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Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + Tri Insolvency and Bankruptcy - 2020 (1) TMI Tri This

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2020 (1) TMI 1235 - Tri - Insolvency and Bankruptcy


Issues Involved:
1. Default in repayment under the Debenture Subscription Agreement.
2. Nature of the Debenture Subscription Agreement (investment vs. loan).
3. Validity of the petition under Section 7 of the IBC.
4. Computation of the outstanding amount.
5. Authority to invoke the corporate guarantee.
6. Stamp duty on the Deed of Guarantee.
7. Moratorium period and redemption of debentures.
8. Admissibility of the petition under Section 7 of the IBC.

Issue-wise Detailed Analysis:

1. Default in repayment under the Debenture Subscription Agreement:
The petitioner, a finance company, disbursed ?20,00,00,000/- to the Corporate Debtor under a Debenture Subscription Agreement dated 27/03/2015. The Corporate Debtor committed default in repayment, with the outstanding amount totaling ?41,25,10,306/- as of 25/03/2019. Despite notices and reminders, the Corporate Debtor failed to repay the dues.

2. Nature of the Debenture Subscription Agreement (investment vs. loan):
The Corporate Debtor contended that the Debenture Subscription Agreement was an investment, not a loan. However, the tribunal relied on the National Company Law Appellate Tribunal's decision in Neelkanth Township and Construction Pvt. Ltd. v. Urban Infrastructure Trustees Ltd., which held that a debenture qualifies as a 'financial debt' under Section 5(8) of the IBC, 2016 and Section 2(30) of the Companies Act, 2013. Therefore, the argument that the agreement was merely an investment does not stand.

3. Validity of the petition under Section 7 of the IBC:
The Corporate Debtor argued that the petition was not maintainable under Section 7 of the IBC due to the Debenture Trust Deed and Deed of Guarantee, which authorized IL&FS to invoke the corporate guarantee. However, the tribunal found that clause 18.2.1 of the Debenture Subscription Agreement entitled the petitioner to enforce the security documents upon default.

4. Computation of the outstanding amount:
The Corporate Debtor disputed the computation of the amount claimed in default. The tribunal observed that the outstanding amount included the principal, interest, redemption premium, and penal interest as per the Debenture Subscription Agreement. The amount due was secured by the Corporate Debtor through a Deed of Guarantee.

5. Authority to invoke the corporate guarantee:
The Corporate Debtor claimed that the petition was filed without the consent of other debenture holders and that the Board Resolution did not authorize the initiation of the Corporate Insolvency Resolution Process. The tribunal found that the Board Resolution annexed by the petitioner did authorize the initiation of insolvency proceedings, and the petition was validly filed.

6. Stamp duty on the Deed of Guarantee:
The Corporate Debtor argued that the Deed of Guarantee was not duly stamped and hence not enforceable. The tribunal noted that the Deed of Guarantee was executed in New Delhi with sufficient stamp duty paid. The obligation to pay stamp duty lay with the Corporate Debtor, who executed the Deed of Guarantee. The tribunal also distinguished the case from the Supreme Court judgment in Garware Walls Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd., as it pertained to arbitration proceedings, not IBC petitions.

7. Moratorium period and redemption of debentures:
The Corporate Debtor contended that the principal moratorium period was still available. However, the tribunal found that the moratorium period expired on 31/03/2017, and the date 30/09/2018 was for the repayment of the last 20% of the principal amount, not the entire debt.

8. Admissibility of the petition under Section 7 of the IBC:
The tribunal concluded that the petition fulfilled all requisite conditions under Section 7 of the IBC. The Corporate Debtor defaulted in repaying the loan, and the existence of debt and default was reasonably established by the Financial Creditor. The petition was admitted, and an Interim Resolution Professional was appointed to carry out the functions under the Insolvency & Bankruptcy Code.

Order:
The petition was admitted, and a moratorium was imposed prohibiting the institution or continuation of suits, transferring or disposing of assets, and other actions against the Corporate Debtor. The supply of essential goods or services to the Corporate Debtor was to continue during the moratorium period. Public announcement of the corporate insolvency resolution process was to be made immediately, and an Interim Resolution Professional was appointed.

 

 

 

 

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