NDLI: Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited Vs. Axis Bank Limited Etc. Etc.

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Insolvency and Bankruptcy
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Insolvency and Bankruptcy Code, 2016 (31 of 2016)
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4 Referred Case 5 Referred Case 6 Referred Case 7 Referred Case 8 Referred Case 9 Referred Case 10 Referred Case 11 Referred Case 12 Referred Case 13 Referred Case 14
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Allowed
Headnote	Insolvency and Bankruptcy Code, 2016:Sections 5(7), 5(8), 7, 43, 45 and 66 – Corporate insolvencyresolution process against corporate-debtor company – The claimof lenders of the holding Company of corporate-debtor for beingrecognized as financial creditors of the corporate-debtor on thestrength of transactions whereby the corporate-debtor hadmortgaged its properties as collateral securities for the loan to theholding company of the corporate-debtor – The claim rejected byInterim Resolution Professional (IRP) – Application by IRP seekingavoidance of the mortgage transactions as being preferential,undervalued and fraudulent u/ss. 43, 45 and 46 – National CompanyLaw Tribunal (NCLT) allowed the application of IRP – AppellateTribunal (NCLAT) set aside the order of NCLT – Appeal to SupremeCourt – Held: If a transaction entered into by a corporate-debtor isnot falling in either of the exceptions provided in sub-section (3) ofs. 43, and satisfies the threefold requirements of sub-sections (2)and (4) thereof, it would be deemed to be a preference during arelevant time, whether or not, it were so and whether or not it wereintended or anticipated to be so – The transactions in question wereof deemed preference to related party during the look-back periodof two years – The transactions also cannot be said to have beendone in the ordinary course of business and hence are not exceptedtransfers in terms of sub-section (3) – Thus, the transactions are hitby s. 43 – The questions as to whether the transactions wereundervalued or fraudulent in terms of ss. 45 and 66, are left open –For a debt to become ‘financial debt’, the basic elements are that itought to be a disbursal against the consideration for time value ofmoney – Therefore, for a person to be designated as ‘financialcreditor’ of the corporate-debtor, the corporate-debtor needs to owea financial debt to such person – Thus, a third party to whom thecorporate-debtor does not owe a ‘financial debt’ cannot become its‘financial creditor’ for the purpose of insolvency and liquidationprocess of corporate persons – In the present case, the mortgagetransactions in questions since were neither towards any loan,facility or advance to the corporate-debtor nor towards protectingany facility or security of the corporate-debtor, the lenders of theholding company of the corporate-debtor, may fall in the categoryof ‘secured creditors’, but not in the category of ‘financial creditors’within meaning of s. 5(8) – Therefore the claim of the lenders ofholding company rightly rejected by IRP.Interpretation of Statutes:Definition clause – Interpretation of – Where a word is definedto ‘mean’ something, the definition is prima facie restrictive – Wherethe word defined is declared to ‘include’ something more, thedefinition is prima facie extensive.Mortgage -Re-mortgage – Legality of – Held: There is no concept of re-mortgage – On release by mortgagee, a mortgage ceases to exist –The so-called re-mortgage can only be regarded as fresh mortgage.Judgment:Observations in a judgment are required to be read in thecontext in which they appear.Words and Phrases:Expressions ‘financial debt’ ‘financial creditors’, ‘operationalcreditor’, ‘secured creditor’ and ‘unsecured creditor’ – Meaning ofin the context of Insolvency and Bankruptcy Code, 2016.
Judge	Hon'ble Mr. Justice Dinesh Maheshwari
Neutral Citation	2020 INSC 227
Petitioner	Anuj Jain Interim Resolution Professional For Jaypee Infratech Limited
Respondent	Axis Bank Limited Etc. Etc.
SCR	[2020] 8 S.C.R. 291
Judgement Date	2020-02-26
Case Number	8512-8527

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