Religare Finvest Ltd vs Strategic Credit Capital Pvt. Ltd

[Arising out of the Order dated 25.11.2022, passed by the 'Adjudicating Authority' (National Company Law Tribunal, New Delhi) in (IB)-16281PB)/2019]

IN THE MATTER OF: Religare Finvest Limited A company incorporated under the Companies Act, 1956 Having its registered office at 24, Nehru Place, 2nd Floor, Rajlok Building New Delhi - 110019 ...Appellant

Versus

Strategic Credit Capital Private Limited A company incorporated under the Companies Act, 1956 having its registered office at: A-49, Mohan Co-operative Industrial Estate Mathura Road, New Delhi - 110044 ...Respondent

Present: For Appellant : Mr. Sumesh Dhawan, Ms. Vatsala Kak, Mr. Shaurya Shyam, Ms. Khyati Khemka, Ms. Varsha Mohanty, Advocates and Mr. Sandeep D. Das, Advocates

For Respondent : None

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)] The present Appeal is under Section 61 of the Insolvency and Bankruptcy

Code, 2016 filed by the Appellant, Religare Finvest Limited ("Appellant/Financial

Creditor") is impugning the Order dated 25 November 2022 passed by the Ld. National Company Law Tribunal, Principal Bench in the matter titled as "Religare

Finvest Limited vs. Strategic Credit Capital Private Limited' numbered as "IB No.

1628 (PB) of 2019" under Section 7 of the Code whereby, the Insolvency Petition

was dismissed by the Adjudicating Authority.

Condonation of delay

2. Initially as per order dated 27.04.2023 in IA No. 1327 of 2023, this

Appellate Tribunal had held that there is delay of more than 15 days in filing the

appeal and accordingly the delay condemnation application was rejected and the

memo of appeal was also rejected. Subsequently the appellant had taken up the

matter before Hon'ble Supreme Court in Civil Appeal No. 5958 of 2023 dated 4th

February 2025 and the application for condemnation of delay was allowed and

this Appellate Tribunal was directed to proceed to decide the appeal in

accordance with law.

Briefly speaking

3. Briefly speaking on 21.07.2015, Nishu Finlease Private Limited ("NFPL"),

a NBFC, had disbursed a loan of ₹40,00,00,000/- (Rupees Forty Crores)

("Financial Debt") to the Corporate Debtor under the Term Loan Agreement dated

21.07.2015 ("Loan Agreement"). As per the Loan Agreement, the Financial Debt

was repayable by 21.07.2016, i.e., 12 months from the date of disbursement.

The Financial Debt was secured by creating pledge over 1,32,33,328 equity

shares of ABG Shipyard Limited ("Pledge Shares"). The pledged shares were

transferred into the demat account of the Financial Creditor as encumbered

shares but the pledge was never invoked the pledge qua the aforementioned

shares and as such, there has been no payment of the debt owed by the Company Appeal (AT) (Insolvency) No. 398 of 2025 2 of 38 Corporate Debtor whatsoever. Subsequently on 16.06.2016, 'NFPL, as an

assignor, assigned all rights under the Loan Agreement to the Financial Creditor

by way of Sale Agreement dated 16.06.2016 for a consideration of

₹45,00,00,000/- (Rupees Forty-Five Crores). The Financial Creditor thus

acquired all rights and interests of NFPL under the Loan Agreement as regards

the Corporate Debtor. On 24.06.2016, the Financial Creditor issued the

Termination cum recall Notice to the Corporate Debtor, thereby demanding

payment of the Financial Debt along with accrued interest, as well as future

interest, as applicable ("Recall Notice"). Therefore, there has been default of the

debt due. Subsequently, the Financial Creditor and Corporate Debtor along with

other parties executed a Settlement Agreement dated 01.07.2017, whereby, in

terms of Clause 3.7 of the Settlement Agreement, the Corporate Debtor and

others, collectively, agreed to pay to the Financial Debtors an amount of

₹793,67,20,176/-, which included the Financial Debt owed by the Corporate

Debtor, i.e., the debt of ₹45,00,00,000/- assigned by NFPL to RFL. The terms of

the Settlement Agreement, particularly Clause 3.3, require the Corporate Debtor,

as one of the Principal Parties, to repay the admitted dues of ₹793,67,20,176/-

which included the Financial Debt owed by the Corporate Debtor. The repayment

was to be affected in tranches with the Corporate Debtor and Perpetual procuring

amounts aggregating to ₹400,00,00,000/- (Rupees Four Hundred Crores) within

a period of 9 months, portion whereof to be paid to RFL against the total amount

due. Pertinently, no amount has been paid despite the unequivocal obligation to

repay INR 400 crores within 9 months. Therefore, there has been a default as

Company Appeal (AT) (Insolvency) No. 398 of 2025 3 of 38 under the Settlement Agreement as well. Consequently, the Corporate Debtor

has committed default in payment of the Financial Debt under the Loan

Agreement and the Settlement Agreement. This default in repayment of the

Financial Debt would relate back to the original default date under the Loan

Agreement i.e., the date on which the Terminational cum Recall Notice

(24.06.2016) was issued to the Corporate Debtor. Despite having unequivocally

acknowledged the Financial Debt, the Corporate Debtor has failed to make any

payments against the same. Accordingly, on 10.06.2019, the Appellant filed the

Insolvency Petition under Section 7 of the Code before the Ld. Adjudicating

Authority seeking initiation of Corporate Insolvency Resolution Process against

the Corporate Debtor. Similarly, on account of default in payment of financial

debt of ₹3,18,91,47,450/- by Perpetual Capital and Servicing Private Limited

("Perpetual"), a petition under Section 7 of the Code was initiated before the

Mumbai Bench, NCL T. Pertinently, Perpetual was also a signatory to the

Settlement Agreement. This Section 7 petition was allowed and Perpetual has

been admitted into CIRP by. way of order dated 12.08.2022.

4. On 25.11.2022, the Ld. Authority erroneously dismissed the Insolvency

Petition vide the Impugned Order despite clear existence of a financial debt and

default. Pertinently, the Ld. Adjudicating Authority has misinterpreted the record

in order to come to a conclusion that the Settlement Agreement superseded and

hence subsumed the Loan Agreement, as a result of which, no standalone debt

of INR 40,00,00,000/- existed anymore. The Ld. Adjudicating Authority has

erroneously concluded that since the Settlement Agreement, having swallowed Company Appeal (AT) (Insolvency) No. 398 of 2025 4 of 38 the Loan Agreement, was subsisting as on date, there could be no question of a

debt and a default nor was there a relationship of creditor debtor existing

between the parties. Further, the Ld. Adjudicating Authority has failed to

appreciate that the Corporate Debtor has already acted in default of its

obligations under the Settlement Agreement in failing to pay the initial sum of

INR 400 crores. Provided that the Settlement Agreement is to subsist till the

payment of the entire amount of ₹7,93,67,20, 176/- in terms of Clause 9.2 of the

Settlement Agreement, if the logic of the Ld. Adjudicating Authority is to be

followed, there can never be a default in terms of the Settlement Agreement.

