Spade Financial Services Ltd. & Anr vs Hari Krishan Sharma & Ors

[Arising out of Order dated 19th July 2019 passed by NCLT, New Delhi Bench-III in CP(IB) - 55/ ND/ 2018]

IN THE MATTER OF:

1. Spade Financial Services Limited Through its Authorised Representative Mr S.C. Arora Having Registered Office at: K-24, Jangpura Extension New Delhi - 110014

2. AAA Landmark Private Limited Through its Authorised Representative Mr S.C. Arora Having Registered Office at: K-24, Jangpura Extension New Delhi - 110014 ...Appellants

Versus

1. Hari Krishan Sharma Operational Creditor/Applicant u/s 9 of IBC R/o 36/1, Krishna Nagar (Bagu) NH-24, Ghaziabad Uttar Pradesh - 201009

2. AKME Projects Limited A Company registered under the provisions of the Companies Act, 1956 Through Resolution Professional (RP) Mr Anurag Sharma IBBI/IPA-002?IP-N00209/2017-18/10728 40 LGF, National Park Lajpat Nagar-IV New Delhi - 110024 Anurag.s.irp@gmail.com

3. Anil Nanda Ex-Director M/s AKME Projects Limited S/o Shri H.P Nanda R/o 12 C, Friends Colony West New Delhi - 110025

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 1 of 23 4. Yes Bank Limited (The applicant in CA-268/C-2/ND/2018 & CA-269/C-2/ND/2018) 48, Nyay Marg, Chanakya Puri New Delhi - 110021 subhal.garg@yesbank.in sanju.kumar@yesbank.in

5. Phoenix ARC Private Limited (The applicant in CA-337/C-2/ND/2018 and CA-338/ND/2018) 5th Floor, Dani Corporate Park 158 CST Road, Kalina Santacruz (E) Mumbai - 400098 pallavi.chavan@phoenixarc.co.in ajit.kewin@phoenixarc.co.in ...Respondents

Present: For Appellant: Shri Ramji Srinivasan, Sr. Advocate with Shri Lokesh Bhola, Shri Rohit K. Nagpal, Shri Karan Grover, Ms Syloma Mohaptra and Shri Yash Patel, Advocates

For Respondent: Shri Abhishek Anand, Advocate (R-2) Shri Neeraj Yadav and Ms Aditi Sharma, Advocates (R-4) Shri Amit Chadha, Sr. Advocate with Ms Sonaakshi Dhiman, Shri Suresh Dobhal, Ms Srishti Grovil and Shri Sharan Mehta, Advocates (R-5)

[Per; V. P. Singh, Member (T)]

The present appeal is preferred against the common impugned order

dated 19th July 2019 passed by the National Company Law Tribunal, New

Delhi Bench -III in CP (IB) No. 55 /ND/2018 titled as 'Hari Krishan Sharma

Versus AKME Project Limited'. By the impugned order the Adjudicating

Authority has held that Mr Arun Anand and his Companies, namely, Spade

and AAA Landmark were related parties to the 'Corporate Debtor'. However,

after 2013 (soon after signing the Agreement to Sell ), Arun Anand resigned

from Anil Nanda Group, and so they are no longer related to the 'Corporate

Debtor' at the time of filing of an application for initiation of 'Corporate

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 2 of 23 Insolvency Resolution Process'. The Adjudicating Authority further observed

that the affairs of the 'Corporate Debtor; as well as the Group of Arun Anand

companies are deeply entangled and it is difficult for the Tribunal in a

summary jurisdiction to unravel the same. Considering that the 'Corporate

Debtor' and Spade and AAA were in close business relationship in the past

and also the fact that the accounts of the 'Corporate Debtor' have not been

finalised and audited and filed with the Registrar of Companies since 2016,

the Adjudicating Authority has allowed the application of the Yes Bank

Limited and Phoenix ARC Private Limited and declared that the Spade and

AAA Landmark are related parties to the 'Corporate Debtor'. Feeling

aggrieved by the said order, this appeal has been filed.

