TEAM CODE- TC 1-R

III SURANA & SURANA AND UPES SCHOOL OF LAW

NATIONAL INSOLVENCY LAW MOOT COURT COMPETITION, 2020-21

BEFORE

THE HON’BLE SUPREME COURT OF INDIA

CIVIL APPEAL NO. ___ / 2020

INDIAN TELECOM V. JOEL CARDOZA, RP OF VODATEL

CIVIL APPEAL NO. ___ / 2020

GURGAON DEVELOPMENT AUTHORITY V. JOEL CARDOZA, RP OF VODATEL

CIVIL APPEAL NO. ___ / 2020

DEPARTMENT OF TELECOM V. JOEL CARDOZA, RP OF VODATEL

CIVIL APPEAL NO. ___ / 2020

MR. MERWIN SINGHANIA V. STATE BANK OF INDIA

WRIT PETITION (CIVIL) NO. ___ / 2020

MR. MERWIN SINGHANIA V. UNION OF INDIA

MEMORIAL FOR RESPONDENTS

III SURANA & SURANA AND UPES NATIONAL INSOLVENCY LAW MOOT 2

MEMORIAL for RESPONDENTS [TABLE OF CONTENTS]

 III SURANA & SURANA AND UPES NATIONAL INSOLVENCY LAW MOOT 1

TABLE OF CONTENTS

TABLE OF CONTENTS .........................................................................................................1

TABLE OF ABBREVIATIONS ..............................................................................................4

INDEX OF AUTHORITIES ...................................................................................................7

STATEMENT OF JURISDICTION.....................................................................................10

STATEMENT OF FACTS .....................................................................................................11

STATEMENT OF ISSUES ....................................................................................................13

SUMMARY OF ARGUMENTS ...........................................................................................14

ARGUMENTS ADVANCED ................................................................................................15

I. COC SHALL NOT BE DIRECTED TO CONSIDER THE PLAN OF INDIAN TELECOM ......15

A. RP’S DECISION WAS MADE IN ADHERENCE TO THE TIME-LIMIT PROVIDED UNDER THE

CODE ...........................................................................................................................15

B. RESOLUTION PLAN CAN PROVIDE FOR LIQUIDATION .....................................................16

i. Approving the Plan with liquidation comes under the commercial wisdom of CoC

16

ii. The idea of the Code is outcome agnostic as per the BLRC Report ....................17

C. COMMERCIAL WISDOM OF THE COC IS PARAMOUNT ...................................................17

II. GURGAON DEVELOPMENT AUTHORITY IS NOT A FINANCIAL CREDITOR ...............18

A. GDA IS AT BEST AN OPERATIONAL CREDITOR ...............................................................18

i. Provision of land on lease is a service provided by GDA ....................................19

ii. Dues payable in respect of provision of land on lease is an operational debt ......20

MEMORIAL for RESPONDENTS [TABLE OF CONTENTS]

 III SURANA & SURANA AND UPES NATIONAL INSOLVENCY LAW MOOT 2

B. IN ARGUENDO, GDA FALLS UNDER THE CATEGORY OF OTHER CREDITORS ...................20

i. GDA is not a financial creditor .............................................................................20

ii. GDA is not an Operational Creditor .....................................................................21

III. THE SPECTRUM SHALL BE A PART OF CIRP AND AGR DUES ARE OPERATIONAL IN

NATURE .........................................................................................................................22

A. THE SPECTRUM SHALL BE A PART OF CIRP ..................................................................22

i. The Spectrum shall be treated as an asset of the CD ............................................22

ii. The Code will prevail over the Indian Telegraph Act as per Section 238 of the

Code ......................................................................................................................23

B. AGR DUES ARE OPERATIONAL IN NATURE ...................................................................23

i. AGR dues are statutory dues ................................................................................24

ii. The Spectrum is a raw material for CD ................................................................24

IV. PERSONAL INSOLVENCY PROCEEDINGS CAN BE INITIATED AGAINST THE PERSONAL

GUARANTOR .................................................................................................................25

A. SECTION 10A SHALL NOT EXTEND TO THE PERSONAL GUARANTOR ...............................25

i. Legislative intent of Section 10A cannot be challenged .......................................25

ii. The default committed by Mr. Singhania was not due to Covid-19 .....................25

B. PERSONAL INSOLVENCY CAN BE INITIATED AGAINST THE PERSONAL GUARANTOR UNDER

SECTION 95 ..................................................................................................................26

i. Simultaneous proceedings can be initiated against the personal guarantor ..........26

ii. The principle of contract of guarantee weighs against the personal guarantor.....27

MEMORIAL for RESPONDENTS [TABLE OF CONTENTS]

 III SURANA & SURANA AND UPES NATIONAL INSOLVENCY LAW MOOT 3

PRAYER .................................................................................................................................29

MEMORIAL for RESPONDENTS [TABLE OF CONTENTS]

4

TABLE OF ABBREVIATIONS

MEMORIAL for RESPONDENTS [TABLE OF ABBREVIATIONS]

