Avj Heightss Apartment Owners ... vs India Infoline Finance Limited & Anr

2. It is submitted that the IA 1261/2020 was disposed of by the

Adjudicating Authority vide the Impugned Order thereby directing

the Resolution Professional to admit IIFL's claim as 'financial debt'

and, inter alia, holding that:

a) If guarantee is given over the money borrowed by the

principal debtor from the creditor and the same is supported

by guarantee agreement, it will suffice to admit the claim as

'financial debt'. Since IIFL has not only filed the documents

reflecting transfer of money, creation of obligation by way of

Corporate Guarantee, but also furnishing of security by way

Company Appeal (AT)(Ins) No.626/2021 3

of mortgage, therefore, the RP should have admitted IIFL's

Claim as 'financial debt'.

b) With regard to the obligation of guarantee of the Corporate

Debtor, there is a separate guarantee deed (Corporate

Guarantee) which the Corporate Debtor has executed taking

upon itself the obligation to pay the loan amount of Rs.85

crores availed by the Director, i.e. Mr. Vinay Jain, in the event

the said Director defaults in repaying the said loan.

3. The learned counsel of the Appellant submitted that it is

pertinent to mention that, in the impugned order, the Learned

Adjudicating Authority has observed that the loan of Rs.85 crores

that was availed by the Director was utilized towards the

adjustment of the previous 3 loans (viz. CL 151, CL 152 and CL

252) which were availed by and defaulted by the Corporate Debtor.

It has been further categorically observed by the Ld. Adjudicating

Authority that the dues of the Corporate Debtor towards IIFL were

paid off with the money that was availed by the Director (i.e. Mr.

Vinay Jain).

4. The appellants accordingly are aggrieved with the order of the

Adjudicating Authority.

Company Appeal (AT)(Ins) No.626/2021 4

5. The List of dates and Events of the case as stated by the

Learned counsel of the Appellants are as follows:-

January 09 Corporate Debtor had availed the following three 2015 terms loans from IIFL:

January 13, - Term Loan No.CL151 of Rs.25 Crores ("CL 2015 151");

April 29, - Term Loan No.CL152 of Rs.75 Crores ("CL 2016 152");

- Term Loan No.C:252 of Rs.35 Crores ("CL 252); August, 2017 The said three term loans had become "highly irregular" and the management of the Corporate Debtor had, purportedly, approached IIFL for sanction of the credit facility loan for regularizing the Corporate Debtor's distressed account. September Vide sanction letter, IIFL sanctioned loan of Rs. 28, 2017 85.00 crores in favour of the Director of the Corporate Debtor.

November 01, Deed of Guarantee was purportedly executed by 2017 the Corporate Debtor in respect of the said loan purportedly availed by the director (Mr. Vinay Jain) March 05, IIFL had recalled the entire loan purportedly 2018 granted to the Director under CL 288 and had, purportedly, invoked the Corporate Guarantee given by the Corporate Debtor vide a purported notice/letter, but this letter was not presented to the Ld. Adjudicating Authority.

December 31, IIFL thereby, declared the Loan account of Rs. 2018 85.00 crore was declared Non-Performing Account ("NPA").

October 21, Adjudicating Authority passed an order towards 2019 application filed by one M/s Vishal Fabrics & Ors. Under section 7 of the Code for initiation of corporate insolvency resolution process ("CIRP"), the CIRP of the Corporate Debtor was commenced. Mr. Anil Tayal, was appointed as the Interim Resolution Professional ("IRP") to conduct the CIRP of Corporate Debtor, who later

Company Appeal (AT)(Ins) No.626/2021 5

was confirmed as Resolution Professional ("RP") by the COC of Corporate Debtor.

November 05, IIFL duly submitted Claim Form in Form-C to the 2019 IRP for an amount of Rs.134,15,62,129/-

claiming the said debt arising out of a certain 'Deed of Guarantee' to be part of committee of creditor ("Coc") being a financial debtor.

November 20, On the claim getting rejected by the RP, IIFL filed 2019 the IA 1261 before the Adjudicating Authority, inter alia, seeking directions to the RP to admit IIFL's entire Claim, to treat IIFL as the Financial Creditor and to include IIFL in the COC of the Corporate Debtor.

November Appellant had filed Intervention Application 2020 seeking permission to intervene in IA 1261 so that Appellant's objections to the Claim submitted by IIFL could also be brought on record.

May 20, 2021 Adjudicating Authority passed an order ("Impugned Order") in I.A. No. 1261 of 2020 ("IA 1261") in C.P. (IB) No. 654 (PB)/2019 filed by IIFL.

July 15, 2021 The present appeal was filed assailing the impugned order.

6. The Learned Counsel of the Appellant stated that the

Corporate Guarantee given by CD for the loan taken by Director is

prohibited b Section 185 of the Companies Act, 2013 and hence

invalid under law.

7. The 'Deed of Guarantee' dated November 01, 2017 was

executed by the Corporate Debtor in respect of a loan of Rs. 85

Crores availed by its Director, Mr. Vinay Jain. [ see page(s): 73-

Company Appeal (AT)(Ins) No.626/2021 6

74A, 103A-104A, 151-156 of the Appeal; pages 5-6 of the Reply of

Respondent No.1/IIFL

8. The Corporate Debtor could not have given any such

'Corporate Guarantee' for the loan availed by its director as the

same is barred by Section 185 of the Companies Act, 2013.

