CHINA DEVELOPMENT BANK versus DOHA BANK Q.P.S.C. & ORS.

CHINA DEVELOPMENT BANK versus DOHA BANK Q.P.S.C. & ORS.

Clause 5(iii) of the DoH, read with the MSTA, imposed on the corporate debtor an express obligation to pay any shortfall after realisation of hypothecated assets for facilities availed by third-party RCom entities; that obligation constitutes a guarantee under Section 126 of the Contract Act and therefore the amount of liability in respect of that guarantee is a 'financial debt' under Section 5(8)(i) of the IBC, making the appellants Financial Creditors under Section 5(7); no actual prior default or tendering of amounts to the corporate debtor is required for classification as Financial Creditor, and the moratorium does not extinguish such claims; accordingly the NCLAT order disqualifying...

Parties
Appellant: China Development Bank; Respondent: Doha Bank Q.P.S.C.; Corporate Debtor: Reliance Infratel Limited
Jurisdiction
India
Judgment Date
19 December 2024
Procedural Posture
Civil Appeal / Judgment on Appeal From NCLAT Order
Outcome
Appeals allowed
Legal Topics
Financial Creditor, Financial Debt, Guarantee, Deed of Hypothecation, Committee of Creditors, Moratorium, Security Trustee, Secured Creditor
Insolvency and Bankruptcy Law Contract Law Corporate Law Financial Creditor Financial Debt Guarantee Deed of Hypothecation Committee of Creditors +3 more

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Parties

China Development Bank

Appellant

Doha Bank Q.P.S.C.

Respondent

Reliance Infratel Limited

Corporate Debtor

Procedural Posture

Civil Appeal / Judgment on Appeal From NCLAT Order

Legal Issues

  1. 1 Whether appellants qualify as 'Financial Creditors' under Section 5(7) of the Insolvency and Bankruptcy Code, 2016
  2. 2 Whether the Deeds of Hypothecation (DoH), particularly clause 5(iii), create a guarantee/obligation by the corporate debtor to discharge third-party liabilities within the meaning of Section 5(8)(i)
  3. 3 Whether occurrence of default is a pre-condition for classification as Financial Creditor or for filing claims under Section 15

Ratio Decidendi

Clause 5(iii) of the DoH, read with the MSTA, imposed on the corporate debtor an express obligation to pay any shortfall after realisation of hypothecated assets for facilities availed by third-party RCom entities; that obligation constitutes a guarantee under Section 126 of the Contract Act and therefore the amount of liability in respect of that guarantee is a 'financial debt' under Section 5(8)(i) of the IBC, making the appellants Financial Creditors under Section 5(7); no actual prior default or tendering of amounts to the corporate debtor is required for classification as Financial Creditor, and the moratorium does not extinguish such claims; accordingly the NCLAT order disqualifying...

Court Disposition

Appeals allowed

Orders

  • Impugned judgment and order dated 09.09.2022 of the National Company Law Appellate Tribunal quashed and set aside
  • Order dated 02.03.2021 of the National Company Law Tribunal, Mumbai Bench, restored