2. The main issue under-challenge is regarding the declaration of

Appellants Spade Financial Services Limited, and it's wholly-owned

subsidiary AAA Landmark Private limited as a related party to the corporate

debtor AKME Projects Ltd. They are in the 'Committee of Creditors' of the

corporate debtor "AKME Projects Limited (for brevity APL") because of being

'Financial Creditors' of APL. The main ground under challenge is that Spade

Financial Services Limited and AAA Landmark Private Limited are

companies promoted and managed by Sh. Arun Anand, who is a related

party of the 'Corporate Debtor'.

3. The Yes Bank Limited, one of the 'Financial Creditor' of the 'Corporate

Debtor' has stated in CA-268/2018 and CA-269/2018, that their voting

share in the 'Committee of Creditors' was 15.27%. But the same was

reduced to 4.28%, pursuant to the claims of AAA Landmark Private Limited

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 3 of 23 and Spade Financial Services Private Limited. The Yes Bank Limited has

stated that these two entities are related parties to the 'Corporate Debtor' as

per provisions of Section 5(24) and Section 21(2) of the 'Insolvency and

Bankruptcy Code, 2016'.Thus they should not have been granted the right

of representation, participation or voting in the meeting of 'Committee of

Creditors' of APL.

4. Similarly, Phoenix ARC Private Limited has stated that they had

accrued its rights by registered Deed of Assignment dated 28th December

2015, whereby, Karnataka Bank Limited, assigned its Non-Performing Asset

(concerning the credit facilities granted by Karnataka bank Limited to the

'Corporate Debtor' / AKME Projects Limited) in favour of Phoenix. Thus their

voting share in the 'Committee of Creditors' was reduced to 4.218%,

pursuant to acceptance of the claims of AAA Landmark Private Limited and

Spade Financial Services Private Limited, as the financial creditors of APL,

and their inclusion in the Committee of Creditors.

5. That the question arises for our determination is as under:

Whether appellants Spade Financial Services Private Limited

(Appellant No.1) and AAA Landmark Private Limited (Appellant No.2)

are related parties to the Corporate Debtor, AKME Projects Limited, in

terms of Section 5(24) and Section 21(2) Insolvency and Bankruptcy

Code, 2016?

6. The brief facts of the case are that the Corporate Insolvency

Resolution Process (CIRP) has been initiated against the Corporate Debtor

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 4 of 23 AKME Projects Limited on 18th April 2018 on an application filed by the

Operational Creditor, respondent No.1. During Corporate Insolvency

Resolution Process (in short „CIRP‟) claims were invited by Interim

Resolution Professional (in short „IRP‟). The appellants Spade Financial

Services Private Limited and AAA Landmark Private Limited filed their

claims as Financial Creditors. The „IRP‟ rejected the claim of appellant No.1

on the ground that the alleged transaction does not involve time value

money. The appellant No.2 claim was rejected by „IRP‟ on the ground that it

was received after the last date of submission of the claim as stated in

public announcement. The rejection of the claim was challenged before the

Ld. Adjudicating Authority. The Adjudicating Authority held that there is no

dispute, that the amount has been received by the corporate debtor as a

deposit, which is duly mentioned in the balance sheet. The entries of

interest payment are reflected in Form ‟26 AS‟, deducting TDS on interest

and thus claim of appellant No.1 is a Financial Creditor. After that first

meeting of Committee of Creditors (in short „CoC) held on 1st June 2018,

unanimous decisions were taken to have a forensic audit into the accounts

of Corporate Debtor and replace the „IRP‟.

7. During first „CoC‟ the Financial Creditors, i.e. Yes Bank (Respondent

No.4) and Phoenix ARC Private Limited (Respondent No.5) filed an

application that the Appellants No.1 and 2, i.e. Spade and AAA Landmark

from the CoC, be declared as a related party to the Corporate Debtor AKME

Projects Limited.

