Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + SC Insolvency and Bankruptcy - 2021 (2) TMI SC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (2) TMI 121 - SC - Insolvency and BankruptcyFinancial Creditors or not - Secured creditor - pledge of the shares - whether the appellant is a financial creditor within the meaning of Section 5(8) of the Code on the strength of pledge agreement dated 10.01.2012 and Deed of Undertaking dated 10.01.2012 entered into with L&T Infrastructure? - HELD THAT:- As clear from the definition a contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The present is not a case where the corporate debtor has entered into a contract to perform the promise, or discharge the liability of borrower in case of his default. The Pledge Agreement is limited to pledge 40,160 shares as security. The corporate debtor has never promised to discharge the liability of borrower. The Facility Agreement under which the borrower was bound by the terms and conditions and containing his obligation to repay the loan security for performance are all contained in the Facility Agreement. A contract of guarantee contains a guarantee “to perform the promise or discharge the liability of third person in case of his default”. Thus, key words in Section 126 are contract “to perform the promise”, or “discharge the liability”, of a third person. Both the expressions “perform the promise” or “discharge the liability” relate to “a third person”. The Pledge Agreement dated 10.01.2012 does not contain any contract that the promise which was made by the borrower in the Facility Agreement dated 12.05.2011 to discharge the liability of debt of ₹ 40 crores is undertaken by the corporate debtor. It was the borrower who had promised to repay the loan of ₹ 40 crores in Facility Agreement dated 12.05.2011 and it was borrower who had undertaken to discharge the liability towards lender. This Court held that a person having only security interest over the assets of corporate debtor, even if falling within the description of 'secured creditor' by virtue of collateral security extended by the corporate debtor, would not be covered by the financial creditors as per definitions contained in sub-section (7) and (8) of Section 5. What has been held by this Court as noted above is fully attracted in the present case where corporate debtor has only extended a security by pledging 40,160 shares of GEL. The appellant at best will be secured debtor qua above security but shall not be a financial creditor within the meaning of Section 5 sub-sections (7) and (8). The Appellate Tribunal has dealt with Section 5(8)(f) while rejecting the claim of the appellant as to be the financial creditor. It appears that the submission based on Section 5(8) (i) was not addressed before the Appellate Tribunal which has now been pressed before us. We, thus, uphold the decision of the Resolution Professional as approved by the NCLAT as correct. The appellant is not financial creditor of the corporate debtor. Hence, Miscellaneous Application was rightly rejected by the Adjudicating Authority. Appeal dismissed.
|