Piramal Capital & Housing Finance ... vs Arpan Shah

(Arising out of Order dated 21.04.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Court No. V in I.A. No. 182 of 2022 in C.P. No. 481/I&BC/NCLT/MAH/2021)

IN THE MATTER OF:

Piramal Capital & Housing Finance Limited Unit No.-601, 6th Floor, Amiti Building, Agastya Corporate Park Kamani Junction, Opp. Fire Station LBS Marg, Kurla (West) Mumbai - 400 070. ...Appellant

Versus

Arpan Maheshkumar Shah Resolution Professional for Anuradha Real Estate Developers Pvt. Ltd. Having its registered office at 1069, Near Balaji School, VLG Malad West, Behind Evershine Mall, Mumbai - 400 064. ...Respondent

Present:

For Appellant: Mr. Ramji Srinivasan, Sr. Advocate with Mr. Vishnu Shriram, Ms. Rajshree Chowdhury, Ms. Mesha Dugar, Ms. Raveena Rai and Ms. Shruti Pandey, Advocates.

For Respondents: Ms. Natasha Dhruman Shah, Advocate.

Cont'd.../ -2-

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed against the order dated 21.04.2022

passed by the Adjudicating Authority (National Company Law Tribunal),

Mumbai Bench, Court No.5 dismissing I.A. No. 182 of 2022 filed by the

Appellant praying for admission of its claim and disposing of I.A. No. 308

of 2022 filed by the Resolution Professional for adjudicating of the claim

of the Appellant. Aggrieved by the order dated 21.04.2022, this Appeal

has been filed. The brief facts of the case necessary to be noted for

deciding this Appeal are:

(i) On 01.06.2018, the Appellant sanctioned a loan amount of

Rs.100 Crores to the Corporate Debtor (Anuradha Real Estate

Developers Pvt. Ltd.). The Loan Agreement as well as the

Registered Mortgage was entered on 06.06.2018. Between

11.06.2018 to 10.04.2019, Appellant disbursed total amount of

Rs.32.50 Crores to the Corporate Debtor.

(ii) The Loan Account of the Corporate Debtor was declared NPA on

01.11.2018. On 08.11.2019, the Appellant issued loan recall

notice to the Corporate Debtor. Appellant had issued notice

under Section 13(2) of the SARFAESI Act, 2002 dated

05.08.2020 calling upon the Corporate Debtor to make payment

of Rs.41,78,22,974/- as on 31.07.2020 alongwith the interest.

Company Appeal (AT) (Insolvency) No. 580 of 2022 -3-

The Appellant had issued a possession notice and taken

symbolic possession under Section 13(4) of the SARFAESI Act,

2002 on 05.12.2020.

(iii) On 07.06.2021, the Adjudicating Authority approved the

Resolution Plan submitted by the Appellant, Piramal Capital &

Housing Finance Limited in the Corporate Insolvency Resolution

Process (CIRP) of Dewan Housing Finance Corporation Ltd.

(DHFL).

(iv) On 11.08.2021, CIRP was initiated against the Corporate Debtor

on an application filed by 'Deepak Cheeda & Ors.' who claim to

be Financial Creditors of the Corporate Debtor. In response to

the public announcement made by the Interim Resolution

Professional, the Appellant filed its claim in Form-C dated

27.10.2021 for Rs.48,63,51,064/-. The Resolution Professional

called for certain additional information/ clarification from the

Appellant regarding its claim which was replied by the

Appellant. Further clarifications sought by the Resolution

Professional were also responded by the Appellant. The

Resolution Professional, on 22.12.2021, informed the Appellant

that he is still in process of verifying the claim of the Appellant.

(v) On account of delay in admission of the claim of the Appellant,

the Appellant filed I.A. No. 182 of 2022 before the Adjudicating

Company Appeal (AT) (Insolvency) No. 580 of 2022 -4-

Authority seeking direction to the Resolution Professional to

admit the claim of the Appellant as filed in Form C.

(vi) The Resolution Professional also filed an I.A. No. 308 of 2022

praying that the Adjudicating Authority must adjudicate and

decide the claim of the Appellant. Resolution Professional also

filed his reply in I.A. No. 182 of 2022.

