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2021 (5) TMI 275 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - The Bench is of the view that the contention of the Corporate Debtor that 51% approval of Debenture-holders should have been taken in writing is incorrect. The very fact that the Debenture Trustee has written to all debenture-holder to give their consent and that a non-receipt of any response would constitute as 'deemed approval', is totally correct. Hon'ble Supreme Court in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT has clearly mentioned that in case where a Corporate Debtor commits a default of financial debt, the Adjudicating Authority has to merely see the records of the Information Utility and other evidence produced to satisfy itself that a default has occurred. The facts clearly reveal that the Corporate Debtor who has defaulted in making the payment to the Petitioner is liable to pay the Petitioner - the nature of Debt is a Financial Debt as defined under section 5 (8) of the Code. It has also been established that there is a Default as defined under section 3 (12) of the Code on the part of the Debtor. The two essential qualifications, i.e. existence of 'debt' and 'default', for admission of a petition under section 7 of the I B Code, have been met in this case. Besides, the Company Petition is well within the period of limitation. Petition admitted - moratorium declared.
Issues Involved:
1. Maintainability of the petition 2. Existence of financial debt and default 3. Compliance with Debenture Trust Deed (DTD) 4. Requirement of consent from debenture holders 5. Appointment of Interim Resolution Professional (IRP) 6. Application of moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) 7. Public announcement and duties of IRP Issue-wise Detailed Analysis: 1. Maintainability of the petition: The Corporate Debtor argued that the petition is not maintainable, claiming no default in payment and asserting solvency. However, the Tribunal found the petition maintainable as the Petitioner, Beacon Trusteeship Limited, had established the existence of financial debt and default. 2. Existence of financial debt and default: The Tribunal noted that the Corporate Debtor issued 6,500 secured, unlisted, unrated redeemable, non-convertible debentures aggregating ?65,00,00,000/- with a default amount claimed at ?22,35,75,376/- including interest. The default date was 12.11.2019. The Corporate Debtor failed to pay the Coupon Rate for the quarters ending 12.11.2019, 12.02.2020, 12.05.2020, 12.08.2020, and 12.11.2020, amounting to ?9,13,57,623/-. Additionally, the Corporate Debtor defaulted on the Redemption Amounts for the quarters ending 12.02.2020, 12.05.2020, 12.08.2020, and 12.11.2020, totaling ?65,00,00,000/-. The Tribunal confirmed the existence of financial debt and default as defined under Sections 5(8) and 3(12) of the Code, respectively. 3. Compliance with Debenture Trust Deed (DTD): The Tribunal reviewed the Debenture Trust Deed (DTD) and found that the Corporate Debtor defaulted in making coupon payments due on 12.11.2019 and subsequent dates. The DTD specified that an additional interest of 1% per month compounded annually was payable in the event of default. The Corporate Debtor's failure to pay the coupon rate and redeem debentures constituted an Event of Default under Articles 11.1.4 and 11.1.5 of the DTD. 4. Requirement of consent from debenture holders: The Corporate Debtor argued that the consent of 51% debenture holders was required to declare a default. The Tribunal found this argument erroneous, noting that the DTD clearly defined an Event of Default based on non-payment of coupon rates and redemption amounts. The Tribunal also noted that the Debenture Trustee had sought consent from all debenture holders, and non-receipt of any response constituted deemed approval. The Tribunal relied on the Supreme Court's judgment in "Innoventive Industries Vs. ICICI Bank and Ors." which stated that the adjudicating authority only needs to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. 5. Appointment of Interim Resolution Professional (IRP): The Tribunal appointed Mr. S. Gopalakrishnan as the Interim Resolution Professional (IRP) to conduct the Insolvency Resolution Process. The Tribunal found no disciplinary action pending against the proposed IRP. 6. Application of moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC): Upon admitting the petition, the Tribunal imposed a moratorium as prescribed under Section 14 of the IBC. The moratorium prohibits the institution of any suit before a court of law, transferring/encumbering any assets of the Debtor, and ensures the supply of essential goods or services to the Corporate Debtor is not terminated during the moratorium period. The moratorium remains effective until the completion of the Insolvency Resolution Process or the approval of the Resolution Plan under Section 31 of the Code. 7. Public announcement and duties of IRP: The Tribunal directed the IRP to make a public announcement of the initiation of the Corporate Insolvency Resolution Process as per Section 13 of the Code. The IRP is required to perform duties under Sections 18 and 15 of the Code and inform the Tribunal of the progress within 30 days. Conclusion: The Tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal's order included the appointment of an IRP, the imposition of a moratorium, and directions for public announcement and compliance with the Code. The Tribunal also declared an interlocutory application seeking interim relief as infructuous.
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