Grounds for setting aside the impugned order

5. In this appeal, the Appellant raises the following grounds for setting aside

the impugned order:

o there exist a valid debt and a default thereof and therefore, ought to have admitted the Petition under Section 7 of the Code.

o the debt arising out of the Loan Agreement is no longer a standalone financial debt of SCCPL which can be enforced merely because a settlement agreement was entered into between RFL and the Corporate Debtor, which was subsequently breached. Even where a settlement agreement is executed in terms of a debt due, the same would not alter the nature of the financial debt merely on account of breach of the consent terms.

o the standalone debt of INR 45,00,00,000/- arising out of the Loan Agreement cannot be held to be subsumed within the transaction contained within the Supplementary Agreement. Corporate Debtor still has the unequivocal obligation of repaying the debt of INR 40,00,00,000/- along with interest, which it has defaulted upon. Even otherwise, an event of default has occurred qua the obligations contained in the Settlement Agreement as well, insofar as

Company Appeal (AT) (Insolvency) No. 398 of 2025 5 of 38 the Corporate Debtor has failed to make any payments in term of Clauses 3.3 and 3.4 of the Settlement Agreement.

o It is incorrect to ignore the fact that the Recital C of the Settlement Agreement, of which SCCPL is a party, clearly acknowledges the debt of INR 45,00,00,000/- due and payable by SCCPL to RFL.

o The pledged shares of ABG Shipyard were merely being held by the Appellant under encumbrance. Neither has the pledge been invoked by the Appellant nor have the ·pledged shares been sold to recover the amounts due from the Principal Parties. amounts in excess of INR I lakh would be owed by the Corporate Debtor to the Financial Creditor even despite alleged (and disputed) invocation of pledge against the shares provided as security against the loan of INR 40,00,00,000/- availed by the Corporate Debtor.

o No concrete finding on the composite value of the ABG shipyard shares allegedly transferred in part satisfaction of the amounts owed by the Corporate Debtor to the Financial Creditor. Resultantly, there is no finding on whether the admitted default is against an amount in excess of INR 1,00,000/- as required under Section 4 of the Code.

o The loan granted by NFPL to SCCPL and thereafter transferred to RFL gets subsumed into the Settlement Agreement by way of the recitals. The recital clauses are nothing but acknowledgement of the debt due by the principal parties, including SCCPL, to RFL and the settlement agreement specifically provides in terms of Clause 3.7 that all principal parties shall be under a continuous obligation to repay said debts. Therefore, the debt under the loan agreement subsists despite the execution of the Settlement Agreement, default in repayment of which has occurred.

o Merely because a settlement agreement was entered into between RFL and the Corporate Debtor, which was subsequently breached, the financial debt which was claimed by the financial creditor would not be wiped out nor the nature and/or the character of the financial debt shall be changed on account

Company Appeal (AT) (Insolvency) No. 398 of 2025 6 of 38 of breach of the consent terms. Adjudicating Authority has erred in holding that there is no default on the basis of the mere existence of the Settlement Agreement.

o Erroneous to hold that there exists no relation of creditor and debtor between RFL and SCCPL. Adjudicating Authority erred in holding that there has been a default of the debt owed under the Settlement Agreement as well and therefore the Section 7 application is liable to be admitted even if the Settlement Agreement were to take primacy.

o The Settlement Agreement provides for a clear timeline for the initial repayment of INR 400,00,00,000/- (Realizable amount) by collection of the amounts repayable/recoverable/ receivable from the borrowers within 9 months from the date of execution, which has not been adhered to by the Corporate Debtor. Adjudicating Authority has erred in treating the Settlement Agreement as a subsisting Agreement despite clear and repeated breaches and defaults by the Corporate Debtor.

o Section 46 of the Indian Contract Act, 1872, mandates that when a time for performance has not been satisfied, the performance ought to be done within a reasonable period of time.

o Not only has the Corporate. Debtor failed to repay the amount of INR 400,00,00,000/- within a period of 9 months, but no amounts have been paid into the escrow account in terms of the Settlement Agreement in the last 18 months.

o Impugned order is in the teeth of the dicta in Judgment dated Innoventive Industries Ltd. vs. ICICI Bank, wherein the Hon'ble Supreme Court held that even if a part of the total debt due becomes payable and is not paid, the insolvency resolution process begins. The relevant portion is extracted hereinbelow for convenience:

Company Appeal (AT) (Insolvency) No. 398 of 2025 7 of 38 "2 7. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. "Default" is defined in section 3 (12) in very wide terms as meaning non-

payment of a debt once it becomes due and payable, which includes no-payment of a part thereof or an instalment amount ... "

o Adjudicating Authority has erred in holding that there has been no default in repayment of debt despite recording a finding that no amounts have been tendered in terms of the Settlement Agreement.

o Adjudicating Authority has erred in ignoring the fact that even though there was a recovery of around INR 13 crores which was deposited in the account of Appellant after selling the shares, which were pledged by 12 assigned borrowers, the receivables are not connected with the Corporate Debtor and have been appropriated against the outstanding dues under the Settlement Agreement in accordance with the prevalent law. No monies whatsoever have been deposited in the escrow account opened in terms of the Settlement Agreement.

o Where the Debtors has omitted to indicate and there is no other circumstances indicate which debt payment/recovery is to apply to, the creditor may apply the monies recovered to any debt actually and lawfully payable to it by the Debtors at his discretion.

o Corporate Debtor does not have the necessary capacity or intention to honour its commitments under the Settlement Agreement and has defaulted in its obligations to repay said amounts.

o Adjudicating Authority has erred in rejecting the underlying petition despite there being clear default of debt due, and in absence of any award/receivables in favour of the Corporate Debtor.

Company Appeal (AT) (Insolvency) No. 398 of 2025 8 of 38 Case of the Respondent

6. We note that the Respondents have chosen not to appear before the

Appellate Tribunal and file their reply. We extract their defence from the

materials placed on record in the form of their reply and additional reply herein

after.

7. Limitation: The application filed by the financial creditor is liable to be

dismissed in view of the fact that no application under Section 7 of the IBC Code

can lie beyond the limitation period. In B.K. Educational Services Private

Limited v Parag Gupta and Associates, Civil Appeal No. 23988 of 2017, since

the Limitation Act is applicable to applications filed under Sections 7 and 9 of

the Code from the inception of the Code, Article 137 of the Limitation Act gets

attracted. "The right to sue", therefore, accrues when a default occurs. If the

default has occurred over three years prior to the date of filing of the application,

the application would be barred under Section 137 of the Limitation Act. In the

present case the limitation expired on 24th June 2019 while the present

application was filed on and listed before this Hon'ble Tribunal. Curiously, the

petition fails to address the limitation period, a pre-requisite post the B.K.

Educational Services judgement. The Financial Creditor in Para 9 of the

Application, vide a letter dated 24th June 2016, the Financial Creditor terminated

the Loan Agreement in terms of Clause 5.3 calling upon the Respondent to pay

the alleged loan amount, failing which, it would be constrained to enforce and

liquidate the Pledged Shares as per the Loan documentation entered into

between the parties.

Company Appeal (AT) (Insolvency) No. 398 of 2025 9 of 38

8. Relinquished rights cannot be claimed: In terms of the Agreements dates

21st July 2015 read with the Demand Letter dated 24th June 2016, the

Financial Creditor chose to exercise one of the two rights i.e. (i) to be prepaid

some alleged loan amount or in event of alleged default (ii) liquidate pledged

shares. On 29th June 2016, the Financial Creditor choose the latter options and

invoked the pledged shares. The Financial Creditor has consciously chosen to

forfeit the right of claiming the alleged debt and instead invoked the pledge.

9. Respondent was a 'Financial Service Provider': No application under

Section 7 of the IBC Code lies against a 'Financial service provider'. Further, the

conditions precedent for maintaining an application under Section 7 of the IBC,

2016 are not being met as demonstrated and established. The Respondent

namely Strategic Credit Capital Private Limited is a Private Company previously

known as Kalinga Finlease Private Limited, was incorporated on 17th May 1996.

The Respondent was registered as an NBFC (Category B) by the Reserve Bank of

India (' RBI') vide Certificate of Registration ('CoR') number B-14.02569 dated

February 26, 2002. After the Respondent's name changed from Kalinga Finlease

Private Limited to Strategic Credit Capital Private Limited, the Ministry of

Corporate Affairs issued a fresh certificate of incorporation and RBI also issued

a fresh CoR in the changed name of the Respondent dated April 30, 2007.

