9911796707
TMI Blog2020 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... it is admissible or not, and another application C.A. No. 2876(PB)/2019 being filed by applicant namely Acreage Properties Private Limited stating that its claim is also put on hold, the Resolution Professional having given an undertaking that he/she would dispose of these two claims forms within three days thereof, these applications are hereby disposed of directing the Resolution Professional to consider these two applications in accordance with law within three days hereof. In aforesaid C.A. No. 2876(PB)/2019 filed by applicant namely Acreage Properties Private Limited, with regard to second relief i.e. seeking forensic audit of the Corporate Debtor, we have not dealt with this relief leaving it open to the party, in the event it is entitled to seek such kind of relief, liberty is given to proceed in accordance with law. C.A. No. 1340(PB)/2019 It is an application filed by a claimant namely Ziasess Ventures Limited for its claim has been rejected on 09.04.2019 by the Resolution Professional on the ground the claim falls within the ambit of equity, not within the ambit of debt. On perusal of this application, it appears that an investment agreement was entered into between thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s financial debt because money has been invested through debentures on the condition that the Corporate Debtor would pay interest over the Debentures through coupons. He says that this claim is covered with a right to receive fixed assured returns from the Corporate Debtor. Moreover, as on the date of admission of this case, its debentures not being converted into equity, it shall be treated as debt but not as equity. In support of his argument, the applicant counsel has drawn our attention to the Balance Sheet of the Debtor Company reflecting its claim as a long term borrowing and showing TDS as paid on interest over the debentures. Now after having all along treated it as debt, this RP cannot now go against the very statement in the balance sheet filed by the Corporate Debtor therefore, the applicant counsel has prayed this Bench to allow its claim. As against this argument, the Resolution Professional counsel has argued that this applicant by virtue of having participation in control over the affairs of the company and there being an affirmative vote in favour of the applicant, though investment has been shown as compulsorily convertible debentures, for this debenture principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner of Inland Revenue 1907 1 KB 246; and Lemon v. Austin Friars Investment Trust Ltd. 1926 (1) Ch 15. A debenture may, therefore, be secured or unsecured (Palmer's Company Law, p. 675, 24th Edition). An ordinary debenture has to be distinguished from a 'mortgage debenture' which necessarily creates a mortgage on the assets of a company (See Palmer's Company Law, pg. 706). A compulsorily convertible debenture does not postulate any repayment of the principal. Therefore, it does not constitute a 'debenture' in its classic sense. Even a debenture, which is only convertible at option has been regarded as a 'hybrid' debenture by Palmer's Company Law (para 44.07 at page 676). In this connection, reference may be made to the "Guidelines for the protection of Debenture Holders" issued on the 14th January, 1987 which have recognised the basic distinction between a convertible and a non-convertible debenture. It is apparent that these were issued for the purpose of ensuring the serviceability and repayment of debentures on time. It has been asserted before us that the compulsorily convertible debentures in corporate practice was adopted in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong term borrowings as per the balance sheet of the Company and it is also the case of the Corporate Debtor that TDS has been deducted on the interest accrued against the compulsorily convertible debentures held by the applicant. When a party admits a factual aspect stating that applicant is a creditor, debentures are lying in its name and the debt is shown as long term borrowing, then such party cannot take out diametrically opposite stand stating that the debt being shown as capital under FEMA or under some other Regulations, therefore it is not a debt. As to civil rights are concerned, as long as such rights are not prohibited under any law, a rule or definition given in some provision of some other civil law, cannot change the rights agreed between the parties. Here in this case, this Corporate Debtor all through mentioned and shown this claim as a debt in the books of it. In view of the same, today this Corporate Debtor by relying upon some FEMA Regulations cannot say that it is not a debt, it is an equity invested by the applicant. As to this aspect, the applicant counsel has stated that the submission of the debtor counsel saying that this money is shown as equity in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly, we do not find any sense in this argument because when a company is in the process of winding up or company has become insolvent, as on the date of admission, whatever is shown as debt in the books of the Corporate Debtor, such debt shall continue as debt. Whoever is shown as shareholder, he/she/it will continue as shareholder, in this case, as on the date of admission of the petition, this is shown as debt. It is true that in the agreement, that after 15 years, these debentures would become equity, but until such time the Corporate Debtor shall pay fixed returns to this applicant. The RP merely by showing this, the RP Counsel cannot come with an argument to say that this is to be treated as equity for redemption of debentures has not been envisaged in the agreement. At the time of winding up or admission of a case under IBC, if the debentures are not matured and not convertible for the period for redemption is not complete, they shall be treated as debentures and the consequence is, it will remain as debt. Same is the case here, debentures are not matured for conversion, interest shall be paid through coupons periodically. That has also not complied with. In view thereof, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
