Vistra Itcl India Limited vs Bhrugesh Amin And Ors

[Arising out of order dated 17.03.2023 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-IV in IA. 580/2023 in CP. No.1123/MB-IV/2020]

IN THE MATTER OF:

Vistra ITCL (India) Limited A company having its registered office at the IL&FS Financial Centre, Plot No. C-22, G Block, 3rd floor Bandra Kurla Complex, Bandra (East), Mumbai -400 051. ...Appellant Vs.

1. Bhrugesh Amin Resolution Professional of Radius Infraholdings Private Limited with office at BDO Restructuring Advisory LLP, Raheja Titanium, Floor 6, Western Express Highway, Geetanjali Railway Colony, Ramnagar, Goregaon, Mumbai- 400 063

2. Suraksha Asset Reconstruction Limited ITI House, 36, Dr. R.K Shirodhkar Road, Parel - East, Mumbai -400 012.

3. YES Bank Limited YES Bank House, Off Western Express Highway, Vakola, Santacruz East, Mumbai, Maharashtra 400055. ...Respondents Present:

For Appellant: Mr. Abhijeet Sinha, Mr. Pranaya Goyal, Mr. Dharav Shah, Mr. Shubam Saini, Mr. Shubham Saini, Advocates. For Respondent: Mr. Krishnendu Datta, Sr. Advocate with Mr. Anuj Tiwari, Mr. Rahul Guupta and Ms. Aroshi Pal, Advocates for R-1. Mr. Sumant Batra, Mr. Sagar Bansal, Ms. Ruchi Aggarwal and Mr. Shivam Shorewala, Advocates for R-2. Mr. Amar Dave, Mr. Malak Bhatt and Mr. Siddharth Kumar, Advocates for R-3.

Cont'd.../ -2-

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed against order dated 17.03.2023 passed by

the Adjudicating Authority (National Company Law Tribunal), Mumbai

Bench-IV in IA. 580/2023 filed by the Appellant challenging the rejection of

its claim by the Resolution Professional. The Adjudicating Authority by the

impugned order has rejected IA. 580/2023, aggrieved by which order, this

Appeal has been filed. Brief facts of the case necessary to be noticed for

deciding this Appeal are:

(i) The Appellant, one Aaditri Constructions Private Ltd. (Company) and

Radius & Developers Builders LLP executed a Debenture Trust Deed

(DTD) in relation to 3,95,00,000 secured optionally convertible

debentures having face value of Rs.100/- each aggregating to Rs.395

Crores.

(ii) An Agreement dated 29.03.2019 was executed between the Appellant

- Debenture Trustee and Radius Infra Holdings Private Ltd. (Corporate

Debtor) and the Promoters - Mr. Sanjay Chhabria and Mrs. Ritu

Chhabria to provide additional securities to secure the debentures and

to pay the entire secured consideration under the Debenture Trust

Deed.

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(iii) A notice dated 28.07.2021 was issued by the Debenture Trustee to the

Company calling upon the company to pay the entire amount and

forthwith redeem the debentures on account of occurrence of various

events of defaults. Company having failed to redeem debentures,

Appellant issued notice dated 21.01.2022 to the Corporate Debtor

calling upon the Corporate Debtor to forthwith pay the entire amount

due and payable under the Agreement.

(iv) An application under Section 7 was filed by the Yes Bank (Respondent

No.3 herein) claiming to be the Financial Creditor of the Corporate

Debtor, on which application an order dated 09.05.2022 was passed

by the Adjudicating Authority initiating insolvency resolution process

against the Corporate Debtor and Respondent No.1 - Mr. Bhrugesh

Amin was appointed as Interim Resolution Professional (IRP).

(v) In the CIRP of the Corporate Debtor, the Appellant filed its claim in

Form 'C' (for submission of claim by Financial Creditors) dated

26.05.2022 claiming Rs.1061,34,67,062/- outstanding as on

09.05.2022.

(vi) Respondent No.1 issued an email dated 01.06.2022 requesting the

Appellant to provide a copy of deed of guarantee to substantiate its

claim. In response to which email, Appellant on 10.06.2022 wrote to

Respondent No.1 stating the guarantee was provided by the Corporate

Debtor vide the Agreement dated 29.03.2019. On 22.06.2022, the

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Resolution Professional send an email to the Appellant informing the

rejection of claim of the Appellant.

(vii) Appellant filed I.A. No. 2495 of 2022 seeking declaration of the

Appellant as a 'Secured Financial Creditor' of the Corporate Debtor

and admission of the Appellant's claim.

