TMI Blog2019 (7) TMI 1823X X X X Extracts X X X X X X X X Extracts X X X X ..... . A. Nos. 268, 269, 337 and 338 /C-II/ 2018 in C. P. (IB) No. 55 /ND/ 2018. - - - Dated:- 19-7-2019 - Ms. Ina Malhotra (Judicial Member) And Ms. Deepa Krishan (Technical Member) For the Petitioner : Rohit K. Nagpal and Ms. Garima Anand For the Respondent : Anurag Sharma , resolution professional, Arjun Dyal and Shreyan Das ORDER MS. DEEPA KRISHAN (TECHNICAL MEMBER).- 1. The corporate insolvency resolution process was initiated under section 9 of the Insolvency and Bankruptcy Code, 2016 in the matter of Hari Krishan Sharma v. AKME Projects Ltd. vide order dated April 18, 2018. Subsequently, vide order dated May 31, 2018 this Bench had ordered the inclusion of M/s. Spade Financial Services Ltd. (hereinafter referred to as Spade) and AAA Landmark P. Ltd. (hereinafter referred to as AAA) as financial creditors in the committee of creditors (CoC), in view of their submissions that they had made large financial investments with the corporate debtor. 2. Thereafter, four company applications were filed. These are discussed briefly as below : (i) C. A. No. 337/C-2/ND/2018 has been filed by M/s. Phoenix ARC P. Ltd. (in its capacity as truste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant is one of the financial creditors and is also a member of the CoC of M/s. AKME Projects Ltd. In this application the following prayers are made : (a) Allow the present application and direct the interim resolution professional to reconstitute the committee of creditors in terms of the pro visions of the Insolvency and Bankruptcy Ordinance, 2018 ; (b) Allow the present application and pass directions prohibiting the interim resolution professional from allowing M/s. Landmark P. Ltd., to represent, participate and vote in the meeting of committee of creditors ; and (c) Pass any such further order(s) that this hon'ble Tribunal may deem fit in the facts and circumstances of the case. (iv) C. A. No. 269/ND/2018 has been filed by M/s. Yes Bank Ltd., against the inclusion of Spade Financial Services Ltd., as the financial creditor in the CoC. The applicant is one of the financial creditors and is also a member of the CoC of M/s. AKME Projects Ltd. In this application the following prayers are made : (a) Allow the present application and direct the interim resolution professional to reconstitute the committee of creditors in terms of the pro visions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese two entities were related parties to the corporate debtor and as per provisions of sections 5(24) and 21(2) of the IBC, 2016, they should not have been granted right of representation, participation or voting in the meeting of CoC. 3.3 The following financial arrangements were afforded by Yes Bank and Karnataka Bank (subsequently assigned to Phoenix ARC), thereby qualifying them to be treated as financial creditors within the meaning of section 5(7) of the Code : Yes Bank Ltd., granted financial assistance to CD as per loan agreement dated January 6, 2012. Karnataka Bank granted financial assistance to CD in January, 2014. 4. The CD, Spade and AAA Landmark are all engaged in Real Estate Development and their history of incorporation is as follows : (i) M/s. AKME Projects Ltd. (CD) was incorporated on December 15, 2003 and its original subscribers were Arun Anand, Shruti Choudhari, Aditya Anand (son of Arun Anand), Vinod Kapur, Poonam Kapur (wife of Vinod Kapur), Tushar Patel and Francy Patel. Subsequently, Joint Investments P. Ltd. (JIPL), acting through Mr. Anil Anand (director of corporate debtor) became a majority shareholder of corporate debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suring 77 acres at Village Jandiali, Ludhiana as per e-mails dated January 16/17, 2013 worth ₹ 3 crores. The charge was not registered. Out of the inter corporate deposits given by Spade to CD ₹ 43.06 crores were credited to the account of Arun Anand by consent. Spade was hired as a consultant by the CD on assignment basis only during the period June 1, 2009 to February 28, 2011 with a clear mandate that it would not constitute a partnership. 4.2 The transactions entered by the CD with AAA Landmark are as follows : The corporate debtor and AAA Landmark executed several agreements such as plot buyer's agreement dated May 29, 2009 agreement dated April 8, 2010 memorandum of understanding dated February 1, 2011, development agreement dated March 1, 2012 and agreement to sell dated October 25, 2012. In terms of the development agreement dated March 1, 2012 entered into by the CD with AAA, 38.3 per cent. of the development rights of a project AKME Raaga were sold by the CD to AAA for ₹ 32.80 crores. Subsequently, on October 25, 2012 an agreement to sell (ATS) was executed superseding the development agreement of March 1, 2012 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.1 It is seen that : M/s. Joint Investment P. Ltd., presently holds 98,776 shares (1.45 per cent. voting), in Spade Financial Services P. Ltd., a company of Mr. Arun Anand. Spade shareholding of AKME shares of 24.5 per cent. was sold to JIPL on April 10, 2007. 