Ecl Finance Ltd. vs Abhinav Mukherjee
- Court
- Supreme Court
2026 INSC 1159
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No.6268 of 2022
ECL Finance Ltd. and Anr.
...Appellant(s)
Versus
Abhinav Mukherjee and Ors.
...Respondent(s)
With
Civil Appeal No.6273 of 2022
Contempt Petition (C) No.730 of 2023
in Civil Appeal No.6268 of 2022
Contempt Petition (C) No.731 of 2023
in Civil Appeal No.6273 of 2022
J U D G M E N T
K.VINOD CHANDRAN, J.
There are two appeals before us; one by the
Debenture Trustee and the other by the Debenture
Holder/Lender, who are aggrieved with the order of the
Signature Not Verified
National Company Law Appellate Tribunal (NCLAT), which
Digitally signed by
CHANDRESH
Date: 2026.10.27
17:03:21 IST
Reason:
affirmed the order of the Adjudicating Authority; National
Company Law Tribunal (NCLT) finding the appellants to be
Civil Appeal No.6268 of 2022 etc. Page 1 of 25
‘related party’ to the Corporate Debtor (CD) under Section
5(24) of the Insolvency and Bankruptcy Code, 2016 (IBC), and
thus, not liable to included or participated as a financial
creditor in the Committee of Creditors (CoC) constituted
under Section 21 of the IBC.
2. Heard Sri Gaurav Mitra, learned Senior Counsel for
the appellants and Sri Jayant Mehta & Sri Arijit Prasad,
learned Senior Counsel for the respondents.
3. The Debenture Trustee is the IDBI Trusteeship
Services Limited (ITSL) and the Debenture Holder/Lender is
the ECL Finance Limited (ECL), who were treated as an
undifferentiated monolith by the NCLAT. However, there is a
subtle distinction between both, by virtue of the ECL having
two distinct status, in its relationship with the CD. Hence for
convenience, we refer to the facts from the order of the NCLT.
4. The claims arose from a Debenture Trust Deed dated
13.05.2016 and a Facility Agreement dated 22.09.2017. The
CD is Palm Developers Private Limited, who acted as
Guarantor to one Saha Infratech Private Limited (SIPL), who
issued the debentures and availed the Term Loan Facility. In
June 2016, SIPL, augmenting their resources to generate
Civil Appeal No.6268 of 2022 etc. Page 2 of 25
funds for developing their various projects, proposed
issuance of non-convertible debentures having face value of
Rs.1 Crore each, for an aggregate amount of Rs.160 Crores in
two tranches. The first tranche was proposed as 110
debentures and the second tranche comprising 50
debentures. SIPL appointed ITSL as the trustee for the holders
of the debentures vide Debenture Trustee Agreement dated
18.05.2016. As per the Debenture Trust Deed, a part of the
debenture subscription amount was to be used for funding
the construction ‘Project Encore’ situated at Greater Noida,
Uttar Pradesh. Only the first tranche of Rs.110 Crores was
subscribed and the entire debentures are now held by ECL.
By the Debenture Trust Deed, the SIPL and the CD
guaranteed the performance of all the terms and conditions
of the Debenture Trust Deed, which was secured inter alia by
an unconditional and irrevocable corporate guarantee by the
CD. In addition, first charge and mortgage over the lands and
buildings of ‘Project Encore’ along with hypothecation of the
‘Project Encore’ receivables and creation of an escrow
account for the revenue generated from ‘Project Encore’,
were stipulated in the Debenture Trust Deed.
Civil Appeal No.6268 of 2022 etc. Page 3 of 25
5. Meanwhile SIPL approached ECL for availing
revolving credit facility to an extent of Rs.90 Crores vide
letter dated 13.06.2017, and on the sanction of the said
facility, the SIPL as Principal Borrower entered into a Facility
Agreement dated 22.09.2017 with ECL along with the CD as
Obligor No.5; i.e., Guarantor. The Facility Agreement also
required the Principal Borrower along with the Obligors to
create securities in favour of ECL on various properties
including first charge and mortgage over the various
projects existing and intended, as also furnishing of personal
as well as corporate guarantees including an irrevocable and
unconditional corporate guarantee from the CD and a pledge
of its shares held by the shareholders in favour of ECL to
secure the due performance of all conditions of the Facility
Agreement by a separate guarantee agreement dated
22.09.2017.
