2021 (3) TMI 1333 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - whether or not this Bench can pass Section 7 petition order on the application moved by Creditor i.e. Asset Care and Reconstruction Enterprises Ltd. based on the Assignment deed dated 23.03.2019? - HELD THAT - It is evident on record and it is also not in dispute that the Corporate Debtor is a subsidiary to its holding Company i.e. SARE Public and distinct entity having its properties in its name. It is no more res Integra that once IBC petition is filed, the only point i.e. to be decided is whether debt and default have been proved by the petitioner who has filed an application for initiation of Corporate Insolvency Resolution Process regardless of the proceedings pending before various Courts. Here this order is passed in a declaration suit filed by Receiver appointed to take control of the Corporate Debtor holding company. In the order under Order 39 Rule 1 2 CPC, it has been made clear that undertaking given by the holding company on behalf of Subsidiaries Company is not binding on the subsidiary companies because they are distinct entities having freedom to take actions as per its requirement. Therefore, once IBC proceeding is initiated, unless the proceeding in which order has been granted has overriding effect over IBC, such proceeding or order cannot come in the way of admitting a Company Petition under Section 7 of the Code. Upon perusal of the documents, it appears that these loans were given to the Corporate Debtor in between 2015 and 2018 i.e. before the Hon'ble High Court of Delhi passed order on 12.10.2018. In the said order, it has only been said that Altico should not create any third party right in favour of others. However, since there are two transactions one is Debenture transaction and another is Facility Agreement, out of these two, none being repaid by the Corporate Debtor despite notice has been served upon it, even if Facility Agreement issue is excluded as per the order of Honourable High Court of Delhi passed on 12.10.2018 then also, the financial creditor could establish its case by saying that Assignment with respect to Debentures is valid and not in violation of the orders of Hon'ble High Court and there being no contest with regard to the debt and default from the Corporate Debtor side, we believe that the applicant herein has proved the existence of debt and default under both the transactions. With regard to facility agreement, that issue being pending before the Hon'ble High Court of Delhi, since the petitioner has proved existence of debt and default in relation to debentures issued for an amount of ₹ 95 Crore and ₹ 220 Crore along with interest, it is held that it is a case fit for admission to initiate CIRP taking default of repayment of debenture amounts by the corporate debtor, in view thereof, this petition is hereby admitted. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Default in repayment by the Corporate Debtor.
2. Assignment of debt to the petitioner.
3. Intervener's claims and the binding nature of agreements.
4. Jurisdiction and the effect of pending legal proceedings.
5. Validity of the Facility Agreement and the Debenture Trust Deeds.
6. Appointment of Interim Resolution Professional and declaration of moratorium.

Detailed Analysis:

1. Default in Repayment by the Corporate Debtor:
The petition was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor for defaulting on repayment of ?462,34,02,742. Altico Capital India Ltd. disbursed ?375,00,00,000 through two Debenture Trust Deeds and one Facility Agreement. The Corporate Debtor failed to repay the amount, leading to the initiation of the Corporate Insolvency Resolution Process (CIRP).

2. Assignment of Debt to the Petitioner:
The debt was assigned to the petitioner via an Assignment Agreement dated 23.03.2019. The petitioner also filed an Amended and Restated Declaration of Trust appointing the Financial Creditor as the trustee. The Corporate Debtor owes ?462,34,027,742, including interest and penalties. Despite notice, the Corporate Debtor failed to make payments, prompting the petitioner to seek CIRP initiation.

3. Intervener's Claims and the Binding Nature of Agreements:
SARE Public Company Ltd., through its Receiver, filed an intervener application, claiming that an agreement between Wafra Capital Partners L.P and SARE Public prohibited subsidiaries from creating any lien or encumbrance on their properties. The intervener argued that the Corporate Debtor, being a subsidiary, was bound by this agreement, and thus, the petition should be dismissed.

4. Jurisdiction and the Effect of Pending Legal Proceedings:
The Hon'ble High Court of Delhi had passed an interim order restraining the Corporate Debtor from creating any third-party rights. However, it was clarified that subsidiaries are not bound by the agreements entered into by the holding company. The tribunal noted that IBC proceedings focus on the existence of debt and default, regardless of other pending legal proceedings.

5. Validity of the Facility Agreement and the Debenture Trust Deeds:
The tribunal considered whether the Assignment Deed dated 23.03.2019 was valid. It was noted that the loans were given before the High Court's order on 12.10.2018. The tribunal concluded that the petitioner proved the existence of debt and default under both the Debenture Trust Deeds and the Facility Agreement. The Facility Agreement issue was pending before the High Court, but the default on debentures was sufficient for CIRP initiation.

6. Appointment of Interim Resolution Professional and Declaration of Moratorium:
The tribunal appointed CA Ajit Gyanchand Jain as the Interim Resolution Professional. A moratorium was declared as per Section 14 of the Code, ensuring the continuation of essential supplies to the Corporate Debtor. Directions were issued to the Ex-Management and Auditors to provide necessary documents and information to the Interim Resolution Professional within a week.

Conclusion:
The tribunal admitted the Company Petition and dismissed the intervener application (IA 3783-2020). The order was to be communicated to relevant parties and authorities, and the Registrar of Companies was directed to update the status of the Corporate Debtor. The petition was admitted, initiating the CIRP against the Corporate Debtor.