Ashique Ponnamparambath & Anr. vs BMW India Financial Services Pvt. Ltd.

“47.2.

Therefore, we have no hesitation in saying that a person having only security interest over the assets of corporate debtor (like the instant third-party securities), even if falling within the description of ‘secured creditor’ by virtue of collateral security extended by the corporate debtor, would nevertheless stand outside the sect of ‘financial creditors’ as per the definitions contained in subsections (7) and (8) of Section 5 of the Code. Differently put, if a corporate debtor has given its property in mortgage to secure the debts of a third party, it may lead to a mortgage debt and, therefore, it may fall within the definition of ‘debt’ under Section 3(10) of the Code. However, it would remain a debt alone and cannot partake the character of a ‘financial debt’ within the meaning of Section 5(8) of the Code.”

RESOLVED FURTHER THAT pursuant to the provisions of Section 179 of the Companies Act, 2013 and the relevant Rules thereunder, the consent of the Board of Directors be and is hereby granted to Co-borrow alongwith Platino Classic Motors(India) Pvt Ltd) INR 130,000,000/- (Rupees One Hundred & Thirty Million only) from BMW India Financial Services Private Limited ("BMW Financial Services") for the purpose of Takeover of Cash Credit limit from The Federal Bank amounting to INR 85Mn & Additional working Capital Term Loan (WCTL) to the tune of 45Mn to support the working capital requirement under the working Capital Term Loan (WCTL) Facility.

RESOLVED FURTHER THAT consent of the Board be and is hereby accorded to the Company for creation of charge / hypothecation / security in the above arrangement in form and manner and with such ranking and at such time and on such terms as the Board may determine, on the following property/asset of the Company, both present and future and / or the whole or any part of the undertaking(s) of the Company, as the case may be in favour of BMW India Financial Services Private Limited for securing the borrowings availed / to be availed by the Company by way of loan(s):

Sl No.	Property/Asset	Address
	Property Located at 25.98 Ares of property in Re-Survey Nos.26/17&26/18 in block no13, Thandaper No.7365, Ernakulam Dist, Maradu Sub District, Kanayannur Thaluk, Maradu Village	NH By Pass Maradu Ernakulam

RESOLVED FURTHER THAT the securities to be created by the Company as aforesaid may rank prior / pari passu / subsequent with / to the mortgages and / or charges already created or to be created in future by the Company or in such other manner and ranking as may be thought expedient by the Board and as may be agreed to between the concerned parties.

RESOLVED FURTHER THAT all the terms and conditions as set out in the respective facility agreements for sanction of the facility and any amendments thereto, which shall govern and regulate the obligations of the Company as co-borrower, be and is hereby approved.

RESOLVED FURTHER THAT the Company do secure the due repayment of the Facility along with all interest, fees, costs, charges, expenses and all other monies payable in respect thereof, inter alia by such collateral as described in the schedule hereto. (if applicable)

RESOLVED FURTHER THAT Mr Ashique PP and Mrs. SHAMEENA ASHIQUE (the "authorized directors/ members") be and are hereby authorised severally to convey to BMW Financial Services the acceptance on behalf of the Company of the Facility Terms and agree to such changes and modifications as may be suggested by BMW Financial Services from time to time and to execute such security documents and other writings as may be necessary

For KOYENCO AUTOS (P) LTD. P.P. ASHIQUE Managing Director

For KOYENCO AUTOS (P) LTD. Director

RECITALS: WHEREAS

A. The Parties have entered into a Floorplan Facility Agreement on 06.09.2010, Working Capital Agreement on 13.12.2010, Spare Parts facility agreement on 14.01.2015 and its subsequent amendments whereunder BMW Financial Services has granted finance to Borrower in the capacity of a borrower (together referred to as "Agreement"). B. The Borrower is desirous to add Co-borrower as the Co-borrower and the Co-Borrower is desirous of being added as Co-Borrower to the aforesaid Agreement. C. All the rights and obligations under the Agreement remains the same and be jointly and severally shared by the Borrower and Co-borrower. D. In order to give effect to the amendment thereof, Borrower has requested BMW Financial Services to consider the same on the terms and conditions contained herein.