(vii) Both the I.As were heard together and by order dated

18.02.2022, the Adjudicating Authority expended the scope of

Transaction Audit. Transaction Audit Report dated 09.03.2022

was given to the Appellant.

(viii) The Adjudicating Authority by the impugned order rejected I.A.

No. 182 of 2022 and accordingly disposed of I.A. No. 308 of

2022. Aggrieved by which order this Appeal has been filed.

2. Shri Ramji Srinivasan, learned senior counsel appearing for the

Appellant challenging the impugned order contends that the Adjudicating

Authority erred in rejecting the claim of the Appellant on a wrong premise

that the loan of Rs.32.50 crore was discharged by the sister concern -

'Rite Developers Pvt. Ltd.' (RDPL), hence, no amount is due on the

Corporate Debtor to be paid to the Appellant. It is submitted that the

loan due and payable by the Corporate Debtor to the Appellant was never

discharged and the plea taken by the Suspended Director of the

Corporate Debtor as well as the Resolution Professional was not based on

Company Appeal (AT) (Insolvency) No. 580 of 2022 -5-

any cogent material. The Adjudicating Authority relied on the

Transaction Audit Report dated 09.03.2022 which Transaction Audit

Report had recorded conclusion that it is not possible to comment on the

fact as to whether the loan of Appellant has been discharged. The

Adjudicating Authority relied on the internal correspondence between the

Corporate Debtor and its sister concern 'RDPL' which were self-serving

letters prepared by same Promoters of both entities i.e. the Corporate

Debtor and RDPL, which letters were not even marked to the Appellant.

The Adjudicating Authority relied on unaudited draft Book of Accounts of

the Corporate Debtor as on 31.03.2021 where the loan of the Appellant

was mischievously not shown whereas the said loan was duly reflected in

the Balance Sheets of the Corporate Debtor for the year 2018-19 and

2019-20. The conclusion drawn by the Adjudicating Authority that the

amount laying in the account of DHFL were adjusted towards the loan to

the Corporate Debtor were not based on any material and was perverse

finding. The Corporate Debtor failed to prove that the loan given to it was

discharged by any means, hence, the rejection of the claim of the

Appellant is wholly unjustified and unsustainable. Learned counsel for

the Appellant referred to the loan account of RDPL as maintained by the

Appellant as well as the ledger account of the Corporate Debtor brought

on record alongwith the Reply of the Resolution Professional. Learned

counsel for the Appellant submits that the amount of Rs.38,51,98,750/-

which is claimed to be adjusted by RDPL towards the loan of Corporate

Debtor was in fact payment of EMI by RDPL and then further

Company Appeal (AT) (Insolvency) No. 580 of 2022 -6-

disbursement by Appellant to RDPL which is clearly apparent from the

transaction entries in the loan account of RDPL.