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 5 of 23

8. The allegations based on which the R-4 claimed Appellants to be

related party are at Para 16 [at Pg. 196 & 212] of its application and Para 14

[at Pg. 229 & 246] of Application by R-5. The sum and substance of

allegations are as under:

i. Arun Anand, Director of both Appellants, was appointed as Group CEO, of Anil Nanda Group of Companies of which CD was a part, on 26.11.2012 till February 2013.

ii. Agreement to Sell dated 25.10.2012 read with Development Agreement dated 01.03.2012 reveals joint development/ partnership between Appellant no 2 & CD.

iii. Name of one of the projects of CD "AKME Raaga" derived from the name of CD and Raaga Realtech, a company belonging to Mr Arun Anand, thus is a partnership.

iv. Mr Sonal Anand (Director of CD) is Co-brother of Mr Arun Anand.

v. CD & JIPL (holding Company of CD) holds shares of Appellant No-

1, totalling to 1.45% voting rights in Appellant No-1.

vi. Mr Arun Anand held 20000 shares of CD in the past and Mr Anil Nanda had working relations with Mr Arun Anand in the past."

9. The Adjudicating Authority allowed the application of Respondent

No.4 and Respondent No.5 vide impugned order dated 19th July 2019. The

appellant contends that the impugned order is based on incorrect factual

findings not supported by any record. By the impugned order the

Adjudicating Authority has reversed its earlier order dated 31st May 2018,

which had remained unchallenged and undisputed.

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 6 of 23

10. The appellant contends that Rs.43.06 crores have been credited to the

account of Mr Arun Anand is a baseless and against the record. Mr Arun

Anand was not Director of Corporate Debtor, nor any allegation was made in

this regard. Appellant has also raised the issue that finding of the

Adjudicating Authority regarding the collusive transaction is based on non-

credit of Rs.43.06 crores in the account of Mr Arun Anand, is based on a

false assumption about entire amount under ICDs, which was never given to

the Corporate Debtor. It is further contended by the appellant that

Association of Mr Arun Anand with the Corporate Debtor and its Group of

Companies as Director and shareholder is also baseless and against the

record. The finding of the Adjudicating Authority is based on factually

incorrect facts. The appellants vehemently contended that they are not a

related party to the Corporate Debtor. The allegations for five years before

the commencement of CIRP would not be a relevant consideration, given the

provision of Section 43(4) and Section 46 of the Insolvency and Bankruptcy

Code, 2016 (in short „I&B Code, 2016).

11. We have heard the counsel for both the parties and perused the

record. Admittedly appellants are the Financial Creditors of the Corporate

Debtor AKME Projects Limited (in short „APL‟). By the impugned order,

Adjudicating Authority had treated the appellant as a related party to the

Corporate Debtor, as per provision of Section 5(24) and Section 21(2) of the

I&B Code, 2016. To know the natures of the transactions entered into

between the appellants and the Corporate Debtor, it is imperative that

status, influence and interrelationship among the parties must be

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 7 of 23 examined, inter-alia, for the period of the transactions that were entered

into between in 2010 to 2013.

In this regard, the close relationship of the key managerial person of

the Corporate Debtor (Mr Anil Nanda) and Appellant (Mr Arun Anand) is

quintessential. Based on the claim forms of the appellants, signed by Mr

Arun Anand and the documents filed before the Adjudicating Authority, it is

evident that Mr Arun Anand (Director of the Appellants) worked for Mr Anil

Nanda, Corporate Debtor) for over 25 years and purported transactions from

2010 to 2013 were entered into vide Mr Arun Anand, who had worked as an

employee for Escorts Limited/Nanda Group of Companies specifically Mr

Anil Nanda including AKME Projects Limited the Corporate Debtor, and also

held Key Managerial roles in the companies. The chart below clearly shows

each transaction and the relationship of the persons above:

(i) On perusal of the documents, it is clear that AKME Projects

Limited, Spade Financial Services Private Limited and AAA

Landmark Private Limited throughout has common Key

Managerial person Mr Arun Anand and Mr Sonal Anand, who

acted and benefited Mr Anil Nanda and his Group of

Companies, i.e. Goetze India, NANZ or AKME Projects Limited

during 2010 to 2013. These personals entered into transactions

as managerial persons of one entity, while holding an essential

portfolio in the other. The following chart reveals:

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 8 of 23

a) Each transaction and the relationship of associated persons

specifying the conditions of Section 5(24)(a) of the I&B Code,

2016.

b) That on 02nd December 2010, Memorandum of

Understanding between Spade Financial Services Private

Limited and AKME Projects Limited was done for giving

money to the Subros, which is apparent from page 390 of the

reply of Phoenix ARC Private Limited. Mr Anil Anand signed

this MOU on behalf of Spade Financial Services Private

Limited, and it‟s on record that Mr Arun Anand was also the

financial consultants for the Corporate Debtor AKME

Projects Limited. Mr Sonal Anand was Whole Time Director

of Joint Investment Private Limited, i.e. the holding company

of AKME Projects Limited and Mr Anil Nanda was Promoter/

Director of the AKME Projects Limited.

c) On 8th February 2011, Memorandum of Understanding

between appellant Spade Financial Services Private Limited

and the Corporate Debtor AKME Projects Limited was

entered into towards Spade Financial Services Private

Limited shares in AKME Raaga Projects (At page 391 of the

reply of Phoenix). At the time of Memorandum of

Understanding, Mr Arun Anand was the Financial

Consultant for the Corporate Debtor AKME Projects Limited,

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 9 of 23 and at that time Mr Sonal Anand was Whole Time Director of

Joint Investment Private Limited (holding company of a

Corporate Debtor AKME Projects Limited) and Director of the

Corporate AKME Projects Limited, and Mr Anil Nanda was

the Director of the Corporate Debtor AKME Projects Limited.

d) On 18th May 2011, an Agreement to Sale was executed

between Corporate Debtor AKME Projects Limited and the

appellant Spade Financial Services Private Limited for alleged

development of the project. The said agreement was entered,

even though Spade Financial Services Private Limited was

incorporated only to render financial services at the time of

agreement Mr Arun Anand was appointed as Financial

Consultant/Strategic Advisor for the Corporate Debtor AKME

Projects Limited and Mr Sonal Anand was Whole Time

Director of Joint Investment Private Limited, i.e. holding

company of AKME Projects Limited and Director of the

Corporate Debtor AKME Projects Limited and Mr Anil Nanda

was Promoter/Director of AKME Projects Limited.

e) On 12th August 2011 Memorandum of Understanding was

arrived between Corporate Debtor AKME Projects Limited

and Spade Financial Services Private Limited, stating that

ICD of Rs.26.55 crores granted to AKME Projects Limited by

Spade Financial Services Private Limited (At page 844 of the

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 10 of 23 reply of Phoenix ARC Private Limited). At the time of the

alleged transaction, Mr Arun Anand was Financial

Consultant/ Strategic Advisor for the Corporate Debtor

AKME Projects Limited, Mr Sonal Anand was Whole Time

Director of Joint Investment Private Limited, i.e. holding

company of AKME Projects Limited and Director of the

Corporate Debtor. Mr Anil Nanda was the Director of the

Corporate Debtor of the AKME Projects Limited.

f) On 1st March 2012 the Corporate Debtor (through Mr Anil

Nanda) and AAA Landmark Private Limited (through Mr Arun

Anand) executed the alleged development agreement (At

page 163 to 178 of the reply of Phoenix ARC Private Limited).

At the time of execution of development agreement, Mr Arun

Anand was Financial Consultant/ Strategic Advisor for the

Corporate Debtor AKME Projects Limited. Mr Sonal Anand

was Whole Time Director of Joint Investment Private Limited,

i.e. holding company of AKME Projects Limited and Director

of AKME Projects Limited. Mr Anil Nanda was promoter

Director of AKME Projects Limited.

g) That on 25th October 2012, Agreement to Sale, AAA

Landmark Private Limited along with the letter, incorporating

terms akin to the development agreement (At page 179 to

192) and (At page 193 to 197 of reply to appeal by Phoenix

ARC Private Limited). At the time of Agreement Mr Anil

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 11 of 23 Anand was appointed as Financial Consultant/Strategic

Advisor for the Corporate Debtor AKME Projects Limited and

Mr Sonal Anand was Whole Time Director of holding

company Joint Investment Private Limited (JIPL) and

Director of the Corporate Debtor AKME Projects Limited and

Mr Anil Nanda was the promoter of AKME Projects Limited.