Respondent was engaged in providing financial services for the last 23 years. On

27th February 2018 the Board of Directors of the Respondent company decided

to discontinue the NBFC activities and accordingly surrender the CoR. On 28th

February, 2018 the Respondent filed an application before the RBI seeking Company Appeal (AT) (Insolvency) No. 398 of 2025 10 of 38 voluntary surrender of its CoR of its NBFC license. It is pertinent to mention that

on February 25, 2019, the RBI, in exercise of powers conferred on the RBI under

Section 45-IA (6) of the Reserve Bank of India Act, 1934, cancelled the Certificate

of Registration of various companies including the Respondent. Accordingly, the

Respondent's CoR stood cancelled on January 25, 2019 and the Respondent

since has not engaged in any services whatsoever. Thus, the Respondent is not

a Corporate Debtor and accordingly excluded from the purview of the IBC regime

and the Corporate Creditor.

10. Transaction not covered under the definition of 'claim': The dispute/

alleged debt does not fall under the definition of "claim" as defined under Section

3 (6) of the IBC. The definition of claim is as given hereafter:

"claim" means - (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed legal, equitable, secured, or unsecured;

(b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;

11. The transaction is a part of a structured debt servicing agreement between

the respondent and the Corporate Creditor. It was part of a larger agreement

which included financing to the sister company, Perpetual. It was the lawyers

of the Corporate Creditor who had structured this 'complicated transaction' with

inducements for the respondent and eventually the respondent learned that this

was part of a complicated scheme to pass on fraudulent loans to the Respondent

and the Respondent terminated the agreement.

Company Appeal (AT) (Insolvency) No. 398 of 2025 11 of 38

12. Deep and complex dispute: Respondent claims that only one limb of the

entire complex transaction has been narrated while leaving out the essential

facts. The Respondent company had entered into a structured servicing financial

service arrangement with the Corporate Creditor on or about July of 2015. This

inter-alia involved Assignment Agreements in terms whereof the Corporate

Creditor had unconditionally and irrevocably sold, transferred and assigned the

loans granted by the Corporate Creditor to certain borrowers to the Respondent

for a fixed amount. The said twelve loans were sold to the Respondent on the

fraudulent misrepresentation of being arms-length transactions but in reality,

the said loans turned out be related party loans which were a fund siphoning

scheme adopted by the Corporate Creditor. The Respondent contemporaneously

had entered into a Term Loan Agreement with one Nishu Finlease Private Limited

which was a related party of the Corporate Creditor on July 21, 2015 seeking

credit facility for the purposes of funding the structured financial services to be

provided to the Corporate Creditor. The manipulation scheme adopted by the

Corporate Creditor involved the 12 borrowing companies to serially trade shares

of one 'ABG Shipyard Limited' in order to inflate the price of shares of ABG

Shipyard, enabling ABG Shipyard to borrow upto Rs. 16000 Crores from various

Lenders. ABG Shipyard, a company duly incorporated under the Companies Act,

1956, was a related party entity of the petitioner wherein the petitioner would

purchase shares to inflate the value of ABG Shipyard Limited. ABG Shipyard

having become a debt-ridden company was one of the first entities to have been

identified by the RBI for reference to the bankruptcy court for resolution or

Company Appeal (AT) (Insolvency) No. 398 of 2025 12 of 38 liquidation (RBI's first list of 12 companies). When the Respondent discovered

this fraud, numerous litigations ensued between the parties which resulted in a

final all-encompassing suit filed in the Hon'ble High Court of Mumbai, notably,

Eleos Finvestia Acquisition Trust and Ors. vs. Religare Finvest Ltd. & Ors.

COMSL/254/2017 (hereinafter Elios Suit). Upon the filing of the Eleos Suit,

there was an immediate move for settlement, which was captured in the

Settlement Deed dated July 1, 2017. The loan from Nishu Finlease. Private

Limited was part of the original transaction structure, which was a non-recourse

loan as per the committed understandings at the time. In any event, the loan

from Nishu Finlease Private Limited was used to secure shares of ABG Shipyard

and when the transaction unravelled the Nishu Finlease Private Limited loan was

acquired by the Corporate Creditor and the shares stood invoked. The Settlement

Agreement of July, 2017 captures the Nishu Finlease Private Limited loan as

being part of the Settlement Agreement. The Settlement Agreement accomplished

the following objectives:

i. Gave the Respondent a right to recover/ earn up to ₹400 Crores [50% of the ₹800 Crores recovery], which was on a best-efforts basis ii. settled all litigations against the Respondent and its related parties iii. obligated the Corporate Creditor to provide complete support to the Respondent for recovery of the original loans.

13. Financial Creditor is not covered under the definition of Section 5 (7): At

the time the settlement was entered into, the Financial Creditor accepted that

the falsities and reduced the repayment of the obligations on a "best efforts"

basis. At best upon the execution of the settlement agreement, the respondent

Company Appeal (AT) (Insolvency) No. 398 of 2025 13 of 38 became an operational creditor and thus the Respondent is not a Corporate

Debtor. On June 26, 2016 the Respondent transferred all its obligations and

rights to Eleos Trust. This transfer was accepted by the petitioner as part of the

settlement agreement and any obligations arising later were assumed by the

Trust and accepted by the Corporate Creditor. The above understanding is

evidenced by the pass through certificate' issued by the Eleos Trust and accepted

by the Corporate Creditor for settlement of all obligations and reducing them to

receipts from the pass through certificate. It is pertinent to point out that the

Corporate Creditor had recognised the transfer by the Respondent of all its rights

and in favour of Eleos Finvestia Acquisition Trust. The Eleos Finvestia

Acquisition Trust had issued a pass-through certificate to the Corporate Creditor

for the settlement of all obligations and limited the obligation to receiving 50% of

the net proceeds.

14. Failure by the Financial Creditor to meet its obligations: There are other

suits/ litigations pending before various courts between the parties which

involve the rights and obligations backing the financial services provided by the

Respondent to the Corporate Creditor including assignment of the 'Religare'

brand to the Respondent as security offered by the Corporate Creditor and its

related entities for services to be rendered by the Respondent. The Corporate

Creditor instead of complying with the terms and conditions of the Settlement

Agreement dated 01 July 2017 interfered with the Respondent's rights to recover

the loans as ensconced under the Settlement Agreement. To resolve the dispute

between the parties which includes the alleged debt under this petition, a suit Company Appeal (AT) (Insolvency) No. 398 of 2025 14 of 38 has been filed in Saket district court titled Strategic Credit Capital Private

Limited & Ors. vs. Religare Finvest Limited & Anr. CS DJ No. 384 of 2018, in

terms of the dispute resolution clause of the said Settlement Agreement which

supersedes all agreements entered into between the parties as mentioned in the

Settlement Agreement The suit filed in Saket inter-alia seeks the following:

i. Decree in favour of the Respondent and against the Financial Creditor declaring that the Respondent is discharged of all obligations and/or liabilities, whatsoever, arising out of the Settlement

ii. Agreement in view of the fact that the Financial Creditor themselves have acted in a manner so as to have frustrated the purpose of the Settlement Agreement and making it impossible for the Respondent to performs

iii. Specific Performance of part of the Settlement Agreement by the Financial Creditor, directing the Financial Creditor to comply with the terms of the Settlement Agreement and withdraw and/or appropriately amend all notices/utterance/litigations including inter alia those to the Income Tax authority and the Reserve Bank of India.

iv. Specific Performance of part of the Settlement Agreement by the Financial Creditor, directing the Financial Creditor to release all collateral(s) as-pen the Settlement Agreement to the Respondent;

v. Directing rendition of accounts of the Financial Creditor to ascertain the gain(s) the Financial Creditor have made from their conduct including that from the preferential issue;

Thus, it is claimed that the instant petition lacks any cause of action including

surviving cause of action under the IBC, 2016.

