2021 (6) TMI 248 - Tri - Companies Law

Redemption of Secured Non-Convertible Debentures (NCDs) - Scope of resolution plan on redemption - Seeking intervention in the captioned Company Petition - Petitioner are party to the ICA or not - debenture trustee - hearing of Application under Section 71(10) of the Act - no Resolution Plan has yet been finalised - HELD THAT - Section 71(10) entitles the debenture holders and the debenture trustee to make the Application to the Tribunal where the Company fails to redeem the debentures on the date of the maturity or fails to pay the interest on the debentures when it is due. The issue of debentures is a contract between the debenture holders and the Respondents. The Petitioner as the debenture trustee acts in the interest of the debenture holders and is specifically permitted under 71(10) of the Act to approach the Tribunal - the Applicant could not be classified as 'a person interested in the matter'. Besides the Petitioner in its Petition has clearly pleaded that neither it nor the debenture holders are parties to the ICA nor have acceded there to. Therefore, the Applicant cannot be regarded either as a necessary or proper party to the Company Petition. The statutory rights of the debenture holders cannot be sacrificed and jeopardized, under the garb of facilitating the Resolution Plan, which is yet to see the light of the day. The ends of justice certainly would not encourage or sanction such a contingency. Besides the Resolution of R1 and the rights of the Petitioner under Section 71(10) are independent of each other. The Resolution on the basis of an administrative Circular of the RBI would not thwart the statutory rights of the Petitioner. Therefore, hearing of the Company Petition in the absence of the Applicant would not be an abuse of the process of the Tribunal. The Application is frivolous and is devoid of any merits whatsoever - application dismissed.

Summary

Issues:
Application for intervention and dismissal of Company Petition by Lead Bank of creditors under an Inter Creditor Agreement (ICA).

Analysis:
1. The Application filed by the Lead Bank of the creditors under an Inter Creditor Agreement (ICA) sought intervention in the Company Petition and dismissal of the Company Petition. The Company Petition was filed by the IDBI Trusteeship Services Limited against Reliance Home Finance Limited and Reliance Capital Limited, seeking direction to redeem debentures issued by R1. The Petitioner alleged defaults by R1 in servicing debts, leading to the Company Petition.

2. The Applicant contended that a Resolution Plan for R1 was in progress, involving lenders under the ICA, and any adverse order in the Company Petition could disrupt the Resolution Process. The ICA lenders refrained from enforcing security interests to resolve R1's financial situation, emphasizing the larger public interest and potential harm to stakeholders if adverse orders were passed.

3. The Applicant sought to be heard in the Company Petition under Rule 73(3) & (4) of the National Company Law Tribunal Rules, 2016 (the Rules) to safeguard interests of stakeholders and the public interest. The Applicant presented prayers for intervention, dismissal of the Company Petition, and any other orders deemed fit by the Tribunal.

4. The Respondent objected to the Application, arguing lack of locus standi for the Applicant in an Application under Section 71(10) of the Companies Act, 2013. The Respondent disputed the influence of the ICA terms on the Company Petition outcome and the timing of the Resolution Plan's finalization.

5. The Tribunal analyzed the Applicant's intervention request under Rule 73(3) & (4) and Section 71(10) of the Act. It determined that the Applicant lacked a direct nexus with the debenture transaction and could not be classified as 'a person interested in the matter.' The Tribunal also dismissed the argument of public interest as a ground for intervention.

6. The Tribunal emphasized that the Applicant's prayers for intervention and dismissal of the Company Petition were contradictory. It clarified that the Company Petition could not be dismissed without a hearing on merits and concluded that the Applicant was not entitled to be impleaded as an intervener.

7. Referring to Rule 11 of the Rules, the Tribunal highlighted that inherent powers could not be used to bring in a party not contemplated under the Act. It underscored the independence of statutory rights of debenture holders and the Resolution Plan, rejecting the Applicant's claims and deeming the Application frivolous and meritless.

8. Ultimately, the Tribunal dismissed the Application for intervention and ordered that there would be no costs associated with the dismissal. The decision was based on the lack of merit in the Applicant's claims and the absence of entitlement to be heard in the Application under Section 71(10) of the Act.