3. Learned counsel appearing for the Respondent, Ms. Natasha

Dhruman Shah refuting the submissions of learned counsel for the

Appellant submits that the Resolution Professional has rightly not

admitted the claim of the Appellant which from the documents placed by

the Ex-Director of the Corporate Debtor was proved to be discharged by

the sister concern- 'RDPL'. Learned counsel for the Respondent has

referred to the entry dated 19.11.2018 in the loan account of RDPL

maintained by the Appellant. It is further submitted by learned counsel

for the Respondent that there was collusion between the Appellant,

Corporate Debtor and RDPL in the disbursement of loan. It is submitted

that the Appellant has not ensured that the amount which was disbursed

to the Corporate Debtor is utilized for the project for which the amount

was sanctioned. The Corporate Debtor siphoned the amount and

transferred substantial amount to the RDPL of about Rs.23 Crores which

could not have been possible if an Escrow Account was insisted. It is

submitted that disbursement of amount of Rs.9.50 Crore have been even

after date of NPA. The amount of Rs.9.50 Crore which was disbursed in

April, 2019 was allowed to be transferred in the account of Sameer Dedia,

the Director of the Corporate Debtor and allied group of companies from

which the amount was used to settle the claim against RDPL. Learned

counsel for the Respondent further submits that the entire transaction

was collusive transaction and application filed by the Resolution

Company Appeal (AT) (Insolvency) No. 580 of 2022 -7-

Professional in the CIRP against the DHFL for avoiding the transaction is

still pending consideration. It is submitted that the Corporate Debtor

vide letter dated 27.07.2020 requested the RDPL to assist them in

repaying DHFL loan of Rs.32.20 Crore. Further reliance has been laid on

letter dated 18.02.2021 issued by RDPL to the Corporate Debtor

informing that the credit amount of Rs.38,51,98,790/- which is laying in

the account of DHFL can be adjusted unconditionally towards the loan

amount availed by the Corporate Debtor of Rs.32.50 Crore. By the letter

details of the account and transaction dated 19.11.2018 was

communicated. Learned counsel for the Resolution Professional submits

that the Resolution Professional being unable to verify the claim of the

Appellant had filed the I.A. 308 of 2022 before the Adjudicating Authority

requesting the Adjudicating Authority to adjudicate the claim of the

Appellant. The Adjudicating Authority has considered all the aspects of

the matter and come to the conclusion that loan given to the Corporate

Debtor was repaid by RDPL, hence, the claim of the Appellant could not

be admitted.

4. We have considered submissions of learned counsel for the parties

and perused the record.

5. From the pleadings of the parties and material on the record

following facts are undisputed:

(i) The Appellant sanctioned a loan of Rs.100 Crore to the

Corporate Debtor on 01.06.2018.

Company Appeal (AT) (Insolvency) No. 580 of 2022 -8-

(ii) The Appellant disbursed an amount of Rs.32.50 Crore to the

Corporate Debtor between 11.06.2018 to 10.04.2019.

(iii) On 27.07.2020, the Corporate Debtor wrote a letter to RDPK

seeking assistance in reference to the loan obtained from DHFL

by the Corporate Debtor. In response to letter dated

27.07.2020, a letter dated 18.02.2021 was sent by the RDPL to

the Corporate Debtor informing that their credit amount of

Rs.38,51,98,790/- laying with the DHFL can be adjusted

towards the loan amount availed by the Corporate Debtor.

(iv) CIRP was initiated against the Corporate Debtor on 11.08.2021.

The Appellant field a claim of Rs.48,63,51,064/- as due and

payable by the Corporate Debtor consequent to disbursal of

Rs.32.50 Crore loan to the Corporate Debtor by the Appellant.

(v) The Resolution Professional asked for various clarifications and

documents from the Appellant regarding verification of the claim

which verification was kept pending.

(vi) The Appellant filed application I.A. No. 182 of 2022 before the

Adjudicating Authority seeking for direction to admit the claim

of the Appellant.

(vii) Thereafter, Resolution Professional also filed an I.A. No. 308 of

2022 praying that the Adjudicating Authority may adjudicate the

claim of the Appellant.

Company Appeal (AT) (Insolvency) No. 580 of 2022 -9-

(viii) The Adjudicating Authority by the impugned order has rejected

the claim of the Appellant.

6. The Adjudicating Authority in its long order has noted contentions

of the parties, date and events, the Balance Sheet for the year 2019-20 of

the Corporate Debtor and the correspondence vide letter dated

27.07.2020 and 18.01.2021, as noted above, but the conclusions

recorded by the Adjudicating Authority are contained in only three paras

i.e. Paras 59, 60 and 61, which are to the following effect:

"59. This bench notes that the Resolution Professional under section 18 of the Code is not empowered to adjudicate the claim of the Applicant herein and is bound to collate the claims on the basis of the available documents.

The internal correspondence between the Corporate Debtor and the RDPL demonstrate that the outstanding loan of DHFL has been repaid by RDPL and consequently, it can be seen that the balance sheet for the year 31.03.2021 does not record the outstanding liability of DHFL.