Appraisal

15. We have heard the counsel of the appellant and also perused the material

placed on record. We note that the respondents have not entered their

appearance despite multiple opportunities and despite even substituted service.

Company Appeal (AT) (Insolvency) No. 398 of 2025 15 of 38 We had to peruse the material placed before the adjudicating authority - which

included the reply of CD, additional reply of CD, rejoinder of FC and reply of FC

on additional affidavit of the CD -which was filed along with the appeal paper

book.

16. Brief question before us is whether under the circumstances, Section 7

petition under the Code is admissible in this case or not. There are following

ancillary questions which we need to answer:

o Whether application under section 7 was hit by limitation or not o Whether FC had relinquished any rights o Whether Respondent-CD is a 'Financial Service Provider' o Whether the transactions are covered under the definition of 'claim' or not o Whether Dispute is of any relevance or not

Limitation issue:

17. The respondent had claimed that the application under section 7 was hit

by limitation as it was filed beyond 3 years and Article 137 of the Limitation Act

gets attracted. "The right to sue", therefore, accrues when a default occurs. If the

default has occurred over three years prior to the date of filing of the application,

the application would be barred under Section 137 of the Limitation Act. In the

present case the limitation expired on 24th June 2019 while the present

application was filed and listed before this Hon'ble Tribunal. We find that the

present petition was filed before this Hon'ble Tribunal on June 12, 2019.

Assuming that the period of limitation for filing the present petition was to

commence from the date of the issuance of the Termination cum Recall Notice Company Appeal (AT) (Insolvency) No. 398 of 2025 16 of 38 dated June 24, 2016, the present petition has been filed within the prescribed

period of limitation of three years. Furthermore, the Corporate Debtor had

acknowledged its liability to repay the outstanding borrowing of ₹45 Crore in the

Settlement Agreement that was executed by the Financial Creditor and the

Corporate Debtor on July 1, 2017. Recitals of the Settlement Agreement as also

Part C of Schedule C thereof categorically states that the sum of ₹45,00,00,000/-

was due and payable as on July 1, 2017 from Corporate Debtor to the Financial

Creditor. Thus, the argument relating to limitation stood rejected. In any case

the Respondent has chosen not to appear and agitate his case. Thus in B.K.

Educational Services Private Limited (supra) will not be of assistance to the

Respondent in this case.

Did FC relinquish any rights

18. Another argument which was canvassed by the Respondent, was that

Relinquished rights cannot be claimed as in terms of the Agreements dated 21st

July 2015 read with the Demand Letter dated 24th June 2016, the Financial

Creditor chose to exercise one of the two rights i.e. (i) to be prepaid some alleged

loan amount or in event of alleged default (ii) liquidate pledged shares. On 29th

June 2016, the Financial Creditor choose the latter option and invoked the

pledged shares. The Financial Creditor has consciously chosen to forfeit the right

of claiming the alleged debt and instead invoked the pledge. From the materials

on records we find that Financial Creditor had not relinquished its right to claim

the outstanding loan of ₹45 Crore and interest thereof from the Corporate Debtor

as alleged. Moreover, under the terms of the Loan Agreement read with the Sale

Company Appeal (AT) (Insolvency) No. 398 of 2025 17 of 38 Agreement, the Financial Creditor was entitled to demand the payment of the

outstanding loan amount and to also enforce its security interest with regard to

the security provided for the outstanding loan amount, being the pledge created

over the pledged shares. We note that the two remedies available to the Financial

Creditor were in addition to and not in derogation of or mutually exclusive or as

alternative to each other. Moreover, the shares of ABG Shipyard Ltd being held

by the Financial Creditor as beneficiaries in their demat account pursuant to the

Sale Agreement executed between the Financial Creditor and NFPL. were pledged

as security to the Loan Agreement, and that ABG Shipyards has been under

corporate insolvency resolution process, and consequently, the pledged shares

of the said company could not be transferred and were otherwise of no

marketable value. Thus, we find this argument of the Respondent also of no

relevance in deciding the case of debt and default.

Whether Respondent-CD is a 'Financial Service Provider'

19. Respondent claims itself to be 'Financial Service Provider' and thus claims

exempted to be a corporate debtor per IBC provisions. In its rejoinder FC denied

that the Corporate Debtor is a Financial Service Provider and thus was not

exempted from the definition of corporate debtor as defined under the Insolvency

and Bankruptcy Code, 2016 ("IBC").

20. We find that on the date of filing of Section 7 application; Respondent is

not an NBFC but on the date of alleged financial transactions the respondent

was very much an NBFC as per the material placed on record. Section 3(7) read

Company Appeal (AT) (Insolvency) No. 398 of 2025 18 of 38 with 3(8) of the Code doesn't allow the Respondent-Strategic, which was FSP at

the relevant point of time, to be considered under Section 7 proceedings.

21. Countering the arguments for its claim to be a FSP, the FC-Appellant has

in its rejoinder before the AA canvassed that the definition of 'financial service

provider' as defined in Section 3(17) of the IBC has two necessary ingredients (1)

the entity should be providing 'financial services', and (ii) the entity shall be

authorized to do so by a 'financial sector regulator'. As such, for an entity to be

exempted from the definition of corporate debtor, it has to qualify both of these

requirements as on the date of filing of the petition under Section 7 of the IBC.

However, the Respondent-Corporate Debtor in the present case has not only

admitted but also filed documentary evidence to establish that it is presently

(and was not on the date of institution of the present petition) neither in the

business of providing any financial services (as defined under Section 3(16) of

the IBC) nor does it have a valid and subsisting registration or license Issued by

a financial sector regulator, including the Reserve Bank of India, for carrying out

such financial services as on the date of filing of the institution of the present

petition to qualify within the meaning of Section 3(17) of the IBC as 'financial

service provider'. It further argues that, merely on the ground that the Corporate

Debtor was holding a certificate of registration of NBFC at the time of the availing

of the loan from NFPL does not exclude it from the definition of corporate debtor.

We do not find the arguments of the appellant financial creditor to be convincing

and we hold that as on the date of financial transactions the respondent was

Company Appeal (AT) (Insolvency) No. 398 of 2025 19 of 38 financial service provider and the Section 7 proceedings under the Code were not

permissible on it and for this sole reason itself the appeal could be dismissed.

Transactions covered under the definition of 'claim' or not

22. Respondent also canvasses an argument that the transaction between the

parties is not covered under the definition of 'claim'. Respondent claims that the

"dispute/ alleged debt" does not fall under the definition of "claim" as defined

under Section 3 (6) of the IBC. The definition of claim is as given hereafter:

"claim" means -

(a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed legal, equitable, secured, or unsecured;

(b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;"

23. Respondent claims that the transactions were part of a structured debt

servicing agreement between the respondent and the Corporate Creditor. It was

part of a larger agreement which included financing to the sister company,

Perpetual and it was the lawyers of the FC who had structured this 'complicated

transaction' with inducements for the respondent and eventually the respondent

learned that this was part of a complicated scheme to pass on fraudulent loans

to the Respondent and therefore the Respondent terminated the agreement.

Respondent has also produced the copy of the mail exchange between various

stakeholders demonstrating that the proposed complex transaction was initiated

and followed through by the lawyers of the Corporate Creditor.

Company Appeal (AT) (Insolvency) No. 398 of 2025 20 of 38

24. A related argument canvassed by the Respondent was that there is a Deep

and complex dispute. The Respondent company had entered into a structured

servicing financial service arrangement with the Corporate Creditor on or about

July of 2015. This inter-alia involved Assignment Agreements in terms whereof

the Corporate Creditor had unconditionally and irrevocably sold, transferred and

assigned the loans granted by the Corporate Creditor to certain borrowers to the

Respondent for a fixed amount. The said twelve loans were sold to the

Respondent on the fraudulent misrepresentation of being arms-length

transactions but in reality, the said loans turned out be related party loans which

were a fund siphoning scheme adopted by the Corporate Creditor. The

Respondent contemporaneously had entered into a Term Loan Agreement with

one Nishu Finlease Private Limited - which was a related party of the Corporate

Creditor on July 21, 2015 seeking credit facility for the purposes of funding the

structured financial services to be provided to the Corporate Creditor.