6. Hence, we observed at the outset, that ECL in its
relationship with SIPL, has two status. One, the Lender to SIPL
and two, the Debenture Holder of SIPL, both intended at
development of the projects of SIPL; the due satisfaction of
both having been guaranteed by the CD. The CD, thus, had
Civil Appeal No.6268 of 2022 etc. Page 4 of 25
a dual obligation to secure the interest of ECL; as a Debenture
Holder and as Lender.
7. The Corporate Insolvency Resolution Process (CIRP)
of the CD was commenced when the petition under Section 7
was admitted on 27.01.2020. On 10.02.2020, ITSL claimed
Rs.131,17,23,044/- as on 29.02.2020 in its capacity as
Debenture Trustee, from the CD. Likewise, ECL claimed an
amount of Rs.139,02,83,168.68/- as amounts due as per the
Term Loan Facility Agreement. Both the entities were treated
as financial creditors and included in the CoC, which was
objected to by one of the financial creditors, a Homebuyer,
individually, as distinguished from agitating it through the
Authorized Representative (AR) of the class of creditors;
herein the Homebuyers. The NCLT found the claims of the
appellants to be not a financial credit, since there was no
financial debt incurred by the CD, no direct disbursal of
amounts to the CD having been occasioned and it also found
that both the appellants were related party, as defined under
Section 5(24)(m)(i) of the IBC. The locus of the single
Homebuyer was accepted.
Civil Appeal No.6268 of 2022 etc. Page 5 of 25
8. The NCLAT found that the ratio of Anuj Jain, Interim
Resolution Professional for Jaypee Infratech Ltd. v. Axis
1
Bank Limited and Others is not applicable. We are also of
1
the opinion that the NCLT misread Anuj Jain to find that since
the CD was not the principal borrower and was a guarantor
that would not be a financial debt under Section 5 (8)
especially when the extracted portion from the cited decision
itself spoke of “… it may also include any liability in respect of
a guarantee or indemnity for any of the items referred to in sub-
clauses (a) to (h) …’ (sic para 46).
9. However, we find the NCLAT to have erred in finding
that the appellants’ claim cannot be entertained for reason of
the corporate guarantee not being invoked prior to the
commencement of CIRP. We are fortified in taking that view
by the decision in China Development Bank v. Doha Bank
2
Q.P.S.C. and Others . The appellant therein had sought
inclusion as a financial creditor in the CoC, which was
challenged by one another financial creditor. The appellants
relied on the Deeds of Hypothecation (DoH) executed jointly
by the group companies, collectively referred to as ‘Rcom
1
(2020) 8 SCC 401
2
(2025) 7 SCC 729
Civil Appeal No.6268 of 2022 etc. Page 6 of 25
entities’; one of whom was the CD. The Rcom entities had also
entered into a Master Security Trustee Agreement with Axis
Trustees Services Limited, who had executed the DoH on
behalf of the appellants and the other Lenders, wherein the
Rcom entities including the CD agreed to provide their
common pooled assets as security for the loans availed by
them. The specific contention taken up was that no default
under the DoH had occasioned, which was rejected, with
reference to the definition of ‘financial debt’ under Section
5(8) of the IBC. It was held that there was no requirement
under Section 5(8), that a facility qualifies as financial debt
only when a default occurs. Section 5(7) of the IBC was also
noticed to find that any person to whom financial debt is
owed, becomes a financial creditor, even if there is no default
in payment of debt. The definition of ‘default’ under Section
3(12), it was held, assumes relevance only when Section 7(1)
of IBC is invoked and a CIRP is sought to be initiated by the
financial creditor. It was noticed from the DoH that it is a
contingent contract, wherein the contingent event is the
shortfall between realization and expenses. The contract
itself becomes impossible of enforcement, owing to the
Civil Appeal No.6268 of 2022 etc. Page 7 of 25
moratorium imposed; prohibiting the sale of hypothecated
properties, and thus, the shortfall cannot be shown to arise.
Hence, on establishing that there is a financial debt under
Section 5(8); which does not speak of a contingent default,
the claim arises for the creditor to approach the IRP/RP,
which has to be submitted on the public announcement of the
CIRP.