60. Be that as it may, the series of correspondence and exchange of letters between the Corporate Debtor and its sister concern RDPL establish the fact that RDPL has provided financial assistance to the Corporate Debtor and consequently, the amounts lying in the account of DHFL were adjusted towards the repayment of the loan of the Corporate Debtor. This Bench takes on record the internal correspondence

Company Appeal (AT) (Insolvency) No. 580 of 2022 -10-

between Corporate Debtor and its sister concern namely RDPL and the books of accounts of Corporate Debtor dated 31.03.2021. It is not the case of the applicant that his right of repayment of the outstanding amounts is lost by this adjustment. The applicant can exercise and enforce the debt outstanding from the RDPL.

61. In view of the aforesaid, this Bench is of the view that the claim of the applicant namely Piramal Capital & Housing Finance Limited cannot be admitted."

7. The Adjudicating Authority in the impugned order has placed

reliance on following for coming to the conclusion that claim of the

Appellant cannot be admitted.

(A) The internal communication between the Corporate Debtor

and RDPL dated 27.07.2020 and 18.02.2021.

(B) Balance Sheet for the year 31.03.2021

8. We may first look into the internal correspondence between the

Corporate Debtor and RDPL to find out as to whether from the said

internal correspondence it can be concluded that loan disbursed to the

Corporate Debtor by the Appellant stood discharged. The Adjudicating

Authority has extracted both the letters in its order. By letter dated

27.07.2020, written by the Corporate Debtor to RDPL, request was made

Company Appeal (AT) (Insolvency) No. 580 of 2022 -11-

to assist the Corporate Debtor in repaying the DHFL loan. The letter

makes following prayer:

"At the same time, we would like to close our transaction with DHFL, therefore, we request you to kindly assist us in repaying DHFL in case it is financially feasible to you"

9. The above letter was replied by the RDPL by its letter dated

18.02.2021. For completeness, we extract the letter dated 18.02.2021,

which is to the following effect:

"Rite Developers Private Limited

Ref: RDE/General/02-01/2021 Date: 18th February, 2021

To, Anuradha Real Estate Developers Private Limited 1069, Balaji School, behind Evershine Mall, Malad (West), Village Malad, Mumbai 400064

Sub: Response to the communication Ref: Your Letter dated 27th July, 2020 for seeking assistance in reference to the Loan obtained from DHFL.

Dear Sir,

We, Rite Developers Private Limited received your letter dated 27th July, 2020 asking for the financial assistance, being your corporate guarantor we, hereby extend our support that our credit Amt Rs.38,51,98,790/- (Rupees Thirty -

Eight Crores Fifty One Lacs Ninety Eight Thousand Seven Hundred and Ninety only) with DHFL can be adjusted unconditionally towards

Company Appeal (AT) (Insolvency) No. 580 of 2022 -12-

the loan amount availed by you Rs.32,52,00,000/-/- (Rupees Thirty-Two Crore Fifty Lacs only) and acknowledge the longterm debt in accounts accordingly.

Giving you the details of credit lying with DHFL Account as follows for your ready reference.

Beneficiary DHFL Account 914020017664947 RDPL Account 0492102000011459 Date of Transaction 19th November, 2018 Transaction Details NEFT (UTR) IBKL181119216236 Amount Rs. 38,51,98,790/- (Rupees Thirty -Eight Crores Fifty One Lacs Ninety Eight Thousand Seven Hundred and Ninety only)

For any other query or assistance please contact us.

Thanking you.

Yours truly

For RITE DEVELOPERS PRIVATE LIMITED

Director."

