The Ahmedabad Bench of the National Company Law Tribunal has dismissed an application filed by the suspended director of Wind World (India) Ltd. seeking removal of IL&FS group entities from the Committee of Creditors (CoC), holding that their claims were rightly admitted as “financial debt” under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC).

The application, moved under Section 60(5) of the IBC by the suspended director and shareholder of the corporate debtor, sought removal of Respondent Nos. 2 to 4 (IL&FS group entities) from the CoC and reconstitution of the CoC on the ground that their claims did not qualify as “financial debt” and were merely project-linked advances under EPC/turnkey arrangements.

The applicant argued that the advances were intrinsically linked to execution of wind power projects and were reflected as “Current Liabilities” in the books of the corporate debtor. It was contended that the transactions lacked the essential element of “disbursement against consideration for time value of money” and therefore could not be classified as financial debt.

The IL&FS entities, however, submitted that although the original arrangements related to project development, the exposure was subsequently crystallised through agreements executed in 2016. Under the final agreement dated October 1, 2016, the corporate debtor acknowledged a quantified liability of approximately ₹180 crores, agreed to repay the amount with interest at 14% per annum, and created security by way of hypothecation. It was argued that this restructuring gave the transaction the commercial effect of borrowing, squarely attracting Section 5(8) of the IBC.

The Resolution Professional stated that the claims had been admitted as financial debt in 2018 after due verification and legal opinion, and that he did not possess authority to unilaterally alter such classification once the creditors were admitted into the CoC.

At the outset, the Tribunal reiterated that upon commencement of CIRP, the powers of the Board of Directors stand suspended and vest in the Resolution Professional. While questions relating to legality of admission of claims may fall within the Tribunal’s jurisdiction under Section 60(5), a suspended director cannot interfere with the commercial functioning of the CoC in the absence of statutory violation or material irregularity.

On merits, the Bench examined the subsequent agreements and noted that the parties had consciously converted the exposure into a structured repayment obligation carrying interest and backed by security. Relying on Supreme Court decisions including Global Credit Capital Ltd. v. Sach Marketing Pvt. Ltd. (2024) and Anuj Jain v. Axis Bank Ltd., the Tribunal held that the essential test for “financial debt” is the existence of a disbursed amount against consideration for time value of money and the commercial effect of borrowing.

The Tribunal observed that once the liability was crystallised, made repayable with interest at 14% per annum, and secured, the statutory ingredients of financial debt stood satisfied. It rejected the contention that accounting treatment as “Current Liabilities” was determinative, emphasising that the real nature of the transaction must be gathered from the contractual arrangement.

The Bench also took note that the claims had been admitted in 2018 and the IL&FS entities had remained part of the CoC for several years. In the absence of any new material demonstrating fraud, misrepresentation or statutory breach, the Tribunal declined to reopen settled issues at an advanced stage of the CIRP.

Holding that no case was made out for directing removal of Respondent Nos. 2 to 4 from the CoC or for reconstitution of the CoC, the Tribunal dismissed the application. The composition of the Committee of Creditors shall remain unchanged.

Appearances: 

For the Applicant:
Mr. Rasheesh Sanjanwala, Senior Advocate
Mr. A.W. Mr. Parth Shah, Advocate

For Respondent No. 1 (RP):
Mr. Navin Pahwa, Senior Advocate
Ms. Neha Naik, Advocate

For Respondent Nos. 2 to 4:
Mr. Gopal Jain, Senior Advocate
Mr. Kuber Dewan, Advocate