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2019 (2) TMI 1865 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - whether the ICICI Bank UK PLC is a party to the agreement executed between the Financial Creditor and the Corporate Debtor. Is it directly a party or beneficiary of clauses in DASA? - HELD THAT - The first facility agreement is between the petitioner-the Financial Creditor and AOCL (a group company of the Corporate Debtor). On 21.12.2007 a Put Option Deed was executed between the Quicknet Telecom Private Limited and the Corporate Debtor (as the Put Option Provider) and AOCL. According to the terms of the agreement AOCL was granted the option to sell 103,600,000 of its ordinary shares in the capital of AOCL issued with a par value of INR 1 each to, Quicknet Telecom Private Limited and secondly the Corporate Debtor was required to place in Escrow with an Escrow Agent, the documents in relation to the property at 3, Bhagwan Das Road, New Delhi-110001. On the same date an Escrow Agreement was executed inter alia between the Corporate Debtor, the Financial Creditor and IDBI Trusteeship Services Limited, whereby IDBI Trusteeship Services Limited was appointed as an Escrow Agent for custody of the documents, pursuant to the Put Option Deed dated 21.12.2007 - It is worthwhile to notice that the Financial Creditor has advanced loan to one of its group company namely AOCL. However, it is a party to the Escrow Agreement executed between the Corporate Debtor and the IDBI Trusteeship Services Ltd. Whether in terms of the mechanism laid down under the Debt Asset Swap Agreement dated 20.12.2014, Undertaking dated 14.04.2015 executed by the Corporate Debtor in favour of the Financial Creditor and the amendment carried in Articles of Association of the Corporate Debtor with an undertaking to sell the property owned by the Corporate Debtor situated at 3, Bhagwan Das Road, New Delhi, the objection concerning privity of contract losses its significance? - HELD THAT - The reading the Facility Agreement, the provisions of DASA dated 20.12.2014, the Undertaking dated 14.04.2015 along with the amendment carried by the Corporate Debtor in its Articles of Association no doubt is left that the Corporate Debtor has acknowledged the applicant-Financial Creditor as its Financial Creditor and therefore the terms of Loan Agreement in respect of the other group companies stand incorporated. The aforesaid conclusion emerges from reading of clause 5 and its sub clauses of DASA dated 20.12.2014, clause 2.1, 2.3 2.4 of the Undertaking dated 14.04.2015 and Article 34 (c) (i) of the Articles of Association. Thus, the petitioner satisfies the requirement of Section 5 (7) of the Code as it is a person to whom financial debt is owed or a person to whom such debt has been legally assigned or transferred. Financial Debt means a debt along with interest which has been disbursed against the consideration for the time value for money - The Limitation for the purposes of enforcing payment of money secured by a mortgage or otherwise charged upon immovable property is twelve years. In that regard Article 62 of the Schedule appended to the Limitation Act may be relied upon. Therefore, going by the provisions of the Limitation Act as made applicable by Section 238 (A) of the Code the petition is within the period of limitation. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code. We are satisfied that a default amounting to crores of rupees has occurred within the meaning of Section 4 of the Code and the application under sub section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrant admission as it is complete in all respects. Petition admitted - moratorium declared.
Issues Involved:
1. Whether the ICICI Bank UK PLC qualifies as a financial creditor under Section 5(7) and (8) of the Insolvency and Bankruptcy Code, 2016. 2. Whether the claim by ICICI Bank UK PLC is time-barred under the Limitation Act. 3. Whether the Debt Asset Swap Agreement (DASA) and the multi-party undertaking create a valid and enforceable obligation on the Corporate Debtor. 4. Whether the application under Section 7 of the Code is complete and meets all statutory requirements. 5. Whether the moratorium under Section 14 of the Code should be applied. Detailed Analysis: 1. Qualification as Financial Creditor: The ICICI Bank UK PLC filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Insolvency Resolution Process against Aditya Estates Private Limited (Corporate Debtor). The Financial Creditor had granted a term loan to Assam Oil Corporation Limited (AOCL), a group company of the Corporate Debtor, and sought to recover the dues through the Corporate Debtor's assets. The Tribunal examined various agreements, including a Debt Asset Swap Agreement (DASA) and a multi-party undertaking, which indicated that the Corporate Debtor had acknowledged the Financial Creditor as a lender and had undertaken to sell its property to repay the debt. The Tribunal concluded that the Financial Creditor satisfies the requirements of Section 5(7) of the Code, as it is a person to whom financial debt is owed or legally assigned. 2. Timeliness of the Claim: The Corporate Debtor argued that the claim is time-barred, citing the date of default as 28.12.2011 and the default in payment of interest as 24.12.2013. The Tribunal noted that the Debt Asset Swap Agreement (DASA) was executed on 20.12.2014, and the multi-party undertaking was executed on 14.04.2015, both of which acknowledged the debt before the expiry of three years from the date of default. Additionally, the Articles of Association were amended in April 2015 to include the Financial Creditor as a lender. The Tribunal held that the limitation period for enforcing payment of money secured by a mortgage or otherwise charged upon immovable property is twelve years under Article 62 of the Limitation Act. Therefore, the petition filed on 06.08.2018 was within the period of limitation. 3. Validity and Enforceability of DASA and Undertaking: The Tribunal examined the Debt Asset Swap Agreement (DASA) dated 20.12.2014 and the multi-party undertaking dated 14.04.2015, which were executed to secure the repayment of loans granted by the Financial Creditor to AOCL. The Tribunal found that these agreements, along with the amendment to the Articles of Association of the Corporate Debtor, established a privity of contract by reference, making the Financial Creditor a beneficiary. The Corporate Debtor had undertaken to sell its property to repay the debt owed to the Financial Creditor, thus creating a valid and enforceable obligation. 4. Completeness of the Application: The Tribunal reviewed the application filed by the Financial Creditor under Section 7 of the Code and found that it was complete in all respects. The application was filed in the prescribed form, included details of the default along with supporting documents, and specified the name of the proposed resolution professional. The Tribunal was satisfied that a default amounting to crores of rupees had occurred, and no disciplinary proceedings were pending against the proposed Interim Resolution Professional. 5. Application of Moratorium: The Tribunal declared a moratorium under Section 14 of the Code, imposing prohibitions on the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of its assets, and recovering any property occupied by the Corporate Debtor. The moratorium would not apply to transactions notified by the Central Government or to a surety in a contract of guarantor to a Corporate Debtor. The Interim Resolution Professional was directed to make a public announcement regarding the admission of the application and to perform all functions as prescribed under the Code. Conclusion: The Tribunal admitted the petition filed by ICICI Bank UK PLC, appointed Mr. Alok Kailash Saksena as the Interim Resolution Professional, and directed the initiation of the Corporate Insolvency Resolution Process against Aditya Estates Private Limited. The Tribunal also imposed a moratorium to protect the assets of the Corporate Debtor and ensure the smooth conduct of the insolvency process.
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