Jindal Steel & Power Ltd. v. Bharat NRE Coke Ltd.

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers 2019 TaxPub(CL) 0742 (NCLAT-Kol) : (2019) 153 SCL 0561 Jindal Steel & Power Ltd. v. Bharat NRE Coke Ltd. INSOLVENCY AND BANKRUPTCY CODE, 2016, --Financial debt --Guarantor failed to fulfill obligation Whether CIRP application admissible----Where a creditor made advance payment under coal purchase agreement to a third party and corporate debtor stood as guarantor and guaranteed to pay advance money on third party's failure to supply coal, but guarantor failed to do so, same would give rise to financial debt.--Applicant-creditor gave advance to GNCL under a coal purchase agreement. Respondent-corporate debtor stood as a guarantor for said amount by pledging two crore shares with creditor. GNCL failed to supply coal thus, order of liquidation was passed against it. The creditor filed arbitration proceedings under section 11 against the corporate debtor and GNCL, wherein, the sole arbitrator passed an award in favour of the creditor and directed GNCL and corporate debtor to pay creditor jointly the advance money together with interest. However, corporate debtor committed default in paying the amount and therefore, creditor initiated CIRP under section 7 against it. The corporate debtor contended that it pledged two crores shares with the creditor, thus, nothing was due by it. Further, the applicant made claim as operational creditor in liquidation of GNCL, thus, it could not claim to be financial creditor. *Held:* The amount claimed by the creditor on the basis of award was a 'financial debt'. It was immaterial to take into consideration as to what submission the applicant made in other proceeding about their status as the creditor. The corporate debtor had not crystallised the debt, therefore, defence taken by corporate debtor that it had pledged shares to applicant creditor was not maintainable and application under section 7 against corporate debtor/guarantor was admitted. Insolvency and Bankruptcy Code, 2016, Sections 5(8) & 7 *Relied:*B. Trading Company v. State of Uttar Pradesh (1993) Supplementary (3) SCC 361(1)), Neeraj Bhatia, Director of Summit Aviation (P) Ltd. v. Summit Aviation (P) Ltd. (2018) 1 IBJ(JP) 228 (NCLAT), Deem Role-Tech Ltd. v. R.L.Steel & Energy Ltd. (2017) SCC OnLine NCLT 465 and Annapurna Infrastructure (P) Ltd. v. SORIL Infra Resources Ltd. (2018) 91 taxmann.com 79 (NCL-AT): 2017 TaxPub(CL) 863 (NCLAT-Del) SUBSCRIBE FOR FULL CONTENT

The Tax Publishers 2019 TaxPub(CL) 0742 (NCLAT-Kol) : (2019) 153 SCL 0561

Jindal Steel & Power Ltd. v. Bharat NRE Coke Ltd.

INSOLVENCY AND BANKRUPTCY CODE, 2016,

--Financial debt --Guarantor failed to fulfill obligation Whether CIRP application admissible----Where a creditor made advance payment under coal purchase agreement to a third party and corporate debtor stood as guarantor and guaranteed to pay advance money on third party's failure to supply coal, but guarantor failed to do so, same would give rise to financial debt.--Applicant-creditor gave advance to GNCL under a coal purchase agreement. Respondent-corporate debtor stood as a guarantor for said amount by pledging two crore shares with creditor. GNCL failed to supply coal thus, order of liquidation was passed against it. The creditor filed arbitration proceedings under section 11 against the corporate debtor and GNCL, wherein, the sole arbitrator passed an award in favour of the creditor and directed GNCL and corporate debtor to pay creditor jointly the advance money together with interest. However, corporate debtor committed default in paying the amount and therefore, creditor initiated CIRP under section 7 against it. The corporate debtor contended that it pledged two crores shares with the creditor, thus, nothing was due by it. Further, the applicant made claim as operational creditor in liquidation of GNCL, thus, it could not claim to be financial creditor. Held: The amount claimed by the creditor on the basis of award was a 'financial debt'. It was immaterial to take into consideration as to what submission the applicant made in other proceeding about their status as the creditor. The corporate debtor had not crystallised the debt, therefore, defence taken by corporate debtor that it had pledged shares to applicant creditor was not maintainable and application under section 7 against corporate debtor/guarantor was admitted.

Insolvency and Bankruptcy Code, 2016, Sections 5(8) & 7

Relied:B. Trading Company v. State of Uttar Pradesh (1993) Supplementary (3) SCC 361(1)), Neeraj Bhatia, Director of Summit Aviation (P) Ltd. v. Summit Aviation (P) Ltd. (2018) 1 IBJ(JP) 228 (NCLAT), Deem Role-Tech Ltd. v. R.L.Steel & Energy Ltd. (2017) SCC OnLine NCLT 465 and Annapurna Infrastructure (P) Ltd. v. SORIL Infra Resources Ltd. (2018) 91 taxmann.com 79 (NCL-AT): 2017 TaxPub(CL) 863 (NCLAT-Del)