TMI Blog2020 (12) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... Creditor and giving voting rights basing on its claims. There are no merits in the application - application dismissed. - IA No. 294/JPR/2020 and 293/JPR/2020 in CP No.(IB)-171/7/JPR/2019 - - - Dated:- 11-12-2020 - AJAY KUMAR VATSAVAYI, MEMBER (J) AND RAGHU NAYYAR, MEMBER (T) For Appellant/Respondent: Anju Jain, Hitesh Sachar, Vivek Dangi, Amol Vyas, Shivangshu Naval, Kamal Kumar Gupta, Advocates ORDER Ajay Kumar Vatsavayi, Member (J) IA No.294/2020 This IA has been filed by 9M Corporation against the Resolution Professional of Bohra Pratisthan Pvt. Ltd. and Others under Section 60(5) of the IBC, 2016 read with Rule 11 of the NCLT Rules, 2016 seeking appropriate directions against the Resolution Professional to reconstitute the CoC as per Section 21 of the Code and for certain other reliefs. 2. It is submitted that the applicant is one of the Financial Creditors of the Corporate Debtor-Bohra Pratishthan Private Limited. The applicant filed CP No.(IB)-171/7/JPR/2019 against the Corporate Debtor under Section 7 of the IBC seeking initiation of CIR Process. This Adjudicating Authority vide order dated 05.08.2019 admitted the CP and initiated the CIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant, Mr. Amol Vyas, the learned counsel for the respondent No.1 and Mr. Shivangshu Naval, the learned counsel for the respondent No.2 and none for the respondent No.3 and perused the pleadings on record. 6. Ms. Anju Jain, learned counsel appearing for the applicant while reiterating the averments made in the application placed reliance on the decision of the Hon'ble Apex Court in Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited Vs. Axis Bank Limited, Civil Appeal No.8512-8527 of 2019 dated 26.02.2020. 7. Mr. Amol Vyas, learned counsel for the respondent No.1 while supporting the decision to categorise the respondent No.2-STCI Finance Limited as a Financial Creditor also placed reliance on the same decision of Anuj Jain (supra) and also on the decision of Hon'ble NCLAT in Ascot Reality Private Limited Vs. Ajay Kumar Agarwal and Ors. in Company Appeal (AT) (Ins) No.658 of 2020 dated 15.10.2020 wherein the decision of the Apex Court in Anuj Jain was considered and distinguished. 8. Since both the counsels have drawn our attention, in detail, to the decision in Anuj Jain (supra), it is necessary to note down the relevant paragraphs of Anuj Jain (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications Under Section 60(5) of the Code, seeking to question the decision of IRP rejecting their claims to be recognized as financial creditors of the corporate debtor JIL on account of the securities provided by JIL for the facilities granted to JAL. The NCLT rejected the applications so filed, by way of its orders dated 09.05.2018 and 15.05.2018 respectively, while concluding that on the strength of the mortgages created by the corporate debtor JIL, as collateral security of the debts of its holding company JAL, the applicants cannot be treated as financial creditors of the corporate debtor JIL. 31.1. The aforesaid orders dated 09.05.2018 and 15.05.2018 were questioned before NCLAT by the said lenders of JAL in Comp. App (AT) (Ins) No. 353 of 2018 and Comp. App (AT) (Ins) No. 301 of 2018 respectively. These appeals formed part of the bunch of appeals decided by NCLAT by way of the impugned common order dated 01.08.2019 and, as per the final result recorded therein, these two appeals also stand allowed. However, fact of the matter remains that nothing has been discussed by NCLAT in the impugned order dated 01.08.2019 as regards the subject-matter of these two appeals i.e., as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned by NCLT in its impugned orders for rejecting the claim of two of the lender banks to be treated as financial creditors of JIL. Reasoning and Findings of NCLT. 33. The Adjudicating Authority, NCLT, in its order dated 09.05.2018 as passed on the application moved by ICICI Bank Limited, with reference to the nature of transaction in question, whereby JIL had extended collateral security towards the facility extended to its holding company JAL as also with reference to the definition and connotations of the expressions 'financial debt' and 'financial creditor' as occurring in IBC, essentially proceeded to find that in such a transaction, as regards the corporate debtor JIL, no consideration for time value for money was involved; and hence, the transaction in question did not qualify as 'financial debt' qua the corporate debtor JIL The NCLT, inter alia, observed as under: 9. In the present case undisputedly corporate debtor has mortgaged its property for creating collateral security for the debt of its holding company JAL. The Corporate debtor is not a borrower, it has created a mortgage in favour of financial institutions for creating collateral secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he definitions given in the Code. The NCLT further distinguished the decision of Gujarat High Court in the case of State Bank of India v. Smt. Kusum Vallabhdas Thakkar MANU/GJ/0303/1991MANU/GJ/0303/1991, while again pointing out that in the present case, the corporate debtor has created a mortgage of its property in favour of third party without any consideration for time value of money. 33.2. Yet further, the NCLT rejected the contentions that the transaction in question could be termed as either 'guarantee' or 'indemnity' while observing, inter alia, as under: 13. The contention of the applicant that mortgage created by the corporate debtor can be termed as either a guarantee or indemnity is not tenable. In terms of the mortgage deeds the corporate debtor has created a mortgage over its immovable properties, which is either money borrowed against payment of interest nor indemnity or a guarantee as claimed by the applicant and therefore, the same does not fall within the definition of the financial debt in terms of Section 5(8) of IBC. It is stated that the corporate debtor has neither issued any guarantee nor has provided an indemnity to the applicant in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would remain a debt alone and cannot partake the character of a 'financial debt' within the meaning of Section 5(8) of the Code. The Respondent mortgagees are not the financial creditors of corporate debtor JIL 48. Indisputably, the debts in question are in the form of third party security; said to have been given by the corporate debtor JIL so as to secure the loans/advances/facilities obtained by JAL from the Respondent-lenders. Such a 'debt' is not and cannot be a 'financial debt' within the meaning of Section 5(8) of the Code; and hence, the Respondent-lenders, the mortgagees, are not the 'financial creditors' of the corporate debtor JIL. xx xx xx xx Summation on second issue 54. For what has been discussed hereinabove, on the issue as to whether lenders of JAL could be treated as financial creditors, we hold that such lenders of JAL, on the strength of the mortgages in question, may fall in the category of secured creditors, but such mortgages being neither towards any loan, facility or advance to the corporate debtor nor towards protecting any facility or security of the corporate debtor, it cannot be said that the corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a financial debt under Section 5(8)(a) read with (i) of IBC. 29. The third party was advanced debt which was admittedly given by the Financial Creditor to the said third party. Even if Corporate Debtor issued guarantee in recovery proceeding for the financial debt of third party and in default the said guarantee/s have been invoked by the Financial Creditor, the Corporate Debtor is liable to pay the amount being amount of liability in respect of guarantee issued which falls in the definition of Section 5(8)(i) of IBC. 10. In Anuj Jain (supra), JIL, which is the Corporate Debtor, created mortgage of its properties to the Bank, as collateral security of the debt of its holding company JAL and Hon'ble Apex Court held that the lenders of JAL could not be categorized as Financial Creditors of JIL for the purpose of the Code. Whereas in Ascot Reality Private Limited (supra) the Corporate Debtor given guarantee for repayment of the debt. 11. A careful examination of Anuj Jain (supra) and Ascot Reality Private Limited (supra) shows that the facts in Ascot Reality Private Limited (supra) are akin to the facts in the instant IA and clearly support the decision taken by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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