(viii) The Adjudicating Authority passed an order dated 16.11.2022

directing the Resolution Professional to put the claim filed by the

Appellant before the CoC and observed that the CoC may take

appropriate decision as per law. The Application was allowed and

disposed of to the above extent by order of the Adjudicating Authority

dated 16.11.2022.

(ix) In its 7th meeting dated 27.12.2022, the CoC considered the claim of

the Appellant as Secured Creditor and view of Yes Bank and Suraksha

Asset Reconstruction Ltd. was noted that prima facie they assented

with the view of the Resolution Professional for rejecting the claim of

the Appellant.

(x) The Resolution Professional vide email dated 20.01.2023

communicated to the Appellant that the CoC have dissented on the

resolution to treat the claim of Appellant as Secured Creditors and

have rejected them from being a part of the CoC.

(xi) After communication dated 20.01.2023, the Appellant filed IA.

580/2023. In the application following prayers were made:

Company Appeal (AT) Insolvency No. 627 of 2023 -5-

"PRAYERS:

It is therefore prayed that this Hon'ble Tribunal be pleased to:

a. quash and set aside the decision of Respondent Nos. 2 and 3 as contained in Respondent No. 1's email dated 20th January 2023 (at Exhibit "O" hereto);

b. declare and admit the Applicant as a "financial creditor" of the Corporate Debtor and issue necessary directions for the re- constitution of the Committee of Creditors with the Applicant as a member thereof;

c. declare and admit the Applicant as a "secured financial creditor" of the Corporate Debtor and issue necessary directions for the re-constitution of the Committee of Creditors with the Applicant as a member thereof;

d. That pending the hearing and final disposal of the present Application, the corporate insolvency resolution process (CIRP) of the Corporate Debtor be stayed;

e. For ad-interim n relief in terms of prayer-clause (c) above;

f. For costs of the Application against the Respondents: and

g. For such further and other reliefs as this Hon'ble Tribunal may deem fit."

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(xii) The Respondent No.1 filed a reply to the IA. 580/2023 submitting the

Appellant's claim has rightly been rejected and application deserve to

be rejected.

(xiii) The Adjudicating Authority after hearing both the parties by the

impugned order dated 17.03.2023 rejected IA. 580/2023. The

Adjudicating Authority after noticing the recitals in the Agreement

took view that obligation of the Corporate Debtor was limited to the

extent of RIHPL security, mortgage on RIHPL project. No mortgage

was created on the RIHPL project. Aggrieved by the order rejecting the

IA filed by the Appellant, this Appeal has been filed.

2. We have heard Shri Abhijeet Sinha, learned counsel appearing for

the Appellant, Shri Krishnendu Datta, learned senior counsel appearing for

the Resolution Professional, Shri Sumant Batra, learned counsel for

Respondent No.2 and Shri Amar Dave, learned counsel for Respondent No.3.

3. Learned counsel for the Appellant challenging the impugned order

submits NCLT failed to appreciate that the Agreement is a contract of

guarantee under Section 126 of the Indian Contract Act, 1872. Learned

counsel for the Appellant placed reliance on Clause 4 of the Agreement, as

per which the Corporate Debtor has provided an expressed, unqualified and

unconditional undertaking to pay the secured obligations. Such undertaking

was in addition to the other security interests created under the Debenture

Trust Deed / Transaction Documents. The Corporate Debtor as per Clause 4

expressly and unconditionally undertook to repay the secured obligations

Company Appeal (AT) Insolvency No. 627 of 2023 -7-

thereby undertaking to discharge the liability of a third party i.e. the

Obligators. Clause 4 of the Agreement therefore satisfied all the requisites of

contract of guarantee under Section 126 of the Indian Contract Act. It is

submitted that nomenclature of deed or documents are not relevant and the

contents of such deeds and documents are of utmost relevance for

understanding the nature such documents. It is submitted that the

Adjudicating Authority committed error in holding that the Corporate Debtor's

obligation under the Agreement is merely restricted to RIHPL security. The

Corporate Debtor having undertaken to discharge the obligation of Obligors it

has executed a guarantee in favour of the Appellant. Agreement was as per

Debenture Trust Deed document dated 03.08.2018. By letter dated

21.01.2022, the Appellant has made demand to the Corporate Debtor to pay

the secured obligations. Learned counsel for the Appellant to buttress his

submission has referred to various clauses of the agreement and DTS which

we shall refer to while considering the submissions in detail. Learned counsel

for the Appellant submits that the Corporate Debtor being Guarantor within

the meaning of Section 126 of the Contract Act, the Appellant is the Financial

Creditor within meaning of Section 5 Sub-section (8)(i) of the I&B Code. It is

further submitted that under the I&B Code there is no jurisdiction vested with

the CoC to adjudicate the claim of a Financial Creditor. The order passed by

the Adjudicating Authority directing the Resolution Professional to place claim

of the Appellant before the CoC for consideration was ex-facie erroneous and

patently illegal. The Financial Creditors i.e. Respondent No. 2 and 3 have

conflicting interest with the Appellant. They could not be entrusted with any

Company Appeal (AT) Insolvency No. 627 of 2023 -8-

decision regarding the admission the claim of the Appellant. The CoC has no

adjudicatory power to sit over the claims of the Creditors.

