TMI Blog2023 (12) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... per in favour of the Debenture Trustee in a form and manner acceptable to the Debenture Trustee - Security Provider can also be any other person apart from Obligors and Security Document include Corporate Guarantee and such other documents for creating such other Security as may be required by the Debenture Trustee from the Obligors. Security Documents, thus, both includes Corporate Guarantee, which has already been defined and other document for creating such other security as may be required. There is no averment in the entire agreement that RIHPL is undertaking to guarantee to repayment of secured obligations by the Company. It is to be noted that Corporate Guarantee was already executed on 03.08.2018 on which date the Debenture Trust Deed was executed and in event the RIHPL was taking on its folds the entire lability of Principal Borrower as a Guarantor there ought to have been some indication in the Agreement. The Resolution Professional having not admitted the claim of the Appellant and communicated its rejection, it is not necessary for us to enter into the submission of the Appellant that Committee of Creditor s decision prima facie not accepting the claim of the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity by the impugned order has rejected IA. 580/2023, aggrieved by which order, this Appeal has been filed. Brief facts of the case necessary to be noticed for deciding this Appeal are : (i) The Appellant, one Aaditri Constructions Private Ltd. (Company) and Radius Developers Builders LLP executed a Debenture Trust Deed (DTD) in relation to 3,95,00,000 secured optionally convertible debentures having face value of Rs.100/- each aggregating to Rs.395 Crores. (ii) An Agreement dated 29.03.2019 was executed between the Appellant - Debenture Trustee and Radius Infra Holdings Private Ltd. (Corporate Debtor) and the Promoters Mr. Sanjay Chhabria and Mrs. Ritu Chhabria to provide additional securities to secure the debentures and to pay the entire secured consideration under the Debenture Trust Deed. (iii) A notice dated 28.07.2021 was issued by the Debenture Trustee to the Company calling upon the company to pay the entire amount and forthwith redeem the debentures on account of occurrence of various events of defaults. Company having failed to redeem debentures, Appellant issued notice dated 21.01.2022 to the Corporate Debtor calling upon the Corporate Debtor to forthwith pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be pleased to: a. quash and set aside the decision of Respondent Nos. 2 and 3 as contained in Respondent No. 1's email dated 20th January 2023 (at Exhibit O hereto); b. declare and admit the Applicant as a financial creditor of the Corporate Debtor and issue necessary directions for the re- constitution of the Committee of Creditors with the Applicant as a member thereof; c. declare and admit the Applicant as a secured financial creditor of the Corporate Debtor and issue necessary directions for the re-constitution of the Committee of Creditors with the Applicant as a member thereof; d. That pending the hearing and final disposal of the present Application, the corporate insolvency resolution process (CIRP) of the Corporate Debtor be stayed; e. For ad-interim n relief in terms of prayer-clause (c) above; f. For costs of the Application against the Respondents: and g. For such further and other reliefs as this Hon'ble Tribunal may deem fit. (xii) The Respondent No.1 filed a reply to the IA. 580/2023 submitting the Appellant s claim has rightly been rejected and application deserve to be rejected. (xiii) The Adjudicating Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall refer to while considering the submissions in detail. Learned counsel for the Appellant submits that the Corporate Debtor being Guarantor within the meaning of Section 126 of the Contract Act, the Appellant is the Financial Creditor within meaning of Section 5 Sub-section (8)(i) of the I B Code. It is further submitted that under the I B Code there is no jurisdiction vested with the CoC to adjudicate the claim of a Financial Creditor. The order passed by the Adjudicating Authority directing the Resolution Professional to place claim of the Appellant before the CoC for consideration was ex-facie erroneous and patently illegal. The Financial Creditors i.e. Respondent No. 2 and 3 have conflicting interest with the Appellant. They could not be entrusted with any decision regarding the admission the claim of the Appellant. The CoC has no adjudicatory power to sit over the claims of the Creditors. 