10. The NCLAT, however, held in favour of the individual
financial creditor as distinguished from a financial creditor in
class, who had approached the NCLT, and upheld his locus
relying on Phoenix ARC Private Limited v. Spade Financial
3
Services Limited and Others , which also answers
effectively the question as to whether the corporate
guarantee could be termed to be a financial debt, despite the
guarantee not having been invoked prior to commencement
of CIRP, affirmatively. On the locus , the Tribunal referred to
its own decision in Aashray Social Welfare Society & Ors. v.
4
Saha Infratech Pvt. Ltd. & Ors. as to the role of the
‘Authorized Representative’ (AR) of the creditors in a class. It
was held therein that the AR under the statutory scheme
3
(2021) 3 SCC 475
4
Company Appeal (AT) (Insolvency) No. 904 of 2021
Civil Appeal No.6268 of 2022 etc. Page 8 of 25
represents the financial creditors i.e., the Homebuyers in a
class, for a limited purpose i.e., for attending meetings of the
CoC and voting on behalf of the financial creditors in a class.
It cannot be said that since the AR has not himself approached
the Adjudicating Authority with the application, the
appellants who themselves are Homebuyers, had no right to
participate in the adjudication.
3
11. Phoenix ARC Private Limited also considered a
similar objection, wherein the NCLT allowed two entities,
who claimed their status as financial creditors, to re-submit
their claims with a direction to the IRP to consider such
claims. This was projected as res judicata when two other
financial creditors objected to their inclusion. This Court
found that when the NCLT allowed resubmission of claims as
financial creditors, none of the creditors of the CoC were
represented in the proceedings. When the order was passed
without hearing the financial creditors, who had challenged
their inclusion subsequently, it does not bring in res judicata.
The financial creditors were held to be legitimately within
their rights in seeking a direction for exclusion of the two
entities from the CoC as related parties; which dictum
Civil Appeal No.6268 of 2022 etc. Page 9 of 25
squarely applies to the present case where an individual
financial creditor had, before the NCLT, objected to the
inclusion of the appellants in the CoC, being related parties.
12. What remains is only the question as to whether the
appellants were related parties of the CD within the meaning
of Section 5(24) of the IBC and were resultantly liable to be
excluded from the CoC under the first proviso to Section
21(2) of the IBC. We extract hereunder Section 5(24)(m)(i),
sub-sections (1) & (2); its first proviso and (6A) of Section 21:
‘ Section 5(24) “related party” in relation to a
corporate debtor, means---
xxx xxx xxx
(m) - any person who is associated with the
corporate debtor on account of —
(i) participation in policy making processes of the
corporate debtor; or’
‘ Section 21(1) The interim resolution professional
shall after collation of all claims received against
the corporate debtor and determination of the
financial position of the corporate debtor,
constitute a committee of creditors.
(2) The committee of creditors shall comprise all
financial creditors of the corporate debtor:
Provided that a financial creditor or the authorised
representative of the financial creditor referred to
in sub-section (6) or subsection (6A) or subsection
(5) of section 24, if it is a related party of the
corporate debtor shall not have any right of
representation, participation or voting in a
meeting of the committee of creditors.’
Civil Appeal No.6268 of 2022 etc. Page 10 of 25
‘ (6A)- Where a financial debt-
(a) is in the form of securities or deposits and the
terms of the financial debt provide for
appointment of a trustee or agent to act as
authorised representative for all the financial
creditors, such trustee or agent shall act on behalf
of such financial creditors;
(b) is owed to a class of creditors exceeding the
number as may be specified, other than the
creditors covered under clause (a) or sub-section
(6), the interim resolution professional shall make
an application to the Adjudicating Authority along
with the list of all financial creditors, containing the
name of an insolvency professional, other than the
interim resolution professional, to act as their
authorised representative who shall be appointed
by the Adjudicating Authority prior to the first
meeting of the committee of creditors;
(c) is represented by a guardian, executor or
administrator, such person shall act as authorised
representative on behalf of such financial
creditors,
and such authorised representative under clause
(a) or clause (b) or clause (c) shall attend the
meetings of the committee of creditors, and vote
on behalf of each financial creditor to the extent of
his voting share.’