9. Section 185 provides that no company shall, directly or

indirectly, advance any loan to any director or give any guarantee

or provide any security in connection to the loan availed by the

said director or any such other person. The said section 185 is

reproduced hereunder for ready reference:

"185. Loans to Directors, etc.

(1) Save as otherwise provided in this Act, no company shall, directly or directly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person:

Provided that nothing contained in this sub-section shall apply to:

(a) the giving of any loan to a managing or whole-time director:

(b) a company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by the Reserve Bank of India.

(c) any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or

Company Appeal (AT)(Ins) No.626/2021 7

(d) any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company:

Provided that the loans made under clauses (c) and (d) are utilised by the subsidiary company for its principal business activities. ....

(2) If any loan is advanced or a guarantee or security is given or provided in contravention of the provisions of sub-section (1), the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees ond the director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with Imprisonment which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees, or with both."

i. Moreover, the Corporate Debtor could not have given any Corporate Guarantee for securing any loan, let alone for securing the loan of its director(s), as the Corporate Debtor was itself an NPA and a distressed company. [see pages 150-151 of the Appeal and page 264 of Reply by IIFL) ii. Furthermore, had the Corporate Debtor had, in fact, given such a Corporate Guarantee in respect of the loan availed by its Director, the same must have been reported to the Registrar of Companies ("ROC"). However, there is no record/return/financial statement available with the ROC or filed by the Corporate Debtor with the ROC that would remotely suggest that the Corporate Debtor had even intended to give any such Corporate Guarantee. [See page 3 of Reply filed by the Respondent No.2/RP]

iii. The Hon'ble Supreme Court has, in the matter of Municipal Corporation of Greater Mumbai vs. Abhilash Lal 2020 (13) SCC 234, while following the principle laid down in Nazir Ahmad v. King Emperor, 1936 SCC Online PC 41, has stated as follows:

39. The principle that if a statute requires a thing to be done in a particular manner, it should be done in that manner or not at all"

However, in light of the submissions made hereinabove, it is clear that the transaction of issuance of the Corporate Guarantee in favour of the Respondent no. 1 had been carried out in complete contravention of the law which has a direct bearing on such a transaction.

iv. The Respondent no.1, being a financial/ lending institution was responsible to conduct a proper and detailed due diligence to check the background of the borrower and the guarantor to the repayment capacity of such parties. However, the Respondent No.1 has clearly failed to conduct proper due diligence miserably lacked in performing

Company Appeal (AT)(Ins) No.626/2021 8

its duties as required under the rules and regulations framed by the financial sector regulator, Reserve Bank of India ("RBI").

10. The RP had submitted that the Claim submitted by IIFL could

not be verified as per the books of account and records of the

Corporate Debtor. Further the RP submitted that it also checked

the records of the ROC and the only charge created in favour of

IIFL was with respect to the loan taken by the Corporate Debtor in

the year 2015 to the tune of Rs. 135 crores. [See page 320 of the

Appeal and page 3 of the Reply of the Respondent No.2/RP]

11. On the other hand, the Appellant has established that

irrespective of the genuineness of the documents and whether the

same were executed or not, the Corporate Debtor could not have

given its Corporate Guarantee in favour of the Respondent No.1 for

the loan availed by its Director in view of the prohibition imposed

under Section 185 of the Companies Act, 2013.

12. In this regard, reference is had to the judgment dated July

28, 2005 passed by Kerala High Court in "J. Daniel vs. State of

Kerala & Anr, 2005 SCC Online Ker 366 whereby it was held that

any agreement opposed to law or forbidden by law is not

Company Appeal (AT)(Ins) No.626/2021 9

enforceable, and accordingly every debt or liability upon which a

cheque is issued is not enforceable.

13. Neither the DRT nor the Adjudicating Authority were

apprised of the said true and correct position of law which is

applicable to the Corporate Debtor and to the transaction that is

currently disputed by the Appellant.

14. Moreover, the Respondent No 1 has failed to address how the

transaction of the Corporate Guarantee is legal and has failed to

bring on even a single document on record to show that the

Corporate Guarantee given by the Corporate Debtor was a legal

document.

15. Besides, it is submitted that the Respondent no. 1 has

resorted to "ever greening" of the distressed account of the

Corporate Debtor which had been declared as NPA by IIFL, by

granting loan to its Director against the Corporate Guarantee of

the Corporate Debtor itself:

16. Such grant of loan by IIFL to the Director of the Corporate

Debtor without conducting due diligence to ascertain the financial

Company Appeal (AT)(Ins) No.626/2021 10

viability or the cash flows of the borrower or even the reasonable

certainty of repayment by either the borrower or even the

Corporate Debtor, goes in the teeth of Master Circular- Prudential

Norms on Income Recognition, Asset Classification and

Provisioning Pertaining to Advances' dated July 01, 2015 ("Master

Circular") issued by the Reserve Bank of India. As per the said

Master Circular, no account could be taken up for restructuring

by a bank/ financial Institution unless the financial viability is

established and there is a reasonable certainty of repayment from

the borrower, as per the terms of the restructuring package.

Pertinently, the said Master Circular further provides that any

restructuring done without looking into cash flows of the borrower

and assessing the viability of the projects/ activity financed by

banks would be treated as an attempt at "ever greening a weak

credit facility."

17. As such, the Respondent no. 1 cannot claim to be a creditor

much less, financial creditor' for its Claim of Rs. 134,15,62,129/-

(Rupees One Hundred and Thirty- Four Crores Fifteen Lakhs

Sixty-Two Thousand One Hundred and Twenty-Nine only)

Company Appeal (AT)(Ins) No.626/2021 11

submitted in Form-C dated November 05, 2019 with the RP during

the CIRP of the Corporate Debtor.

