Vide Master Lease Agreement certain assets were given by Bhavna Asset Operators Pvt. Ltd. (BAOPL) to the Corporate Debtor on an operating lease basis and the CD was required to pay monthly lease rentals on each payment date. BAOPL, CD and the Debenture trustee also entered into a Tripartite Agreement. BAOPL defaulted in payment of its obligations under the debentures. The Debenture trustee, therefore, lodged its claim on as a Financial Creditor of the CD which had guaranteed to make the outstanding payments due and payable by BAOPL.
NCLT Mumbai Bench held that:
(i) The obligations of BAOPL in respect of NCDs are to be secured, inter alia, by the creation of first ranking exclusive mortagage over the cash flows and receivables arising out of the MLA and all cash flows and receivable arising out of the MLA are to be directly deposited by CD into an escrow account. Hence, in our view a liability or obligation to pay the lease rentals cannot be equated with a financial debt nor can it be said that the CD stood as guarantor for payment of the NCDs.
(ii) As per the Code, for a person to be designated as a financial creditor of the CD, it has to be shown that the CD owes a financial debt to such person. As already stated, the obligation of the CD is to make payments of lease rentals and other charges to BAOPL as per the terms of MLA.
(iii) Therefore, the essence of the Transaction Documents cannot be taken to be falling within the definition of a financial debt so far as CD is concern. Therefore, the relief sought in the IAs cannot be granted.
Lessor