10. The letter dated 18.02.2021 which was written by RDPL intimated

that their credit amount Rs.38,51,98,790/- is with DHFL which can be

adjusted towards the loan amount availed by the Corporate Debtor. The

letter refers to transaction dated 19.11.2018 which was NEFT transaction

in the beneficiary DHFL account. The above letter dated 18.02.2021

cannot be read in any manner to discharge any loan of the Corporate

Debtor which was owed to the Appellant. The letter at best refers to

Company Appeal (AT) (Insolvency) No. 580 of 2022 -13-

transaction dated 19.11.2018 by the RDPL in the account of DHFL. Any

transaction made by the RDPL in account of DHFL on 19.11.2018 cannot

ipso facto discharge loan liability of Corporate Debtor owed to the DHFL

and there are no material brought on record to show that subsequent to

letter dated 18.02.2021, actually the loan was discharged by remitting the

amount of Rs.38,51,98,790/- in the loan account of the Corporate Debtor

which was received by DHFL. For first time on 18.02.2021, the RDPL is

making an offer to adjust the amount laying in the account of DHFL. By

mere making an offer, there shall not be any adjustment of loan payable

by Corporate Debtor to the Appellant. There has to be any transaction

after 18.02.2021 to show that the loan of Corporate Debtor was actually

discharged by making payment of Rs.38,51,98,790/-. It is further

relevant to notice that apart from the above two letters dated 27.07.2020

and 18.02.2021 no other correspondence is even claimed by Corporate

Debtor or RDPL for adjustment of the loan of the Corporate Debtor

payable to the Appellant. The letter dated 18.02.2021 is not even

forwarded to the Appellant.

11. We, thus, conclude that the internal correspondence between the

Corporate Debtor and the RDPL who's Promoters are same, does not lend

support to their case that the loan payable by Corporate Debtor to the

Appellant against disbursal of Rs.32.50 Crore stood discharged. The

Adjudicating Authority, thus, erroneously relied on the said

correspondence which is wholly irrelevant for proving any discharge of the

loan amount.

Company Appeal (AT) (Insolvency) No. 580 of 2022 -14-

12. Now we come to the second reason given by the Adjudicating

Authority for accepting the case of the Corporate Debtor i.e. Books of

account of the Corporate Debtor for the year 31.03.2021.

13. The Adjudicating Authority in the impugned order itself has

extracted Statement of Account of the Corporate Debtor as on 31.03.2020

where under 'Long Term Borrowing', Term-Loan of DHFL of Rs.32.50

Crore is clearly mentioned and reflected. The Adjudicating Authority in

Para 53 has referred to Balance Sheet of the year 31.03.2021. Para 53 of

the order is as follows:

"53. However, the unaudited balance sheet of the year did not reflect the long term borrowing of DHFL. The balance sheet for the year 31st March, 2021 is reproduced below:

ANURADHA REAL ESTATE DEVELOPERS PVT. LTD.

Notes forming part of Financial Statements for the period ended 31st March 2021

Note 2: Reserves and Surplus

Reserves and Surplus As at March As at March 31, 2021 31, 2020 Amount in Rs. Amount in Rs.

a. Surplus in Profit & Loss Account 232,970 326,052 (+) Opening balance (93,982) Net Profit/(Net Loss) For the current year (+) - Excess provision of Income (-) Tax of earlier years Transfer to Reserves

Closing Balance 232,970 232,970 Total 232,970 232,970

Company Appeal (AT) (Insolvency) No. 580 of 2022 -15-

Note 3: Non-Current Liabilities

a. Long Term Borrowings

Particulars As at March As at March 31, 2021 31, 2020 Amount in Rs. Amount in Rs.

Secured i Term Loan - DHFL (Refer - 325,000,000 Note 1) ii Inter Corporate Loans 22,800,000 9,300,000 22,800,000 334,300,000

Total 22,800,000 334,300,000

14. The above Balance Sheet has itself been referred to as 'Unaudited

Balance Sheet of the year'. When the Balance Sheet has not yet been

audited, we fail to see that how importance can be attached to such

Balance Sheet. Furthermore, in the Balance Sheet loan of Rs.32.50 Crore

which loan was reflected earlier in the Balance Sheet has just been

deleted whereas in the same Balance Sheet as on 31.03.2020, the loan of

Rs.32.50 Crore has been reflected of DHFL. The Unaudited Balance

Sheet as on 31.03.2021 although does not mention the loan to continue

as on 31.03.2021 but there are no details in the Balance Sheet as to how

the loan stood discharged. Corporate Debtor's Balance Sheet as on

31.03.2021 which is unaudited and has not even show as to when it was

submitted to the ROC, placing reliance by Adjudicating Authority on such

Balance Sheet to accept the case of the Resolution Professional that the

debt stood discharged is wholly inappropriate and unsustainable. In the

Balance Sheet prepared by the Corporate Debtor, mere non-mention of

loan as on 31.03.2021 does not prove discharge of the loan in any

manner. We, thus, are of the view that both the reasons relied by the

Company Appeal (AT) (Insolvency) No. 580 of 2022 -16-

Adjudicating Authority for coming to the conclusion that the loan of the

Appellant of Rs.32.50 Crore stood discharged does not prove in any

manner the discharge of the loan. The Adjudicating Authority fell in error

in rejecting the claim of the Appellant relying on the aforesaid reasons.

