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TMI Blog2020 (5) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... res in consideration of the money brought in by the Financial Creditor into the coffers of the Corporate Debtor. Fully convertible debentures are a financial instrument within the meaning of section 5(8) of the Insolvency and Bankruptcy Code, 2016 - Convertible Debenture is in the nature of financial debt; though it is hybrid in nature, it cannot be treated as equity unless converted into equity; it cannot par take the characteristics of equity until the conversion is done. The Financial Creditor has taken all precautions to safeguard his interest so long as the Convertible Debenture remains as debenture. It is also seen from the documents that a Simple Mortgage is seen to have been created in favour of the Financial Creditor which shows that there is debt which is a financial debt based on the principle that once a mortgage; always mortgage . It postulates that unless and until a mortgage is discharged it remains as a mortgage and as such the financial debt - On a perusal of clause 8.1.2 of the Master Facility agreement, a default is said to have occurred when there is non-payment in full, any of the interest amount that becomes due within a period of 30 days on which such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Project Finance by way of issuance of fully convertible debentures by the Corporate Debtor; 40 debentures of ₹ 25 lakhs each, for an amount of ₹ 10 Crores on 20th August, 2007 and 20 debentures of ₹ 25 lakhs each, totalling ₹ 5 Crores on 20th November, 2007; total value of the debenture being ₹ 15 Crores. 5. Part V of the application describes the particulars of Financial Debt, documents, records and evidence of default as described below: Mortgage Deed: (Annexure I) All that piece of land known as Plot Nos. A11, A12, A13 and A14 in Phase II in MEPZ Special Economic Zone area forming part of Survey No. l64/1(Part) within the village limits of Kadaperi, Tambaram Taluk, Kancheepuram District containing by admeasurements 9,940 sq. meter. Mortgage Deed: (Annexure 2) Superstructure consisting of main building, security building and connected facilities constructed on the land comprising a total built up area of 133,610 Square feet (Approx.) together with borewell, roads and amenities and situated at Plot Nos. A11, A12, A13 and A14, Phase-II, MEPZ Special Economic Zone, NH-45, Tambaram, Chennai 600 045 within the Sub-Registration District ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On 18th April, 2017 a Memorandum of Agreement was executed by and between the Financial Creditors and Corporate Debtor, which is stated to have been confirmed and made binding by Madras High Court on 14th July, 2017, to which Corporate Debtor did not co-operate with Financial Creditor to monetize the assets and to make the payments to Financial Creditor as was agreed in the MOA. 12. Total amount claimed as due as on 20th May, 2014 was ₹ 49,13,76,941/- (Rupees Forty Nine Crores Thirteen Lacs Seventy Six Thousand Nine Hundred Forty one only) to be broken up as a Principal sum of ₹ 15,00,00,000/- (Rupees Fifteen Crores only) and an interest of ₹ 34,13,76,941/- (Rupees Thirty Four Crores Thirteen Lacs Seventy Six Thousand Nine Hundred and Forty One only) 13. In the counter statement filed by the Respondent/Corporate Debtor, it has been stated that: (a) the Respondent Company was engaged in the business of manufacture of knitted garments who had entered into a Master Facility Agreement with the Applicant whereby the Applicant subscribed to fully convertible debentures of the Respondent Company to the extent of ₹ 15,00,00,000/- (Rupees Fifteen Crores onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a quietus to the litigation the Respondent Company entered into the Memorandum of Agreement, agreeing to share 50% of the net assets after deducting/adjusting certain statutory dues etc. which was higher than the maximum of 37.5% equity entitlement of the Applicant. The Corporate Debtor stated that the claims were sought to be settled on the basis of assets available and not on the basis of any liability admitted or otherwise. 15. The Corporate Debtor stated to have approached the MEPZ-SEZ Authorities after obtaining the High Court Order which was given in November, 2017 with a view to accomplish the surrender and sale of the assets as contemplated by the said MOA through the office of the MEPZ-SEZ. The Corporate Debtor also submitted that the property in question namely the factory building belonging to the MEPZ-SEZ (Government of India). The Corporate Debtor further submitted that company being a 100% export oriented company had various obligations concerning debonding of machinery etc. and elucidated various procedural prescriptions. 16. The Corporate Debtor has also claimed that the Memorandum of Agreement constituted a separate Contract distinguishable from the Master F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facility or the issue of bonds, notes, debentures, loan stock or any similar instrument. A mere perusal of the aforesaid definition makes it very clear that any amount raised pursuant to issuance of debentures falls within the ambit of Financial Debt and therefore the principal and interest amount that is liable to be paid by the Respondent to the Applicant in pursuance to the Master Facility Agreement is a Financial Debt . It is also stated in the Rejoinder that the Respondent Company has acknowledged the Applicant as a Debenture Holder in its Balance Sheet for the year ending 2016-17, further establishing that a Financial Debt is due to the Financial Creditor. 19. This Tribunal has examined the averments and statements as per the application of the Financial Creditor, the affidavit by the Corporate Debtor, the Rejoinder filed by the Financial Creditor and various documents such as Master Facility Agreement, Debenture Subscription Agreement, Simple Mortgage Deed, etc. which form part of the application. 20. On evaluation of the aforementioned documents and after hearing both the parties, this Tribunal hereby is of the opinion that the intention of both the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarter ending September, 2007, interest amount was not paid for the remaining period by the Respondent and there is a clear default on part of the Respondent. 24. The Applicant being a debenture holder and further in order to secure the amounts due and payable under the Master Facility Agreement and Debenture Subscription Agreement dated 21.05.2007, a Simple Mortgage Deed dated 25.02.2010 was executed by the Respondent Company. 25. Thus taking into consideration the facts and circumstances of the case as well as the position of Law, we are of the view that this Application as filed by the Applicant - Financial Creditor is required to be admitted under section 7(5) of the I B Code, 2016. 26. The Financial Creditor has proposed the name of Mr. A.R. Ramasubramania Raja having Registration Number [IBBI/IPA-002/IP-N00635/2018-19/11982] (e-mail:- [email protected]) (Mobile No: +91-9843043576) as Interim Resolution Professional (IRP) and a written communication in the format prescribed under Form 2 of the Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016 has been filed by the proposed IRP who is appointed as the IRP to take forward the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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