4. The submission of the learned counsel for the Appellant were

refuted by Shri Krishnendu Datta, learned senior counsel appearing for the

Resolution Professional. Learned counsel for the Resolution Professional

submits that the Agreement dated 29.03.2019 was executed for sole purpose

to provide addition/further security to the Appellant, as per Clause 7.5 of the

Debenture Trust Deed. An agreement to provide Additional Security cannot

be read as a Deed of Guarantee. The Principal Debtor is not party to the

Agreement dated 29.03.2019 and for execution of Deed of Guarantee all the

three parties i.e. Principal Debtor, Guarantor and Creditor have to be party.

When the Agreement dated 29.03.2019 is read it is clear that it was only for

the purpose of providing additional security by the Corporate Debtor. Clause

4 of the Agreement, on which much reliance has been placed by the Appellant,

cannot be read in isolation. All clauses have to be read together to find out

real nature of the transaction. Corporate Debtor is not an Obligor under the

Debenture Trust Deed. It is submitted that at this stage, the Appellant cannot

be allowed to contend that the placing claim of Appellant before CoC for

consideration was without jurisdiction as the order passed by the

Adjudicating Authority directing the claim of the Appellant to be placed before

CoC was never challenged by the Appellant. No mortgage was created under

Agreement dated 29.03.2019 in favour of the Appellant.

Company Appeal (AT) Insolvency No. 627 of 2023 -9-

5. Shri Sumant Batra, learned counsel appearing for Respondent No.2

refuting the submission of learned counsel for the Appellant submits that no

contract of guarantee has been executed by the Corporate Debtor to repay the

debt of the Principal Debtor. The Corporate Guarantor is defined in

Debenture Trust Deed. The Agreement dated 29.03.2019 was only an

Agreement to provide Additional Security which by no means can be read as

a Deed of Guarantee. In the Agreement dated 29.03.2019, the Principal

Borrower was not party. The debt of L&T was not cleared. The Agreement

dated 29.03.2019 does not use the expression 'guarantee'. In the Deed of

Guarantee all the three parties have to be party. The Agreement dated

29.03.2019 is not executed between all the three parties i.e. Principal Debtor,

Creditor and Guarantor. The remedy under the Agreement dated 29.03.2019

is of enforcement of security which cannot be termed as Deed of Guarantee.

6. Shri Amar Dave, learned counsel appearing for the Respondent

No.3 also supported the impugned order and submitted that the Adjudicating

Authority has rightly rejected the claim filed by the Appellant. The Resolution

Professional has rightly rejected the claim of the Appellant as Financial

Creditor. The additional security under the Agreement was subject to settling

the existing dues with the existing creditor i.e. L&T Finance Ltd. It is admitted

fact that the Corporate Debtor did not settle with L&T Finance Ltd, hence,

charge over the Versova Land was never released by L&T Finance Limited and

no charge was created in favour of the Appellant. The Clauses of any

agreement ought to be read holistically and cannot be read in isolation. It is

submitted that the intention of the parties is to be gathered from the language

Company Appeal (AT) Insolvency No. 627 of 2023 -10-

of the instrument. Even if for argument sake it is accepted that Appellant is

a security holder, a security holder does not have any right to be admitted as

a Secured Financial Creditor in the CoC. No financial debt is owed by the

Corporate Debtor of the Appellant. Appellant has no charge over the Versova

Land. Appellant is not a secured creditor and the Appeal deserve to be

dismissed.

7. We have considered the submissions of learned counsel for the

parties and perused the record.

8. The Agreement dated 29.03.2019 executed between the Appellant

and the Corporate Debtor is the basis of claim which was filed by the

Appellant in Form 'C' before the Resolution Professional. The Agreement

dated 29.03.2019 is being claimed as guarantee executed by the Corporate

Debtor in favour of the Appellant to fulfil the obligations of the borrower. The

submission of the Appellant is that the Agreement dated 29.03.2023 being a

Deed of Guarantee, there shall be financial debt within the meaning of Section

5(8)(i) of the I&B Code. There can be no dispute to the preposition canvased

by the Appellant. In event Agreement dated 29.03.2019 is accepted as Deed

of Guarantee, there shall be financial debt by virtue of guarantee given by the

Corporate Debtor and the claim of the Appellant as Financial Creditor could

be admitted. The real issue to be determined in the present appeal is the

nature of the Agreement dated 29.03.2019 and as to whether the said

agreement can be read to be Deed of Guarantee, as contended by learned

counsel for the Appellant.

