before the Adjudicating Authority as the Appellant was always ready and willing to liquidate the debt of the Corporate Debtor to which he could not get any opportunity since the VIF, IRF and SIFL did not perform their obligations. 3. Shri Krishnendu Datta, learned senior counsel appearing for the Respondent submits that the Appellant has no locus to challenge the order dated 20.12.2023. Appellant is not even shareholder of the Corporate Debtor. Appellant has only entered into a Share Purchase Agreement with two shareholders of the Corporate Debtor which also could not fructify. It is submitted that the land has already been provisionally attached by the Enforcement Directorate (ED), which order has been confirmed on 27.08.2021. There is no right in the Appellant to question the admission under Section 7. It is submitted that there was debt and default having been proved, the Adjudicating Authority did not commit 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate (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. 6. 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. Order of admission has been passed by the Adjudicating Authority finding debt and default. In Para 17, 18 and 21 following has been held: "17. 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, L.J. in Snook v. London & West Riding Investments Ltd. 14: (QB p. 802) "As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a "sham," it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the "sham" 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 leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ......Respondents." 10. The contents of Settlement Award indicate that the Appellants, Corporate Debtor and SIFL had acknowledged the loan liability and the Appellant had undertaken to pay Rs.299,00,00,000/- to clear the debt of lenders. Following part of Settlement Award clearly contains the acknowledgement : "AND WHEREAS, after having entering into the SPA, the same was renegotiated and accordingly an Amended and Restated Share Purchase Agreement dated May 17, 2019 was entered into and executed (hereinafter referred to as 'First Amendment Agreement"). Pursuant to the execution of the First Amendment Agreement, the sale and transfer of 100% (Hundred percent) fully paid equity shares of Varutha was made subject to certain conditions that inter alia included payment of the loan liability of the Lender of Varutha aggregating to Rs. 299,00,00,000/- (Rupees Two Hundred and Ninety Nine Crores Only) by the Purchaser(s). The Lender provided the loan facility to Varuthe for the purpose of acquisition of a. parcel of land situated at revenue estate of village Tigra, Nangli Umarpur and Ghata, Sector 62, Gurugram, Haryana ("Said Land") by Varutha. Varutha purchased the Said Land unde ..... 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