ABBREVIATIONS EXPANSION
No. Number
Hon’ble Honourable
NCLAT National Company Law Appellate Tribunal
RP Resolution Professional
CoC Committee of Creditors
v Versus
CIRP Corporate Insolvency Resolution Process
Code Insolvency and Bankruptcy Code, 2016
CD Corporate Debtor
s Section
EOI Expression of Interest
INR Indian Rupees
Cr. Crore
AA Adjudicating Authority
BLRC Bankruptcy Law Reforms Committee
% Percentage
Ind. AS Indian Accounting Standards
GDA Gurgaon Development Authority
Ors Others
& And
Anr Another
SC Supreme Court
Ltd Limited
¶ Paragraph
CGST Central Goods and Services Tax
DoT Department of Telecom
AGR Adjusted Gross Revenue
Pvt Private
M/s Messrs

MEMORIAL for RESPONDENTS [TABLE OF ABBREVIATIONS]

6

GOI Government of India

UP Uttar Pradesh
Co Company
UOI Union of India
SCC Supreme Court Cases
NCLT National Company Law Tribunal
SBI State Bank of India
Bom Bombay
AT Appellate Tribunal
CP Company Petition
CA Company Appeal
Reg Regulation
Corp Corporation
Assn Association
MCA Ministry of Corporate Affairs
CIT Commissioner of Income Tax
SCR Supreme Court Reports
AIR All India Reporter
Mad Madras
Edn Edition
MB Mumbai Bench
TMI Tax Management India
Sch Schedule
CLA Company Law Advisers

MEMORIAL for RESPONDENTS [TABLE OF ABBREVIATIONS]

 7

INDEX OF AUTHORITIES

STATUTES

Central Goods and Services Tax Act 2017 19

Companies Act 2013 21
Consumer Protection Act 2019 19
Indian Contract Act 1872 28
Indian Telegraph Act 1885 22
Insolvency and Bankruptcy Code 2016 15

CASE LAWS

Anup Sushil Dubey v National Agriculture Co-operative Marketing Federation of 19

India Ltd (2020) 10 TMI 331

Arcelor Mittal India Pvt Ltd v Satish Kumar Gupta (2019) 2 SCC 1 23
Bank of Bihar Ltd v Damodar Prasad & Anr AIR 1969 SC 297 28
Canonnore Spinning and Weaving Mills Ltd v Industrial Finance Corp of India 28

Ltd (2002) 5 SCC 54

Chokalinga Chettiar v Dandayunthapani Chattiar AIR 1928 Mad 1262 28
Cinemax India Ltd v UOI (2011) 8 TMI 71 19
Col Vinod Awasthy v AMR Infrastructure Ltd 2017 SCC OnLine NCLT 16278 22
Committee of Creditors of Essar Steel (India) Ltd v Satish Kumar Gupta (2020) 8 16

SCC 531
Edelweiss Asset Reconstruction Co Ltd v Murli Industries Ltd 2018 SCC OnLine 16

NCLT 5758
Edelweiss Asset Reconstruction Co Ltd v Sachet Infrastructure Pvt Ltd & Ors 27

(2019) 11 TMI 1212

Girija Sugars & Agro Pvt Ltd v Pankaj Sham Joshi & Anr CP No 2156/MB/2019 15
Gupta Energy Pvt Ltd v T Sathisan 2017 SCC OnLine NCLT 11306 18

MEMORIAL for RESPONDENTS [INDEX OF AUTHORITIES]

Hindustan Oil Exploration Co v Erstwhile Committee of Creditors JEKPL Pvt Ltd 15

(2020) 3 TMI 1104

Industrial Investment Bank of India Ltd v Biswanath Jhunjhunwala (2009) 9 28

SCC 478
K Sashidhar v Indian Overseas Bank & Ors (2019) 12 SCC 150 16
M Ravindranath Reddy v G Kishan & Ors 2020 SCC OnLine NCLAT 84 22
Maharashtra State Electricity Board (Bom) v Official Liquidator AIR 1982 SC 28

1497
Maharasthra Seamless Ltd v Padmanabhan Venkatesh & Ors (2020) 1 TMI 903 18
Mobilox Innovations Pvt Ltd v Kirusa Software Pvt Ltd (2018) 1 SCC 353 19
Nikhil Mehta & Sons (HUF) v AMR Infrastructure Ltd Company Appeal (AT) 21

(Insolvency) No 07 of 2017
Pr Director General of Income Tax v M/s Synergies Dooray Automotive Ltd & 24

Ors (2019) 149 CLA 462

Pramod Yadav & Ors v Divine Infracon Pvt Ltd (2017) 11 TMI 194 20
Promila Taneja v Surendri Design Pvt Ltd Company Appeal (AT) (Insolvency) No 22

459 of 2020
Ram Kishun v State of UP (2011) 11 SCC 511 28
Ramesh Kymal v Siemens Gamesa Renewable Power Pvt Ltd Company Appeal 26

(AT) (Insolvency) No 701 of 2020

SBI v Athena Energy Ventures Pvt Ltd 2020 SCC OnLine NCLAT 774 27
SBI v Indexport Registered & Ors AIR 1992 SC 1740 28
SBI v V Ramakrishnan (2018) 17 SCC 394 29
Swiss Ribbons Pvt Ltd v UOI (2019) 4 SCC 17 23
Vijaykumar V Iyer v UOI 2019 SCC OnLine NCLT 751 23