13. The Tribunal looked at the various documents,
including the Debenture Trust Deed as also the Facility
Agreement to find the appellants to be related party,
especially relying on the judgment of this Court in Arcelor
Mittal India Private Limited v. Satish Kumar Gupta and
Civil Appeal No.6268 of 2022 etc. Page 11 of 25
5
Others . Therein the issue considered was the
disqualification of a Resolution Applicant under Section 29A
(c). The disqualifications under clause (c) of Section 29A
leading to ineligibility to submit a Resolution Plan, being any
one of the three things detailed therein; which are
disjunctive, must be established. The disqualifications are
that ‘the Corporate Debtor may be under the management of
the person referred to in Section 29A, the Corporate Debtor
may be a person under the control of such person, or the
Corporate Debtor may be a person, of whom such person is
a promoter’.
14. Referring to the expression ‘control’ as defined in the
Companies Act, 2013; Section 2(27), it was held so in
paragraph 50 as under:
‘50. The expression “control” is therefore defined
in two parts. The first part refers to de jure control,
which includes the right to appoint a majority of
the Directors of a company. The second part refers
to de facto control. So long as a person or persons
acting in concert, directly or indirectly, can
positively influence, in any manner, management
or policy decisions, they could be said to be “in
control”. A management decision is a decision to
be taken as to how the corporate body is to be run
in its day-to-day affairs. A policy decision would
be a decision that would be beyond running day-
to-day affairs i.e. long-term decisions. So long as
5
(2019) 2 SCC 1
Civil Appeal No.6268 of 2022 etc. Page 12 of 25
management or policy decisions can be, or are in
fact, taken by virtue of shareholding, management
rights, shareholders agreements, voting
agreements or otherwise, control can be said to
exist.’
15. It was held that the ‘control’ in Section 29A(c) denotes
positive control, which means that a mere power to block
special resolutions of the company, cannot amount to control.
Finding ‘control’ to be the power to drive actual management
or policy decisions, reference was approvingly made to a
judgment of the Securities Appellate Tribunal in Subhkam
Ventures (I) Private Limited v. Securities and Exchange
6
Board of India and the following paragraph was extracted:
‘Control — The direct or indirect power to direct
the management and policies of a person or entity,
whether through ownership of voting securities, by
contract, or otherwise; the power or authority to
manage, direct, or oversee.”
[Black’s Law Dictionary –Eighth Edition]
Control, according to the definition, is a proactive
and not a reactive power. It is a power by which an
acquirer can command the target company to do
what he wants it to do. Control really means
creating or controlling a situation by taking the
initiative. Power by which an acquirer can only
prevent a company from doing what the latter wants
to do is by itself not control. In that event, the
acquirer is only reacting rather than taking the
initiative. It is a positive power and not a negative
power. In a board managed company, it is the
board of directors that is in control. If an acquirer
6
2010 SCC OnLine SAT 35
Civil Appeal No.6268 of 2022 etc. Page 13 of 25
were to have power to appoint majority of directors,
it is obvious that he would be in control of the
company but that is not the only way to be in control.
If an acquirer were to control the management or
policy decisions of a company, he would be in
control. This could happen by virtue of his
shareholding or management rights or by reason of
shareholders agreements or voting agreements or
in any other manner. The test really is whether the
acquirer is in the driving seat. To extend the
metaphor further, the question would be whether
he controls the steering, accelerator, the gears and
the brakes. If the answer to these questions is in the
affirmative, then alone would he be in control of the
company. In other words, the question to be asked
in each case would be whether the acquirer is the
driving force behind the company and whether he
is the one providing motion to the organization. If
yes, he is in control but not otherwise. In short
control means effective control.’
16. Thus, there was a distinction drawn of a positive or a
proactive control, as opposed to a mere negative or a
reactive control. Reference was also made to Clause (g),
which too refers to ‘the management or control of a
Corporate Debtor’, the words ‘management’ and ‘control’
taking colour from each other on the principle of noscitur a
sociis. It was categorically declared in paragraph 53 that
‘what is referred to Clauses (c) and (g) is de jure or de facto
proactive and positive control and not mere negative control,
as distinguished from an expansive reading of the definition
Civil Appeal No.6268 of 2022 etc. Page 14 of 25
of the word ‘control’ contained in Section 2(27) of the
Companies Act, 2013, which is exclusive and not exhaustive
in nature’ (sic).
