New Delhi: Holding in favour of the SBI-led consortium of lenders, the Supreme Court on Tuesday restored their status and directed their inclusion as financial creditors of debt-ridden Reliance Infratel for a claim of ₹3,628 crore in dues.
Setting aside the National Company Law Tribunal and its appellate tribunal's orders that had previously stripped the consortium of its status as financial creditors, the apex court directed the resolution professional of Reliance Infratel to reconstitute the committee of creditors (CoC) by including six lenders - State Bank of India, Bank of India, UCO Bank, Canara Bank, Punjab National Bank and Indian Overseas Bank - and proceed with the corporate insolvency resolution process of the company.
A bench of Justices PS Narasimha and Alok Aradhe said that the corporate guarantees executed by Reliance Infratel in favour of these banks constitute "financial debt" within the meaning of the Insolvency and Bankruptcy Code, 2016. The banks are entitled to be recognised as financial creditors and the rejection of their claims by the Mumbai bench of the NCLT and NCLAT is "legally unsustainable", it said, adding that their orders suffered from perversity and warrant interference by the apex court.
The lenders, through counsel Sanjay Kapur, had submitted that the banks are financial creditors of Reliance Infratel on the basis of corporate guarantees and a deed of hypothecation. They said that, as per the RBI circular of July 2015 relating to asset classification and provisioning pertaining to advances, in case of restructuring, the asset classification will be reckoned from the date it became an NPA on the first occasion.
In 2016, the accounts of Reliance Communications, Reliance Telecom and Reliance Infratel were classified as non-performing assets, indicating default in repayment obligations.
An SBI-led consortium, including Bank of India, UCO Bank, Syndicate Bank, Oriental Bank of Commerce and Indian Overseas Bank, had claimed over ₹3,628 crore based on corporate guarantees executed by Reliance Infratel to secure loans for its group entities, Reliance Communications and Reliance Telecom.
The claim was challenged by another financial creditor, Doha Bank Q.P.S.C, an external commercial borrowings (ECB) lender, which argued that the guarantees were suspicious, insufficiently stamped and not properly disclosed in financial statements.
Rejecting Doha Bank Q.P.S.C's contention that the corporate guarantees were not duly stamped as stamp duty under the Maharashtra Stamp Duty Act, 1958 had not been paid, the Supreme Court said that merely because the corporate guarantees were not filed along with Form C, a document for filing claims during the insolvency process, the claim of the banks could not have been negated.
Setting aside the National Company Law Tribunal and its appellate tribunal's orders that had previously stripped the consortium of its status as financial creditors, the apex court directed the resolution professional of Reliance Infratel to reconstitute the committee of creditors (CoC) by including six lenders - State Bank of India, Bank of India, UCO Bank, Canara Bank, Punjab National Bank and Indian Overseas Bank - and proceed with the corporate insolvency resolution process of the company.
A bench of Justices PS Narasimha and Alok Aradhe said that the corporate guarantees executed by Reliance Infratel in favour of these banks constitute "financial debt" within the meaning of the Insolvency and Bankruptcy Code, 2016. The banks are entitled to be recognised as financial creditors and the rejection of their claims by the Mumbai bench of the NCLT and NCLAT is "legally unsustainable", it said, adding that their orders suffered from perversity and warrant interference by the apex court.
The lenders, through counsel Sanjay Kapur, had submitted that the banks are financial creditors of Reliance Infratel on the basis of corporate guarantees and a deed of hypothecation. They said that, as per the RBI circular of July 2015 relating to asset classification and provisioning pertaining to advances, in case of restructuring, the asset classification will be reckoned from the date it became an NPA on the first occasion.
In 2016, the accounts of Reliance Communications, Reliance Telecom and Reliance Infratel were classified as non-performing assets, indicating default in repayment obligations.
An SBI-led consortium, including Bank of India, UCO Bank, Syndicate Bank, Oriental Bank of Commerce and Indian Overseas Bank, had claimed over ₹3,628 crore based on corporate guarantees executed by Reliance Infratel to secure loans for its group entities, Reliance Communications and Reliance Telecom.
The claim was challenged by another financial creditor, Doha Bank Q.P.S.C, an external commercial borrowings (ECB) lender, which argued that the guarantees were suspicious, insufficiently stamped and not properly disclosed in financial statements.
Rejecting Doha Bank Q.P.S.C's contention that the corporate guarantees were not duly stamped as stamp duty under the Maharashtra Stamp Duty Act, 1958 had not been paid, the Supreme Court said that merely because the corporate guarantees were not filed along with Form C, a document for filing claims during the insolvency process, the claim of the banks could not have been negated.