REPORTS

Ministry of Corporate Affairs, Bankruptcy Law Reforms Committee Report (2015) 16

MEMORIAL for RESPONDENTS [INDEX OF AUTHORITIES]

Ministry of Corporate Affairs, Report of the Insolvency Law Committee (March 23

2018)

ONLINE SOURCES

‘Accounting Standards (AS) 19 Leases’ (MCA) <https://mca.govin/Ministry/ 21

notification/pdf/AS_19.pdf> accessed on 25 December 2020

‘Insolvency and Bankruptcy Code (Amendment) Ordinance 2020’ (MCA) 26

<https://mca.govin/Ministry/pdf/IBCAmedBill_05062020.pdf> accessed on 2

January 2021

BOOKS

Ashish Makhija, Insolvency and Bankruptcy Code (1st edn, LexisNexis 2018) 15
Bryan A Garner, Black’s Law Dictionary (9th edn, St Paul 2009) 19
Pollock and Mulla, Indian Contract and Specific Relief Acts (12th edn, LexisNexis 28

2006)

MEMORIAL for RESPONDENTS [INDEX OF AUTHORITIES]

 10

STATEMENT OF JURISDICTION

The Respondents solemnly submits to the inherent jurisdiction of the Hon’ble Supreme Court

of India arising by virtue of Section 62 of the Insolvency and Bankruptcy Code, 2016 and

Article 32 of the Constitution of India to adjudicate the present appeals.

The Hon’ble Supreme Court of India has the territorial jurisdiction arising by the virtue of

Section 62 of the Insolvency and Bankruptcy Code, 2016 and Article 32 of the Constitution

of India.

The present memorial puts forth the facts, contentions and arguments in the present case.

MEMORIAL for RESPONDENTS [STATEMENT OF JURISDICTION]

11

STATEMENT OF FACTS

Vodatel [hereinafter CD] is a Private Limited Company registered under the Companies Act,

1956. The CD was in the business of providing telecom services and real-estate business. In

the initial years, the CD was incurring huge losses. In an attempt to save the CD, Mr. Merwin

Singhania was appointed as the director.

The CD took a loan from a consortium of five banks. It was also secured by the personal

guarantee of Mr. Merwin Singhania. In 2014, the CD launched a high-class housing project.

For the purpose of this project, the CD entered into a lease agreement dated 20.12.2014 with

Gurgaon Development Authority for a consideration of INR 380 cr.

In 2016, there was a huge disruption in the Indian telecom sector due to the entry of a new

telecom company. The CD’s market share declined to 5% by the year 2018. As a result of

which, the CD defaulted on its loan obligation in March, 2019. On 06.04.2019, the SBI

initiated Insolvency Proceedings against the CD under Section 7 of the Insolvency and

Bankruptcy Code, 2016 [hereinafter Code].

Gurgaon Development Authority, Indian Telecom, Department of Telecom filed an

intervention application challenging the decision of Resolution Professional [hereinafter

RP] before the Hon’ble National Company Law Tribunal [hereinafter NCLT], which

rejected the claims of GDA, Indian Telecom and DoT. National Company Law Appellate

Tribunal [hereinafter NCLAT] dismissed the appeals and upheld the order of NCLT.

SBI initiated personal insolvency proceedings against Mr. Merwin Singhania, which was

challenged by him before the Hon’ble NCLT. The Hon’ble NCLT passed an order to initiate

insolvency proceedings against him. The Hon’ble NCLAT upheld the order. Thereafter, three

MEMORIAL for RESPONDENTS [STATEMENT OF FACTS]

12

appeals were filed before the Hon’ble Supreme Court of India [hereinafter SCI] and Mr.

Merwin Singhania also filed an appeal along with a writ petition, thus the present case.

MEMORIAL for RESPONDENTS [STATEMENT OF FACTS]

 13

STATEMENT OF ISSUES

I. Whether the CoC should simultaneously consider the Resolution Plans of Indian

Telecom and Skyrockets or not?

II. Whether Gurgaon Development Authority falls under the definition of financial creditor

or not?

III. Whether the Spectrum can be a part of CIRP or not and AGR dues are financial in nature

or not?

IV. Whether the personal insolvency can be initiated against the personal guarantor or not?

MEMORIAL for RESPONDENTS [STATEMENT OF ISSUES]

14

SUMMARY OF ARGUMENTS

I. CoC shall not be directed to consider the plan of Indian Telecom as: The Resolution

Professional’s decision was made in adherence to the time-limit provided under the

Code. Further, Resolution Plan can provide for liquidation and commercial wisdom of

the CoC is paramount.

II. Gurgaon Development Authority is not a financial creditor as: Gurgaon

Development Authority is at best an operational creditor as provision of land on lease is a

service and dues payable in respect of provision of services falls under the ambit of

operational debt. In arguendo, GDA falls under the category of other creditors.

III. The Spectrum shall be a part of CIRP and AGR are operational in nature as: In

order to revive the CD, which is the main objective of the Code, the Spectrum should be

treated as an asset of the CD. Further, AGR dues are dues owed to the government and

statutory dues falls in the ambit of operational debt.

IV. Personal Insolvency can be initiated against the personal guarantor as: Section 10A

shall not extend to the personal guarantor and simultaneous proceedings can be initiated

against the personal guarantor under Section 95.