h) On 16th/17th January 2013, email was sent by Mr Sonal

Anand, the relation of Mr Arun Anand, to Mr Anil Nanda for

3rd party debts to Mr Bawa (At page 845 of the reply of

respondent No.5). At the time of this email and Mr Arun

Anand was Financial Consultant/Strategic Advisor for AKME

Projects Limited, Mr Sonal Anand was Whole Time Director

of the holding company of the Corporate Debtor AKME

Projects Limited, and Mr Anil Nanda was Promoter/Director

of the Corporate Debtor AKME Projects Limited.

i) Admittedly, Spade Financial Services Private Limited was

incorporated on 21st October 1994 and was promoted and

managed by Mr Arun Anand, who was the Director and

Majority Shareholder. The other Directors included his wife

and daughter. The AAA Landmark Private Limited is a 100%

subsidiary of the Spade Financial Services Private Limited

and was incorporated in June 2011. Spade Financial

Services Private Limited gave inter-corporate deposits to the

Corporate Debtor from 1st June 2009 to January 2013

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 12 of 23 amounting to Rs.66 crores vide Memorandum of

Understanding dated 12th August 2011. Out of inter-

corporate deposits given by Spade Financial Services Private

Limited to the Corporate Debtor, Rs.43.06 crores credited to

the account of Mr Arun Anand by consent. The Spade

Financial Services Private Limited was hired as Consultant

by the Corporate Debtor on assignment basis during the

period 1st June 2009 to 28th February 2011. Appellants

contend that Mr Anil Nanda is the major shareholder of Joint

Investment Private Limited (in short „JIPL‟) the company

holding 80% of the Corporate Debtor share. The Corporate

Debtor is a part of Mr Anil Nanda Group of Companies, Mr

Arun Anand holds different positions in the Group

Companies of Mr Anil Nanda at different point of time.

Details of the position held by Mr Arun Anand as per

documents submitted before us is given below:

Years Positions held Company

1. 1979-1993 Various positions Escorts Including Manager Limited Limited

2. 1993-1995 General Manager Nanz Foods (Finance) Products Limited

3. 1996 General Manager GI Power Corporation Limited

4. 1996-2003 Various Positions Goetze India including whole-time Limited

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 13 of 23 director the executive director

5. 2005-2007 Vice-Chairman & Federal-Mogul Managing Director Goetze

6. 2007-2011 Consultant (Through AKME Projects Spade) Limited

7. 2012-2013 Group CEO The Anil Nanda Group of Companies

8. 2012-2013 Group CEO The Anil Nanda Group of Companies

12. Appellants contend that Mr Arun Anand ceased to be a Director in

AKME Projects Limited as on 31st March 2002. Mr Arun Anand and Mr

Aditya Anand‟s shareholding in Corporate Debtor AKME Projects Limited,

i.e. 20,000 equity share were sold in year 2004/2005.

13. That because Mr Arun Anand was a Group CEO of Mr Anil Nanda

Group. It is alleged by respondent No.4 & 5 that Mr Arun Anand being a Key

Managerial Person the corporate debtor is a related party to the corporate

debtor in terms of Section 5(24)(b) of the I&B Code, 2016. Even otherwise

both Mr Arun Anand and Spade Financial Services Private Limited on

account of being CEO/Strategic Advisor/Consultant, at the relevant point of

time, would fall within ambit of related party in terms of Section 5(24)(h) and

Section 5(24)(m)(i) of I&B Code, 2016.

It is also alleged by the respondents No.4 and 5 that Mr Arun Anand

is closely related to one of the Director of the Corporate Debtor Mr Sonal

Anand, being brother- in- law (Brother of Mr Arun Anand‟s wife), who was

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 14 of 23 the Director of Corporate Debtor from November 2007 to 2013. It is further

contended by the respondents that said Mr Sonal Anand and Mr Anil Anand

have common Directors on the Board of the same Group of Companies, i.e.

