Advances for unallotted compulsorily convertible preference shares constitute debt but not financial debt absent time value of money; allotted CCPS are equity, not financial debt. RP must admit claims supported by bank records.

ORDER

Per: Rekha Kantilal Shah, Member (Technical)

1. I.A.(IB) No. 985/KB/2024

1.1 The instant application by the Applicant seeks to challenge the action of the Interim Resolution Professional who has rejected the claim of the applicant, i.e., the financial creditor, on a purported plea that the Compulsorily Convertible Preference Share ("CCPS") and the share application money paid to the Corporate Debtor pending allotment of shares is not a financial debt. The present application is being filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 ("Code"), read with Rule 11 of the National Company Law Tribunal Rules, 2016 ("Rules") to seek the following reliefs, inter alia: -

a. Declaration that the respondent has no power to adjudicate on the claims submitted by the creditors in the course of corporate insolvency resolution process being undertaken by the Resolution Professional under Insolvency and Bankruptcy Code, 2016 and verification of claims cannot extend beyond receiving and collating the claims mandated thereunder;

b. An order be passed setting aside the Respondent's decision to reject the applicant's claim in his email dated 28 March 2024.

c. Mandatory order be passed directing the respondent to admit the claim of the petitioner on the amount of the CCPS shown in the books of the Corporate Debtor as a financial liability and on the amount of Rs 7.70 crores advanced by the applicant to the Corporate Debtor which is admitted and acknowledged in the books of the Corporate Debtor as a financial liability.

d. Pending the hearing of the present application, the Respondent be restrained from giving effect to and/or further effect to the email dated 28 March 2024;

e. Stay of corporate insolvency resolution process in the Corporate Debtor until disposal of the instant application;

f. Ad interim order in terms of prayers above.

g. Such further or other orders or orders be passed, and direction or directions be given as this Tribunal may deem fit and proper.

2. Background of the Case-:

2.1 The Corporate Debtor is in the energy business and maintains a 450 MW Thermal Power Plant in Haldia. It was incorporated on 28 April 2008 to undertake and establish Power plan operations at Haldia and generate, transmit, use, distribute, and supply electrical energy.

2.2 By an order passed by this Hon'ble Adjudicating Authority on 2^nd January 2024 ("Admission Order") under Section 7 of the Code, the Corporate Debtor was admitted into CIRP, and a moratorium in terms of Section 14 of the Code was imposed. By the Admission Order, Mr. Bhuvan Madan was appointed as the interim resolution professional ("IRP") of the Corporate Debtor.

3. Facts of the case-:

3.1 The Corporate debtor required substantial funds for its projects and, for the same purpose, entered into the said agreements.

3.2 On 4 April 2013, the Corporate Debtor entered into a "CCPS Subscription Agreement" (hereinafter referred to as the "said agreement") with erstwhile India Power Corporation Limited ("IPCL"). In terms of the said agreement, IPCL agreed to infuse a sum of 8,000 (Million) in the Corporate Debtor against the subscription of "CCPS" of the Corporate Debtor. A copy of the agreement dated 4 April 2013 is annexed hereto and marked as "P- 2". Under the said agreement, the erstwhile IPCL infused a total sum of Rs 203.93 Crore into the Corporate debtor and received 20,39,30,000 nos. of CCPS in the Corporate Debtor of the face value of Rs. 10 each aggregating to Rs. 203.93 crore.

3.3 The Corporate Debtor entered into a "CCPS Subscription Agreement" (hereinafter referred to as the "said agreement") with one DPSC (now known as India Power Corporation Limited). In terms of the said agreement, DPSC agreed to infuse a sum of 2,500 (Million) in the Corporate Debtor against the subscription of "CCPS" of the Corporate Debtor. A copy of the agreement dated 4 April 2013 is annexed hereto and marked as "P-3