MEMORIAL for RESPONDENTS [SUMMARY OF ARGUMENTS]

 15

ARGUMENTS ADVANCED

I. COC SHALL NOT BE DIRECTED TO CONSIDER THE PLAN OF INDIAN

TELECOM

(¶ 1.) The RP, most humbly submits that firstly, RP’s decision was made in adherence to the

time-limit provided under the Code [A]; secondly, Resolution Plan can provide for

liquidation [B] and lastly, commercial wisdom of the CoC is paramount [C].

A. RP’S DECISION WAS MADE IN ADHERENCE TO THE TIME-LIMIT PROVIDED UNDER THE

CODE

(¶ 2.) The CIRP shall mandatorily be completed within 330 days from the date of

commencement.1 The intent of the Code is to complete the insolvency resolution process in a

time bound manner.2

(¶ 3.) Application filed by the prospective Resolution Applicant was dismissed, which had

belatedly filed its EOI after the extended deadline due to Covid-19, but failed to justify how

the pandemic has led to delayed submission.3 An unsuccessful Resolution Applicant has no

locus to challenge the implementation of the resolution plan, approved by the AA.4

(¶ 4.) In the present case, the unsuccessful resolution applicant - Indian Telecom has not

explained as to how the unprecedented situation5 has led to delay in submission of the

resolution plan. Therefore, the Indian telecom, being an unsuccessful Resolution Applicant,

has no locus to challenge the decision.

1 Insolvency and Bankruptcy Code 2016, s 12 (IBC).

2 Ashish Makhija, Insolvency and Bankruptcy Code (1st edn, LexisNexis 2018).
3 Girija Sugars & Agro Pvt Ltd v Pankaj Sham Joshi & Anr CP No 2156/MB/2019.
4 Hindustan Oil Exploration Co v Erstwhile Committee of Creditors JEKPL Pvt Ltd (2020) 3 TMI 1104.
5 Moot Proposition, ¶ 13.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

 16

(¶ 5.) Thus, it is concluded that a mere reference of unprecedented situation would not be an

adequate justification to provide extension of time. The decision taken was in adherence of

completing CIRP within the time limit stipulated by the Code.

B. RESOLUTION PLAN CAN PROVIDE FOR LIQUIDATION

(¶ 6.) The RP submits that firstly, approving the plan with liquidation comes under the

commercial wisdom of CoC [i]; and secondly, idea of the Code is outcome agnostic as per

BLRC Report [ii].

i. APPROVING THE PLAN WITH LIQUIDATION COMES UNDER THE COMMERCIAL WISDOM

OF COC

(¶ 7.) If CD is capable of being revived by reopening only one unit, then such decision is a

part of commercial wisdom of CoC.6 66% vote bank of CoC is the only benchmark to be

checked by AA to approve or reject the resolution plan.7 The Code embodies the idea of

maximisation of the assets of CD in a time bound manner.8 CoC is competent to judge the

feasibility and viability of the Resolution Plan better than anyone else.9

(¶ 8.) In the present case, the CoC approved the Resolution Plan submitted by the Skyrockets

which provides for the liquidation of the real-estate business.10 Therefore, it is argued that if

CoC believes that CD is capable of being revived by reopening only the telecom business and

value maximisation of the assets of the CD is happening by closing off one business. Then,

such business decision is a part of commercial wisdom of CoC and value maximisation of the

asset is something that the Code also envisages.

6 Edelweiss Asset Reconstruction Co Ltd v Murli Industries Ltd 2018 SCC OnLine NCLT 5758.
7 K Sashidhar v Indian Overseas Bank & Ors (2019) 12 SCC 150.
8 Ministry of Corporate Affairs, Bankruptcy Law Reforms Committee Report (2015).
9Bankruptcy Law Reforms Committee Report (n 8); Committee of Creditors of Essar Steel (India) Ltd v Satish
Kumar Gupta (2020) 8 SCC 531.
10 Moot Proposition, ¶ 12.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

 17

(¶ 9.) Thus, it is concluded that the approved Resolution Plan cannot be challenged on the

grounds that it provides for liquidation as the Resolution Plan is approved by the 68% votes

of CoC11.

ii. THE IDEA OF THE CODE IS OUTCOME AGNOSTIC AS PER THE BLRC REPORT

(¶ 10.) The CoC should make the decision about the disposition of a defaulting firm as it is a

business decision and only the creditors should make it.12 Striking a balance between

liquidation and reorganisation is one of the objectives of the Code.13 The legislature and the

courts should not be burdened to make business decisions.14

(¶ 11.) It is submitted that the BLRC report provides that the CoC should decide whether the

outcome of CIRP is liquidation or revival and it is a policy matter for which the Code doesn’t

prescribe. Also, it is not mentioned anywhere in the Report that the objective of the Code

should be revival of CD.

(¶ 12.) Thus, it is concluded that as per the BLRC report, the outcome is dependent on the

decision made by the CoC as they are in a better position to make such business decision.