5.2 It is stated by the directors of Mr. Arun Anand Group : Arun Anand ceased to be a director in AKME Projects Ltd., as on March 31, 2007. Arun Anand was a director in Satara Rubbers and Chemicals Ltd from February 4, 2004 to September 24, 2007 when it was a subsidiary of Federal Mogul (Mr. Anil Anand Group company). Arun Anand/Aditya Anand's shareholding in AKME Projects Ltd., of 20,000 equity shares and 9,600 equity shares respectively was sold in the year 2004/2005. 5.3 The applicants in the CAs under consideration have presented the following arguments to show that the non-applicants, namely, Spade and AAA are related parties to the corporate debtor : ► Shri Arun Anand, who is the promoter, director and shareholder of M/s. AAA Landmark P. Ltd., and M/s. Spade Financial Services Ltd., had been appointed as group CEO of the Anil Nanda Group vide l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd., GI Insurance Services Ltd., AKME Maintenance 86 utilities Ltd., and Cathedral AKME Projects P. Ltd. The aforesaid narration assumes significance in view of the fact that, Mr. Sonal Anand was a director of the corporate debtor at the relevant time (i. e., the date of transaction between CD and AAA Landmark P. Ltd., and CD and Spade) and falls within the definition of the relative of Mr. Arun Anand and Mrs. Renu Anand, (Mr. Arun Anand's wife) the shareholders in Spade Financial Ser vices Ltd., as provided under Explanation (a) of 5(24)A of the IBC, 2016. ► The applicants have also pointed out that Mr. Arun Anand in para graph 7 of its affidavit filed before this hon'ble Tribunal on August 4, 2018 has admitted that Mr. Sonal Anand was a non-executive director of the corporate debtor, which categorically shows that both Mr. Arun Anand and Mr. Sonal Anand fall in the category of a related party in terms of section 5(24) of the IBC, 2016. ► It is further pointed out that the IRP vide its letter dated May 25, 2018 had clearly noted that Spade Financial Services Ltd., was claiming monies transferred by it to the account of AAA Landmark P. Ltd. (not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of the applicant that the term related party shall also include an entity or a person who was a related party at the time of the transaction between it and the corporate debtor and not merely those who fall in the definition of related party at the time of initiation of the CIRP. ► AAA Landmark P. Ltd., and Spade Financial Services P. Ltd., being related party , do not have any right of representation, participation or voting in the meeting of the committee of creditors as clearly envisaged in proviso to section 21(2) of the Insolvency and Bankruptcy Code, 2016. 6. The rebuttal given by M/s. Spade Financial Services P. Ltd., and AAA Landmark P. Ltd., is as follows : Arun Anand (AA) is a chartered accountant and had been a professional CEO in MNC's in one the fortune 500 companies and has extensive experience in financial and real estate matters. Spade Financial Services Ltd. (Spade) was incorporated on October 21, 1994 having expertise in financial matters. AKME Projects Ltd. (hereinafter CD) was incorporated by (AA) along with friends and family members in the year 2004 and the shares of which were later acquired by JIPL (Joint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pliance of this Tribunal's order dated July 6, 2018. The main points stated in this affidavit are : In 2006 to 2007 JIPL through Anil Nanda invested ₹ 73,58,00,000 in Spade and was allotted 98,776 shares aggregating to 9.89 per cent. of the shareholding of Spade. As on date JIPL holds the same number of shares which now represent 1.45 per cent. of the voting and the liquidation rights in Spade. Mr. Sonal Anand, brother-in-law of Mr. Arun Anand and brother of Mrs. Renu Anand held key managerial positions including bring the director of the corporate debtor in various companies of the Anil Nanda Group since the year 2005. The corporate debtor and AAA Landmark executed several agreements from 2008 to 2012. Several litigations pertaining to the aforesaid agreements are pending adjudication including but not limited to petition under section 9 of the Arbitration and Conciliation Act, 1996 before the District Court, Haryana and a Special Leave Petition (Civil) No. 8294 of 2018 before the hon'ble Supreme Court of India. There are several inter se litigations between the parties, apart from the ones mentioned above, which are pending determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney. In addition, since the said agreement to sell, between the corporate debtor and AAA Landmark, has been part of a series of acts of fraud, the same are null and void. It is also submitted that the applicant was not given any notice with respect to the company applications with regard to which the order dated May 31, 2018 was passed, and as such the applicant did not have an opportunity to explain facts and circumstances in view of which AAA Landmark and Spade should not be treated as financial creditors. 