17. We must immediately notice that a reading of Section
5(24) with the first proviso of sub-section (2) and sub-section
(6A) of Section 21, does not indicate a requirement of a
proactive control as would the rigour of the word ‘control’ in
Section 29A (c) & (g) would bring forth. Sub-section (24) of
Section 5, by sub-clause (m)(i), only requires an association
with the CD by way of participation in policy making process
of the CD. First proviso to Section 21, as extracted
hereinabove, restricts a financial creditor or an AR of a
financial creditor, inter alia referred to in sub-section (6A), if
it is a related party of the CD, from the right of representation,
participation or voting in a meeting of the CoC. Admittedly,
the status of ECL as a Debenture Holder, which interest ITSL
as a Debenture Trustee seeks to protect, falls under sub-
section (6A) (a) of Section 21. We are, hence, only looking at
whether the association with the CD by the ECL, in its status
as a Debenture Holder; which alone we would as of now
consider, brings in a participation in policy making of the
Civil Appeal No.6268 of 2022 etc. Page 15 of 25
Corporate Debtor. The rigour to find a financial creditor to
be a related party under Section 21 read with the second
proviso and sub-section (6A)(a), is a tad lesser than that
required to find ‘control’ under Section 29A (c) and (g). The
requirement would not be to the extent of being in the
driving seat, but a role of navigation would suffice, in
determining policy and channelising business interests.
18. With this in mind, we look at the order of the NCLAT.
The financial creditor, the Homebuyer, raised the following
issues to prohibit the participation of the appellants in the
CoC. We extract hereunder, for brevity, the specific points
as extracted in paragraph 37 of the impugned order:
‘Control over the decisions of the Board of
Directors.
• Final say in any decision at a Board Meeting or
at a shareholders meeting or on any other matter
in the event of a deadlock.
• Control over the appointment and removal of
key managerial personnel of the 'Corporate
Debtor'.
• Control over the approval and modifications of
the business plans of the 'Corporate Debtor'.
• Control over the modalities of sale of units in the
projects.
• Control over the sale of units to prospective
customers and registration of units before the
Registrar.
• Control over all revenue and other accounts of
the 'Corporate Debtor'.
• Selling partner of the 'Corporate Debtor'.’
Civil Appeal No.6268 of 2022 etc. Page 16 of 25
19. The Tribunal looked at the Sanction Letter, the Articles
of Association (AoA), the Facility Agreement and the Builder-
Buyer Agreement. We will deal separately with the aspects
concerning the Debenture Trust Deed and the Facility
Agreement; which are two separate aspects of the matter,
both giving rise to separate claims, of amounts due on the
debentures held and the term loan outstanding. Insofar as the
Debenture Holder is concerned, Clause 7.1 of the AoA was
extracted, which we deem it proper to extract:
" 7.1 . Without prejudice to the other rights of the
Debenture Holders and the lenders under these
Articles and the loan documentation and
debenture trust deed and under applicable Laws,
the Debenture Holders and/ or the lenders shall
upon occurrence of an event of default have the
right to appoint a nominee director on the Board
of the Company. The Promoters of the Company
shall take all necessary steps, including passing
necessary resolutions at the Board and
Shareholder meetings and filing necessary forms
with the RoC, to enable the Debenture Holders
and/ or the lenders to exercise the aforesaid
right. Notwithstanding anything contained in
these Articles and, or, in the Transaction
Documents, the Promoters and the Company
shall in the event there is a deadlock on any
matter/decision at a board meeting and, or, at a
shareholders meeting amongst the directors or
the Promoters, such matter/ decision shall be
referred to the nominee director of the
Debenture Holder and/ or the lenders and, or, to
the Debenture Holders or the lenders for final
Civil Appeal No.6268 of 2022 etc. Page 17 of 25
decision. Any decision by such director of the
Debenture Holders and/ or lenders and, or, the
Debenture Holders and/or the lenders shall be
final and binding on the Promoters of the
Company."