C. COMMERCIAL WISDOM OF THE COC IS PARAMOUNT

(¶ 13.) The commercial wisdom of the CoC has been given paramount status and the

legislature, consciously, has not provided any grounds to challenge it.15 Primacy has been

given to the CoC to evaluate the various possibilities and make a decision.16 The CoC may

11 Moot Proposition, ¶ 13.

12 Bankruptcy Law Reforms Committee Report (n 8).
13 ibid.
14 K Sashidhar (n 7).
15 K Sashidhar (n 7); Essar Steel (n 9).
16 Bankruptcy Law Reforms Committee Report (n 8).

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

 18

approve a resolution plan by a vote of not less than 66% after considering its ‘feasibility and

viability’.17 NCLAT accepted the decision of CoC approving the resolution plan which

quoted an upfront payment at an amount lesser than the liquidation value of CD.18 The CoC

has the requisite expertise to assess the viability and commercial feasibility of the resolution

plan.19

(¶ 14.) In the present case, the Resolution Plan of the Skyrockets has been approved by the

CoC by 68% votes.20 Thus, it is submitted that it comes under their commercial wisdom and

therefore, cannot be challenged on the grounds of superiority21. It is also submitted that the

CoC, in the instant case, possesses such expertise, to assess the viability and feasibility of the

Resolution Plan.

(¶ 15.) Thus, it is concluded that the CoC’s decision of approving resolution plan comes

under commercial wisdom and hence, it cannot be challenged on the ground of superiority.

II. GURGAON DEVELOPMENT AUTHORITY IS NOT A FINANCIAL

CREDITOR

(¶ 16.) The RP humbly submits that Gurgaon Development Authority [hereinafter GDA] is

not a financial creditor because firstly, GDA is at best an operational creditor [A]; and in

arguendo, GDA falls under the category of other creditors [B].

A. GDA IS AT BEST AN OPERATIONAL CREDITOR

17 Essar Steel (n 9).

18 Maharasthra Seamless Ltd v Padmanabhan Venkatesh & Ors (2020) 1 TMI 903.
19Bankruptcy Law Reforms Committee Report (n 8); Essar Steel (n 9); Gupta Energy Pvt Ltd v T Sathisan 2017
SCC OnLine NCLT 11306.
20 Moot Proposition, ¶ 13.
21 Moot Proposition, ¶ 14.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

19

(¶ 17.) The RP submits that GDA is at best an operational creditor because firstly, Provision

of land on lease is a service provided by GDA [i]; and secondly, dues payable in respect of

provision of land on lease is an operational debt [ii].

i. PROVISION OF LAND ON LEASE IS A SERVICE PROVIDED BY GDA

(¶ 18.) “Service” is doing something useful, usually for a fee.22 Service means service of any

description made available in connection with housing construction for commercial

purpose.23 Any lease to occupy land is a supply of service.24

(¶ 19.) Using the definition of service as defined under the Consumer Protection Act25 and

CGST Act26, the Hon’ble NCLAT held that consideration arising out of lease of a storage unit

for commercial purpose would fall under Operational Debt.27 Renting of an immovable

property for commercial purpose would amount to rendition of service.28 Any consideration

by way of rent, lease and licence would fall within the ambit of Section 5(21) of the Code.29

(¶ 20.) In the present case, the CD launched a housing project named “Posh Residency”30 and

entered into a lease agreement with GDA31. It is submitted that since the Code has not

defined the terms goods or services hence, one has to rely on the general usage of the terms

so used in other statutes in the law. In the instant case, GDA has done an act of providing the

22 Bryan A Garner, Black’s Law Dictionary (9th edn, St Paul 2009).

23 Consumer Protection Act 2019, s 2 (42).
24 Central Goods and Services Tax Act 2017, sch 2 (2) (a).
25 Consumer Protection Act, 2019.
26 Central Goods & Service Tax Act, 2017.
27Anup Sushil Dubey v National Agriculture Co-operative Marketing Federation of India Ltd (2020) 10 TMI
331.
28 Cinemax India Ltd v UOI (2011) 8 TMI 71.
29Bankruptcy Law Reforms Committee Report (n 8); Mobilox Innovations Pvt Ltd v Kirusa Software Pvt Ltd
(2018) 1 SCC 353.
30 Moot Proposition, ¶ 4.
31 Moot Proposition, ¶ 6.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

 20

land, which is beneficial to the CD for which the CD has paid INR 380 cr.32 to GDA. It is

apparent from the facts that the leasing of land is for the housing project therefore, the lease

agreement is purely commercial in nature.

(¶ 21.) Thus, it is concluded that the leasing of land falls under the definition of ‘service’ as

defined in the Consumer Protection Act and the CGST Act. Hence, the leasing of land is a

service.

ii. DUES PAYABLE IN RESPECT OF PROVISION OF LAND ON LEASE IS AN OPERATIONAL DEBT

(¶ 22.) Operational creditor is a person to whom an operational debt is owed.33 Operational

debt is a claim in respect of the provision of goods or services.34 “Goods” or “services” used

in the definition of operational debt must relate to direct input to the output produced or

supplied by the CD.35

(¶ 23.) It is submitted that for construction of houses the CD must enjoy uninterrupted right

to use the land and is therefore, critically dependent on the supply of leasing service. The

nexus between them is, therefore, direct and inseparable.