9.1 It is also stated in this application that however, since the abovementioned two companies have been treated as the financial creditors, they have constituted majority of the creditors and the said companies, through Mr. Anand will try to frustrate the resolution process of the corporate debtor. It is thus submitted that absence of the directors of suspended board and the other financial creditors in the meeting of the CoC will result in grave harm and prejudice to the corporate debtor and all its stakeholders. 10. After going through the above applications filed by M/s. Yes Bank Ltd., and Phoenix challenging the inclusion of Spade and AAA as financial creditors i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account ; (h) any counter indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution ; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause. 11.1 Perusal of the documents pertaining to the inter corporate deposit stated to have been given by Spade Financial Services P. Ltd., to the corporate debtor from June 1, 2009 to January, 2013 shows the following points of interest : ► Though the loan was given from June, 2009 to January, 2013, the memorandum of understanding regarding the same is dated August 12, 2011. ► The said memorandum of understanding provided for interest at the rate of 24 per cent. but it is stated that only 12 per cent. interest was paid on mutual agreement. ► In the claim filed before the RP only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature and an attempt to divert the properties of the CD to AAA for reasons best known to the parties. It is also noted that the transactions between the CD and AAA as well as Spade were done during the period when Arun Anand, who along with his family members is the promoter and director of both Spade and AAA Landmark, was associated in various capacities from 1982 to 2013 with the CD and its directors and the group of companies to which the CD belongs. It is during this period only that Mr. Arun Anand promoted and subscribed to the memorandum of association of the CD, Spade and AAA Landmark. Mr. Arun Anand and his family members at various points of time also had shareholding in the group companies of the Mr. Anil Nanda group. It is also seen that the alleged financial transactions of Spade and AAA Land mark with the CD occurred during the period 2009 to 2013, the time when he was consultant (through Spade) to the CD, and was consultant and strategic advisor in his individual capacity to the CD and finally group CEO of the Mr. Anil Nanda group of companies. Considering the above facts, we are of the opinion that the transactions between the CD and both Spade and AAA Landm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor ; (h) any person, on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act ; (i) a body corporate which is a holding, subsidiary or an associate company of the corporate debtor, or a subsidiary of a holding company to which the corporate debtor is a subsidiary ; (j) any person who controls more than twenty per cent. of voting rights in the corporate debtor on account of ownership of a voting agreement ; (k) any person in whom the corporate debtor controls more than twenty per cent. of voting rights on account of ownership or a voting agreement ; (l) any person who can control the composition of the board of directors or corresponding governing body of the corporate debtor ; (m) any person who is associated with the corporate debtor on account of- (i) participation in policy making processes of the corporate debtor ; or (ii) having more than two directors in common between the corporate debtor and such person ; or (iii) interchange of managerial personnel between the corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xviii) father's brother and sister, (xix) mother's brother and sister, and (b) wherever the relation is that of a son, daughter, sister or brother, their spouses shall also be included. There is no doubt in our mind that Arun Anand and his companies, namely, Spade and AAA Landmark were related parties to the CD. However, after 2013 (soon after signing the agreement to sell signed on October 25, 2012) Arun Anand resigned from all the companies of Anil Nanda Group and so they are no longer related to the CD at the time of filing of application of CIRP. 13. Before parting with this application, we would like to observe that the affairs of the CD as well as the group of Arun Anand companies are deeply entangled and it is difficult for the Tribunal in a summary jurisdiction to unravel the same. Considering that the CD and Spade and AAA were in close business relationship in the past and also the fact that the accounts of the CD have not been finalized and audited and filed with the Registrar of Companies since 2016, we have no hesitation in allowing the instant applications filed by Yes Bank Ltd., and Phoenix ARC P. Ltd. 14. C. A Nos. 268, 269, 337 an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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