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TMI Blog2019 (4) TMI 1903X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 passed by the Adjudicating Authority (National Company Law Tribunal), Hyderabad Bench, Hyderabad, Section 7 application filed by the Bank of Baroda has been admitted and 'Interim Resolution Professional' has been appointed but Section 7 application preferred by the Appellant- 'MAIF Investments India Pte. Ltd.' has been dismissed on the ground that default is deemed to have been repaid in view of the invocation of pledge of shares and conversion of 'Compulsorily Convertible Debentures' ("CCD" for short) into equity shares. 2. The brief fact of the case is that 'M/s. Ind-Barath Energy (Utkal) Limited'- ('Corporate Debtor') is a Public Limited Company engaged in the business of developing, constructing, operating power generation and related transmission and distribution facilities and is a subsidiary of 'Ind- Barath Thermotek Private Limited' ("IBTPL" for short). The 'IBTPL' is, in turn, a subsidiary of 'Ind-Barath Power Infra Limited' ("IBPIL" for short). 3. The case of the Appellant is that 'MAIF Investments India Pte. Ltd.' and one 'MAIF Investments India 2 Pte. Ltd. ("MAIF-II or 2" for short) are pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Clause 3.3 read with Clause 9.4 of the Subscription Agreement of 2016. However, no payments were made by the 'Corporate Debtor' despite the amounts becoming due and payable. It was in this background, the Appellant filed an application under Section 7 of the 'I&B Code'. 10. Learned counsel for the Appellant submitted that the 'Corporate Insolvency Resolution Process' having initiated against 'M/s. Ind-Barath Energy (Utkal) Limited'- ('Corporate Debtor'), the dismissal of Section 7 has lost its force but the question remains as to whether the Appellant comes within the meaning of 'Financial Creditor' or not for the purpose of constitution of the 'Committee of Creditors' and determining its claim. 11. Reliance has been placed on the Investment Agreement dated 25th June, 2015 and the Subscription Agreement dated 23rd December, 2016, pursuant to which, the investments were made in the 'Corporate Debtor' and its holding Company. According to the Appellant, both the Agreements are inter-connected so much so that event of default is common to both agreements, relevant of which as detailed below: AGREEMENT DT NAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of 'OCD' of 102 Crores by claiming independent right under the Subscription Agreement dated 23rd December, 2016 and subsequently filed petition under Section 7 of the 'I&B Code'. 15. From the record, it appears that Clause 9 of the Subscription Agreement stipulates mechanism of redemption. Clause 9.2 provides for put option to enable to buy 'OCD', Clause 9.3 is for failure to purchase 'OCD', Clause 9.4 stipulates creation of redemption reserve account after 12 months and to redeem 'OCD' out of this fund only. 16. According to the Promoters, the Appellant in compliance of Clause 9.2 never issued notice for put option because debt was satisfied by invocation of pledge and the Appellant issued notice on 15th April, 2018 for redemption contrary to Clause 9.2 of the Subscription Agreement and hence neither debt was owed nor due. 17. According to learned counsel for the 'Resolution Professional', the Appellant has made a total claim of about Rs. 143.02 Crores and 'MAIF-2' has made a total claim of about Rs. 1439.34 Crores. The basis of the Appellant's claim is stated to be on account of a Subscription Agreement dated 23rd D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the 'Corporate Debtor' and 'IBTPL', the Investors sought to exercise their rights under the Investment Agreement, the Debenture Trust Deed and the Share Pledge Agreement and on 31st August, 2017, the Debenture Trustee invoked the pledge of the shares in its favour in terms of the Share Pledge Agreement. 19. The Adjudicating Authority on consideration of the matter held that the default, if any, committed by the 'Ind-Barath Energy (Utkal) Limited' is deemed to have been repaid in view of invocation of pledge shares and the conversion of 'CCDs' into equity shares. 20. The questions arise for consideration in this appeal is: (i) Whether the Appellant is a 'Financial Creditor' of the 'Corporate Debtor'? and; (ii) Whether the debt of the Appellant stands paid as held by the Adjudicating Authority? 21. Section 3(11) defines 'debt' means: "3. Definition.─ (11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; 22. Section 5(7) defines 'Financial Creditor' whereas Section 5(8) defines 'Financial Debt', whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of bonds, notes, debentures, loan stock or any similar instrument, comes within the meaning of 'financial debt'. Therefore, from the aforesaid fact, we find that there is a disbursal of Rs. 102 Crores in favour of the 'Corporate Debtor' and the 'OCDs' originally met is against time value of money and per se, constitute 'financial debt' in the light of Section 5(8)(c) of the 'I&B Code'. 24. The next question is whether the debt amount payable by 'M/s. Ind- Barath Energy (Utkal) Limited'- ('Corporate Debtor') is deemed to have been repaid in view of invocation of pledge shares and the conversion of 'CCDs' into equity shares? 25. Admittedly, by Subscription Agreement dated 23rd December, 2016, the Appellant provided a bridge loan for a sum of Rs. 102 Crores by subscribing to 10,200,000 'Optionally Convertible Debentures' ("OCD" for short) of the 'Corporate Debtor' at Rs. 100/- per 'OCD' (in February 2017). The interest payments on the 10,200,000 'OCDs' held by the Appellant were required to be made by the 'Corporate Debtor' in terms of Clause 10.1 of the Subscription Agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, 2018. 29. The aforesaid fact shows that the dispute relating to redemption of 'NCD' and 'CCD' were alleged to have been converted into equity shareholder of the 'Corporate Debtor' with 49% and 51% of holding company. Apart from the fact that it does not relate to the 'OCD', the dismissal of the application under Section 59 of the Companies Act, 2013 shows that it has not been accepted by the National Company Law Tribunal that the debenture stands converted as share in favour of the Appellant. 30. Such a finding given on a petition under Section 59 of the Companies Act, 2013 by the National Company Law Tribunal, the same National Company Law Tribunal being the Adjudicating Authority in the application under Section 7 filed by the Appellant was wrong to hold that by invocation of pledge of shares and conversion of 'CCD' into equity shares the debt amount stands paid. Under the law, there is no presumption of payment of debt merely on the invocation of the pledge till conversion of the debenture into share is accepted under the law. Further, the 'OCD' being the subject matter for disbursement of amount of Rs. 102 Crores, it cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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