Company Appeal (AT) Insolvency No. 627 of 2023 -11-

9. For answering the above issue, we need to look into the Debenture

Trust Deed dated 03.08.2018 as well as Agreement dated 29.03.2019. The

Debenture Trust Deed was executed between the Appellant, Aaditri

Constructions Private Ltd. (Company), Radius & Developers Builders LLP, Mr.

Sanjay Chhabria and Mrs. Ritu Chhabria. In the Debenture Trust Deed, the

Company, the Developers and the Promoters are collectively referred to as the

'Obligors'. Clause 1 contains 'Definitions and Construction' wherein

expression 'Corporate Guarantee' has been defined in the following words:

""Corporate Guarantee" shall mean the Deed of Guarantee to be executed by the Developer in favour of the Debenture Trustee in a form and manner acceptable to the Debenture Trustee."

10. 'Security Interest', 'Security Providers', 'Secured Obligations' and

'Security Documents' have been defined in following words:

""Security Interest" shall refer to any security interest created / to be created for the purposes of securing the obligations of the Company in relation to the Debentures and shall include the Mortgage, Pledge, Corporate Guarantee, Personal Guarantee or any other agreement or arrangement having the effect of conferring Security in favour of the Debenture Trustee.

"Security Providers" shall mean the Obligors and shall also include any other person which has created or agreed to create any Security Interest for or in relation to the Debentures and "Security Provider" means each and any one of the Security Providers.

Company Appeal (AT) Insolvency No. 627 of 2023 -12-

"Secured Obligations" shall mean all present and future obligations and liabilities (whether financial, performance or otherwise, whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Obligors to the Debenture Holders including in connection with the issue and subscription of the Debentures, the Debenture Payments and the creation and maintenance of Security and all costs and expenses incurred in relation thereto under the Transaction Documents.

"Security Documents" shall mean:

(a) this Deed;

(b) Debenture Trustee Agreement;

(c) Deed(s) of Mortgage,

(d) Personal Guarantee;

(e) Corporate Guarantee;

(f) Escrow Agreements;

(g) Deed of Pledge; and

(h) such other document for creating such other Security as may be required by the Debenture Holders/Debenture Trustee from the Obligors

including any modifications/ amendments/ supplemental agreements thereto and any other agreements, deeds or documents designated as such by the Debenture Trustee."

Company Appeal (AT) Insolvency No. 627 of 2023 -13-

11. 'Transaction Documents' have been defined in following words:

""Transaction Documents" shall mean:

(a) the Security Documents;

(b) the Private Placement Offer Letter;

(c) other agreements and documents contemplated in connection with the issue of Debentures, or the transactions contemplated hereby; and

(d) any other document identified by the Debenture Trustee as a Transaction Document."

12. Learned counsel for the parties have referred to Clause 7.5 of the

Debenture Trustee Document which is as follows:

"7.5 Alternate/Further Security

(a) In case of any Material Adverse Effect in relation to any of the Security or the title of any Security Provider to any Security is affected for any reason whatsoever or is otherwise in the opinion of the Debenture Trustee, is impaired in any manner, then, (without prejudice to the rights of the Debenture Holders to treat the same as an Event of Default), such Security shall be substituted by the Security Providers, with other security(ies) acceptable to the Debenture Trustee ("Alternate Security"), which together with the Security, shall comprise the Security in favour of the Debenture Trustee for the benefit of the Debenture Holders. Such

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Alternate Security will be identified by the Security Providers, within 7 (seven) Business Days of the occurrence of a Material Adverse Effect or the title to the Security being found defective or otherwise affected, without the requirement of any notice whatsoever, or the Debenture Trustee communicating to the Security Providers of the Security being impaired as aforesaid and the Alternate Security will be created and perfected within 15 (fifteen) Business Days thereof.

(b) If the Debenture Trustee (acting on the instructions of the Majority Debenture Holders), is of the opinion that any Security created under the Transaction Documents has become inadequate for meeting the Security Cover as defined in Clause 7.6 or is otherwise not sufficient to meet the outstanding Debenture Payments or Secured Obligations, then on such communication from the Debenture Trustee, such additional security to the satisfaction of the Debenture Trustee shall be created provided by the Security Providers within 15 (fifteen) Business Days of such communication, from the Debenture Trustee and the Security Providers shall ensure that the necessary documents to be executed in connection therewith are duly executed and registered as required by Applicable Law."

