# In the matter of SREI Infrastructure Finance Ltd. Vs. Canara Bank & Ors. CA (AT) Nos. 316 & 317-2018

> NCLAT judgment dated 2018-07-20. Citation: TCN-2018-NCLAT-00197. The case involves an appeal against an order by the NCLT, Principal Bench, New Delhi, which…

- **Court:** NCLAT
- **Order date:** 20 Jul 2018
- **Citation:** TCN-2018-NCLAT-00197
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/srei-infrastructure-finance-ltd-vs-canara-bank-ors-ca-e3ec9883

## Summary

### Background

The case involves an appeal against an order by the NCLT, Principal Bench, New Delhi, which upheld the Resolution Professional's decision to not include SREI Infrastructure Finance Limited as a member of the Committee of Creditors (CoC) for Deccan Chronicle Holdings Limited (DCHL). The Resolution Professional argued that SREI was a 'related party' due to holding more than 20% shares, which was contested by SREI, claiming it was a financial creditor having disbursed Rs. 240 Crores to DCHL.

## Facts

SREI Infrastructure Finance Limited (Appellant) disbursed Rs. 240 Crores to Deccan Chronicle Holdings Limited (Corporate Debtor) for time value of money. DCHL converted a portion of this investment (Rs. 20 Crores) into 6,60,37,735 equity shares of Rs. 2 each at a premium of Rs. 1.18 per share, allotting them to SREI. The Resolution Professional considered SREI a 'related party' because it held more than 20% shares in DCHL. The allotment of equity shares to SREI was not recognized/accounted for in DCHL's books of accounts because the stock exchanges did not approve the allotment as per their guidelines. The NCLT upheld the Resolution Professional's decision, leading SREI to appeal to the NCLAT. DCHL's balance sheets as of March 31, 2016, March 31, 2017, and July 18,

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## Issues and analysis

### Issue 1: Whether SREI Infrastructure Finance Limited can be considered a 'related party' to Deccan Chronicle …

**Ratio:** The legal principle applied is the definition of 'related party' under Section 5(24) of

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**Reasoning:** The court reasoned that while SREI held equity shares in DCHL, the allotment of these

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**Interpretation:** The interpretation of Section 5(24) hinges on whether the shareholding is

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**Application:** The court applied this reasoning to the facts by noting that the allotment of

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## Parties

- **Judges:** S.J. Mukhop…; Bansi Lal…
- **Appellants:** Srei Infrastructur…
- **Respondents:** Deccan Chronicle…; Canara Bank…
- **Advocates:** Sudipto S…; Abhijeet…; +7 more

## Timeline

- **2017-11-15 — Impugned Order by…**: The Adjudicating Authority (NCLT, Hyderabad Bench) passed an impugned order upholding the…
- **2017-11-16 — Impugned ord…**: The impugned order was…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 60(5) — Adjudicating Authority for corporate persons](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-60)

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