GI Power Company Limited, AKME Projects Limited, Akme Rhine River

Projects Private Limited, Joint Investment Private Limited, GI Insurance

Services Limited, Akme Maintenance 86 Utilities Limited and cathedral

acme Projects Private Limited.

14. The appellant also contends that Mr Arun Anand has admitted in

affidavit dated 4th August 2018 before the Adjudicating Authority that, Mr

Sonal Anand was a Non-Executive Director of the Corporate Debtor, which

categorically shows that Mr Arun Anand and Mr Sonal Anand fall in the

category of a related party in terms of Section 5(24) of the I&B Code, 2016.

15. It is further pointed out by the IRP that Spade Financial Services

Private Limited was claiming monies transferred by it to the account of AAA

Landmark Private Limited, as Inter Corporate Deposit to the Corporate

Debtor AKME Projects Limited, but no interest is claimed on such debt.

16. Respondent further contends that there was nexus between the

Corporate Debtor AAA Landmark Private Limited and Spade Financial

Services Private Limited.

17. The Learned Adjudicating Authority held that Mr Arun Anand and his

Group Companies namely Spade Financial Services Private Limited and AAA

Landmark Private Limited were related parties to the Corporate Debtor. But

after 2013, i.e. soon after signing the Agreement to Sale, Dt. 25th

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 15 of 23 October 2012, Mr Arun Anand resigned from all the Companies of the

Mr Anil Nanda Group, and they are no longer related to the Corporate

Debtor at the time of filing of an application for initiating Corporate

Insolvency Resolution Process (CIRP). But the Adjudicating Authority

further observed that the affairs of the Corporate Debtors, as well as the

Group of Arun Nanda Companies, are deeply entangled and it is difficult for

the Tribunal in a summary jurisdiction to unravel the same. "Considering

that the Corporate Debtor and Spade and AAA Landmark Private Limited

were in close business relationship in the past and also the fact that the

accounts of the Corporate Debtor have not been finalised and audited and

filed with the Registrar of Companies since 2016, we have no hesitation in

allowing the instant applications filed by Yes Bank Limited and Phoenix ARC

Private Limited."

18. The Appellant No 2, AAA Landmark Pvt Ltd and corporate debtor entered

into a Development Agreement Dt 1.3.2012.Even after cancellation of this

development agreement, and in place thereof the Appellant No 2 had entered

into an Agreement to sale Dt 25.10.2012, yet the Appellant continued to be

partner of the Corporate debtor in view of the terms of the agreement. On

perusal of the letter 25.10.2012, issued by Appellant No 2 to the corporate

debtor, it is evident that Agreement Dt 25th Oct 2012 was merely a

camouflage, and the Appellant No2 and corporate debtor AKME were

partners in developing the project to be sold to third party for profit.

Therefore the Appellant No 2 is Related Party to the corporate debtor in

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 16 of 23 terms of Sec 5(24)(a) of the I& B Code 2016. Sec 5(24) of Insolvency and

Bankruptcy Code 2106 is given as under for ready reference;

―Related party‖, in relation to a corporate debtor, means--

(a) a director or partner of the corporate debtor or a relative of a director or partner of the corporate debtor;

Thus, Appellant, No 2 is a related party to the corporate debtor in

terms of Sec 5(24)(a) of the Insolvency and Bankruptcy Code 2016.

On perusal of the documents filed by the parties, it is also apparent

that AKME Projects Ltd, i.e. Corporate Debtor, promoted by Sri Arun Anand

and his son Mr Aditya Anand, being majority shareholder therein. The Arun

Anand and his family members, i.e. his wife, his son and daughter are the

majority shareholder in the Appellant SPADE Financial Services. The said

Mr Arun Anand, Ms Renu Anand and Ms Gayatree Anand are the directors

of the Appellant SPADE, while Appellant No 2, AAA Landmark is wholly

owned subsidiary of it.

It is an undisputed fact that Mr Arun Anand is the director of the

Appellant SPADE Financial Services since its inception. Even though Mr

Arun Anand claims that he resigned from the corporate debtor since 2007.