Respondent claims that the manipulation scheme adopted by the Corporate

Creditor involved the 12 borrowing companies to serially trade shares of one

'ABG Shipyard Limited' in order to inflate the price of shares of ABG Shipyard,

enabling ABG Shipyard to borrow upto ₹16000 Crores from various Lenders.

ABG Shipyard, a company duly incorporated under the Companies Act, 1956,

was a related party entity of the petitioner wherein the petitioner would purchase

shares to inflate the value of ABG Shipyard Limited. ABG Shipyard having

become a debt-ridden company was one of the first entities to have been

identified by the RBI for reference to the bankruptcy court for resolution or

Company Appeal (AT) (Insolvency) No. 398 of 2025 21 of 38 liquidation (RBI's first list of 12 companies). Respondent claims that when it

discovered this fraud, numerous litigations ensued between the parties which

resulted in a final all-encompassing suit filed in the Hon'ble High Court of

Mumbai, notably, Eleos Finvestia Acquisition Trust and Ors. vs. Religare

Finvest Ltd. & Ors. COMSL/254/2017 (hereinafter Elios Suit). Upon the filing

of the Eleos Suit, there was an immediate move for settlement, which was

captured in the Settlement Deed dated July 1, 2017. The loan from Nishu

Finlease. Private Limited was part of the original transaction structure, which

was a non-recourse loan as per the committed understandings at the time. In

any event, the loan from Nishu Finlease Private Limited was used to secure

shares of ABG Shipyard and when the transaction unravelled the Nishu Finlease

Private Limited loan was acquired by the Corporate Creditor and the shares stood

invoked. The Settlement Agreement of July, 2017 captures the Nishu Finlease

Private Limited loan as being part of the Settlement Agreement. The Settlement

Agreement accomplished the following objectives:

o Gave the Respondent a right to recover/ earn up to Rs 400 Crores [50% of the ₹800 Crores recovery], which was on a best efforts basis o settled all litigations against the Respondent and its related parties o obligated the Corporate Creditor-FC to provide complete support to the Respondent for recovery of the originals loans

25. Basis above background the Adjudicating Authority had come to the

following conclusion:

"16. We noticed that as between the parties herein the transaction has been going on for a long time and in different parts and the assignment of the NFPL loan is one such transaction. We would have accepted the FC request for treating it as debt and

Company Appeal (AT) (Insolvency) No. 398 of 2025 22 of 38 default, but for the settlement agreement dated 01.07.2017 which contains an all- encompassing clause that Escrow account will be operated by the Principal Parties and the Second Party. The Escrow agreement also provides for the certain division on realization where was the need for sharing the realised amount that is the issue for which there is no proper explanation by the FC/Petitioner. There was no need to add ₹40,00,00,000/- (Rupees Forty Crores Only) of the NFPL debt into Schedule C of the settlement agreement dated 01.07.2017, if it was a stand-alone and independent transaction. We find that there is more in letter and spirit in the settlement agreement dated 01.07.2017. The actual design behind that comprehensive settlement dated 01.07.2017 to a great extent is a convoluted way of settlement. If the FC had a claim, in NFPL assignment it could have kept that separately out of the settlement agreement dated 01.07.2017. In this case, the NFPL debt and other debt in a total sum of ₹793,67,20,176 /- (Rupees Seven Hundred Ninety Three Crores Sixty Seven Lakhs Twenty Thousand One Hundred Seventy Six Only) which read with terms of the settlement, recovery, escrow and certain conditions to be followed in implementation makes it a case of agreement for recovery after withdrawing each other's claims in the litigation. The petitioner has given a sum of ₹2,00,00,000 (Rupees Two Crores Only) to the CD to ensure the recovery makes them a partner in the recovery, process.

Hence it is an agreement for recovery not a case to establish debt."

[emphasis supplied]

26. We find that a loan was taken by the Respondent [who was FSP] from a

third-party lender [Nishu-NFPL]. Subsequently the outstanding loan amount

and accrued interest thereon in terms of the Loan Agreement between NFPL and

Respondent was purchased by the Financial Creditor. We note that in a petition

under Section 7 of the IBC the Adjudicating Authority has to determine whether

the Respondent [who was FSP] owes financial debt to the Financial Creditor, and

whether the same is not paid and that consequently there exist default on part

of the Corporate Debtor. In the present background when the Corporate Debtor

Company Appeal (AT) (Insolvency) No. 398 of 2025 23 of 38 itself is a Financial Service Provider and thus Section 7 petition itself is not

maintainable and therefore other questions are only academic. But we are

delving into other issues for sake of completeness.

Dispute of any relevance:

27. Another ground which has been raised by the respondent is that the

present petition is part of a deep or complex dispute. We note that unlike Section

9 of the IBC, dispute is of no relevance to a petition filed under Section 7 of the

IBC. Consequently, presence of any alleged dispute between the parties has no

bearing to the present petition filed under Section 7 of the IBC but in this case

the petition itself is not maintainable as the Respondent at the relevant point of

time was a FSP.

28. But what is the so called dispute? In the present case it is the case of

Religare Finvest Limited - Financial Creditor that the loan agreement of dated

21.07.2015 read with the sale agreement dated 16.06.2016 constituted a valid

financial debt which was disbursed against consideration for the time value of

money and was supported by a pledge of shares. We note that the Appellant-

FC had also assigned 12 loan accounts to the Respondent for recoveries vide

assignment dated 25.07.2015. Later on, Appellant - Financial Creditor -

Religare Finvest Limited recalled the loan of ₹40 Crores by issuing a demand

notice on 24.06.2016, which is still in default. Further, there is a settlement

agreement dated 01.07.2017 which was to settle multifarious litigations, which

had following parties:

Company Appeal (AT) (Insolvency) No. 398 of 2025 24 of 38 Principal Parties Perpetual Capital & Servicing Pvt Ltd.

Strategic Credit Capital Pvt. Ltd.

(Respondent) Second Party Religare Finvest Ltd. (Appellant)

And as per the Settlement Terms, as per the settlement, 3 liabilities were

identified against the Respondent and Perpetual Capital:

o Against Perpetual - ₹228.75 Cr. [Recital B @Pg.120, Schedule C Part C @Pg.138] - Transaction 1 as noted herein earlier.

o Against Respondent ₹40 Cr. with 12% interest payable by Respondent to the Appellant. [Recital C @Pg.120, Schedule C Part B @Pg.139] - Transaction 2 as noted herein earlier {Loan which was assigned by Nishu Finlease to Appellant}

29. It is the case of the Appellant that the settlement agreement dated

01.07.2017 does not extinguish or waive the original debt and at best is a

repayment arrangement thereby implying that the breach of settlement

agreement revives the original cause of action. The Appellant also relies on

clause 3.7 in the settlement agreement, which imposes a continuing

obligation to repay the outstanding debt. It claims that since no payments

have been made either under the loan agreement or under the settlement

agreement despite express acknowledgment of liability obligation. Basis the

provisions under the Code that "(5) Where the Adjudicating Authority is

satisfied that--(a) a default has occurred and the application under sub-

section (2) is complete, and there is no disciplinary proceedings pending

against the proposed resolution professional, it may, by order, admit such

application" and settled judicial precedents, we could conclude that this is

a fit case of admission of debt and default.

Company Appeal (AT) (Insolvency) No. 398 of 2025 25 of 38

30. To add strength to the arguments of the Appellant we find that in the

related case under the same settlement agreement, on the petition of the FC

against Perpetual, which is also one of the parties in the settlement

agreement, NCLT Mumbai Bench passed admission order 1 against perpetual

for defaulting. The relevant portion of the order is as follows:

"...

