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2022 (1) TMI 1017 - AT - Insolvency and BankruptcyCorrectness of admitting of the application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - validity of assignment agreement - it is alleged that Adjudicating Authority failed to consider the fact that Assignment Agreement does not permit severance/ bifurcation of the Facility - HELD THAT - In the present case, it is noticed that there were three financial transactions, which were assigned by Agreement dated 23.03.2019. Even if, one transaction that is Facility Agreement dated 14.05.2018 was under cloud due to interim order passed by the Delhi High Court dated 12.10.2018, there was no cloud on other financial transactions, which were much before of passing of the interim order. There can be no illegality with regard to assignment of debt in favour of Respondent No.2 with regard to above two transactions and there being default with regard to above two transactions, which is an admitted fact, no exception can be taken to the admission of Application under Section 7 of the Code. The three loans which were assigned by Altico in favour of Respondent No.2 were severable and even if the Facility Agreement dated 14th May, 2018, which was sought to be given effect to be excluded from consideration, the assignment cannot be held to be illegal with regard to other two transactions that is Debenture Trust Deeds dated 04.12.2015 and 24.11.2016. There being default under the above two transactions being INR 111,55,88,511 INR 2,73,76,59,666 as mentioned in Column 2 of Part-IV of the Section 7 Application and default being more than ₹ 1 crore, the Application has rightly been admitted by the Adjudicating Authority. No error has been committed by the Adjudicating Authority in admitting the Section 7 Application - appeal dismissed.
Issues Involved:
1. Validity of the Assignment Agreement dated 23.03.2019. 2. Compliance with the interim order dated 12.10.2018 by the Delhi High Court. 3. Admissibility of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016. 4. Severability of financial transactions under the Assignment Agreement. Detailed Analysis: 1. Validity of the Assignment Agreement dated 23.03.2019: The Appellant argued that the Assignment Agreement dated 23.03.2019 in favor of Respondent No.2 (ACRE) was void and unsustainable as it violated the interim order dated 12.10.2018 passed by the Delhi High Court. The Respondent countered that the Appellant had no locus to challenge the order and that the assignment did not violate any court orders. The tribunal noted that the assignment included three financial transactions: two Debenture Trust Deeds (DTD1 and DTD2) and a Facility Agreement. The tribunal found that even if the Facility Agreement was under cloud due to the interim order, the other two transactions were validly assigned. 2. Compliance with the interim order dated 12.10.2018 by the Delhi High Court: The interim order restrained Altico from giving effect to the Facility Agreement dated 14.05.2018. The tribunal agreed with the Appellant that the assignment of the Facility Agreement was in violation of the interim order. However, the tribunal observed that the interim order did not affect the assignment of the other two Debenture Trust Deeds, which were separate and independent transactions. 3. Admissibility of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016: The tribunal examined whether the Section 7 Application was maintainable based on the existence of debt and default. The tribunal noted that the application included three financial transactions with a total default amount of INR 462,34,02,742. The tribunal emphasized that the Adjudicating Authority only needed to ascertain the existence of a default from the records or other evidence furnished by the Financial Creditor. The tribunal found that there was an admitted default under the two Debenture Trust Deeds, which was sufficient to admit the Section 7 Application. 4. Severability of financial transactions under the Assignment Agreement: The tribunal considered the severability clause in the Assignment Agreement, which allowed for the severance of any illegal, invalid, or unenforceable provisions without affecting the remaining provisions. The tribunal concluded that even if the Facility Agreement was unenforceable due to the interim order, the other two transactions were valid and enforceable. The tribunal referred to precedents that supported the principle of severability, allowing the valid parts of a transaction to be enforced independently. Conclusion: The tribunal held that the Assignment Agreement was valid concerning the two Debenture Trust Deeds and that there was an admitted default under these transactions. Therefore, the Section 7 Application was rightly admitted by the Adjudicating Authority. The appeal was dismissed, and the tribunal found no merit in the Appellant's arguments.
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