15. The transaction dated 19.11.2018 on which much reliance is

placed by the RDPL and is claimed as basis for discharge of the loan of

the Corporate Debtor also needs to be considered in detail. A copy of the

account of the Appellant under which loan was sanctioned to RDPL has

been annexed as part of Volume III of the appeal paper book. The

aforesaid account is a loan account through which loan sanctioned to the

RDPL. Total disbursement of the loan is Rs.758,51,98,790/-. In the

column of disbursement, loan is claimed to be disbursed on seven dates.

Last date of disbursement as reflected in the account is 19.11.2018 for an

amount of Rs.38,51,98,790/-. The account further reflects that the due

date of PEMI/EMI is Tenth of every month. Two entries of 19.11.2018 on

which much reliance is placed are extracted as follows:

Date VOUCH Account Receipt Chq Chq Clear Dr. Amt Cr. Amt ER Head No. no. Dt. Dt.

29/09 00133 PEMI IBT 4398 01/01 19/11 0 385198790 /2018 858 JV Received 83 /0100 /2018

19/11 00006 Loan 7 1911 19/11 19/11 385198790 0 /2018 953 BP (disb.) 18 /2018 /2018

16. The perusal of the above entry indicate that PEMI was received

from RDPL of Rs.38,51,98,790/- on 19.11.2018 (which is date when

amount was cleared) and on the same date by another entry on

Company Appeal (AT) (Insolvency) No. 580 of 2022 -17-

19.11.2018 loan disbursal is recorded of Rs.38,51,98,790/- to the

Corporate Debtor. When we read the above entries, it is clear that the

amount of Rs.38,51,98,790/- in the loan account, which was claimed to

be laying in the credit which was offered by RDPL by letter dated

18.02.2021 is claimed as discharge of the debt. The amount which was

paid by the RDPL is PEMI/EMI which was on the same date disbursed as

loan to the Corporate Debtor again. When the amount is disbursed as

loan amount to the Corporate Debtor, the transaction has completed and

exhausted. The case taken by the Resolution Professional on the basis of

said entry that amount discharged the loan of Corporate Debtor payable

to the Appellant is baseless and a false plea.

17. Both the above entries on 19.11.2018 are more fully explained in

the copies of Statement of Account of RDPL alongwith ledger filed by the

Resolution Professional in Affidavit in Reply as Annexure R-10. When we

look into Annexure R-10 filed alongwith the Reply, both the transactions

dated 19.11.2018; payment of Rs.38,51,98,790/- paid to DHFL and

further received from DHFL is reflected in the account. We extract entry

dated 19.11.2018 as contained in Annexure R-10 which is to the

following effect:

Date Particulars Vch Type Vch Location Debit Credit Balance No

19-11- To Idbi Bank Payment 001 Rite 385,198, 6,813,601, 2018 A/C No. 61 Developers 790.00 210.00 C 04921020000 Pvt. Ltd. -

11459 HO NARR>> Being payment paid to DHFL Bank Dt. 19-11-2018 (APHO/00161/18-19) [APQHO/00161/18-19]

Company Appeal (AT) (Insolvency) No. 580 of 2022 -18-

By Idbi Bank Receipt 001 Rite 385,198, 7,198,800, A/C No. 07 Developers 790.00 000.00 C 00591020000 Pvt. Ltd. -

17019 HO NARR>> Being payment received from DHFL Bank Dt. 19-11-2018 (RDBR/00107/18-19) [RDBR/00107/18-19]

18. The above part of the account of RDPL clearly indicate that

payment of Rs.38,51,98,790/- was made from the IDBI Bank Account of

the RDPL to the DHFL Bank and on the same day another entry indicate

that the same amount was received from DHFL Bank. Thus, the payment

of PEMI/EMI was made by RDPL to DHFL and on the same day they

received the same amount in other account as payment from DHFL Bank,

which clearly indicates that the amount of Rs.38,51,98,790/- was

received in the Bank Account of RDPL and is not laying in credit with the

DHFL which can be adjusted as referred to in the letter dated 18.02.2021.

