IFCI Limited vs. Sutanau Sinha Rp - (NATIONAL COMPANY LAW APPELLATE TRIBUNAL) (05 Jun 2023)

IBC is a time bound process and any delay in challenging the rejection of the claims cannot be condoned as a matter of routine

MANU/NL/0540/2023

Insolvency

Present Appeal is preferred by IFCI Limited under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the Impugned Order passed by the National Company Law Tribunal, whereby the Adjudicating Authority has dismissed the Application filed by the Appellant challenging the rejection of its Claim by the 1st Respondent/ the Resolution Professional (RP).

Clause 2.1 of the Debenture Subscription Agreement' ("DSA") specifies that interest at 11% p.a., shall be payable on quarterly basis by the 'Sponsor Company' on the last day of the quarter, till the buy back of all CCDs / Conversion of Compulsorily Convertible Debentures (CCDs) into equity in the SPV Company. The DSA Agreement also clarifies that it is the 'Sponsor' and not the 'Corporate Debtor' who is liable to pay Coupon interest on the CCD. The Corporate Debtor is not under any obligation to pay the interest on the so called borrowing and therefore the argument of the Learned Senior Counsel that the interest component in the factual matrix of this case, signifies 'Time value of Money', cannot be accepted. The CLA dated 22nd February, 2017 categorically states that the amount infused by the Appellant is to be treated as 'Equity', thereby manifesting a relationship of 'Investor of the Corporate Debtor'.

It is evidenced from the material on record that, as per terms of the CLA between the Lenders Consortium, assigned to ACRE and the Corporate Debtor, the Corporate Debtor was prohibited from taking any further debt without the consent of the assignee. The Record does not show anywhere that any such approval was sought by the Corporate Debtor from the Lenders Consortium. At the time of disbursal of the amount, it was to be treated as Equity alone and not as 'Debt'. Even if these amounts were reflected in the financial statements of the Corporate Debtor as 'Other Financial Liability', it would depend on the facts of each case as to whether such an entry in the balance sheet construes a 'Financial Debt' as defined under the IBC.

In the instant case, the terms of the DSA, CLA and the 'Share Agreement' have to be read together with the fact that it was the Sponsor Company which was liable to pay the interest component and not the Corporate Debtor. The Hon'ble Supreme Court in a catena of Judgments has categorically held that 'IBC Code, 2016' is a time bound process and any delay in challenging the rejection of the claims cannot be condoned as a matter of routine. In the instant case, the claim of the Appellant was rejected on 9th August, 2022 where as the challenge to the Rejection was filed only on 30th November, 2022 after a period of four months after the rejection of the claim. The Resolution Plan has already been approved by the CoC by 100% majority voting share.

Present Tribunal is of the earnest view that in the facts of the attendant case, the CCDs are in the nature of 'Equity Instruments' and do not fall within the definition of 'Financial Debt' as defined under Section 5(8) of the IBC. Appeal dismissed.

Tags : CLAIM REJECTION DELAY