Company Appeal (AT) Insolvency No. 627 of 2023 -15-

Present is a case where in exercise of Clause 7.5 (b), Debenture

Trustee entered into Agreement dated 29.03.2019 for additional security.

13. Now we come to the Agreement dated 29.03.2019 to find out its real

nature and content. Clause (F), (G) and (I), which are relevant to the present

case are as follows:

"F. The Company being in need of capital for, inter-

alia, undertaking the Sanctioned project and the Second Sanctioned Project and for making the payment of the DMA Deposit, approached the Investor for making an investment in the Company and by and under Debenture Trust Deed dated 3rd August 2018 ("DTD") executed between the Debenture Trustee/ Trustee (on behalf of the Debenture Holders set out therein ("Debenture Holders"), the Company, the Developer and the Promoters read with letter agreement dated 3rd August 2018, it has been agreed that the Debenture Holders shall subscribe to and the Company shall issue and allot the Debentures (as defined in the DTD), to the Debenture Holders, in accordance with the terms of the DTD. Capitalised terms used but not defined herein shall have the meaning ascribed to these terms in the DTD.

G. One of the terms of the issuance of the Debentures is that the Debenture Payments (as defined therein) and discharge of the Secured Obligations (as defined therein) under the DTD and other Transaction Documents (which includes this

Company Appeal (AT) Insolvency No. 627 of 2023 -16-

Agreement) in respect of the Debentures shall be secured by additional security and covenants ("Additional Security"), until, inter-alia, the Debenture Trustee deems fit and proper.

I. The Parties are accordingly executing this Agreement as part of the Additional Security."

14. Clause (G), as extracted above, clearly referred to terms of issuance

of the debentures that Debenture Payments and discharge of the secured

obligations under the Debenture Trust Deed shall be secured by additional

security and covenants., until, inter-alia, the Debenture Trustee deems fit

and proper. The Agreement was executed by the Debenture Trustee requiring

additional security which can be very well done as per Clause 7.5(b) of the

Debenture Trust Deed. Clause (I), as extracted above, makes it abundantly

clear that parties have executed the Agreement as part of the Additional

Security.

15. Now we come to Clause 2 of the Agreement, which is as follows:

"2. In consideration of the Debenture Holders having agreed to subscribe to the Debentures, the Promoters and RIHPL do hereby agree and covenant, as under, with the Debenture Trustee (for the benefit of the Debenture Holders) and as part of the Additional Security, to secure the Debenture Payments and Secured Obligations and perform all the terms and conditions of the Transaction Documents to the satisfaction of the Debenture Trustee and the Debenture Holders:-

Company Appeal (AT) Insolvency No. 627 of 2023 -17-

(a) All amounts to be paid to the Promoters from time to time by RIHPL by whatever name called and of whatsoever nature, whether by way of distribution of profit or its share of profit, dividends paid or payable other than in cash with respect of the Shares, cash paid, payable or otherwise distributed in respect of buy-back of, or in exchange for the Shares, return of capital, Interest or return on capital, or otherwise howsoever (hereafter collectively referred to as "RIHPL Security") shall be deposited by RIHPL in Company Escrow Account being a designated escrow bank account being escrow account no.

57500000084708 in the name and style of "AADITRI CONSTRUCTIONS PVT LTD ESCROW ACCOUNT opened with HDFC Bank, Bandra East - Kalanagar Branch ("the Account"). which will be solely operated by the Trustee and which amount will be and remain as security for due repayment and discharge of the Debenture Payments and the Secured Obligations and due performance of all the terms and conditions of the Transaction Documents to the satisfaction of the Debenture Trustee and the Debenture Holders;

(b) RIHPL will deposit the RIHPL Security directly in the Account;

(c) No change or amendment will be made by the Promoters or RIHPL to the constitution documents of the RIHPL or the operation of

Company Appeal (AT) Insolvency No. 627 of 2023 -18-

the Account, without the prior written consent of the Debenture Trustee who shall act on the instructions of the Debenture Holders;

(d) No encumbrance or charge or third party rights shall be, directly or indirectly, created by the Promoters to the Shares or the RIHPL Security:

(e) Neither the Promoters nor RIHPL will deal with or transfer the RIHPL Security in any manner whatsoever; and

(f) RIHPL and the Promoters agree and confirm that whenever the loans taken by RIHPL from L&T Finance Limited ("Lender") under the agreements dated 27th June 2018 have been repaid and the security under the deeds of mortgage executed and registered under serial Nos. BDR-1/7951/2018 has been released, the Promoters and RIHPL will create a mortgage, pledge and charge over the RIHPL Security and the RIHPL Project in favour of the Debenture Trustee and will sign, execute and register the necessary deeds, documents and writings required for this purpose."