But even after that, the Appellant Spade Financial Services, was appointed

as Consultant on 1.6.2009 to carry out the assignment, assigned by the

corporate debtor. It is also on record that first Inter Corporate Deposit was

given by the Appellant SPADE FINANCIAL SERVICES on 1.6.2009 when

Appellant SPADE was appointed as a consultant. (Page 117-119 of

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 17 of 23 Respondent No‟s 4 replies).The said consultancy agreement of SPADE

continued till 21.2.2011, after that the said agreement was terminated by

the corporate debtor AKME Projects. After that instead of SPADE on

1.11.2011, Mr Arun Anand was appointed as Strategic Advisor. Mr Arun

Anand was also appointed as Group CEO of the Anil Nanda Group of

Companies including the corporate debtor, i.e. AKME Projects Ltd w.e.f.

26.11.2012.

Sec. 5(24)(h) of the Code provides that:

― any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act;‖

Admittedly in the present case, ICD worth Rs 26,55,00,000 was

provided by Appellant No 1 SPADE to the corporate Debtor AKME bearing

interest of 24%.No date is given when the ICD was given to the corporate

debtor. It is mentioned that First ICD was given to the Corporate Debtor in

mid of 2009, whereas MOU Dt 12.8.2001 shows that ICD were given by the

Appellants when Appellant No 1 was a consultant to the corporate debtor.

Thus it is clear that on the advice, directions or instructions of the

Appellants, a director, partner or manager of the corporate debtor is

accustomed to act. Therefore the Appellants are related party to the

corporate debtor in terms of Sec 5(24)(h) of the Code.

Further Sec 5(24) of the Code provides that;

(m) any person who is associated with the corporate debtor on account of--

(i) participation in policy-making processes of the corporate debtor; or

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 18 of 23 The Appellant No 1 being the consultant of the corporate debtor from

1.6.2009 to 21.2.2011 and its director and majority shareholder Mr Arun

Anand being a strategic Advisor of the corporate debtor w.e.f.1.3.2011, being

Group CEO of Anil Nanda Group of Companies, which clearly shows that

both the Appellants are related Party in terms of Sec 5(24)(m)(i) of the

Code.

Sec 5(24) of Insolvency and Bankruptcy Code 2106 provides that:

―related party‖, in relation to a corporate debtor, means--

(a) a director or partner of the corporate debtor or a relative of a director or partner of the corporate debtor;

Sec 5(24-A) "related party", in relation to an individual, means--

(a) a person who is a relative of the individual or a relative of the spouse of

the individual;

It is also pertinent to mention that Mr Arun Anand and Mr Sonu

Anand continued to be director of the corporate debtor till 2013 and

therefore Arun Anand being the relative also falls within the definition of a

Related party in terms of Sec 5(24)(a) read with Sec 5(24)(A) of the Code.

On perusal of the documents specifically, Memorandum of

Understanding signed on 2nd December 2010 signed between Spade

Financial Services Private Limited through Mr Arun Anand and AKME

Projects Limited Corporate Debtor, Memorandum of Understanding dated

8th February 2011 between Spade Financial Services Private Limited and

AKME Projects Limited, Agreement to Sale dated 18th May 2011 between

AKME Projects Limited and Spade Financial Services Private Limited

allegedly development project and Memorandum of Understanding dated

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 19 of 23 12th August 2011 between AKME Projects Limited and Spade Financial

Services Private Limited, Memorandum dated 1st March 2012 between

AKME Projects Limited and AAA Landmark Private Limited, Agreement to

Sale dated 25th October 2012 executed by AAA Landmark Private Limited

and AKME Projects Limited. Therefore we are of the considered opinion that

Mr Anil Nanda, Mr Arun Anand had created a Web of Companies in which

both along with the near and dear ones including Ms Renu Anand (Wife of

Mr Arun Anand) and Mr Sonal Anand (Bother-in-law of Mr Arun Anand)

acted in a concert with each other. The said person and entities falls in the

definition of related parties in terms of Section 5(24) of the I&B Code, 2016,

specifically during 2010 to 2013 and based on that the Corporate Debtor

Promoter/Director Mr Anil Nanda is trying to get back door entry to the

Committee of Creditors of Corporate Debtor.