20. The amendments to the Debenture Trust Deed on
16.01.2017 incorporated the following clause:
‘ 10 . Business Plan, Project Cost and
Quarterly Budget Approval Mechanism
5) The Debenture Trustee/ Monitoring Agent
may approve the Quarterly Construction
Budget or may advise the Issuer and/ or
Security Providers to make modification as
mutually decided. The Issuer and/ or
Security Providers will revise/ modify the
respective Quarterly Construction Budget if
so advised by the Debenture Trustee/
Monitoring Agent. The Quarterly
Construction Budget once approved by the
Debenture Trustee/ Monitoring Agent
("Approved Quarterly Construction
Budget”) shall be applicable to for the
quarter for which the same is approved and
the amount from the Escrow Account to meet
the construction cost shall during such
quarter will be released as per the Approved
Quarterly Construction Budget subject to
availability of the amount in the Escrow
Accounts. The Debenture Trustee/
Monitoring Agent may in suitable
circumstances and at the request of the
Issuer and/ or Security Providers approve
such modification/ revisions in the
respective Approved Quarterly Construction
Budget as may be deemed necessary by the
Debenture Trustee/ Monitoring Agent.’
Civil Appeal No.6268 of 2022 etc. Page 18 of 25
This clearly confers a proactive role on the debenture holder
and the Trustee in steering the Company, SIPL, through
difficult times; but also, the CD, who is the security provider.
21. Insofar as the Facility Agreement, the special
conditions in the Sanction Letter indicate absolute right to
appoint a Director on the Board of the Borrower and such
nominee Director, being insulated from any liability, as
indemnified by the Borrower. The nominee Director also
would be a member of all the Committees appointed by the
Board of Directors of the Borrower/Security Providers, and
the Lender has the right to appoint an Observer on the Board
of the Borrower and/or Management of the Security
Providers, who shall forward a copy of all the
Notices/Resolutions/Agenda of the respective Board
meeting to such Observer. Clause 6.8 of the Facility
Agreement, with the nominal heading ‘Management’ was
also extracted by the Tribunal, which prohibits removal of
any managerial personnel, of either the Borrower or Obliger,
having substantial managerial powers and who are available
at the time of the execution of the Facility Agreement, without
the consent of the Lender. The Borrower and the Obligor
Civil Appeal No.6268 of 2022 etc. Page 19 of 25
were also required to appoint and change, to the satisfaction
of the Lender, suitable, technical, financial and executive
staff in key posts, if the Borrower or the Obligor fail to adhere
to the business plan and meet the requirement of project
milestones as provided in the Facility Agreement. The
Lender also retains with itself the right to appoint, whenever
necessary, any person, firm, company or association of
persons engaged in technical, management or consultancy
business to inspect and examine the working of the Borrower
and/or Obligor, as also conduct examination of the financial
or Cost Accounting Systems, through Cost
Accountants/Chartered Accounts, the fees of which will have
to be borne by the Borrower and/or Obligor.
22. Clause 21 of the Sanction Letter indicates controlling
power on ECL to appoint Real Estate Agents/Distributing
Agents on behalf of the CD for sale of specific residential
unit/inventory of the total saleable area in the various
projects of the promoters. There was also a Power of Attorney
executed by the Borrower and/or Obligor, which conferred
sweeping powers on the ECL in the construction of the
projects, enabling sanctions and approvals from statutory
Civil Appeal No.6268 of 2022 etc. Page 20 of 25
authorities, matters related to supply of raw materials,
appointing labour and construction of the project itself,
communication with the purchasers and entering into
transactions, to carry out the finalization of the sales made
and to ensure the proceeds of the sale to be retained in
escrow accounts. Clause 4.1 of the AoA was extracted in
paragraph 53 to find that the project revenues including the
payments made by the allotees of the CD, is in the direct
control of the appellant/ECL.
23. From the above, it is crystal clear that ECL has an all-
pervasive control, insofar as the projects of the principal
Borrower are concerned, for facilitating which the
debentures were issued and the Term Loan Facility
extended. The AoA of the CD, a Guarantor, also indicated
such control being exercised by the debenture
holder/lender on its management and it cannot be said to be
a mere restrictive or negative control exercised. That the
said control was never put in place, cannot at all be
countenanced, since the policy implementation and the
business carried out, were under the overall supervision of
ECL, both as a Debenture Holder, the powers being
Civil Appeal No.6268 of 2022 etc. Page 21 of 25
exercised by the Debenture Trustee, the ITSL, and as a Term
Loan Lender. If the ECL is found to be a related party, as
coming forth from Section 24(5)(m)(i), then it cannot
participate in the proceedings of the CoC, nor can it be
included. If the ECL cannot be included as a Debenture
Holder, since admittedly the entire debentures are held by
the ECL, the Debenture Trustee who seeks to secure the
interest of the Debenture Holder also cannot participate in
the CoC, nor can it be included.