The above Statement of Accounts which Statement is filed by the

Respondent themselves prove that the amount of Rs.38,51,98,790/- is

the amount paid by the RDPL to DHFL and same amount was received

back as loan amount and the transactions was complete and exhausted

and said amount cannot be said to be available to the RDPL to discharge

the debt of the Corporate Debtor being payable by DHFL to Corporate

Debtor.

19. Learned counsel for the Respondent in support of her submission

that entire transaction between the Appellant, Corporate Debtor and

RDPL was collusive, hence, the claim was rightly not admitted, has placed

Company Appeal (AT) (Insolvency) No. 580 of 2022 -19-

reliance on the judgment of Hon'ble Supreme Court in "(2021) 3 SCC

475, Phoenix ARC Private Limited vs. Spade Financial Services

Limited & Ors.". Reliance has been placed on Para 48 of the judgment

where following has been laid down:-

"48. The above discussion shows that money advanced as debt should be in the receipt of the borrower. The borrower is obligated to return the money or its equivalent along with the consideration for a time value of money, which is the compensation or price payable for the period of time for which the money is lent. A transaction which is sham or collusive would only create an illusion that money has been disbursed to a borrower with the object of receiving consideration in the form of time value of money, when in fact the parties have entered into the transaction with a different or an ulterior motive. In other words, the real agreement between the parties is something other than advancing a financial debt. A useful elaboration of "sham transactions" can be found in the opinion of Diplock L J in Snook vs. London and West Riding Investments Ltd. [1967] 2 QB 786:

"As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a "sham," it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the "sham" which are

Company Appeal (AT) (Insolvency) No. 580 of 2022 -20-

intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create."

(emphasis supplied)"

20. The Hon'ble Supreme Court in the above case has elaborated the

'sham transactions'. It was held that the transaction which is sham or

collusive would only create an illusion that money has been disbursed to

a borrower with the object of receiving consideration in the form of time

value of money, when in fact the parties have entered into the transaction

with a different or an ulterior motive. In the present case, the claim of the

Appellant has not been admitted on the ground that the loan of the

Appellant to the Corporate Debtor stood discharged by RDPL. There is no

finding in the impugned order terming the transaction as a collusive

transaction. Hence, the contention of the Respondent, in the above view,

is rejected. Furthermore, there is no denial by Corporate Debtor of

disbursal of loan of Rs.32.50 Crore.

21. We, thus, are satisfied that there are no material to indicate that

the loan which was disbursed by the DHFL to the Corporate Debtor was

discharged at any point of time. The Adjudicating Authority committed

error in refusing to admit the claim of the Appellant. Resolution

Professional also did not correctly and properly look into the materials

placed before it by the Appellant as well as the Ex-Director of the

Corporate Debtor and erred in not verifying the claim of the Appellant. In

Company Appeal (AT) (Insolvency) No. 580 of 2022 -21-

view of the foregoing discussion, we are satisfied that order passed by the

Adjudicating Authority is unsustainable and deserved to be set aside. We

allow the Appeal and set aside the impugned order dated 21.04.2022.

Allow the I.A. No. 182 of 2022 filed by the Appellant and direct the

Resolution Professional to admit the claim of the Appellant and

reconstitute the CoC accordingly. The parties shall bear their own cost.

[Justice Ashok Bhushan] Chairperson

[Justice M. Satyanarayana Murthy] Member (Judicial)

[Barun Mitra] Member (Technical)

NEW DELHI

19th September, 2022

Archana

Company Appeal (AT) (Insolvency) No. 580 of 2022