TMI Blog2021 (12) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... es. It is abundantly clear to the Bench that no voting rights ever accrues to a Financial Creditor in any AGM/ EGM. The rights enjoyed by GVFL in HBT Mehsana like exercising votes in the AGM/ EGM are typically the rights of a Shareholder and not a Financial Creditor. This is because, Equity is not a debt and as such any contract for acquisition of shareholding in a body corporate can never result in the formation of a debt. The SPA and SHA are both contracts in relation to GVFL acquisition of equity shareholding in HBT Mehsana. The Bench is of the view that share purchase in HBT Mehsana by GVFL with exit option of inter alia Annual Put Option cannot be considered as a debt which is disbursed against consideration of time value for money. The Bench also notes that Internal Rate of Return (IRR) cannot be equated with interest payments. The relevance of IRR for an investor in shares is in relation to expected profit and dividend pay out and capital appreciation of the shares which is totally different to the interest which is return for any investment by way of loan - GVFL may be entitled to this claim under the SHA as a Shareholder of HBT Mehsana. However, the Bench has no do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outcome of the maintainability Application in case of HBT Mehsana will also be applicable to other MAs viz. MA 2411/2019, MA 2413/2019 and MA 2414/2019. BRIEF BACKGROUND OF THE CASE:- 4. A Share Subscription and Shareholders Agreement (SHA) dated 24.09.2010 was signed between IL FS Trust Company Limited (ILFS), IIRF India Realty XVIII Limited (IIRF) and Hubtown Ltd and two other Promoters of HBT Mehsana. Consequent to this Agreement, IL FS and IIRF invested in HBT Mehsana by subscribing to Class A equity shares, Class B equity shares and Class D equity shares. Subsequent to this investment the shareholding in HBT Mehsana was as under:- Name of Shareholders No. of Shares at the fact value ₹ 10 each % Class A Hubtown Limited 50000 50.00 IL FS Trust Company Limited 1395 1.40 IIRF India Realty XVIII Limited 48605 48.61 Total 100000 100.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 100.00 Class D IL FS Trust Company Limited 1173 2.79 IIRF India Realty XVIII Limited 40854 97.21 Total 42027 100.00 Class E GVFL Trustee Company Private Limited 100 100 Total 100 100.00 Class F GVFL Trustee Company Private Limited 7873 100 Total 7873 100.00 6. Under the SHA, GVFL was provided with Shareholders rights like right to nominate one Director on the Board of the Company, right to vote in AGM/ EGM, special veto power etc. Other shareholders right which accrued to GVFL included giving various exit options under SHA which has been enumerated at Clause 13.1 of the SHA which reads as under:- 13.1. The Investor No.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; 9. This Bench, therefore, has to see whether the claim of GVFL as a Shareholder of HBT Mehsana in exercise of its put option tantamount to a financial debt. The Bench is of the view that a shareholder is different from a lender. The shareholder undertakes the risk by investing in shares and derives its return by way of profits in the form of dividends and appreciation in the value of shareholding, i.e., capital gains. In contrast, the Lender gives loans for which the payment is by way of Interest. 10. The Bench notes that as per the SHA, GVFL invested in HBT Mehsana by purchasing the shares of ILFS group. This cannot be termed as an investment of GVFL by way of a loan. The money paid by GVFL to acquire the share of HBT Mehsana cannot be constr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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