18. The present Appeal has been filed under Section 61 of the

Code which allows "any person aggrieved by the order of the

Adjudicating Authority" to file an Appeal. As such, the Appellant,

being a "person" aggrieved by the order of the Adjudicating

Authority, has sufficient locus to file the present Appeal and, as

such, the present Appeal is very much maintainable with this

Hon'ble Appellate Tribunal, as against the contention of the

Respondents that "appellant has no locus to file the present

appeal".

19. Moreover, as submitted in the Appeal, Appellant is the

'Association of Homebuyers' and is registered as a 'society duly

established and registered with the Registrar of Firms, Societies

and Chits, Meerut ("Registrar") under the provisions, of the

Societies Registration Act, 1860 ("Societies Registration Act"). The

Appellant has placed on record an 'Additional Affidavit explaining

in detail how the registration of the Appellant as a 'Society' is valid

and the same fact has been admitted by the RP. [Refer para 12 of

the Additional Affidavit with respect to locus of the Appellant].

Company Appeal (AT)(Ins) No.626/2021 12

20. Since the Appellant is an association of home-buyers who are

part of the Committee of Creditors ("COC"), any decision of the

Adjudicating Authority shall directly have a direct bearing and

strong impact on the rights of the home buyers. In various

judgments, the Hon'ble Supreme has upheld the rights and

interests of the home buyers as "Aggrieved Persons".

21. The Learned counsel for the appellant also brought on record

through IA No.1772/2022 filed on 19th May, 2022 vide Dy

No.55756 a copy of the order dated February 10, 2022 passed by

the Hon'ble High Court of Allahabad in Writ C No.2032 of 2022

and also dated March 03, 2022 passed by the Hon'ble High Court.

This judgement of Hon'ble High Court is in respect of renewal of

Registration Application of AVJ Heightss Apartment Owners

Association, Appellants, and some direction has been given.

22. This Tribunal also while hearing the appeal on 26th July,

2022 desired to know the status of FIR No.143/2019 registered

with PS EOW, New Delhi. The same is reproduced below:-

"26.07.2022: In this Appeal on last date we heard Mr. Sunil

Fernandes, learned counsel for the Appellant. Since alongwith

this Appeal another connected Appeal i.e. 626/2021 was also

on the Board we had partly heard Mr. Shashank Agarwal

Company Appeal (AT)(Ins) No.626/2021 13

learned counsel for the Appellant in CA(AT) No.626/2021.

Hearing in the Appeal was deferred.

At the time when the Appeal was taken up, the Tribunal wanted

to know regarding the status of FIR No.143/2019 registered

with PS EOW, New Delhi, in which the Appellant of the present

case is informant. The case was registered for offence under

Section 420, 465, 468, 471 read with 120B of IPC. Since the

said FIR has direct bearing for final adjudication in the present

appeal, it is necessary to know about the stage/status of the

case. However the learned counsel for the Appellant was not

in a position to intimate the Court regarding the result of the

investigation and the stage of investigation of the case. In view

of this situation the Court is left with no option but to call for

report from the Commissioner of Police, New Delhi regarding the

status of FIR No.143/2019.

The Commissioner of Police, New Delhi is requested to submit a

detail report in respect of stage of investigation in FIR

No.143/2019, within a period of three weeks from the date of

receipt of this order. The Registry is directed to communicate

this order forthwith to the Commissioner of Police, New Delhi.

Put up both the Appeals again on 12th October, 2022 as 1st

case under the heading for hearing since it is part heard

matter."

Company Appeal (AT)(Ins) No.626/2021 14

22. In this context also the Deputy Commissioner of Police, EOW,

New Delhi submitted the Status Report with the approval of

Commissioner of Police, New Delhi, which is depicted

hereinbelow:-

"The brief facts of the case are that the present case was registered on

the complaint of Vinay Jain, S/o Sh. Bal Mukund Jain, R/o B-230, Vivek

Vihar, Delhi against M/s India Infoline Finance Ltd (now named IIFL

Finance Ltd), an NBFC & its directors/officials. The core allegation of

Vinay Jain in the complaint is that the accused entity (NBFC)

fraudulently sanctioned a loan of Rs. 85 Crore to him in his individual

capacity while he had never applied for any such loan. To support his

allegation he relies upon the fact that the loan of Rs. 85 Crore was

sanctioned to him vide Sanction Letter dated 28.09.2017 duly

acknowledged by him However, on the given date i.e. 28.09.2017, he was

in judicial custody at Kasna District Jail, UP. The said sanction letter

dated 28.09.2017 also doesn't bear the endorsement of the concerned

Jail authorities which is mandatory provision according to the applicable

rules & regulations as per the Jail Manual. He claims to have come across

the purported forged Sanction Letter of loan of Rs. 85 Crore only in June

2018 during the proceedings on the application U/s 14 SARFAESI Act

filed before the Hon'ble Court of Ld. CMM/Shahdara Distt. in connection

with the three loan accounts of Rs. 135 Crore sanctioned & disbursed to

M/s AVJ Developers (India) Pvt. Ltd. In the said photocopy of the

Sanction Letter of Rs. 85 Crore filed before the court of Ld. CMM, the

Company Appeal (AT)(Ins) No.626/2021 15

designated spaces for "Date" and "Reference No." were left blank and was

having his forged signatures. The loan amount of Rs. 85 Crore was shown

to be secured by equitable mortgage of the below mentioned properties:-

1. Under Construction Project AVJ Heights at Plot No. GH-12/2,

Sector-Zeta-1, Greater Noida, UP developed by M/s AVJ Developers

(India) Pvt Ltd spread over 42,600 Sq. Meters.