(¶ 24.) Thus, it is concluded that since the leasing of land is a service and is a direct input to

the output produced or supplied, therefore, dues payable in respect of lease of land for the

purpose of housing project is an operational debt. Hence, GDA is an operational creditor.

B. IN ARGUENDO, GDA FALLS UNDER THE CATEGORY OF OTHER CREDITORS

(¶ 25.) It is submitted that the GDA falls under the category of other creditors because firstly,

GDA is not a financial creditor [i] and secondly, GDA is not an operational creditor [ii].

i. GDA IS NOT A FINANCIAL CREDITOR

32 Moot Proposition, ¶ 6.
33 IBC, s 5 (20).
34 ibid, s 5 (21).
35 Pramod Yadav & Ors v Divine Infracon Pvt Ltd (2017) 11 TMI 194.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

 21

(¶ 26.) Financial creditor is any person to whom a financial debt is owed.36 Financial debt is a

debt disbursed against the consideration for time value of money37 and includes any liability

in respect of any lease (finance/capital lease) under the Ind. AS38. Financial transactions in

the definition of financial debt which are usually for a sum of money received today to be

paid for over a period of time in a series or single instalment in future.39

(¶ 27.) In the present case, GDA is receiving a sum of money in exchange of a piece of land

and is not liable to pay for the sum of money he has received in future. Therefore, this

transaction is not of the nature of financial debt. As per the prescribed Accounting Standards

in the Companies Act40, lease agreements to use lands are excluded from the ambit of

financial lease as per Ind. AS-19 on leases.41

(¶ 28.) Thus, it is submitted that the Ind. AS-19 on Leases are not applicable on the lease

agreements to use lands therefore it is concluded that the lease agreement between GDA and

CD cannot fall under the definition of finance lease. Therefore, GDA is not a financial

creditor.

ii. GDA IS NOT AN OPERATIONAL CREDITOR

(¶ 29.) The lease of immovable property cannot be considered as a supply of goods or

rendering of any services and thus, cannot fall within the definition of Operational Debt.42

36 IBC, s 5 (7).
37 ibid, s 5 (8).
38 ibid, s 5 (8) (d).
39 Nikhil Mehta & Sons (HUF) v AMR Infrastructure Ltd Company Appeal (AT) (Insolvency) No 07 of 2017.
40 Companies Act, 2013.
41 ‘Accounting Standards (AS) 19 Leases’ (MCA) <https://mca.govin/Ministry/notification/pdf/AS_19.pdf>
accessed on 25 December 2020.
42 M Ravindranath Reddy v G Kishan & Ors 2020 SCC OnLine NCLAT 84; Col Vinod Awasthy v AMR
Infrastructure Ltd, 2017 SCC OnLine NCLT 16278; Promila Taneja v Surendri Design Pvt Ltd Company
Appeal (AT) (Insolvency) No 459 of 2020.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

 22

(¶ 30.) In the present case, the lease of land cannot be considered as a supply of goods or

services43 and thus, it cannot fall under the category of operational debt. Thus, it is submitted

that GDA is not an operational creditor.

III. THE SPECTRUM SHALL BE A PART OF CIRP AND AGR DUES ARE

OPERATIONAL IN NATURE

(¶ 32.) It is humbly submitted before the Hon’ble SC that firstly, the Spectrum shall be a part

of CIRP [A] and secondly, AGR dues are operational in nature [B].

A. THE SPECTRUM SHALL BE A PART OF CIRP

(¶ 33.) The RP submits that the Spectrum should be a part of CIRP because firstly, the

Spectrum shall be treated as an asset of the CD [i]; and secondly, the Code will prevail over

the Indian Telegraph Act44 as per Section 238 of the Code [ii].

i. THE SPECTRUM SHALL BE TREATED AS AN ASSET OF THE CD

(¶ 34.) The Telecom Licences & Spectrum are valuable asset of the CD, no Resolution

Applicant will show any interest in the business of the CD if these are not considered as an

asset.45 The primary focus of the legislation is to ensure revival of the CD and put CD back

on its feet, not being a mere recovery legislation for creditors.46 Liquidation is the last

resort.47

43 IBC, s 5 (21).
44 Indian Telegraph Act, 1885 (Telegraph Act).
45 Vijaykumar V Iyer v UOI 2019 SCC OnLine NCLT 751.

46 Arcelor Mittal India Pvt Ltd v Satish Kumar Gupta (2019) 2 SCC 1.
47 Swiss Ribbons Pvt Ltd v UOI (2019) 4 SCC 17.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

 23

(¶ 35.) In the present case, the assets of CD mainly comprise of the spectrum, spectrum

licence and real-estate and without these, there will be no Resolution Applicant who will

show interest in reviving the CD which is the main objective of the Code48.

(¶ 36.) Thus, it is concluded that since the presence of Spectrum license is sine qua non for

getting efficient Resolution Plan therefore, Spectrum should be treated as an asset of the CD.

ii. THE CODE WILL PREVAIL OVER THE INDIAN TELEGRAPH ACT AS PER SECTION 238 OF

THE CODE

(¶ 37.) The provisions of this Code shall have effect, notwithstanding anything inconsistent

therewith contained in any other law for the time being in force.49 The Central Government

shall have exclusive privilege of establishing, maintaining and working telegraphs50 and may

grant a license, on such conditions and in consideration of such payments as it thinks fit51.