16. Clause 2 indicate that the Corporate Debtor had agreed, as par to

additional security to secure the debenture payments and secured

obligations, as per the sub-clause mentioned therein. What was the security

provided under the agreement was explained in Clause 2, as noted above. It

is further relevant to notice that under Clause (f), RIHPL and Promoters have

Company Appeal (AT) Insolvency No. 627 of 2023 -19-

agreed to create mortgage, pledge and charge over the RIHPL Security and the

RIHPL Project in favour of the Debenture Trustee, whenever the loans taken

by RIHPL from L&T Finance Ltd under the agreements dated 27.06.2018 have

been repaid and the security under the deeds of mortgage have been executed

and released. It is undisputed fact between the parties is that no mortgage

could be created in favour of the Debenture Trustee as per the Agreement

dated 29.03.2019.

17. Much emphasis has been laid by learned counsel for the Appellant

on Clause 4 of the Agreement, which reads as follows:

"4. In addition to and without prejudice to what is stated in the DTD and the Transaction Documents, it is agreed between the Parties that RIHPL shall be liable to repay the Secured Obligations under the said DTD and the Transaction Documents and failure to repay the same shall result in an Event of Default."

18. It is contended that Agreement notices the agreement between the

parties that RIHPL shall be liable to repay the secured obligations under the

said Debenture Trust Deed and the Transaction Documents and failure to

repay the same shall result in an event of default.

19. We may also notice Clause 5 and 6, which is to the following effect:

"5. It is agreed between the Parties that the Debenture Trustee will release the RIHPL Security only upon the Secured Obligations being fulfilled

Company Appeal (AT) Insolvency No. 627 of 2023 -20-

to the satisfaction of the Debenture Trustee provided that no Event of Default has occurred under any of the Transaction Documents.

6. It is agreed between the Parties that upon the occurrence of an Event of Default, and without prejudice to the other rights and remedies of the Debenture Trustee, the Debenture Trustee on the instruction of the Majority Debenture Holders shall be entitled to enforce the RIHPL Security in such manner as the Debenture Trustee deems fit and shall be entitled to do all acts, deeds, matters and things necessary for this purpose."

20. As noted above, principal issue between the parties is true nature

and content of Agreement dated 29.03.2019 and whether it can be read as

Deed of Guarantee or not. It can be read as deed of guarantee is the prime

submission advanced by learned counsel for the Appellant. We may now

notice certain judgments of Hon'ble Supreme Court which has been relied by

learned counsel for the Appellant in support of his submission. Hon'ble

Supreme Court in "Prakash Roadlines Pvt. Ltd. vs. Oriental Fire &

General Insurance Co. Ltd., (2000) 10 SCC 64" has laid down that a

documents has to interpreted not by its nomenclature but what is contained

in the said document. In Para 3 of judgment following has been laid down:

"3. It is a settled law that a document has to be interpreted not by its nomenclature but what is contained in the said document. A reading of the document shows that it was a deed of assignment in favour of the Insurance Company. We are, therefore, in

Company Appeal (AT) Insolvency No. 627 of 2023 -21-

agreement with the view taken by the High Court. Consequently, we do not find any merit in the appeal. It is accordingly dismissed. There shall be no order as to costs."

21. Submission of the Appellant is that mere fact that the document

dated 29.03.2019 is containing heading 'Agreement' is not decisive and its

nomenclature is not decisive. There can be no dispute to the preposition that

nomenclature is not decisive. To find out the nature of the document, we

need to notice the Agreement dated 29.03.2019 in light of Debenture Trust

Deed which is the genesis of Agreement dated 29.03.2019. As noted above,

the Debenture Trust Deed defines the Corporate Guarantee which was to

mean that the Deed of Guarantee was to be executed by the Developer in

favour of the Debenture Trustee in a form and manner acceptable to the

Debenture Trustee. The definition of Security Provider is also contained in

the Debenture Trust Deed which mean the Obligors and shall also include

any other person which has created or agreed to create any Security Interest

for or in relation to the Debentures and "Security Provider" means each and

any one of the Security Providers. Thus, Security Provider can also be any

other person apart from Obligors and Security Document include Corporate

Guarantee and such other documents for creating such other Security as may

be required by the Debenture Trustee from the Obligors. Security Documents,

thus, both includes Corporate Guarantee, which has already been defined

and other document for creating such other security as may be required.