All capitalized terms used herein would have the same meaning as provided under the Agreement unless expressly defined herein.

NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, UNDERTAKINGS AND COVENANTS CONTAINED HEREIN, THE PARTIES HERETO HEREBY AGREE AS FOLLOWS:

1.

With effect from 17.05.2017 Co-Borrower shall assume as Co-borrower, the rights, interests and liabilities of Borrower to the Agreement referred to above, Co-Borrower undertakes to comply with all the terms and conditions specified in the Agreement along with the Schedules and related documents executed along with the Agreement and to be bound by the terms and conditions of this addendum.

2.

Co-Borrower hereby agree that all rights and obligations of borrower under the Agreement shall also vest with himself alongwith Borrower and be shared jointly by both.

3.

With effect from the date as specified in clause 1 above, Co-Borrower shall be treated as if it had originally been a party to the Agreement and all references in the Agreement and documents executed along with the Agreement, in any capacity shall be read and construed as if they were references to the Co-borrower;

4.

Borrower and Co-borrower agrees to release, indemnify and keep indemnified from and against any liability incurred as a result of any action, demand, claim or proceeding against BMW Financial Services at any time by any party under or in respect of the Agreement relating to any act or omission of the Borrower and Co-borrower at any time (including prior to the Date of this addendum).

5.

The following definitions shall be added to Article 2

( ) "SARFAESI" means the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 as amended from time to time; and"

( ) "DRT" means the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 as amended from time to time"

For Platino Classic Motors India Pvt. Ltd.

Managing Director

For KOYENCO AUTOS (P) LTD.

P.P. ASHIDUE Managing Director

KOYENCO

KOYENCO AUTOS PRIVATE LIMITED

CIN: U50101KL2003PTC015004 SERVICE TAX NO: AACCK2016.5700 TIN: 32110217155 CST: 1102C001715

CERTIFIED TRUE COPY OF THE RESOLUTION PASSED IN THE MEETING OF BOARD OF DIRECTORS OF KOYENCO AUTOS PRIVATE LIMITED ("Company") HELD ON FEBRUARY 23, 2018 AT _NH BYEPASS ROAD,MARADU PO, KOCHI

RESOLVED THAT pursuant to the provisions of Section 179 of the Companies Act, 2013 and the relevant Rules thereunder, the consent of the Board of Directors be and is hereby granted to revision of facility amount under the Floorplan Financing Agreement dated September 6,2010 with BMW India Financial Services Private Limited ("BMW Financial Services"). The Company is hereby authorized to revise the facility amount in following manner:

Facility	Current Facility Amt.	Revised Facility amount
Floorplan Financing Agreement	55,600,000.00	110,000,000.00

RESOLVED FURTHER THAT the Company may revise the facility amount for any additional amounts as may be agreed by the authorised director/signatories up to an aggregate amount of INR 136,000,000/- under Floorplan Financing Agreement.

RESOLVED FURTHER THAT all the terms and conditions as set out in the Facility Agreement for sanction of the facility and any amendments thereto, which shall govern and regulate the obligations of the Company as Co-borrower, be and is hereby approved.

RESOLVED FURTHER THAT Mr Ashiq PP, and Ms Shamina Ashique (the "authorized directors/ members") be and are hereby authorised severally to convey to BMW Financial Services the acceptance on behalf of the Company of the Facility Terms with regard to revision of facility amount and agree to such changes and modifications as may be suggested by BMW Financial Services and to execute such security documents and other writings as may be necessary or required for this purpose. The authorised directors/members be and are hereby severally authorised to execute all agreements, deeds, documents, undertakings and other writings as may be necessary or required for the purposes aforesaid, and to accept and execute any amendments or modifications to any agreements, deed, documents, undertakings and other writings, including acknowledgement of debt/balance confirmation(s) and/or any renewal documents, as and when necessary.