4. The submission of the learned counsel for the Appellant were refuted by Shri Krishnendu Datta, learned senior counsel appearing for the Resolution Professional. Learned counsel for the Resolution Professional submits that the Agreement dated 29.03.2019 was executed for sole purpose t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant as Financial Creditor. The additional security under the Agreement was subject to settling the existing dues with the existing creditor i.e. L T Finance Ltd. It is admitted fact that the Corporate Debtor did not settle with L T Finance Ltd, hence, charge over the Versova Land was never released by L T Finance Limited and no charge was created in favour of the Appellant. The Clauses of any agreement ought to be read holistically and cannot be read in isolation. It is submitted that the intention of the parties is to be gathered from the language of the instrument. Even if for argument sake it is accepted that Appellant is a security holder, a security holder does not have any right to be admitted as a Secured Financial Creditor in the CoC. No financial debt is owed by the Corporate Debtor of the Appellant. Appellant has no charge over the Versova Land. Appellant is not a secured creditor and the Appeal deserve to be dismissed. 7. We have considered the submissions of learned counsel for the parties and perused the record. 8. The Agreement dated 29.03.2019 executed between the Appellant and the Corporate Debtor is the basis of claim which was filed by the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means each and any one of the Security Providers. Secured Obligations shall mean all present and future obligations and liabilities (whether financial, performance or otherwise, whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Obligors to the Debenture Holders including in connection with the issue and subscription of the Debentures, the Debenture Payments and the creation and maintenance of Security and all costs and expenses incurred in relation thereto under the Transaction Documents. Security Documents shall mean: (a) this Deed; (b) Debenture Trustee Agreement; (c) Deed(s) of Mortgage, (d) Personal Guarantee; (e) Corporate Guarantee; (f) Escrow Agreements; (g) Deed of Pledge; and (h) such other document for creating such other Security as may be required by the Debenture Holders/Debenture Trustee from the Obligors including any modifications/ amendments/ supplemental agreements thereto and any other agreements, deeds or documents designated as such by the Debenture Trustee. 11. Transaction Documents have been defined in following words: Transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicable Law. Present is a case where in exercise of Clause 7.5 (b), Debenture Trustee entered into Agreement dated 29.03.2019 for additional security. 13. Now we come to the Agreement dated 29.03.2019 to find out its real nature and content. Clause (F), (G) and (I), which are relevant to the present case are as follows: F. The Company being in need of capital for, inter-alia, undertaking the Sanctioned project and the Second Sanctioned Project and for making the payment of the DMA Deposit, approached the Investor for making an investment in the Company and by and under Debenture Trust Deed dated 3rd August 2018 ( DTD ) executed between the Debenture Trustee/ Trustee (on behalf of the Debenture Holders set out therein ( Debenture Holders ), the Company, the Developer and the Promoters read with letter agreement dated 3rd August 2018, it has been agreed that the Debenture Holders shall subscribe to and the Company shall issue and allot the Debentures (as defined in the DTD), to the Debenture Holders, in accordance with the terms of the DTD. Capitalised terms used but not defined herein shall have the meaning ascribed to these terms in the DTD. G. One of the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Account ). which will be solely operated by the Trustee and which amount will be and remain as security for due repayment and discharge of the Debenture Payments and the Secured Obligations and due performance of all the terms and conditions of the Transaction Documents to the satisfaction of the Debenture Trustee and the Debenture Holders; (b) RIHPL will deposit the RIHPL Security directly in the Account; (c) No change or amendment will be made by the Promoters or RIHPL to the constitution documents of the RIHPL or the operation of the Account, without the prior written consent of the Debenture Trustee who shall act on the instructions of the Debenture Holders; (d) No encumbrance or charge or third party rights shall be, directly or indirectly, created by the Promoters to the Shares or the RIHPL Security: (e) Neither the Promoters nor RIHPL will deal with or transfer the RIHPL Security in any manner whatsoever; and (f) RIHPL and the Promoters agree and confirm that whenever the loans taken by RIHPL from L T Finance Limited ( Lender ) under the agreements dated 27th June 2018 have been repaid and the security under the deeds of mortgage executed and regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebenture Trustee on the instruction of the Majority Debenture Holders shall be entitled to enforce the RIHPL Security in such manner as the Debenture Trustee deems fit and shall be entitled to do all acts, deeds, matters and things necessary for this purpose. 