Company Appeal (AT) Insolvency No. 627 of 2023 -22-

22. We have already noticed the relevant Clauses of Agreement dated

29.03.2019; Clause (F), (G) and (I). When the Clause in the Agreement clearly

mentions that the parties are accordingly executing this Agreement as

part of the Additional Security, the Agreement was a document for

additional security which is clear from the words/expression used in the

document itself. Clause 2 again uses expression as part of the Additional

Security.

23. We also notice the judgment of Hon'ble Supreme Court in "State

of Orissa vs. Titaghur Paper Mills Co. Ltd., 1985 (Supp) SCC 280", where

again the same preposition which was laid down in Orient Paper Mills case

has been reiterated in following words in Para 120 of the judgment:

"120. It is true that the nomenclature and description given to a contract is not determinative of the real nature of the document or of the transaction thereunder. These, however, have to be determined from all the terms and clauses of the document and all the rights and results flowing therefrom and not by picking and choosing certain clauses and the ultimate effect or result as the Court did in the Orient Paper Mills case."

24. Another preposition which is well settled is that documents has to

be read as whole, which principle has been reiterated by the Hon'ble Supreme

Court in "Super Ployfabriks Ltd. vs. Comm. Of Central Excise Punjab,

(2002) 11 SCC 398", where following has been laid down in Para 8:

Company Appeal (AT) Insolvency No. 627 of 2023 -23-

"8. There cannot be any doubt whatsoever that a document has to be read as a whole. The purport and object with which the parties thereto entered into a contract ought to be ascertained only from the terms and conditions thereof. Neither the nomenclature of the document nor any particular activity undertaken by the parties to the contract would be decisive."

25. We, thus, have to look into the Agreement dated 29.03.2019 as a

whole. Clause 4 of the Agreement which is sheet anchor of the argument of

the Appellant has to be read along with other relevant clauses. Learned

counsel for the Appellant has emphasised that as per Clause 4 in addition to

and without prejudice to what is stated in the DTD and the Transaction

Documents, RIHPL agreed to be liable to repay the Secured Obligations under

the said DTD and the Transaction Documents and failure to repay the same

shall result in an Event of Default. When additional security was being

created and RIHPL is agreeing to give additional security by virtue of

Agreement dated 29.03.2019, it has to be said that RIHPL shall be liable to

pay secured obligation under the DTD. Security interest as created to repay

secured obligations was to the extent of additional security created under the

Agreement. There is no averment in the entire agreement that RIHPL is

undertaking to guarantee to repayment of secured obligations by the

Company. It is to be noted that Corporate Guarantee was already executed

on 03.08.2018 on which date the Debenture Trust Deed was executed and in

event the RIHPL was taking on its folds the entire lability of Principal Borrower

as a Guarantor there ought to have been some indication in the Agreement.

Company Appeal (AT) Insolvency No. 627 of 2023 -24-

There is not even any averment in the Agreement that the default has been

committed by the Company and that it is necessary to give guarantee by the

RIHPL.

26. Further Clause 6 of the Agreement clearly provide that on

occurrence of any event of default, the Debenture Trustee on the instruction

of the Majority Debenture Holders shall be entitled to enforce the RIHPL

Security. Thus, in event of default security which was given by RIHPL can

be enforced by the Debenture Trustee.

27. Learned counsel for the Resolution Professional has relied on

judgment of this Tribunal in "Company Appeal (AT) (Ins.) No.463 of 2020,

IL & FS Financial Services Limited vs. Mahananda Suppliers Ltd."

decided on 22.07.2022 in which case Financial Creditor has extended loan to

the Borrower and a Facility Agreement was executed. The Facility Agreement

contained a security package and personal guarantee. The security being not

found sufficient, on the same date an Unattested Pledge Agreement was also

executed in which Mahananda Suppliers Ltd. and Sungrowth Share and

Stocks Ltd. came forward to support the Borrower and all of them pledged

their security which was mentioned in the Schedule appended with the

Agreement. On the basis of said Unattested Pledge Agreement, the Financial

Creditor filed a Section 7 application, which application came to be rejected.

An appeal was filed in this Tribunal contending that all the Pledger having

jointly and severally being liable to pay the dues, the amount can be recovered

from the Pledgers. It was contended that Pledge Agreement is basically a

Company Appeal (AT) Insolvency No. 627 of 2023 -25-

guarantee extended to the Financial Creditor on behalf of the Borrower. The

Arguments have been noticed in Para 11 of the judgment, which are as

follows:

"11. It is further submitted that in Clause 6.2 pertaining to the remedies it can enforce any or all of the security, in part or whole as mentioned in this Agreement and/or the Facility Agreement, to realize either in part or entire amount of the Borrower's Dues and/or invoke any guarantee provided under the Facility Agreement. It is sought to be argued that the Financial Creditor has exclusive right to recover the amount payable from the present Respondent by virtue of Clause 5.1(g) of the Pledge Agreement which is basically a guarantee extended to the Financial Creditor on behalf of the Borrower."