RESOLVED FURTHER THAT copies of the aforesaid resolutions certified to be true be furnished to BMW Financial Services and they be requested to act thereon.

RESOLVED FURTHER THAT the common seal of the Company be affixed in the presence of _Managing Director ** on such of the aforementioned documents as may be required by BMW Financial Services in connection with the Financing Facility. (**As per the Articles of the Company)

“26.

In judgment in the matter of ‘Anuj Jain vs. Axis Bank Ltd.’ (supra), the issue before the Hon’ble Supreme Court was whether the Respondents (Lenders of Jai Prakash Associate Ltd. – JAL) could be recognized as Financial Creditors of the Corporate Debtor – Jaypee Infratech Limited (JIL) on the strength of the mortgage created by the Corporate Debtor, as collateral security of the debt of its holding company JAL. In Para 33.2 of the judgment, Hon’ble Supreme Court referred to Para 13 and 14 of the judgment of NCLT in that matter where Resolution Professional had pointed out contents of the mortgage deed concerned to submit that Corporate Debtor had only agreed to create the mortgage in favour of the Applicant towards the financial assistance granted to the holding company JAL. On facts in that matter it was pointed out before NCLT that perusal of the mortgage made it clear that the Corporate Debtor had neither given any guarantee to repay or any indemnity qua the repayment of loans granted by the Applicant to JAL. With such and other facts discussed by the Hon’ble Supreme Court, Hon’ble Supreme Court in Para 47.2 of the judgment concluded the question of law as under:

“47.2.

Therefore, we have no hesitation in saying that a person having only security interest over the assets of corporate debtor (like the instant third party securities), even if falling within the description of ‘secured creditor’ by virtue of collateral security extended by the corporate debtor, would nevertheless stand outside the sect of ‘financial creditors’ as per the definitions contained in subsections (7) and (8) of Section 5 of the Code. Differently put, if a corporate debtor has given its property in mortgage to secure the debts of a third party, it may lead to a mortgage debt and, therefore, it may fall within the definition of ‘debt’ under Section 3(10) of the Code. However, it would remain a debt alone and cannot partake the character of a ‘financial debt’ within the meaning of Section 5(8) of the Code. The respondent mortgagees are not the financial creditors of corporate debtor JIL” [Emphasis supplied]

27.

Thus on facts the matter is different here. If there had been ‘only a security interest’ like pledging of shares, it would have been different. However, in the present set of facts considering the documents executed between the parties, apart from the pledging of shares, the Corporate Debtor – Doshi Holdings entered into agreement with the Financial Creditor as Coborrower and as the Co-borrower a loan was received.

28.

We thus, agree with the Adjudicating Authority when the Adjudicating Authority admitted the Application under Section 7 of IBC although there was error in observations where reference is made interchangeably to Co-borrower and Guarantor. The Adjudicating Authority at the same time dealt with the case as a matter of Co-borrower. It is a case of Co-borrower and for reasons recorded by us in this judgment we decline to interfere with the impugned order admitting the Application.”

“36.

The proposition of law which emerges from the judgment is that a pledgor per se may not be a Financial Debtor. However, in this case, as observed above, the Appellate Authority arrived at a factual finding that Disha Holdings was a borrower. In Lalit Kumar Jain v. Union of India 5, this Court held that the approval of a resolution plan in relation to a Corporate Debtor does not discharge the guarantor of the Corporate Debtor. On a parity of reasoning, the approval of a resolution in respect of one borrower cannot certainly discharge a co-borrower.

37.

If there are two borrowers or if two corporate bodies fall within the ambit of corporate debtors, there is no reason why proceedings under Section 7 of the IBC cannot be initiated against both the Corporate Debtors. Needless to mention, the same amount cannot be realised from both the Corporate Debtors. If the dues are realised in part from one Corporate Debtor, the balance may be realised from the other Corporate Debtor being the co-borrower. However, once the claim of the Financial Creditor is discharged, there can be no question of recovery of the claim twice over.”