26. The Respondent in its reply alleged that the Petitioner had unconditionally and irrevocably sold, transferred and assigned the loans granted to certain borrowers, to the Respondent and SCCPL. Further, the Respondent submits that the loans sold turned out to be related party transactions and funds siphoning scheme adopted by the Petitioner which led to filing of multiple suits which ultimately resulted in Settlement and accordingly parties entered into Settlement Agreement.

27. The Respondent is not disputing the fact that the outstanding amount is due and payable to the Petitioner. Further, infact vide Settlement Agreement dated 01.07.2017 to which the Respondent is a signatory party acknowledged the debt of Rs.260,00,00,000/- (Rupees Two Hundred and Sixty Crore Only) in Recital B at pages 70 of the Petition.

28. The Respondent contented that the subject debt is disputed and pending before Saket District Court for adjudication. We opine that as per scheme of the Code and plethora of landmark judgements i.e. E.S. Krishnamurthy vs Bharath Hi-Tecch Builders (P) Limited and Innoventive Industries (supra) the proposition laid down by the Hon'ble Supreme Court on the law relating to Section 7 of the Code is that this Adjudicating Authority is bound to examine the existence of debt and default.

1 Order dated 12.08.2022 passed in Religare Finvest Limited v. Perpetual Capital and Servicing Private Limited, CP (IB) No. 3640/MB/C-1/2019

Company Appeal (AT) (Insolvency) No. 398 of 2025 26 of 38

29. The Settlement Agreement was entered into pursuant to the litigation before the Hon'ble Bombay High Court to settle issues. After reading settlement agreement by any stretch of imagination it cannot be concluded that the said agreement has altered the transaction between the parties. At the same time, it was acknowledged that basis the loan agreement dated 20.06.2015 a loan facility was availed to the tune of ₹260,00,00,000/- (Rupees Two Hundred and Sixty Crore Only).

30. We have also perused the case of M/s Brand Realty Services Ltd. Vs Sir John Bakeries India Private Limited Company Appeal (AT) Insolvency No. 958 of 2020 wherein it was held that unpaid instalment under the settlement agreement can't be treated as an Operational Debt as per Section 5(21) of the Code. In the present case the application is filed by the Financial Creditor and the amount was disbursed against time value of money. Moreover, we hold that the facts of the present case are distinguishable on the ground that the settlement agreement on record ratifies that fact the Respondent was under a continuing obligation to repay the outstanding amount of ₹260,00,00,000/- pursuant to loan agreement dated 20.06.2015.

31. In light of the above circumstances we hold that aforesaid acknowledgment meets all the essential ingredients of Section 18 of the Limitation Act, 1963.

Therefore, the debt is within the period of limitation.

32. Further, clause 3.4 and 3.7 of the Settlement Agreement stipulates that:

"3.4 The principal parties further undertake to procure, on best effort basis, that amounts aggregating to at least ₹400,00,00,0001- (Rupees Four Hundred Crores Only) ('Realizable Amount'') are realized by collection of amounts repayable I recoverable I receivable from the borrowers, within a period of9 (nine) months from the Execution Date".

"3.7 The obligation of the Principal Parties to pay the entire Second Party Dues shall be a continuing obligation and the Principal Parties shall not be discharged of their obligations to Second Party until the entire Second Party Dues are paid in full, including by way of collections in the Escrow Account, and I or by disposal of co/laterals listed in Schedule C as contemplated in Clause 7.1 (iv)."

Company Appeal (AT) (Insolvency) No. 398 of 2025 27 of 38 Therefore, the Respondent is under a continuing obligation to pay the dues to the Petitioner.

33. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor."

31. It is argued by the FC that this is also a fit case for Section 7

admission. But the Adjudicating Authority had not admitted the Section 7

petition against the Corporate Debtor - Strategic while deciding this case

and had concluded as follows:

"...

16. We noticed that as between the parties herein the transaction has been going on for a long time and in different parts and the assignment of the NFPL loan is one such transaction. We would have accepted the FC request for treating it as debt and default, but for the settlement agreement dated 01.07.2017 which contains an all-encompassing clause that the Escrow account will be operated by the Principal Parties and the Second Party. The Escrow agreement also provides for the certain division on realization where was the need for sharing the realised amount that is the issue for which there is no proper explanation by the FC/Petitioner. There was no need to add ₹240,00,00,000/- (Rupees Forty Crores Only) of the NFPL debt into Schedule C of the settlement agreement dated 01.07.2017, if it was a stand-alone and independent transaction. We find that there is more in letter and spirit in the settlement agreement dated 01.07.2017. The actual design behind that comprehensive settlement dated 01.07.2017 to a great extent is a convoluted way of settlement. If the FC had a claim, in NFPL assignment it could have kept that separately out of the settlement agreement dated 01.07.2017. In this case, the NFPL debt and other debt in a total sum of ₹2793,67,20,176/- (Rupees Seven Hundred Ninety Three Crores Sixty Seven Lakhs Twenty Thousand One Hundred Seventy Six Only) which read with terms of the settlement, recovery, escrow and certain conditions to be followed in

Company Appeal (AT) (Insolvency) No. 398 of 2025 28 of 38 implementation makes it a case of agreement for recovery after withdrawing each other's claims in the litigation. The petitioner has given a sum of ₹2,00,00,000 (Rupees Two Crores Only) to the CD to ensure the recovery makes them a partner in the recovery, process. Hence it is an agreement for recovery not a case to establish debt."

32. Adjudicating Authority has gone into the background and finds that

loan claimed by the Financial Creditor is subsumed into the settlement

agreement dated 01.07.2017 and it is not a stand-alone liability. The terms

of settlement are all encompassing on its various terms. Therefore, the

question of debt and default in a subsisting agreement which is alive even

as of today would not partake the character of debt. It has come to a

conclusion that it is a recovery process agreement, the question of default

as pleaded by the petitioner does not arise.

33. We have also perused the materials placed on record, and we find this

loan to be in part C of the Schedule of the settlement agreement dated

01.07.2017. When we look into the details of the settlement agreement, we

find at Clause 3.4 that the principal parties which include both perpetual

and Strategic Credit Capital Private Limited -were to procure repayment

recovery of all amounts dues by / borrowers and were to be deposited in the

escrow account. It was also agreed to procure on best effort basis at least ₹400

Crores within a period of 9 months from the execution paid. Also, Clause 3.7

provides that the obligations of the principal parties to pay the second parties

dues shall be a continuing obligation and the Principal Parties shall not be

discharged of their obligations to Second Party until the entire Second Party

Company Appeal (AT) (Insolvency) No. 398 of 2025 29 of 38 Dues are paid in full, including by way of collections in the Escrow. And the

appellant relies very heavily upon this clause 3.7. While clause 3.7 is relevant

but when we peruse the background in which the "debt" has been created

and the settlement agreement between the parties, it raises many

unanswered questions for it to fall in the category of debt. Most importantly,

the Respondent being a Financial Service Provider (FSP) shuts the case

being non-maintainable.

34. As noted herein earlier. there is a fundamental question of the

maintainability of the Section 7 petition. The Corporate Debtor had also

provided a detailed account of the genesis of the debt, which is available on the

material placed on record and at the relevant time its status as NBFC. Briefly

speaking it was pointed out by the Respondent that the Financial Creditor had

unconditionally and irrecoverably sold, transferred and assigned the loans

granted to certain borrowers to the Respondent - SSCPL and Perpetual.