2. Under construction Commercial project namely AVJ Business

Heights situated at Property Bearing No. C, Community Centre,

Anand Vihar Delhi spread over 2,674 Sq. Meters area.

During the course of investigation, the replies and documents were

collected from the accused entity M/s IIFL Finance Ltd. The concerned

officials of the accused entity who had dealt with the documentation of

loan of Rs. 85 Crore sanctioned & disbursed to Vinay Jain were also

examined. M/s IIFL Finance Ltd. replied that it had sanctioned three

Term Loans to M/s AVJ Developers (India) Pvt Ltd, the company

controlled & managed by Vinay Jain, in January 2015 and had disbursed

total amount of Rs. 123 Crore. These three loan accounts had become

irregular in August 2017. Ms Asha Jain W/o Vinay Jain, who was

officiating as director of M/s AVJ Developers (India) Pvt. Ltd. had

approached the officials of M/s IIFL Finance Ltd (the then M/s India

Infoline Finance Ltd.) for sanctioning loan to Vinay Jain and the said loan

amount was to be used for regularization of three loan accounts by

utilizing for making the loan repayments. At the request of Ms. Asha Jain,

Company Appeal (AT)(Ins) No.626/2021 16

the Cash Credit Facility of Rs. 85 Crore was sanctioned and disbursed in

the name of Vinay Jain. It is replied that the said loan amount of Rs. 85

Crore was utilized/adjusted against the loan dues of M/s AVJ Developers

(India) Pvt Ltd.

In respect of the Sanction Letter dated 28.09.2017, it is replied that the

Sanction Letter was handed over to Ms Asha Jain for perusal and

acknowledgement by Vinay Jain The requisite documents for processing

of loan of Rs. 85 Crore were made available by Asha Jain. The other

financial records & documents pertaining to the projects of M/s AVJ

Developers (India) Pvt. Ltd. & M/s Best View Properties Pvt. Ltd. were

retrieved from the loan file of previous loans. The same was returned by

Asha Jain to M/s IIFL Finance Ltd. after getting the signatures thereon

from Vinay Jain. After release from Jail, Vinay Jain had signed the other

loan documents.

On being queried about the blank spaces in Sanction Letter filed before

the Hon'ble Courts of Ld. CMM/Shahdara during the proceedings U/s 14

SARPAESI Act, it was replied that the draft of the Sanction Letter was

prepared at Mumbai office of M/s IIFL Finance Ltd. and the same draft

of the Sanction Letter having the blank spaces was shared with Delhi

Team, dealing with Vinay Jain, for perusal & opinion/consent of Vinay

Jain to the terms & conditions of said Sanction Letter. However, the

signed Sanction Letter having the signatures of Vinay Jain was returned

by Delhi Office to Mumbai Office. The Loan Account number is generated

only at the time of disbursement and the date is also mentioned at the

Company Appeal (AT)(Ins) No.626/2021 17

time of disbursement. The Delhi team may have scanned the undated &

unsigned sanction letter for its record. The same draft sanction letter may

have been filed before the Hon'ble Court of Ld. CMM/Shahdara, Delhi.

During the course of investigation, it is found that complainant Sh Vinay

Jain is Director & Shareholder of the company namely (1) M/s AVJ

Developer Pvt. Ltd.. (2) M/s AVJ Developer (India) Pvt. Ltd. and (3) M/s.

Best View Properties Pvt. Ltd. M/s AVJ Developers (India) Pvt Ltd was

developing Group Housing project namely AVJ Heights at Sector-Zeta-1,

Greater Noida. M/s Best View Properties Pvt. Ltd. was developing

commercial project namely AVJ Business Heights at Community Centre,

Anand Vihar, Delhi. For meeting the financial requirements for

developing the project, M/s AVJ Developers (India) Pvt. Ltd. had got

sanctioned loan of Rs. 135 Crore from the alleged NBFC namely M/s

India Infoline Finance Ltd. vide Loan A/c No. C-151 for Rs. 25 Crore,

Loan A/c No. C-152 for Rs. 75 Crore and Loan A/c No. CL-252 for

Rs. 35 Crore to M/s AVJ Developers Pvt. Ltd., the company of Vinay

Jain. However, the alleged company disbursed loan amount of Rs.

23,62,50,000/- on 20.03.2015 and Rs. 74,23,23,000/- only on

10.04.2015 against the actual loan amounts of Rs. 25 Cr. & 75 Cr

deducting the balance amount on account of processing fees, etc.

Thereafter, in May 2016, an amount of Rs. 23 Cr. was disbursed.

The above mentioned loan amounts were also secured by way of equitable

mortgage of abovementioned under construction projects of AVJ Heights

& AVJ Business Heights. The said loan accounts were declared NPA on

05.03.2018 with the following outstanding balances.

