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2024 Supreme(Online)(NCLT) 1783
NATIONAL COMPANY LAW TRIBUNAL
Mr. Shammi Khan, J, Mr. Sameer Kakar, T
HT Media Ltd – Appellant
Versus
GHCL Ltd – Respondent
TP/11(AHM)2022 in CP/215(AHM)2014
For the Applicant: Mr. Navin Pahwa, Sr. Adv., Mr. M. N. Marfatia, Adv
For the Respondent: Mr. Mihir Thakore, Sr. Adv., Mr. Venkat Subramanyam, Adv
Indemnity obligations and equity instruments cannot be classified as financial debt under the IBC.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 - Corporate Insolvency Resolution Process - Application by financial creditor for initiation of CIRP against the corporate debtor based on a claim of financial debt having arisen from a subscription agreement, which was found not to constitute financial debt under the Code. (Para 24)
(B) Financial Debt - Definition under IBC - The distinction between equity instruments and financial debt discussed, emphasizing that indemnity obligations do not equate to financial debt as per the precedents established by the NCLT and Supreme Court. (Paras 20, 21, 22)
Facts of the case:
The applicant sought initiation of CIRP against the respondent for unpaid debts arising from a debenture subscription agreement. The respondent contested the claims based on lack of jurisdiction and the nature of the claimed debt as not being a financial debt under IBC.
Findings of Court:
The Tribunal found that the applicant's debt claim does not fall within the purview of financial debt under IBC, leading to the petition's rejection.
Issues: The main issues pertained to whether the applicant could be recognized as a financial creditor under the IBC based on the indemnity associated with the convertible debentures.
Ratio Decidendi: The court held that the applicant, despite claiming to be a financial creditor, could not establish his claim under the definition of financial debt in the IBC as the obligations arose from an equity instrument rather than a debt obligation, leading to rejection of the petition.
Result: The present petition is not maintainable and hence stands Rejected accordingly.
| Table of Content |
|---|
| 1. jurisdiction transfer to nclt (Para 1 , 2) |
| 2. debt claim basis under subscription agreement (Para 8 , 9) |
| 3. classification of financial debt and equity definition (Para 20 , 21 , 22) |
| 4. rejection of the application due to inapplicability of financial debt (Para 24) |
ORDER
1. Originally the petition being C.P. No. 215 of 2014 was filed before the Hon’ble high Court of Gujarat by the Applicant HT Media Limited (hereinafter referred to as “Applicant/Financial Creditor”) against the Respondent GHCL Limited (hereinafter referred to as “Respondent/Corporate Debtor”) under Section 433 & 434 of the Companies Act, 1956 seeking winding up of the the Respondent/Corporate Debtor. Subsequently, vide order dated 30.11.2021 (which is annexed at Annexure-D) case was transferred from Hon’ble High Court to this Tribunal in view of change of jurisdiction in pursuance of establishment of National company law Tribunal. The case was re-numbered
2. Accordingly, this Application was filed on 06.10.2022 by the Applicant HT Media Limited (hereinafter referred to as “Applicant/Financial Creditor”) against the Respondent GHCL Limited (hereinafter referred to as “Respondent/Corporate Debtor”) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiation of Corporate Insolvency Resolution Process (CIRP) against the Respondent/Corporate Debtor, to appoint Interim Resolution Professional (hereinafter referred to as “IRP”) and declare the moratorium for having defaulted payment of its outstanding dues Rs.6,61,25,000/-. The date of default is stated to be 24.02.2012.
3. Perusal of Part-I of the Form-1 reveals that the Applicant is a company incorporated under the provisions of the Companies Act, 1956 with CIN No. U22121DL2882PLC117874. The registered office of the Applicant is situated at HT House, 18- 20, Kasturba Gandhi Marg, New Delhi-110001.
4. Perusal of Part-I of the Form-1 also reveals that this application has been filed through authorized representative Mr. Sachin Kalra who has been authorised by Power of Attorney dated 02.04.2020 which is annexed at Annexure-B.
5. Perusal of Part-II of the Form-1 reveals the Respondent/Corporate Debtor is a company incorporated under the provisions of the Companies Act, 1956 with CIN No. L24100GJ1983PLC006513. The registered office of the Company is situated at GHCL House, Opposite Punjabi Hall, Navrangpura, Ahmedabad, Gujarat-380009.
6. Perusal of Part-III of the Form-1 reveals that the Applicant has proposed the name of the Interim Resolution Professional (‘IRP’) Mr. Malav Jitendra Ajmera, having registration No. IBBI/IPA-001/IP-P-01190/2018-2019/11908, Addrtess: A/8, 6th Floor, Safal Profitaire, Corporate Road, Prahladnagar, Ahmedabad-380015, Gujarat. There is a declaration made by him that there are no disciplinary proceedings pending against him with the Board or in Indian Institute of Insolvency Professionals of ICAI. In addition, further necessary disclosures have been made by him as per the requirement of the IBBI Regulations.
7. Perusal of Part-IV of the Form-1 reveals that total dues as claimed by the Applicant is Rs.6,61,25,000/- (consisting of Rs.5,00,00,000/- being principle and amount of Rs.1,61,25,000/- as interest.)
8. The averments made by the Applicant in its petition are summarized hereunder: -
a) The Applicant on the assurances provided by the Respondent, entered into a debenture subscription agreement with M/s Rosebys Interiors India Limited. Within this agreement, the Respondent committed to bring an Initial Public Offering (IPO) of M/s Rosebys Interiors India Limited by 23.02.2012 and to acquire the equity shares either personally or through a nominee. Additionally, the Respondent agreed to indemnify the Applicant for any losses resulting from a violation of the debenture subscription agreement.
b) The Applicant were allotted 5,00,