(¶ 38.) In the present case, spectrum and spectrum licence should be treated as an asset of the

CD as revival52 is the main objective of the Code but this is inconsistent with the Indian

Telegraph Act, which provides that only the right to use the spectrum could be transferred to

the licensee and not the right to ownership.

(¶ 39.) Thus, it is concluded that the objective of the Code is directly inconsistent with Indian

Telegraph Act and therefore, the Code should prevail over Indian Telegraph Act.

B. AGR DUES ARE OPERATIONAL IN NATURE

48 Ministry of Corporate Affairs, Report of the Insolvency Law Committee (March 2018).
49 IBC, s 238.
50 Telegraph Act, s 4 (1).
51 ibid.
52 Report of the Insolvency Law Committee (n 48).

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

24

(¶ 40.) It is submitted that, AGR dues are operational in nature and therefore the Department

of Telecom [hereinafter DoT] is an operational creditor since firstly, AGR dues are statutory

dues [i]; and secondly, the Spectrum is a raw material for the CD [ii].

i. AGR DUES ARE STATUTORY DUES

(¶ 41.) Operational debt is a claim in respect of the payment of dues arising under any law for

the time being in force and payable to the Central Government.53 The statutory dues fall

within the definition of 'operational debt' and the statutory authorities claiming the aforesaid

dues will be treated as operational creditors.54 A debt arising under any statute and payable to

Government is an operational debt.55

(¶ 42.) In the present case, it is contended that the AGR dues are dues payable to the DoT,

which is a department of the Ministry of Communications of the executive branch of the

GOI. Thus, it is argued that the AGR dues are dues payable to the Government.

(¶ 43.) Therefore, it is concluded that the AGR dues are statutory dues and comes under the

purview of Operational Debt. Hence, the DoT is an operational creditor.

ii. THE SPECTRUM IS A RAW MATERIAL FOR CD

(¶ 44.) Operational debt includes dues in respect of provision of goods or services.56 Raw

material is something from which final product is made.57 Spectrum is a raw material for the

telecom companies as it is needed to run a telecom company as a going concern.

(¶ 45.) In the present case, the CD is a telecom company therefore it is submitted that the

Spectrum is used as a raw material for the CD.

53 IBC, s 5 (21).
54 Pr Director General of Income Tax v M/s Synergies Dooray Automotive Ltd & Ors (2019) 149 CLA 462.
55 M Ravindranath Reddy v G Kishan 2020 SCC OnLine NCLAT 84.
56 IBC, s 5 (21).
57 Bryan A Garner, Black’s Law Dictionary (9th edn, St Paul 2009).

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

25

(¶ 46.) Thus, it is concluded that the AGR dues are dues in respect of the provision of the

Spectrum, which is a raw material for the CD. Hence, the AGR dues are operational in nature

and therefore, the DoT is an operational creditor.

IV. PERSONAL INSOLVENCY PROCEEDINGS CAN BE INITIATED AGAINST

THE PERSONAL GUARANTOR

(¶ 47.) The Union of India [hereinafter UOI] & State Bank of India [hereinafter SBI],

humbly submits that personal insolvency proceedings can be initiated against Mr. Merwin

Singhania [hereinafter Mr. Singhania] forasmuch as firstly, Section 10A shall not extend to

the personal guarantor [A]; and secondly, personal insolvency can be initiated against the

personal guarantor under Section 95 [B].

A. SECTION 10A SHALL NOT EXTEND TO THE PERSONAL GUARANTOR

(¶ 48.) It is submitted that firstly, legislative intent of Section 10A cannot be challenged [i];

and secondly, the default committed by Mr. Singhania was not due to Covid-19 [ii].

i. LEGISLATIVE INTENT OF SECTION 10A CANNOT BE CHALLENGED

(¶ 49.) An application relating to the insolvency resolution of a personal guarantor of CD

shall be filed before such NCLT, where CIRP of a CD is pending.58 CIRP cannot be initiated

against a CD for any default arising on or after 25th March, 2020.59

(¶ 50.) In the present case, it can be said that initiation of CIRP against CD is a pre-condition

to initiate insolvency proceedings against a personal guarantor before the same NCLT. Thus,

this impliedly gives protection to personal guarantors and this is the legislative intent. Thus, it

is concluded that legislative intent of Section 10A cannot be challenged.

ii. THE DEFAULT COMMITTED BY MR. SINGHANIA WAS NOT DUE TO COVID-19

58 IBC, s 60 (2).
59 ibid, s 10A.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

26

(¶ 51.) The initiation of insolvency proceedings against businesses when the economy and

markets have been critically impacted on account of Covid-19, would not only be

counterproductive to the legislative scheme of the Code, but also detrimental to the revival of

the economy.60

(¶ 52.) In the present case, the CD’s market share was reduced to merely 5% in 201861 due to

the entry of the new telecom company. This caused failure in the payment of debts, which

caused CD to go into insolvency.62 Also, Mr. Singhania being a director63 of CD will be

directly affected by the downfall of CD.