Company Appeal (AT)(Ins) No.626/2021 18

Loan Account Number Outstanding Amount CL-151 Rs. 17,21,24,405/- CL-152 Rs. 20,75,11,882/- CL-252 Rs. 55,69,46,727/- TOTAL Rs. 93, 65, 83, 014/-

During the course of investigation, the original loan documents

pertaining to Loan Amount of Rs. 85 Crore sanctioned and disbursed

on 28.09.2017 to Vinay Jain were collected from the accused entity M/s

India Infoline Finance Ltd (now named IIFL Finance Ltd.). The loan

amount of Rs. 85 Crore to Vinay Jain was sanctioned vide loan

reference No CL-288 vide Sanction Letter Dated 28.09.2017. The loan

amount of Rs. 85 Crore sanctioned to Vinay Jain was disbursed in the

Escrow A/c No 01930350000089 opened with HDFC Bank, Manak

Vihar, Delhi, opened and operated as mandated in the Escrow Account

Agreement Dated 14.02.2015 executed between (1) M/s AVJ Developers

(India) Pvt. Ltd, (2) M/s India Infoline Finance Ltd. and HDFC Bank.

On the perusal of the Sanction Letter dated 28.09.2017, it is found that

the designated spaces for Date and Reference No, Prospect Number are

filled with ball pen while the rest of the entire sanction letter is printed

one. It was having 08 signatures of complainant Vinay Jain. It is

pertinent to mention that the figure of Term Loan of INR Rs. 85 Crore

is in printed form in the said sanction letter. The places where

signatures of Vinay Jain are present, are also carrying scanned/printed

cross marks indicating the designated places where the signatures have

to be made.

Company Appeal (AT)(Ins) No.626/2021 19

Further, the statement of Axis Bank account number

055010100250283 of Vinay Jain which is part & parcel of loan

documents of loan of Rs. 85 Crore, was also provided the accused

entity. On the perusal it is found that the said statement of account

was printed on 29.09.2017. However as per the investigation

conducted, Vinay Jain was in Judicial Custody on the given date. The

statement of account is also having the stamp of Axis Bank, Vivek Vihar

Branch, Delhi and initial of signatures of Axis Bank official. Ms. Shashi

Bala, the then Deputy Manager at Vivek Vihar Branch confirmed her

initial signatures on the said statement of account. She stated that the

printout of the said statement was not generated at the branch since

the statements generated at the branch carries employee ID who have

generated the said statement of account by login into the banking

software using his login credentials. She further added that either Vinay

Jain or someone else authorized by him must have visited the branch

with the printouts of the statement of account for authentication and

she after confirming the correctness of the statement must have ratified

the same.

The certified copy of the statement of account number

055010100250283 of Vinay Jain of the subject period since 1.11.2016

to 29.09.2017 was also collected from Axis Bank, Vivek Vihar Branch,

Delhi.

Company Appeal (AT)(Ins) No.626/2021 20

The comparison of transaction entries reflected in the statement

provided by M/s IIFL Finance Ltd. with the statement collected

from Vivek Vihar Branch confirmed the correctness of statement

provided by accused entity M/s IIFL Finance Ltd. From the

statement of Shashi Bala, the then Deputy Manager, Axis Bank,

Vivek Vihar Branch, it is confirmed that the statement was not

generated at the bank branch and was brought to branch by

someone on behalf of Vinay Jain for ratification. It means that

the statement of account was generated either by any of family

members of Vinay Jain or any other trustworthy person with

whom Vinay Jain had shared his banking credentials.

During the course of investigation, the admitted signatures of

Vinay Jain of the contemporary period were collected. The

original loan documents and the admitted signatures of

complainant Vinay Jain were submitted in FSL for GEOD

opinion about the veracity of the allegations of forgery of

signatures of Vinay Jain.

During investigation, the GEQD opinion regarding the

signatures of complainant Vinay Jain was received from FSL,

Madhuban Chowk, Rohini, Delhi. Ms. Smita Sinha, Junior

Forensic/Assistant Chemical Examiner (documents) has opined

:-

1. The person who wrote the red enclosed signatures stamped

and marked Al to A59 (admitted signatures of Vinay Jain) also

Company Appeal (AT)(Ins) No.626/2021 21

wrote the red enclosed signatures similarly stamped and

marked Q1 to Q7, Q9 to Q37 & Q84 to Q86 (questioned

signatures of Vinay Jain).

2. It has not been possible to express any opinion on red

enclosed signatures stamped and marked Q8 & Q38 to Q83

(questioned signatures of Vinay Jain) in comparison with the

red enclosed signatures similarly stamped and marked Al to

A59 (admitted signatures of Vinay Jain).

From the GEQD opinion, it is confirmed that complainant Vinay

Jain has signed the sanction letter dated 28.09.2017 and other

loan documents In this manner, the allegations of forgery of his

signatures leveled by complainant Vinay Jain could not be

substantiated.

Vinay Jain has challenged the authenticity of the Sanction

Letter dated 28.09.2017 and disbursement of loan

amount of Rs. 85 Crore on 04.10.2017 on the ground that

at the given date he was in Jail and the sanction letter having

his signatures to the effect of acknowledgment/acceptance of

loan of Rs. 85 Crore doesn't have endorsement of Jail

Authorities. Interestingly, complainant Vinay Jain was

appointed Director of company M/s AVJ Developers (India) Pvt.

Ltd. w.e.f. 11.08.2017. He had also signed the Form DIR-2 on

11.08.2017 consenting to his appointment to the Board of

Directors of M/s AVJ Developers (India) Pvt. Ltd. He had also

Company Appeal (AT)(Ins) No.626/2021 22

accepted the Resignation Letter dated 13.08.2017 of Pardeep

Singhal from the Directorship of Company M/s AVJ Developers

(India) Pvt. Ltd, and also signed the Certified True Copy of

Board Resolution passed at the meeting of the Board of

Directors of M/s AVJ Developers (India) Pvt. Ltd. on 14.08.2017

to the effect of acceptance of resignation of Pardeep Singhal.

