# In the matter of Sarga Hotel Private Limited

> NCLT judgment dated 2023-10-18. Citation: TCN-2023-NCLT-01140. The case involves an application filed by J. C. Flowers Asset Reconstruction Private Limited…

- **Court:** NCLT
- **Order date:** 18 Oct 2023
- **Citation:** TCN-2023-NCLT-01140
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/sarga-hotel-private-limited-e16a15fa

## Summary

### Background

The case involves an application filed by J. C. Flowers Asset Reconstruction Private Limited (JCF), acting as trustee of JCF YES Trust, under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The original petition was filed by YES Bank Limited as a financial creditor against Sarga Hotel Private Limited (Corporate Debtor). YES Bank later assigned the debt to JCF, making JCF a financial creditor in the Corporate Debtor's CIRP. JCF sought directions to the Resolution Professional (RP) to reject the claim filed by RARE Asset Reconstruction Company Ltd. (RARE ARC) as a financial creditor, arguing that the assignment of the loan from SREI Equipment Finance Limited (SEFL) to RARE ARC was collusive and fraudulent.

## Facts

YES Bank Limited initially filed a petition against Sarga Hotel Private Limited (Corporate Debtor), initiating the CIRP. Subsequently, YES Bank assigned the debt to J. C. Flowers Asset Reconstruction Private Limited (JCF), who then became the applicant. SREI Infrastructure Finance Limited (SIFL) sanctioned a loan of Rs. 300 Crores to the Corporate Debtor, which was later transferred to SREI Equipment Finance Limited (SEFL). SEFL then entered into an assignment agreement with RARE ARC to assign the Impugned Loan. The RP classified RARE ARC as a 'related party financial creditor'. RARE ARC challenged this decision. The Administrator of SEFL filed applications alleging fraudulent transactions in the assignment of the loan from SEFL to RARE ARC. The Hon'ble NCLAT had

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## Issues and analysis

### Issue 1: Whether the Resolution Professional should be directed to reject the claim filed by RARE ARC as a …

**Ratio:** The Tribunal relied on the principle that fraudulent transactions cannot be classified as

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**Reasoning:** The Tribunal considered the allegations of collusion and fraudulent transactions in the

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**Interpretation:** The Tribunal interpreted the provisions of the I&B Code and the precedents

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**Application:** The Tribunal applied the ratio to the specific facts of the case, considering

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## Parties

- **Judges:** BIDISHA BA…; Balraj…
- **Appellants:** J.C. Flowers…
- **Respondents:** Sarga Hotel…; Rare Asset…
- **Advocates:** Manju Bhu…; Pooja Ma…; +10 more

## Timeline

- **2018-08-29 — Loan San…**: SREI Infrastructure Finance Limited sanctioned a Loan of Rs. 300 Crores to Sarga Hotel…
- **2019-08-16 — Business Transfer…**: The loan was purportedly transferred to SREI Equipment Finance Limited via a Business…

## 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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