(¶ 53.) Thus, it is concluded that the cause of default committed by Mr. Singhania was not

Covid-19 but the downfall of CD due to new entrant into the market. Therefore, the

protection cannot be extended to Mr. Singhania under Section 10A of the Code.

B. PERSONAL INSOLVENCY CAN BE INITIATED AGAINST THE PERSONAL GUARANTOR

UNDER SECTION 95

(¶ 54.) The UOI & SBI submits that firstly, simultaneous proceedings can be initiated against

the personal guarantor [i]; and secondly, the principle of contract of guarantee weighs against

the personal guarantor [ii].

i. SIMULTANEOUS PROCEEDINGS CAN BE INITIATED AGAINST THE PERSONAL GUARANTOR

(¶ 55.) An application relating to the insolvency resolution of a personal guarantor of CD

shall be filed before such NCLT, where CIRP of a CD is pending.64 It also provides that any

60Ramesh Kymal v Siemens Gamesa Renewable Power Pvt Ltd Company Appeal (AT) (Insolvency) No 701 of
2020; ‘Insolvency and Bankruptcy Code (Amendment) Ordinance 2020’ (MCA) <https://mca.govin/Ministry/
pdf/IBCAmedBill_05062020.pdf> accessed on 2 January 2021.
61 Moot Proposition, ¶ 7.
62 Moot Proposition, ¶ 9.
63 Moot Proposition, ¶ 3.
64 IBC, s 60 (2).

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

 27

insolvency resolution process pending in any court or tribunal shall stand transferred to

the AA dealing with insolvency resolution process of CD.65 Simultaneous proceedings can be

initiated against the principal borrower and the sureties.66

(¶ 56.) It is submitted that the Code envisages initiation of concurrent proceedings against

both a CD and its sureties, before the same AA.

(¶ 57.) Thus, it is concluded that simultaneous proceedings can be initiated against the Mr.

Singhania under the Code.

ii. THE PRINCIPLE OF CONTRACT OF GUARANTEE WEIGHS AGAINST THE PERSONAL

GUARANTOR

(¶ 58.) The liability of a surety towards a creditor is coextensive67 with that of the principal

borrower.68 When a default is committed, the principal borrower and the surety are jointly

and severally liable, and the creditor has the right to recover its dues from either or from both

of them simultaneously,69 in no particular sequence.70 An action against the surety cannot be

prevented solely on the ground that the creditor has an alternative relief against the principal

borrower71 as this will defeat the very object of the guarantee.72 The discharge which the

principal debtor may get under the Code does not absolve the surety of his liability.73

65 ibid, s 60 (3).
66Edelweiss Asset Reconstruction Co Ltd v Sachet Infrastructure Pvt Ltd & Ors (2019) 11 TMI 1212; SBI v
Athena Energy Ventures Pvt Ltd 2020 SCC OnLine NCLAT 774.
67 Indian Contract Act 1872, s 128.
68 Ram Kishun v State of UP (2011) 11 SCC 511.
69 Pollock and Mulla, Indian Contract and Specific Relief Acts (12th edn, LexisNexis 2006).
70 Chokalinga Chettiar v Dandayunthapani Chattiar AIR 1928 Mad 1262.
71 Bank of Bihar Ltd v Damodar Prasad & Anr AIR 1969 SC 297.
72SBI v Indexport Registered & Ors AIR 1992 SC 1740; Industrial Investment Bank of India Ltd v
Biswanath Jhunjhunwala (2009) 9 SCC 478.
73Maharashtra State Electricity Board (Bom) v Official Liquidator AIR 1982 SC 1497; Canonnore Spinning
and Weaving Mills Ltd v Industrial Finance Corp of India Ltd (2002) 5 SCC 54.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

28

(¶ 59.) In the present case, the very object of a contract of guarantee would be prejudiced if

SBI is prohibited from filing claims in the CIRP of both the CD and Mr. Singhania74 and the

ability of SBI to recover its debt may be seriously impaired. The personal guarantor being a

director of CD75 should not be allowed to escape the rigour of the law.76

(¶ 60.) Thus, it is concluded that the principle of contract of guarantee weighs against the

personal guarantor and therefore, simultaneous proceedings can be initiated against the

personal guarantors under Section 95.

74 Bank of Bihar Ltd (n 71).

75 Moot Proposition, ¶ 3.
76 SBI v V Ramakrishnan (2018) 17 SCC 394.

MEMORIAL for RESPONDENTS [ARGUMENTS ADVANCED]

 29

PRAYER

Wherefore in light of the facts stated, issues raised, arguments advanced and authorities cited,

counsels for respondents humbly prayed that this Hon’ble Court may be pleased to adjudge

and declare that:

1. The CoC shall not be directed to consider the plan of Indian Telecom.

2. GDA is not a financial creditor.

3. Spectrum shall be a part of CIRP and AGR dues are operational in nature.

4. Personal Insolvency can be initiated against personal guarantors under Section 95 of

the Code. Further, Section 10A of the Code shall not extend to personal guarantors.

The Court being satisfied may also make any such order as it may deem fit in the light of

Justice, Equity and Good conscience

All of which is most humbly prayed

ON BEHALF OF RESPONDENTS

PLACE: SD/-

DATE: COUNSELS FOR THE RESPONDENTS

MEMORIAL for RESPONDENTS [PRAYER]