Both these documents were uploaded to ROC website on

14.08.2017. However, admittedly during this period i.e. since

11.08.2017 to 14.08.2017, Vinay Jain was lodged in Sub- Jail

at Kishangarh Bas, Alwar, Rajasthan. Even these documents

does not carry the endorsements of Jail Authorities but Vinay

Jain has not challenged these documents and has not disputed

his appointment to the Board of Directors of M/s AVJ

Developers (India) Pvt. Ltd. since 11.08.2017.

From the above discussed facts in the aforesaid para, it is

established that someone who used to visit Vinay Jain at the

jail used to get the documents signed from Vinay Jain. This fact

totally corroborates with the contentions of M/s IIFL Finance

Ltd. that the Sanction Letter Dated 28.09.2017 was handed

over to Ms. Asha Jain, wife of Vinay Jain, for acknowledgement

from him and the acknowledged copy returned by Asha Jain

was having signatures of Vinay Jain. The GEQD opinion has

confirmed that Vinay Jain is the author of his signatures on the

Sanction Letter dated 28.09.2017 & other loan documents.

Company Appeal (AT)(Ins) No.626/2021 23

Further, Vinay Jain has himself taken contradictory stands in

his complaint itself. As per the Demand Notices dated

5.03.2018 raised by M/s IIFL Finance Ltd. against the loan

accounts CL-151, CL-152 & CL 252 of M/s AVJ Developers

(India) Pvt. Ltd., the outstanding loan liability was approx. Rs.

93.66 Crore whereas he admittedly offered Rs. 100 Crore for

One Time Settlement (OTS). It is a well settled practice in the

financial sector that OTS is always done at a much lower

amount than the outstanding loan dues. Vinay Jain could not

provide any plausible explanation regarding offering 100 Crore

for OTS against the lesser amount of outstanding dues. It

indicates that he was well aware about the additional

loan liability of Rs. 85 Crore.

From the investigation conducted it has been found that the

loan of Rs. 85 Crore was utilized only for settling the liabilities

of M/s AVJ Developers (India) Pvt. Ltd. against the Loan

Accounts No. CL-151, CL-152 and CL-252 in the following

manner on 30.09.2017:-

Loan Outstanding Adjustment Outstanding A/c before amount out of Loan Amount No. adjustment Rs. 85 Crore after (Rs.) (Rs.) Adjustment (Rs.) CL- 35,52,47,012/- 18,38,85,621/- 14,13,61,391/- 151 CL- 102,81,72,456/- 56,83,34,016/- 45,98,38,44/- 152 CL- 28,33,80,761/- 9,77,80,363/- 18,56,00,399/- 252

Company Appeal (AT)(Ins) No.626/2021 24

From the investigation conducted, it is understood that the

accused entity M/s India Infoline Finance Ltd. had nothing to

gain from this alleged act of fraud & forgery except the interest

income on the said loan amount of Rs. 85 Crore. The properties

in question mortgaged against this loan of Rs. 85 Crore were

already mortgaged with the accused NBFC M/s India Infoline

Finance Ltd. against the loan dues of Rs. 135 Crore of M/s AVJ

Developers (India) Pvt Ltd in Loan A/c No. and no additional

security was offered. Moreover, the amount of Rs. 85 Crore was

utilized only for repayment of loan dues against the loan A/c

No. CL-151, CL-152 & CL- 252 as explained above reducing the

loan liability of M/s AVJ Developers (India) Pvt. Ltd. In this

scenario, the loan of Rs. 85 Crore had not been disbursed &

adjusted against the existing loan liabilities, the original Loan

Dues would have stood at the pre-adjustment levels.

From the study of the circumstances that have emerged during

the course of investigation, the only reason found for the

disbursement of loan of Rs. 85 Crore which can be understood,

is that the original loan accounts of M/s AVJ Developers (India)

Pvt. Ltd. were irregular and would have turned NPA in the year

2017 itself leading to wiping out of credit ratings of the

company. In these circumstances it would not have been able

to raise further funding. Therefore, with between the

complainant and alleged entity, the loan of Rs. 85 Crore was

Company Appeal (AT)(Ins) No.626/2021 25

disbursed to Vinay Jain and was appropriated towards the

payment of outstanding loan dues of M/s AVJ Developers

(India) Pvt. Ltd. with the idea of maintaining the status of loan

accounts as regular.

Complainant Vinay Jain is a habitual offender and involved in

09 FIRS registered at Delhi and 35 FIRS registered in UP. In 05

cases, Chargesheet has been filed by EOW, Delhi Police against

Vinay Jain and 04 cases are pending investigation. Most of the

cases registered against him are in respect of Real Estate

Projects developed by his companies namely (1) M/s AVJ

Developers (India) Pvt. Ltd. and (2) M/s Best View Pvt. Ltd. The

allegations of forgery of his signatures leveled by Vinay Jain

have been disproved by the GEQD Opinion substantiating that

he himself is the author of the questioned signatures. His claim

that the Sanction Letter Dated 28.09.2017 is also not bearing

the endorsement of Jail Authorities is demolished by the fact

that he had also signed documents dated 11.08.2017 and

13.08.2017 to the effect his appointment and resignation of

Pardeep Singhal from the board of Directors of M/s AVJ

Developers (India) Pvt. Ltd. also does not have endorsement of

Jail Authorities. These documents are not discarded by Vinay

Jain while even on both these dates he was lodged in Kasna

District Jail. He only disowns the documents i.e. Sanction Letter

and Loan documents which hurts his interests and puts the

Company Appeal (AT)(Ins) No.626/2021 26

liability of repayment of loan of Rs. 85 Crore upon him. His

previous other loans of Rs. 135 Crore were also declared NPA.

