HDFC HDFC HDFC BANK CASE
HDFC Bak v AMit
Facts
HDFC Bank had extended credit facilities to R.J. Feeds Pvt. Ltd., which were secured by a corporate guarantee and mortgage created by the corporate debtor, Khadkeshwar Hatcheries Ltd. During the CIRP of the corporate debtor, the Resolution Professional invited claims, but HDFC Bank did not submit its claim within the prescribed period because the principal borrower had not defaulted and the guarantee had not been invoked. After becoming aware of the CIRP, HDFC Bank filed its claim, which the Resolution Professional rejected solely on the ground of delay. HDFC Bank challenged the rejection and sought condonation of delay along with consideration of its claim as a secured financial creditor.
Grounds on which the Tribunal directed the Resolution Professional to consider the claim in accordance with law
The Tribunal directed the Resolution Professional to consider HDFC Bank's claim in accordance with law because the Resolution Professional had failed to discharge the statutory duty under Regulation 6A by not informing HDFC Bank of the commencement of the CIRP despite being aware of its contingent claim from the corporate debtor's financial statements and registered charge records. The Tribunal further held that, in light of the principles laid down in the China Development Bank judgment and Regulation 14 of the CIRP Regulations, an uninvoked corporate guarantee gives rise to a contingent claim that is capable of admission in the CIRP. Since the claim had been rejected solely on the ground of delay and the resolution plan had not yet been approved under Section 31 of the Insolvency and Bankruptcy Code, the Tribunal condoned the delay and directed the Resolution Professional to verify and deal with the claim in accordance with law.
Asset Reconstruction
Facts
The applicant, Asset Reconstruction Company (India) Limited, had acquired loans advanced to Vijay Group Housing Private Limited, which were secured by a pledge of the Corporate Debtor's shares in the borrower company. After the Corporate Debtor entered CIRP, the applicant sought exclusion of the pledged shares from the resolution process, exemption from the moratorium to enforce the pledge, and directions to protect its security interest. The Resolution Professional opposed the application, contending that the pledge had not been invoked, the shares continued to belong to the Corporate Debtor, and the applicant should pursue its claim in the CIRP of the borrower company.
Grounds on which the Tribunal directed the Resolution Professional to consider the claim in accordance with law
The Tribunal held that the applicant, as a pledgee, was a secured creditor of the Corporate Debtor notwithstanding that it was neither a financial creditor nor an operational creditor. Relying on the Supreme Court's decision in China Development Bank, it held that invocation of the pledge was not a prerequisite for the submission of a claim and that the existence of a security interest entitled the applicant to have its claim examined. Accordingly, the Tribunal directed the applicant to file its claim before the Resolution Professional and directed the Resolution Professional to examine and verify the claim in accordance with law, without rejecting it on the ground that the pledge had not been invoked or that the claim had been filed belatedly. At the same time, it held that the pledged shares would continue to remain part of the Corporate Debtor's assets and could not be excluded from the CIRP or be enforced during the moratorium under Section 14 of the Code
Union Bank of India v Kiran Shah
L&T Finance Limited
Facts
The applicant filed a claim of Rs. 11.90 crore during the CIRP of the corporate debtor on the basis of a Memorandum of Understanding and a Supplemental Memorandum of Understanding. The claim comprised Rs. 4.90 crore towards reimbursement of TDS allegedly paid on behalf of the corporate debtor and Rs. 7 crore payable in relation to the Phase II project. The Resolution Professional rejected both components of the claim on the ground that the conditions giving rise to the liabilities had not been satisfied. The applicant challenged the rejection, contending that both amounts constituted financial debt and were payable without any further contingency.
Grounds on which the Tribunal upheld the Resolution Professional's application of law
The Tribunal held that the Resolution Professional had correctly rejected the claim because neither component satisfied the legal requirements for admission as a financial debt. It found that the claim for Rs. 4.90 crore was contingent upon the applicant first paying the TDS on behalf of the corporate debtor, and since no evidence of such payment was produced, no right to reimbursement had arisen. The Tribunal further held that the parties could not convert a liability into a financial debt merely by describing it as such in their agreement, as it must independently satisfy the definition under Section 5(8) of the Insolvency and Bankruptcy Code. As regards the claim of Rs. 7 crore, the Tribunal held that the liability would arise only upon the corporate debtor receiving its share under the Joint Development Agreement, an event that had not yet occurred. Accordingly, it concluded that the Resolution Professional had correctly applied the law in rejecting both claims
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