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2024 Supreme(Online)(NCLAT) 813
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
ASHOK BHUSHAN, J
Saratvam Creators – Appellant
Versus
Sudhir Construction Infrapase Pvt. Ltd. – Respondent
Company Appeal (AT) (Insolvency) No.1664 of 2024
For the Appellants/Petitioners: Mr. Ramji Srinivasan, Mr. Gautam Singh, Mr. Shubhendu Anand, Ms. Namrata Sarogi, Mr. Akshat Kaushik
For the Respondents: Mr. Kunal Kanungo, Mr. Mukesh Jain, Mr. Aush Rajani, Mr. Muktesh Punaniya, Mr. Abhijeet Sinha, Mr. Anuj Tiwari, Mr. Chaitanya Nikte, Ms. Monika, Mr. Aditya Shukla, Ms. Heena Kochar, Mr. Piyush M Dwivedi
A Financial Creditor must establish a clear debtor-creditor relationship, validated by appropriate documentation and disbursement, to be included in the Committee of Creditors.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 5(24), Section 7 - Financial Creditor vs. Operational Creditor - Appellant claimed to be a Financial Creditor but was held to be a related party and an Operational Creditor by the Adjudicating Authority, which led to exclusion from Committee of Creditors - Application for CIRP initiated by Bank of Maharashtra as Corporate Debtor defaulted on dues. Adjudicating Authority's findings were based on the existence of documents post the service of Section 7 Application, suggesting ulterior motives, leading to claims being deemed inflated and thereby unsustainable. The Appellant's Loan Agreement was executed after the Corporate Debtor default was noted, raising questions on its validity. The Tribunal thus directed a forensic audit for verification of transactions and possible preferential treatment. (Paras 71, 75, 79, 43)
Findings of Court:
The Corporate Debtor's claim that the Appellant constitutes an unsecured Financial Creditor was rejected based on the nature of the transactions and relationship between the parties. The claim was deemed unsustainable due to lack of sufficient disbursement to the Corporate Debtor as required for Financial Creditor status under Section 5(24).
Issues: The central issue was whether the Appellant qualifies as a Financial Creditor or a related party, affecting its participation in the Committee of Creditors.
Ratio Decidendi: The Court affirmed that the obligation rests on the creditor to establish the requisite framework of valid disbursement and creditor-debtor relationship to sustain its claim of being a Financial Creditor. The Court allowed the Appellant the opportunity to present any new evidence from the audit report regarding its claim as a Financial Creditor.
Result: Appeal dismissed but liberty granted to file applications subsequent to audit findings.
| Table of Content |
|---|
| 1. factual background of the insolvency case. (Para 1 , 2) |
| 2. observations on the role and rights of creditors in insolvency. (Para 3 , 4 , 8 , 12 , 34) |
| 3. arguments related to claims and assertions of financial creditor status. (Para 5 , 6 , 9) |
| 4. independent provisions for evaluating creditor claims after audit. (Para 14 , 15 , 41 , 42) |
| 5. conclusion on appeal and future steps permitted. (Para 43) |
J UDGMENT
ASHOK BHUSHAN, J.
This Appeal by the Appellant, who claimed to be Financial Creditor of the Corporate Debtor has been filed challenging the order dated 02.08.2024 passed by National Company Law Tribunal, Mumbai Bench, Court-V in IA No.2142 of 2023 (filed by Bank of Maharashtra) (Respondent No.6 herein), where by the impugned order, the Adjudicating Authority has allowed IA No.2142 of 2023 and directed the RP to reconstitute the Committee of Creditors (“CoC”) after excluding the Appellant and other unsecured Financial Creditors. The Appellant aggrieved by the order dated 02.08.2024 has filed this Appeal.
2. Brief facts of the case necessary to be noticed for deciding the Appeal are:
(i) The Corporate Debtor – Sudhir Construction Infraspace Pvt. Ltd. was extended Financial Facilities by the Bank of Maharashtra in the year 2018. Cash Credit Limit, Term Loan and the Encashment of Bank Guarantees were extended by Bank of Maharashtra. The Corporate Debtor could not service the Facilities, hence, the account was declared as NPA on 31.12.2019.
(ii) The Corporate Debtor was awarded a Hybrid Annuity Model Road Project (“HAM Project”) by the Public Works Department (“PWD”) in the year 2018. The Corporate Debtor formed a SPV for the purposes of execution of HAM Project namely - M/s Sudhir Constructions Infraspace (Shegaon Palkhi Road) Private Limited (“SPV”). A Concession Agreement was executed between SPV and PWD on 03.01.2019 to carry out the work within 24 months. The Corporate Debtor faced difficulties in executing the Project. The Corporate Debtor efforts to find out the entities to carry out the Project failed twice.
(iii) On 18.06.2022, the SPV of the Corporate Debtor M/s Sudhir Constructions Infraspace (Shegaon Palkhi Road) Private Limited entered into an Agreement with M/s Saratvam Creators (Appellant herein) to execute the work on back-to-back basis. The Appellant agreed to execute the work on back-to-back basis on mutually agreed condition as mentioned in the Agreement.
(iv) In the year 2022, the Bank of Maharashtra filed Application under Section 7 against the Corporate Debtor for initiation of CIRP. The advance copy of Section 7 Application was served on the Corporate Debtor on 04.07.2022, on which Application CP (IB) No.52 of 2023 was registered.
(v) After service of the copy of Section 7 Application by Bank of Maharashtra, the Appellant entered into a Loan Agreement with SPV and Corporate Debtor dated 05.08.2022. The SPV was the borrower and the Appellant as lender. A separate Deed of Guarantee-cum-Indemnity was executed by the Corporate Debtor. The lender agreed to lend an amount of Rs.195 crores to the borrower. Guarantor/ Indemnifier has undertaken guarantee/ indemnity to make good of loss along with interest, if the borrower fails to repay the amount of loan.
(vi) On an Application filed under Section 7 by a Financial Creditor one Mr. Mahesh Bapuraoji Nage for a principal amount of Rs.1.25 crores, CIRP against the Corporate Debtor commenced on 03.03.2023. In pursuance of the publication issued by the RP, the Bank of Maharashtra on 16.03.2023 duly submitted its claim on Form-C, claiming as a secured creditor. Total principal and interest was claimed as Rs.165,70,10,986/-. The Appellant also filed its claim on 24.03.2023 as unsecured Financial Creditor for principal amount of Rs.195/- crores and interest of Rs.28,11,699/-. Certain other unsecured Financial Creditors also filed their claims before the IRP.
(vii) The RP after collating the claims issued Notice dated 29.03.2023 for holding the first meeting of