In this case the Final Report as Cancellation had been prepared

and was put in court on 18.05.2022. Now, the present case is

under consideration with Hon'ble Court of Ms. Preeti Parewa,

Ld. CMM, Shahdara and next date of hearing is fixed for

24.08.2022.

This status report is submitted with the approval of Worthy

Commissioner of Police, Delhi."

23. the Learned Counsel for the Respondent No.2/RP has

submitted that the Adjudicating Authority disposed off vide

impugned order in question the following applications:

a) CA No.1261(PB) of 2020.

b) IA No.2205(PB) of 2020

c) IA No. 3125 of 2020.

24. The Learned counsel for R2/RP also submitted that the claim

of the R1 could not be verified as per books of accounts and

documents available with the CD. The amount so claimed is

neither reflected in the financial statement nor there exists any

proof of the same in record of the CD. R1 has filed a claim of Company Appeal (AT)(Ins) No.626/2021 27

Rs.134,15,62,129/- for a loan of Rs.85 crores given to the

suspended director Mr. Vinay Jain on 1.11.2017 and it is alleged

that the CD was guarantor in such loan agreement. Various

emails have been exchanged between the RP and R1 and nothing

could be verified from the books of accounts of CD regarding the

exact claim made by the R1.

25. It was also stated by the RP that in the FIR and through

enquiry Mr. Vinay Jain, suspended director stated that the

documents so executed for alleged loan of Rs.85 crores was never

executed by him and he has not signed any document with respect

to the said loan amount. It was also stated by the Learned counsel

for the RP/R2 that there exists no record showing loan of Rs.85

crores nor there was any charge created or recorded with the ROC.

It was also stated by the R2/RP that in view of the judgment of this

Appellate Tribunal in para in Avil Menezes, Resolution Professional

of AMW Auto Component Ltd Vs Shah Coal Pvt Ltd, Company

Appeal (AT) (Ins) No.63/2021 this Tribunal has categorically held

that the Resolution Professional would not have any locus to

challenge the decision of Adjudicating Authority to admit the

claim. Accordingly, the RP has not challenged the decision of the

Adjudicating Authority for admission of claim.

Company Appeal (AT)(Ins) No.626/2021 28

26. The learned senior counsel for the R1/IIFL has stated that

the appeal is not maintainable as the appellant has no locus to

challenge the order of Adjudicating Authority. Learned senior

counsel also stated that the verification of claim of the financial

creditor in CIRP proceeding is a duty cast upon the RP who is

incharge of CD to take any action with the approval of the COC.

27. The learned senior counsel further stated that during the

year 2014-2016 the R1 has granted loan of Rs.85 crores to Mr.

Vinay Jain, suspended director and to secure the repayment of

loan of Rs.85 crores alongwith interest and other charges, the

CD/AVJ executed a Corporate Guarantee in favour of IIFL thereby

guaranteeing and undertaking to repay the outstanding amount of

the above loan to IIFL. It was also stated by the learned senior

counsel that to secure the loan of IIFL, the CD/AVJ also mortgaged

the immovable property owned by CD/AVJ being AVJ Heights,

situated at Plot No.GH, 12/2, admeasuring 42600 sq. mtrs Sector

Zeta 01, Greater Noida, Gautam Budh Nagar, Uttar Pradesh. It

was also stated that when the suspended director defaulted in

repayment of outstanding dues then IIFL/RI issued Notice dated

3rd December, 2018 on both the suspended director of CD for

repayment of the loan alongwith interest and cost etc. To support

Company Appeal (AT)(Ins) No.626/2021 29

his stand he took shelter of the Board Resolution dated 06.05.2021

and mortgaged documents including the financial statement of

IIFL that the debt has not been paid. The learned senior counsel

stated that the order of Adjudicatory forum under SARFAESI Act,

2002 for upholding the right and claim of the IIFL. It was also

stated by the learned senior counsel that the RP is taking the stand

against the view/order of DRT, Delhi.

28. The learned senior counsel also stated that the appellant in

connivance with the suspended director is unnessarily harassing

the Respondent/IIFL and thereby finally made a prayer for

dismissal of the appeal filed by the appellant with exemplary cost.

29. We have carefully gone through the pleading of the parties

and perused the material available on record and submissions

made by the learned counsel for the parties.

30. The available record reflects that Board Resolution has been

passed guaranteeing/mortgaging the property. No doubt it is

contrary to the provisions of Section 185 of the Companies Act,

2013.

31. We are also in agreement that the registration of charges is

not reflecting on the ROC portal as pointed out by the parties.

Company Appeal (AT)(Ins) No.626/2021 30

32. What is not in dispute is that Mr. Vinay Jain, is a director

and shareholder of the Company, AVJ Developer Pvt Ltd and other

group companies. The group companies/CD was developing group

projects so alleged by the appellant. Loan were sanctioned for an

amount of Rs.135 crores to the CD and there was disbursal of

those loan amount during March/April, 2015 and May, 2016. The

said loan became NPA on 5th March, 2018. The loan of Rs.85 crore

was sanctioned and disbursed on 28th September, 2017 to

suspended director Mr. Vinay Jain and the amount was put in a

separate escrow account..........0089 opened with HDFC Bank,

Manak Vihar, Delhi. FIR report reveals that the suspended

director Mr. Vinay Jain is a habitual offender and is involved in 9

FIR in Delhi and 35 FIR registered in UP.

