2019 (12) TMI 1432 - Tri - Companies Law

Seeking direction to make repayment of the deposit(s)/debenture(s) along with interest due - section 71(10) of the Companies Act, 2013 read with rule 73 of the National Company Law Tribunal Rules, 2016 - HELD THAT - It is not case of even the petitioners that the company has resorted to misappropriation/fraud in order to deny the claim of the petitioners. The financial status of the company discloses that the company is suffering substantial losses leading to severe financial distress making it unable to pay its stakeholders. Since the issue is not exclusively confined to the petitioners, as several similarly situated stakeholders, as per the list enclosed to the petition, the efforts being by the company like to explore the possibility of settlement, refer the matter to arbitration, selling properties of the companies, are appropriate/plausible steps to be pursued so as to find solution to the entire issue. The basic facts as contended by the petitioners, prima facie, are not in dispute. While deciding an application/petition filed under section 71(10) of the Companies Act, 2013 read with rule 73 of the NCLT Rules, 2016, the Tribunal has to consider financial status of company, the interest of all stakeholders, etc., before ordering to repay the outstanding standing exclusively in respect of the petitioners. The reasons furnished by the company for its failure to redeem debentures, pay interest of NCDs in question, are convincing. Therefore, it would be just and proper to grant six months' time tentatively to the company to explore all possibilities of settlement of the claims of the petitioners along with all similarly situated claimants. The respondent-company is hereby granted six months' time, pro visionally from today, so as to explore all possibilities of settlement of claims of the petitioners along with other similarly situated claimants.

Summary

Issues Involved:
1. Non-payment of interest and redemption of debentures.
2. Financial distress of the respondent company.
3. Proposal for settlement and arbitration.

Issue-wise Detailed Analysis:

1. Non-payment of Interest and Redemption of Debentures:

The petitioners filed C.P. No. 73/BB/2019 under section 71(10) of the Companies Act, 2013, seeking repayment of deposits/debentures along with interest due from the respondent company, M/s. Tierra Farm Assets Co. P. Ltd. The petitioners subscribed to secured non-convertible debentures issued by the company, which were confirmed via allotment letters in March 2017. The company initially made interest payments but defaulted on subsequent payments due in March, June, September, and December of 2018. Despite repeated correspondence, the company failed to redeem the debentures or make the due interest payments.

2. Financial Distress of the Respondent Company:

The respondent company acknowledged its failure to meet financial obligations due to substantial losses and financial distress. The company shut down its projects in early 2017 due to non-availability of water, resulting in significant financial losses. The company proposed a compromise to settle dues and suggested arbitration for dispute resolution. The company also proposed selling immovable properties to settle the dues but faced delays in obtaining necessary governmental approvals.

3. Proposal for Settlement and Arbitration:

The respondent company expressed willingness to resolve the dispute through arbitration, despite the debenture trust deed not containing an arbitration clause. The company proposed to repay the dues by allotting plots of land to investors equivalent to their investment value. The company outlined a detailed procedure for obtaining necessary approvals and completing the allotment, requiring at least one year. The company sought permission to proceed with arbitration to settle the issue.

Judgment:

The Tribunal acknowledged the financial distress of the company and the efforts being made to explore settlement possibilities. The Tribunal noted that the issue affected multiple stakeholders, not just the petitioners. Considering the financial status of the company and the interests of all stakeholders, the Tribunal found the company's reasons for failing to redeem the debentures and pay interest plausible.

The Tribunal granted the respondent company six months to explore all possibilities of settling the claims of the petitioners and other similarly situated claimants. No order as to costs was made. The judgment emphasized the need to consider the financial status of the company and the interests of all stakeholders before ordering repayment exclusively to the petitioners.