Photo of Uday Khare

Partner in the Projects and Projects Finance Team at the Delhi office of Cyril Amarchand Mangaldas. Uday specialises in infrastructure projects, public-private partnerships and banking & financing. He routinely advises financial institutions, multilateral lending agencies, government/statutory bodies and financial advisors, and has previously worked with the International Finance Corporation as well. He can be reached at uday.khare@yrilshroff.com

Is a Third-Party Security Holder a Financial Creditor Under the Insolvency and Bankruptcy Code

In its judgment pronounced on May 9, 2018, the National Company Law Tribunal (NCLT), Allahabad, in the case of ICICI Bank Limited v. Mr. Anuj Jain (Resolution Professional of Jaypee Infratech Limited), addressed the issue of the rights of third-party security holders of a corporate debtor under the Insolvency and Bankruptcy Code, 2016 (IBC).

The judgment negated ICICI Bank Limited’s contention that it should be considered a financial creditor of Jaypee Infratech Limited, the corporate debtor. ICICI Bank’s claim was based on the corporate debtor having created mortgages on its property to secure loans provided to Jaiprakash Associates Limited, the holding company of the corporate debtor. The NCLT concluded that there was no financial debt owed to ICICI Bank by the corporate debtor, and so it could not be considered a financial creditor of the corporate debtor.

We consider here the correctness of the judgment and whether the NCLT has considered all the implications of its finding.Continue Reading Is a Third-Party Security Holder a Financial Creditor Under the Insolvency and Bankruptcy Code?