33. In this context it is also revealed that there is a separate

guarantee deed given by CD although not appearing in ROC

website.

34. The Adjudicating Authority in the impugned order vide para

24 to 29 has elaborately explained that he is admitting the claim

of IIFL for the specified amount and why IIFL be considered as CoC

Member. Para 24 to 29 is depicted herein below:-

Company Appeal (AT)(Ins) No.626/2021 31

"24. If Regulation 8 of the Insolvency and Bankruptcy Board of

India (CIRP Regulations, 2016) examined, he shall be obliged to

look into the financial contracts supported by financial

statements, the record evidencing disbursal of monies. It is not

said anywhere in Swiss Ribbons supra that claimants records

shall not be taken into consideration, it is not said anywhere

that verification of the claimant's records will not tantamount to

verification of records and it is not said anywhere in Regulation

8 of CIRP Regulations that the corporate debtor records alone

shall be examined and verified for admission of claim.

25. The applicant can only file documents that are present in its

custody, the applicant cannot ensure that record is maintained

by the corporate debtor. The Resolution Professional has not

denied paying off dues of earlier three loans with the money

taken through the loan amount claimed here and by sale of

another property mortgaged by another company.

26. Since the record showing that Mr. Vinay Jain was released

on bail on 24.10.2017, the documents executed by Vinay Jain

on 01.11.2017 cannot be ignored on the ground Vinay Jain

remained in judicial custody.

27. Here, the applicant has filed the financial contract

disclosing that the Suspended director Mr. Vinay Jain executing

a loan agreement in favour of the Applicant herein, the

Applicant disbursing the loan amount to the ESCROW Account,

Company Appeal (AT)(Ins) No.626/2021 32

thereafter appropriating the said amount towards the earlier

loan accouants which became irregular and also documents

reflecting sale of the property mortgaged by Best View

Properties Ltd. Moreover, the suspended directors of the

Corporate Debtor have not denied anywhere about taking

amounts through three loan amounts prior to availing this loan

by the Suspended Director of the Corporate Debtor and

depositing this loan amount of Rs.85 crores in the ESCROW

Account, ther4eafter adjusting the same against the previous

three loan accounts. All these transactions having remained

apparent on record, we wonder how this RP has ignored all this

material establishing financial contract, disbursal of the

amount, thereafter signing memo of deposit of title deeds for

creation of equitable mortgage.

28. With regard to obligation of guarantee, there is a separate

guarantee deed the corporate debtor taking obligation upon

itself to pay the loan amount of Rs.85 crores along with the

interest in the event Vinay Jain defaulted in repaying the loan

amount. In addition to it, the corporate debtor has also given

its property as security by deposit o title deeds. These are two

separate agreements binding the corporate debtor. To proceed

against the corporate debtor to place claim upon it as financial

debt, IIFL need not rely upon the mortgage charge because

section 5(8)(i) of the Code says that when any guarantee is

Company Appeal (AT)(Ins) No.626/2021 33

given over the money borrowed by the borrower with a promise

that he would repay the money borrowed along with interest,

such obligation of guarantee will fall within the ambit of the

clause (i) of section 5(8) of the Code. For the present claim will

fit into clause (i) of definition of financial debt, to admit the

claim, the RP need not look into as to whether any charge

created and whether such charge has been properly recorded.

Of course, all documentary proof is evident on record to prove

that money is availed, security is given towards the

consideration received.

29. What all we say is, if guarantee is given ever the money

borrowed by the principal debtor from the creditor and the same

is supported by guarantee agreement, it will suffice to admit the

claim as financial debt. Here the applicant has not only filed

documents reflecting transfer of money, creation of obligation

by way of guarantee, but also furnishing of security by way of

mortgage, therefore, the RP should have admitted the claim of

the applicant as financial debt, in view thereof, we hereby direct

the RP to admit IIFL claim of

Rs.134,15,62,129 and treat IIFL as COC member according to

its voting share."

35. The only point remains for consideration other than on

factual ground that whether the mortgaged agreement approved

by the Board of the Company which is not in accordance with the

Company Appeal (AT)(Ins) No.626/2021 34

provisions of Section 185 of the Companies Act, 2013 be

considered by the other parties or not. The question is normally

the other parties is not privy of the internal document of the

company and he has relied on the Board Resolution provided by

the other side. However, Section 185 of the Companies Act, 2013

itself provides for punitive action vide Section 185 sub-section (4)

which is depicted hereunder provides clarity on the issue:-

"(4) If any loan is advanced or a guarantee or security is given or provided or utilised in contravention of the provisions of this section,--

(i) the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees;

(ii) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees; and

(iii) the director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees, or with both."

36. Hence there is no need to elaborate further.

Company Appeal (AT)(Ins) No.626/2021 35

37 In view of the facts and circumstances including the law

available on the subject we do not find any inconformity in the

order and accordingly the appeal is dismissed.

(Dr. Ashok Kumar Mishra) (Justice Rakesh Kumar) Member (Technical) (Member (Judicial)

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Company Appeal (AT)(Ins) No.626/2021