Phoenix, in Civil Appeal No. 2842 of 2020, submits that though the NCLAT correctly dismissed the appeal filed by Spade and AAA, holding that they are related parties of the Corporate Debtor and are hence to be excluded from the CoC, there is an erroneous finding that they are financial creditors.
The appeal by Phoenix seeks to challenge the above finding on the ground that: (i) It is contrary to the record; and (ii) The specific stand of Phoenix is that both AAA and Spade are not even creditors of the corporate debtor, much less financial creditors.Spade and AAA have independently filed an appeal under Section 62, Civil Appeal No. 3063 of 2020, on the ground that they are related parties of the Corporate Debtor in terms of Section 5(24) and the first proviso to Section 21(2) of IBC.
Based on the above appeals, three issues have arisen for consideration before this Court:
(i) Whether Spade and AAA are financial creditors of the Corporate Debtor;
(ii) Whether Spade and AAA are related parties of the Corporate Debtor; and
(iii) Whether Spade and AAA have to be excluded from the CoC.“…the transactions between CD and both SPADE and AAA Landmark are collusive in nature and do not qualify as financial debt for the purpose of IBC.” said court.
The Adjudicating Authority held that “there is no doubt in our mind that Arun Anand and his company namely Spade and AAA Landmark were related parties to the CD”.
However, the NCLT noted that after 2013, soon after the execution to the Agreement to Sell of 25 October 2012, Arun Anand resigned from all the companies of the Anil Nanda Group and was no longer related to the Corporate Debtor at the time of the filing of the application for initiation of the CIRP. The ultimate decision of the NCLT was to allow the applications filed by YES Bank and Phoenix for the exclusion of AAA and Spade from the CoC based on its findings on the first issue.
The decision of the NCLAT, in as much as it excluded Spade and AAA from the CoC in accordance with the first proviso of Section 21(2), is affirmed.Appeals were according disposed of.Phoenix Arc Private Limited Gaurav Agrawal Vs Spade Financial Services Limited [ Civil Appeal No. 2842 of 2020].