20. As noted above, principal issue between the parties is true nature and content of Agreement dated 29.03.2019 and whether it can be read as Deed of Guarantee or not. It can be read as deed of guarantee is the prime submission advanced by learned counsel for the Appellant. We may now notice certain judgments of Hon ble Supreme Court which has been relied by learned counsel for the Appellant in support of his submission. Hon ble Supreme Court in Prakash Roadlines Pvt. Ltd. vs. Oriental Fire General Insurance Co. Ltd., (2000) 10 SCC 64 has laid down that a documents has to interpreted not by its nomenclature but what is contained in the said document. In Para 3 of judgment following has been laid down: 3. It is a settled law that a document has to be interpreted not by its nomenclature but what is contained in the said document. A reading of the document shows that it was a deed of assignment in favour of the Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a contract is not determinative of the real nature of the document or of the transaction thereunder. These, however, have to be determined from all the terms and clauses of the document and all the rights and results flowing therefrom and not by picking and choosing certain clauses and the ultimate effect or result as the Court did in the Orient Paper Mills case. 24. Another preposition which is well settled is that documents has to be read as whole, which principle has been reiterated by the Hon ble Supreme Court in Super Ployfabriks Ltd. vs. Comm. Of Central Excise Punjab, (2002) 11 SCC 398 , where following has been laid down in Para 8 : 8. There cannot be any doubt whatsoever that a document has to be read as a whole. The purport and object with which the parties thereto entered into a contract ought to be ascertained only from the terms and conditions thereof. Neither the nomenclature of the document nor any particular activity undertaken by the parties to the contract would be decisive. 25. We, thus, have to look into the Agreement dated 29.03.2019 as a whole. Clause 4 of the Agreement which is sheet anchor of the argument of the Appellant has to be read a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pledge Agreement, the Financial Creditor filed a Section 7 application, which application came to be rejected. An appeal was filed in this Tribunal contending that all the Pledger having jointly and severally being liable to pay the dues, the amount can be recovered from the Pledgers. It was contended that Pledge Agreement is basically a guarantee extended to the Financial Creditor on behalf of the Borrower. The Arguments have been noticed in Para 11 of the judgment, which are as follows: 11. It is further submitted that in Clause 6.2 pertaining to the remedies it can enforce any or all of the security, in part or whole as mentioned in this Agreement and/or the Facility Agreement, to realize either in part or entire amount of the Borrower's Dues and/or invoke any guarantee provided under the Facility Agreement. It is sought to be argued that the Financial Creditor has exclusive right to recover the amount payable from the present Respondent by virtue of Clause 5.1(g) of the Pledge Agreement which is basically a guarantee extended to the Financial Creditor on behalf of the Borrower. 28. This Tribunal after considering the submissions of the parties, dismissed the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communicated vide email dated 22.06.2022 and after the Committee of Creditor s meeting dated 27.12.2022 again by email dated 20.01.2023. The Resolution Professional having not admitted the claim of the Appellant and communicated its rejection, it is not necessary for us to enter into the submission of the Appellant that Committee of Creditor s decision prima facie not accepting the claim of the Appellant was without jurisdiction. In any event, an application has already been filed by the Appellant before Adjudicating Authority questioning the decision. It is decision of the Adjudicating Authority which has approved the decision of the Resolution Professional rejecting the claim of the Appellant, which require scrutiny. There can be no doubt that it is the Adjudicating Authority who is entrusted with jurisdiction to adjudicate all issues which arise out of the resolution process of a Corporate Debtor. The Adjudicating Authority having already given a decision which decision has been challenged in appeal, we confine ourselves to the consideration of the issue whether the Adjudicating Authority has committed any error in rejecting the IA filed by the Appellant being IA. 580/2023. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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