19. Section 5(24)(f) of I&B Code, 2016 provides that anybody Corporate

whose Board of Directors, Managing Director or Manager, in the ordinary

course of business, acts on the advice, directions or instructions of a

Director, Partner or Manager of the Corporate Debtor.

Pertinently during the transaction period of 2010 to 2013, Spade

Financial Services Private Limited under Mr Arun Anand was making

substantial financial arrangements on behalf of AKME Projects Limited by

acting on the advice, directions or instructions of the Director and

Management of the AKME Projects Limited, being Mr Sonal Anand and Mr

Anil Anand, thereby clearly falling under the provisions of Section 5(24)(f) of

I&B Code, 2016.

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 20 of 23

20. Among others, the following two transactions have been noticed by us,

which shows directly influence of AKME Projects Limited over Spade

Financial Services Private Limited.

That on 2nd December 2010 Memorandum of Understanding between

Spade Financial Services Private Limited and AKME Projects Limited arrived,

acknowledging Spade Financial Services Private Limited has on behalf of

AKME Projects Limited paid Rs.22 crores as ICD to a 3rd party Subros and

given a donation of Rs.3 crores to one Subros Trust (At page 390 of reply of

Phoenix at page 394 para 1).

21. That on 16th January 2013 to 17th January 2013 Mr Anil Nanda

Group through its Director, Mr Sonal Anand sought to be settled 3rd party

debts of the Group (Mr Bawa for Rs.2 crore) vide funds parked with Mr Arun

Anand in Spade Financial Services Private Limited (At page 845 of reply of

Phoenix).

22. Even in 2017, Mr Anil Nanda through his company Joint Investment

Private Limited (JIPL) holds shares in Spade Financial Services Private

Limited and Joint Investment Private Limited, is still the holding company,

of the Corporate Debtor AKME Projects Limited.

23. The relationship between Spade Financial Services Private Limited

and AAA Landmark Private Limited is further proved by the fact that Spade

Financial Services Private Limited and AAA Landmark Private Limited

neither objected to not staked any claim against Yes Bank Limited, even

when it proceeded against AKME Projects Limited to sell the project land,

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 21 of 23 even though it is alleged that the appellants investments are purportedly

linked to the said project.

It is pertinent to mention that under the order of the Adjudicating

Authority dated 13th May 2018, the IRP convened Committee of Creditors

meeting on 1st June 2018 in which Mr Arun Anand and Ms Renu Anand

(representing AAA Landmark Private Limited and Spade Financial Services

Private Limited) were also present. It was during said CoC meeting, the

respondent Phoenix came to know about the alleged claims of AAA

Landmark Private Limited and Spade Financial Services Private Limited. On

perusal of the documents, it became apparent to Phoenix that Spade

Financial Services Private Limited and AAA Landmark Private Limited

(Acting through Mr Arun Anand) and at the behest of Mr Arun Nanda) are

related parties to the Corporate Debtor AKME Projects Limited. Accordingly,

Phoenix ARC and Yes Bank filed their application before the Adjudicating

Authority for the exclusion of Spade Financial Services Private Limited and

AAA Landmark Private Limited from the Committee of Creditors of AKME

Projects Limited. Based on the said application the Adjudicating Authority

passed the order dated 19th July 2019 whereby Spade Financial Services

Private Limited and AAA Landmark Private Limited were excluded from the

Committee of Creditors of AKME Projects Limited. Since the Spade Financial

Services Private Limited and AAA Landmark Private Limited.

On the above discussion, we are of the considered opinion that the

Adjudicating Authority has rightly excluded the Spade Financial Services

Private Limited and AAA Landmark Private Limited for participation in

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 22 of 23 Committee of Creditors. We find no reason to interfere in the order passed

by the Learned Adjudicating Authority. Thus, the appeal is rejected with no

order has to cost.

[Justice A.I.S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical)

[V. P. Singh] Member (Technical) NEW DELHI January 27, 2019

pks/md

Company Appeal (AT) (Insolvency) No. 829 of 2019 Page 23 of 23