National Company Law Appellant Tribunal, New Delhi: The Bench of Ashok Bhushan, J., Chairperson, and Shreesha Merla, Technical Member, while dismissing a company appeal held that when a Corporate Debtor as a Guarantor has not invoked the Corporate Guarantee before the initiation of Corporate Insolvency Resolution Process (hereinafter as ‘CIRP') under the provisions of Insolvency and Bankruptcy Code, 2016 (Hereinafter as ‘IBC') then the ‘right to payment' cannot be accrued by the Corporate Debtor.

Background of the Case

The Appellant, IDBI, was appointed as a Debenture Trustee for the benefit of the Holders of certain Debentures issued by M/s. Saha Infratech Pvt. Limited (Principal Borrower) as per the Debenture Trustee Agreement dated 18-05-2016. The first Respondent, Mr. Abhinav Mukherjee, is the Homebuyer of Palm Developers Pvt. Ltd., ‘Corporate Debtor' having a claim of Rs.2,94,43,634/-; the second Respondent Mr. Krit Narayan Mishra is the Resolution Professional of the ‘Corporate Debtor', appointed vide letter dated 13-07-2021 in I.A. 1742/2021 replacing the erstwhile IRP, Mr. Manoj Kumar Singh. The Appellant, ECL Finance Limited is the original Debenture Holder which executed the Assignment Agreement dated 27-03-2020 whereby all rights regarding the Financial Assistance were assigned in favour of Assets Care and Reconstruction Enterprise Limited (‘ACRE').

The appeals were filed under Section 61 (1) of the IBC challenging the impugned order dated 14-03-2022 passed by the National Company Law Tribunal, New Delhi, wherein the application filed by a homebuyer was allowed and held that ‘IDBI Trusteeship Services Limited' and ‘ECL Finance Ltd.', the Appellants are not ‘Financial Creditors' and also observed that the Appellants are ‘Related Parties' to the ‘Corporate Debtor'.

Analysis and Decisions

  • Whether the NCLT, Delhi was right in applying the ratio of ‘Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited v Axis Bank and holding that the Appellants are not ‘Financial Creditors' since there was no ‘direct disbursal' of the amount to the ‘Corporate Debtor'/Guarantor.

The Bench observed that a ‘Guarantee is included' as one of the illustrations which specify the definition of ‘Financial Debt' under Section 5(8)(i) of the IBC. Further, the Bench referred to the judgment given in Ascot Realty Private Limited v. Ajay Kumar .', (2020) SCC OnLine NCLAT 732, where it was held that for initiation of Insolvency Proceedings against the Corporate Guarantor, the element of disbursal for ‘Time Value of Money' is not required. Hence, the Bench opined that there was no direct disbursal of the amount to the Corporate Guarantor, any amounts released to the Principal Borrower and not to the Corporate Guarantor do constitute ‘Financial Debt' as defined under Section 5(8) of the IBC and it cannot be said that such amounts do not have consideration for ‘Time Value of Money'.

Therefore, the Bench held that the ratio of Anuj Jain Interim Resolution Professional for Jaypee Infratech Ltd v. Axis Bank, 2019 SCC OnLine SC 1775 is not applicable.

  • Whether the locus of the ‘Individual Homebuyer' or Financial Creditor to challenge the Constitution of the Committee of Creditors (‘CoC')?

The Bench in this regard referred to the judgment of the Supreme Court in Phoenix Arc Pvt.Ltd.' v. Spade Financial Services Ltd. (2021) 3 SCC 475, wherein it was held that ‘Financial Creditors' forming part of the CoC must be heard during proceedings which would establish the status of other ‘Financial Creditors'. Further, the Bench even referred to the judgment given in Aashray Social Welfare Society v. Saha Infratech Pvt. Ltd. & Ors., Comp. (AT) (Ins) No. 904 of 2021, wherein it was held, “It cannot be said that since the Authorised Representative has not come up before the Adjudicating Authority for filing the impleadment application, the Appellants who themselves are Homebuyers have no right to participate in the adjudication initiated by filing applications”.

Therefore, in the light of the above cases, the Bench held that the Homebuyer has every right to be heard and has the locus to challenge the Claim of the Appellants.

  • Whether the Appellants are ‘Related Parties' of the ‘Corporate Debtor' and were in a ‘position' to ‘control' the affairs of the ‘Corporate Debtor', to fall within the ambit of the definition of ‘Related Party' as defined under Section 5(24) of the IBC.

The Bench observed that the purpose of excluding a related party of a ‘Corporate Debtor' from the CoC is to obviate conflicts of interest that are likely to arise if a related party is allowed to become a part of the CoC. The Supreme Court in many judgments has held that the exclusion under the first proviso to Section 21(2) of the IBC was related not to the debt itself, but to the relationship existing between the related party ‘Financial Creditor' & ‘Corporate Debtor'.

Hence, the Bench relied on the judgment given in the case of Arcelormittal India Pvt. Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1, and held that the Appellants do have ‘Positive Powers'and are in a position to directly and indirectly control the management and the policy decisions of the ‘Corporate Debtor'.

  • Whether the Appellant can make a ‘Claim' based on the ‘Guarantee Deed' which was never invoked pre-commencement of the CIRP, and remained uninvoked even as on the date of filing of the ‘Claim', thereby meaning that ‘Right to Payment' has not yet accrued?

The Bench relied on the observation of the Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17, where it was observed that “Whereas a “claim” gives rise to a “debt” only when it becomes “due”, a “default” occurs only when a “debt” becomes “due and payable” and is not paid by the debtor. It is for the reason that a financial creditor has to prove “default” as opposed to an operational creditor who merely “claims” a right to payment of a liability or obligation in respect of a debt which may be due.” Therefore, the Bench opined that he Appellants cannot Claim the amounts in the CIRP of the ‘Corporate Debtor' who is a ‘Corporate Guarantor ‘based on the Deed of Guarantee which was never invoked as on the date of filing of the Claims.

Further, the Bench placed reliance on the judgment of the Supreme Court in Ghanshyam Mishra and Sons Pvt Ltd v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657 and held that when the ‘Corporate Debtor' is a ‘Guarantor' and the ‘Corporate Guarantee' was not invoked before the commencement of the CIRP, as on the date of filing of the Claims, the ‘Right to Payment' cannot be accrued.

Hence, the Bench dismissed the company appeals.

[IDBI Trusteeship Services Ltd. v. Abhinav Mukherjee, 2022 SCC OnLine NCLAT 267, decided on 12-07-2022]

Appearances before the tribunal


Dr. Abhishek Manu Singhvi, Sr. Advocate with Gaurav Mitra, Dev Roy, Himanshi Rajput, Atul Sharma, and Aditya Vashisth, Advocates, for the Appellants;

Abhijeet Sinha, and Raghavendra M. Bajaj, Advocates, for the Respondent No.1;

Milan Singh Negi, Advocate, for the New IRP.


Ramji Srinivasan, Sr. Advocate with Gaurav Mitra, Dev Roy, Atul Sharma, Renuka Iyer, Aditya Vashisth and Ms. Himanshi Rajput, Advocates, for the Appellants;

Abhijeet Sinha and Raghavendra M. Bajaj, Advocate for R-1;

Milan Singh Negi, Advocate, for the New IRP.

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