28. This Tribunal after considering the submissions of the parties,

dismissed the appeal. This Tribunal held that Pledgers by the Unattested

Pledge Agreement given an option to the Financial Creditor to initiate action

against the security of any of the pledgor but in no case the pledgor can be

termed as a Principal Debtor. In Para 14 and 15 of the judgment following

has been held:

"14. It is apparent from the facts of the case that when it was decided by the Financial Creditor to extend loan to the Borrower a Facility Agreement was executed in which security package was given as contained in the terms and conditions. The only personal guarantee in the Facility Agreement in that of Manoj Kumar Agarwal

Company Appeal (AT) Insolvency No. 627 of 2023 -26-

and none else but it appears that this security was not found sufficient by the Financial Creditor, therefore, on the same date an Unattested Pledge Agreement was also executed in which the present Respondent ie. Mahananda Suppliers Limited and Sungrowth Share and Stocks Limited came forward to support the Borrower ie. Adhunik Meghalaya Steels Private Limited and all of them pledged their security which has been mentioned in the Schedule appended with the Agreement and made themselves liable to pay the dues of the Financial Creditor jointly and severally, meaning thereby giving an option to the Financial Creditor to initiate action against the security of any of the pledgor but in no case the pledgor can be termed as a principal debtor for the purpose of recovery of the entire amount that too by resorting to the filing of the application under Section 7 of the Code.

15. We have minutely gone through both the agreements and other relevant material on record together with the findings recorded by the Adjudicating Authority in which we do not find any error for the purpose of interfering in it and therefore, we are of the considered opinion that the present appeal is totally without any merit and deserves to be dismissed

29. Against the above judgment dated 22.07.2022, Civil Appeal No.

7944 of 2022 was also filed by the Financial Creditor, which was not interfered

by the Hon'ble Supreme Court by its order dated 18.11.2022.

30. The submission of the Appellant that the Committee of Creditors

has no jurisdiction to adjudicate on the claim submitted by the Appellant

Company Appeal (AT) Insolvency No. 627 of 2023 -27-

needs no consideration in the facts of the present case since fact remains that

the Resolution Professional has already refused to admit the claim of the

Appellant which was communicated vide email dated 22.06.2022 and after

the Committee of Creditor's meeting dated 27.12.2022 again by email dated

20.01.2023. The Resolution Professional having not admitted the claim of the

Appellant and communicated its rejection, it is not necessary for us to enter

into the submission of the Appellant that Committee of Creditor's decision

prima facie not accepting the claim of the Appellant was without jurisdiction.

In any event, an application has already been filed by the Appellant before

Adjudicating Authority questioning the decision. It is decision of the

Adjudicating Authority which has approved the decision of the Resolution

Professional rejecting the claim of the Appellant, which require scrutiny.

There can be no doubt that it is the Adjudicating Authority who is entrusted

with jurisdiction to adjudicate all issues which arise out of the resolution

process of a Corporate Debtor. The Adjudicating Authority having already

given a decision which decision has been challenged in appeal, we confine

ourselves to the consideration of the issue whether the Adjudicating Authority

has committed any error in rejecting the IA filed by the Appellant being IA.

580/2023.

31. When we holistically read the Agreement dated 29.03.2019 and

look into the Clauses, it is clear that said Agreement was executed in reference

to Clause 7.5(b) of the Debenture Trust Deed and the Agreement was only of

for the purpose of creating additional security. The RIHPL being party to the

Agreement dated 29.03.2019, the additional security as given under the

Company Appeal (AT) Insolvency No. 627 of 2023 -28-

Agreement can be enforced as per Clause 6 of the Agreement. Giving of

additional security by Agreement dated 29.03.2019 cannot be read to mean

that the Corporate Debtor has given any guarantee in reference to the secured

obligations of the Obligors under the Debenture Trust Deed. The Agreement

dated 29.03.2019 cannot be read as guarantee within the meaning of Section

126 of the Contract Act. The claim filed by the Financial Creditor was not

limited to the extent of RIHPL security but entire amount under the Debenture

Trust Deed was sought to be claimed in the claim form submitted by the

Appellant. We, thus, are of the view that the Resolution Professional did not

commit any error in refusing to admit the claim of the Appellant. We do not

find any good ground to interfere with the order of the Adjudicating Authority

dismissing IA.580/2023. There is no merit in the Appeal. Appeal is

dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

NEW DELHI

13th December, 2023

Archana

Company Appeal (AT) Insolvency No. 627 of 2023