Respondent claims that the loans granted to certain borrowers were sold to

SSCPL as per the settlement agreement dated 01.07.2017. It also claims that

the loans sold out turned out to be the related party's transaction and a funds

siphoning scheme adopted by the Financial Creditor. Upon unearthing the

alleged fraud, multiple litigations ensued between the parties and which

culminated into a suit before Hon'ble Bombay High Court Eleos Finvestia

Acquisition Trust and in the above suit a settlement was arrived at and hence

settlement agreement dated 01.07.2017 was entered into and enforced.

Company Appeal (AT) (Insolvency) No. 398 of 2025 30 of 38

35. The Respondent also claims that when the settlement agreement was

entered into between the Financial Creditor and the Applicant had accepted and

reduced the repayment of the obligations of the respondent on a best-efforts

basis, it implies that the Respondent had to act in good faith and take effective

steps to procure repayment / recovery, all amounts due by/from the borrowers.

It is not the case of the Respondent that it has not breached its obligation of

creating an escrow account, but it made best efforts to collect the outstanding

amount from the borrowers and for that reason it cannot be held liable for

breach. This is particularly important in the context of the background of the

genesis of the loan, which has been described in detail by the Respondent. We

find strength in the arguments that the funding of the Corporate Debtor through

Nishu Finlease Private Limited was mere optics. The loans as well as the

underlying security were both controlled by Financial Creditor itself. Financial

Creditor was controlling the investments being made by the Corporate Debtor

in the shares of ABG Shipyard Pvt. Ltd. It is brought to our notice that the

central purpose of this transaction structure was consolidation of the shares of

ABG Shipyard Pvt. Ltd. in order to force a settlement with the ABG Shipyard

Pvt. Ltd.

36. In normal course when a clear debt was involved and there was a default,

one could have considered the admission under Section 7. But this case appears

to be a deep and complicated set of transactions which have been orchestrated

by collusion of the FC (claimed by FC to be by erstwhile management) and the

Respondent [FSP]. Admittedly, Respondent [FSP] was induced by the fees for Company Appeal (AT) (Insolvency) No. 398 of 2025 31 of 38 the transactions. On one side there is acceptance for fees and on the other side

there is deep and complicated history of creation of debt. We find tacit

understanding of both sides. FC cannot be given shelter of wrong-doings of

erstwhile management and the Respondent [FSP] was also equally at fault when

they allowed their company to be used (abused) by the FC. It is not a clean case

of loan and creation of debt and default. Without going into the details, we find

that if there was a direct linkage of loan between the Financial Creditor and the

Corporate Debtor, it could have been explicitly worked out in a bilateral

settlement agreement. But the settlement which is relied upon by the Financial

Creditor is a convoluted route to settle and is not helpful for Section 7 admission

as debt and default is not clearly established.

37. We have gone into the details of Part-IV in the Section 7 petition which

also provides the background in which a loan has been bought by the Financial

Creditor from Nishu Finlease Private Limited. Part IV is extracted below:

"A. Total amount of debt granted and date of Loan disbursement.

1. Rs. 40,00,00,000 Rupees Forty Crores Only was disbursed by one Nishu Finlease Private Limited NFPL in terms of the Loan Agreement dated 21.07.2015 Loan Agreement executed between NFPL and the Corporate Debtor. The Financial Creditor purchased the loan given to the Corporate Debtor from NFPL by way of Sale Agreement dated 16.06.2016 for a consideration of Rs. 45,00,00,000- Rupees Forty Five Crores only Sale Agreement1, which was paid by the Financial Creditor to NFPL on 16.06.2016. all the rights and interests of NFPL qua the Corporate Debtor arising out of the Loan Agreement and security interests created thereunder. The relevant excerpt of Bank Statement of the Financial Creditor showing the payment of consideration under the Sale Agreement to NFPL and the ledger of the Corporate Debtor are attached herewith collectively and marked as Annexure - G Colly.

Company Appeal (AT) (Insolvency) No. 398 of 2025 32 of 38

2. The Financial Creditor, Religare Finvest Ltd., is a company incorporated under the statutory provision of the Companies Act, 1956 Certificate of Incorporation is already annexed as Annexure B, having its registered office at 2nd Floor, Rajlok Building, 24, Nehru Place, New Delhi - 110019 and is a Non-Banking Financial Company NBFC registered with the Reserve Bank of India. The operations of the Financial Creditor are subject to Reserve Bank of Indian Guidelines and Regulations.

3. The Financial Creditor is filing the present Application through its Authorized Signatory, Manpreet Singh Suri, who is authorized to file the present Application vide Power of Attorney dated 07.06.2017 issued by the Creditor in his favour, already annexed as Annexure D.

4. The present Petition has been filed by the Financial Creditor under Section 71 read with Sections 14 and 33 and other applicable provisions of the Code and Rule 4 of the Insolvency and Bankruptcy Application to Adjudicating Authority Rules, 2016, inter-alia, praying for initiation of corporate insolvency resolution process against the Corporate Debtor.

5. The Corporate Debtor, Strategic Credit Capital Pvt. Ltd., is a private limited company, incorporated under the Companies Act, 1956 on 17.05.1996 bearing Corporate Identity No. U65929DL1996PTC078967 and having its Registered Office at A-49, Mohan co-operative Industrial Estate, Mathura Road, New Delhi - 110044. A copy of the Certificate of Incorporation of the Corporate Debtor and Company Master Data of the Corporate Debtor available on the website of Ministry of Corporate Affairs has already been annexed as Annexure E and Annexure F respectively. Copies of the Memorandum of Association and the Articles of Association of the Corporate Debtor are annexed herewith collectively and marked as Annexure- H Colly.

6. The Financial Creditor submits that the Corporate Debtor is indebted to the Financial Creditor for a total sum of Rs. 60,97,80,821.86 Rupees Sixty Crores Ninety Seven Lakh Eighty Thousand Eight Hundred and Twenty One and Eighty Six as on 31.05.2019. Therefore, the Corporate Debtor is liable to pay total outstanding amount of Rs. 60,97,80,821.86 Rupees Sixty Crores Ninety Seven Lakh Eighty Thousand Eight Hundred and Twenty One and Eighty Six along with pendente lite and future interest which is further accruing on a day to day basis until the debt owed to the Financial Creditor is fully discharged. The circumstances and events leading to the filing of the present Petition are set out in the following paras that establish a clear case

Company Appeal (AT) (Insolvency) No. 398 of 2025 33 of 38 for initiation of corporate insolvency resolution process against the Corporate Debtor by this Hon'ble Tribunal.

7. NFPL entered into a loan agreement with the Corporate Debtor on 21.07.2015 Loan Agreement whereby the Corporate Debtor had availed a loan facility of Rs. 40,00,00,000- Rupees Forty Crores only from NFPL, on the terms and conditions stipulated in the Loan Agreement. The repayment of the borrowed amounts was secured by creation of pledge over securities including 1,32,33,328 One Crore Thirty Two Lakh Thirty Three Thousand Three Hundred and Twenty Eight equity shares of one ABG Shipyard Ltd. The loan given to the Corporate Debtor was repayable within twelve months from the date of disbursal of the loan and carried an interest rate of 12 per annum. The Corporate Debtor was liable to pay the interest on a monthly basis on the last date of each month. Further, under the terms of the Loan Agreement, NFPL had the right to transfer or sell the outstanding loan along with security to any person. A copy of the Loan Agreement dated 21.07.2015 is attached herewith and marked as Annexure - I.

8. On 16.06.2016, the Financial Creditor entreated into a sale agreement with NFPL Sale Agreement whereby the Financial Creditor purchased the outstanding loan, along with the underlying securities and receivables, given by NFPL to SCCPL under the Loan Agreement for a purchase consideration of Rs. 45,00,00,000 Rupees Forty Five Crores. Consequently, RFL acquired all the rights and interests of NFPL qua the loan availed by SCCPL under the Loan Agreement and the underlying security interests created thereunder. A copy of the Sale Agreement dated 16.06.2016 is attached herewith and marked as Annexure - J.