24. We have also found that the Facility Agreement, as
also the AoA, enables overall supervision of the activities of
both the Borrower and the Guarantor by the financial
creditor. ECL, the Lender who has the status of the Debenture
Holder, in accordance with the Debenture Trust Deed;
enabled overall supervision in the policy implementation
and the business carried out of development of projects, who
cannot be participated in the CoC, even as a Lender. If the
status was only of a financial creditor, not coming within the
ambit of sub-section (6) or (6A) of Section 21 or authorising
any insolvency professional under sub-section (5) of Section
24 who is not a related party, ECL would not have been
Civil Appeal No.6268 of 2022 etc. Page 22 of 25
disqualified under the first proviso to Section 21(2). However,
ECL having the status of the Debenture Holder is disabled
from being represented, participating and voting in the CoC
as the Debenture Holder due to the explicit terms in the
Debenture Trust Deed and by reason of that, disabled even
in the status of a lender. The pervasive control conferred on
the sole Debenture Holder also disables the Debenture
Trustee, the ITSL, who is protecting the interest of the
Debenture Holder, from being included in the CoC.
25. Though not specifically argued, we also notice that the
ECL has assigned its rights as per the Facility Agreement to
nd 3
the 2 appellant in its appeal. Phoenix ARC Private Limited
specifically ruled on such assignees being excluded from the
definition of a related party, if they have legitimately taken
over the debt of related parties or where the related party
entity had stopped being a related party ‘long ago’ . Reliance
was also placed on the Insolvency Law Committee Report,
2020, which cautioned that in order to prevent any misuse
prior to including an assignee of a related party-financial
creditor, within the CoC, the Resolution Professional should
verify that the assignee is not a related party of the CD and in
Civil Appeal No.6268 of 2022 etc. Page 23 of 25
cases where it may be proved that a related party had
assigned or transferred its debt to a third party in bad faith
or with a fraudulent intent to vitiate the proceedings under
the Code, the assignee should be treated akin to a related
party-financial creditor, under the first proviso to Section
21(2).
26. In the present case, we already noticed that it was the
ECL who raised the claim before the RP and later the
assignment was made long after the CIRP process was
commenced. The assignment is not ‘long ago’ and is very
recent. It can only be considered as one intended to defeat
the rigour of the proviso to Section 21(2) to participate in the
CoC, reckoning also the report of the Forensic Audit
conducted, specifically noticed by the Tribunal. The Tribunal
referred to the Forensic Audit report, wherein it has been
stated that the CD, who was the Corporate Guarantor, was
fraudulently used as a vehicle to transfer funds from SIPL to
two other entities, which are companies controlled by the
promoters of the CD, and over which ECL has complete
charge of their assets. The extract from the report also speaks
of the very project of ‘ Meghdutam Encore’ having been
Civil Appeal No.6268 of 2022 etc. Page 24 of 25
initiated fraudulently, without any intention to complete it, to
defraud the Homebuyers and to mortgage it for availing loan
facilities from financial creditors, which funds would be
diverted to other connected entities. The assignment hence
nd
fails the test of a bona fide assignment, and the 2 appellant
too cannot be participated.
27. We find absolutely no question of law arising from the
order of the NCLAT and we find no perversity insofar as the
analysis of facts leading to the conclusion of the appellants
being related party under Section 5(24). No valid ground
vitiates the impugned order, and we find no reason to cause
interference.
28. The appeals stand dismissed.
29. The Contempt Petitions stand closed.
30. Pending application(s), if any, shall stand rejected.
.......…….……………………. J.
(J. B. PARDIWALA)
....……….……………………. J.
(K. VINOD CHANDRAN)
NEW DELHI;
OCTOBER 27, 2026.
Civil Appeal No.6268 of 2022 etc. Page 25 of 25