9. Although in terms of the Loan Agreement, the Corporate Debtor was to make payment of the interest on a monthly basis, no such payment was made by the Corporate Debtor. As such, the Financial Creditor invoked its right under Clause 24.1 of the Loan Agreement and terminated the Loan Agreement by issuing a Termination cum Recall Notice dated 24.06.2016. By way of the said notice, the Financial Creditor also recalled the outstanding loan amount along with accrued interest and other charges, aggregating to Rs. 45,00,00,000- Rupees Forty Five Crore Only. Copy of the Notice issued by the Financial Creditor dated 24.06.2016 is attached herewith and marked as Annexure - K.

10. However, the Corporate Debtor failed to pay the Financial Creditor the outstanding debt due and payable under the Loan Agreement. The parties then entered into discussions to settle the payment of the outstanding

Company Appeal (AT) (Insolvency) No. 398 of 2025 34 of 38 dues. Pursuant to the discussions, the Financial Creditor and the Corporate Debtor entered into a Settlement Agreement dated 01.07.2017 executed, inter alia, between the Financial Creditor and the Corporate Debtor for payment of the outstanding debt due and payable to the Financial Creditor. The Corporate Debtor acknowledged its liability to pay the outstanding loan amount of Rs. 40,00,00,000- Rupees Forty Crore Only in the Settlement Agreement. A copy of the Settlement Agreement dated 01.07.2017 is attached herewith and marked as Annexure- L.

11. However, no payment has been made by the Corporate Debtor towards the dues owed by it to the Financial Creditor till date. As such, the Financial Creditor is left with no other alternative except to initiate the present proceedings.

12. The Financial Statement of the Corporate Debtor for the financial year ending March 31, 2016 admits that the aforesaid amount was borrowed by the Corporate Debtor under the head of Other Non-Current Liabilities. A copy of the Financial Statement of the Corporate Debtor for the year ending March 31, 2016 Is attached herewith and marked as Annexure-M.

13. The Financial Creditor apprehends that the Corporate Debtor will alienate dispose of its assets, with the ulterior motive of defrauding its present creditor. Thus, it is imperative that in order to protect the interest of the Financial Creditor, the present Application is admitted, and a moratorium period be declared by this Hon'ble Tribunal under Section 14 of the Code prohibiting the transfer, creation of any right, title or interest, encumbrance, alienation or disposal by the Corporate Debtor on any of its assets.

14. That the Financial Creditor craves leave of this Hon'ble Tribunal to bring on record further additional documents necessary for adjudication of the present Application and refer to the same during the course of arguments with due permission of this Hon'ble Tribunal.

15. That the Financial Creditor declares that the subject matter of the present Application is well within the jurisdiction of this Hon'ble Tribunal as the registered office of the Corporate Debtor is A-49, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi - 110044.

16. Further, it is submitted that the Financial Creditor will suffer irreparable loss, prejudice and injury if the relief as prayed through the present Application is not granted by this Hon'ble Tribunal.

Company Appeal (AT) (Insolvency) No. 398 of 2025 35 of 38

17. That the Financial Creditor has not filed any other insolvency petition before this Hon'ble Tribunal or any other Bench of this Hon'ble National Company Law Tribunal against the Corporate Debtor and that the present Petition Application has been filed bona-fide and in the interest of justice.

B. Amount claimed to be in default and the date on which the default occurred (attach the workings for computation amount and date of default in tabula form)

Rs. 60,97,80,821.86 (Rupees Sixty Crores Ninety Seven Lakh Eighty Thousand Eight Hundred and Twenty One and Eighty Six) as on 31.05.2019.

The Date of Default vis-a-vis the Loan Amount is the date of issuance of the Termination cum Loan Recall Notice dated 24.06.2016 by the Financial Creditor to the Corporate Debtor, by virtue of which the entire loan amount together with stipulated interest became due and payable.

The working for the computation of amount of Rs. 60,97,80,821.86 (Rupees Sixty Crores Ninety Seven Lakh Eighty Thousand Eight Hundred and Twenty One and Eighty Six) as on 31.05.2019 in tabular form is attached herewith and marked as Annexure - N."

38. In the background of the above case as noted herein earlier, we find that

this is a complicated settlement which had been willingly entered into between

the Financial Creditor and various borrowers in which the Corporate Debtor

[FSP] is also one of the parties. The matter has been examined in detail by the

Adjudicating Authority and it has come out with the finding that:

"16. We noticed that as between the parties herein the transaction has been going on for a long time and in different parts and the assignment of the NFPL loan is one such transaction. We would have accepted the FC request for treating it as debt and default, but for the settlement agreement dated 01.07.2017 which contains an all- encompassing clause that Escrow account will be operated by the Principal Parties and the Second Party. The Escrow agreement also provides for the certain division on realization where was the need for sharing the realised amount that is the issue for which there is no proper explanation by the FC/Petitioner. There was no need to add ₹40,00,00,000/- (Rupees Forty Crores Only) of the NFPL debt into Schedule C of the

Company Appeal (AT) (Insolvency) No. 398 of 2025 36 of 38 settlement agreement dated 01.07.2017, if it was a stand-alone and independent transaction. We find that there is more in letter and spirit in the settlement agreement dated 01.07.2017. The actual design behind that comprehensive settlement dated 01.07.2017 to a great extent is a convoluted way of settlement. If the FC had a claim, in NFPL assignment it could have kept that separately out of the settlement agreement dated 01.07.2017. In this case, the NFPL debt and other debt in a total sum of ₹793,67,20,176 /- (Rupees Seven Hundred Ninety Three Crores Sixty Seven Lakhs Twenty Thousand One Hundred Seventy Six Only) which read with terms of the settlement, recovery, escrow and certain conditions to be followed in implementation makes it a case of agreement for recovery after withdrawing each other's claims in the litigation. The petitioner has given a sum of ₹2,00,00,000 (Rupees Two Crores Only) to the CD to ensure the recovery makes them a partner in the recovery, process.

Hence it is an agreement for recovery not a case to establish debt.

17. In the above fact of the case we fail to understand where the principle of creditor and debtor comes. Be that as it may, we hold that this loan is subsumed into the settlement agreement dated 01.07.2017 and it is not a stand-alone liability. The terms of settlement is all encompassing on its various terms. Therefore, the question of debt and default in a subsisting agreement which is alive even as of today would not partake the character of debt. In a recovery process agreement, the question of default as pleaded by the petitioner does not arise."

[Emphasis supplied]

Conclusions

39. In the above noted facts and circumstances, we find that the petition itself

is not maintainable as the Respondent, being a NBFC, is a Financial Service

Provider (FSP) and the impugned transactions had taken place when the

Respondent was NBFC. Moreover, there are deep and complicated transactions

which are disputed. Furthermore, both parties willingly entered into such

transactions, despite being fully aware that it is for purchase of share of ABG

Company Appeal (AT) (Insolvency) No. 398 of 2025 37 of 38 Shipyards. Furthermore, Respondent was being controlled by FC and it willingly

entered into such transactions. We find both parties were colluding with each

other and therefore we are not convinced to allow the admission of Section 7

petition. We also note that Section 7 petition against cannot be filed against

Corporate Debtor being a Financial Service Provider. Accordingly, the appeal

filed by FC is not maintainable and is liable to be dismissed. Apart from non-

maintainability there are other counts also - noted by us herein earlier, which

don't allow admission of Section 7 petition.

Orders

40. Therefore, in the facts and circumstances of the case we find sufficient

grounds to dismiss the Appeal and accordingly the Appeal is dismissed. All

related IAs are also dismissed. No order as to costs.

[Justice N Seshasayee] Member (Judicial)

[Arun Baroka] Member (Technical)

[Indevar Pandey] Member (Technical) New Delhi.

February 06, 2026.

pawan

Company Appeal (AT) (Insolvency) No. 398 of 2025 38 of 38