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TMI Blog2021 (5) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... is unconditional and irrevocable. Further, the Corporate Debtor is liable as if it is the Principal Debtor under the Debenture Trust Deed as per Clause 16 of the Deed of Guarantee. The Bench notes that the Debenture Trustee is duly registered with the RoC and certification of charge has been annexed in the Petition. A Bank statement reflecting disbursal of monies has also been annexed in the Petition. We note that Corporate Debtor has not denied the execution of the trust deed or the deed of guarantee. It is also not disputed by the Corporate Debtor regarding the monies disbursed and the quantum of debt due and computation of interest. The default and its consequences clearly provide that nonpayment of interest towards outstanding NCDs is an 'event of default' and the Debenture Trust Deed recognizes that in case there is an 'event of default', the Petitioners/Debenture Holders are entitled to recover the money paid towards the NCDs. Therefore, the Bench notes that in this case an 'event of default' has occurred in terms of Clause 8.8 of the Debenture Trust Deed when accrued interest was not paid when it became due and payable and therefore the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany') and Pune Kondhwa Realty Private Limited (hereinafter called as 'PKR') are engaged in a real estate project over 61,900 sq. ft. of a land in Village of Yeolewadi, Taluka Haveli, District Pune. 3. LDR through Board Resolution dated 15.09.2016 proposed to issue secured, unrated, redeemable, Non-Convertible Debentures (NCDs) of nominal value of ₹ 20,000/- each aggregating to ₹ 40,00,00,000/- on a private placement basis, issued in two series, in tranches, pursuant to the Debenture Trust Deed dated 06th October, 2016, out of which 14625 non-convertible debentures amounting to nominal value of ₹ 29,25,00,000/- are currently held by the Petitioners herein who are debenture holders. Trust Capital Services Private Limited then transferred 1000 number of Non-Convertible Debentures issued by the Issuer Company amounting to ₹ 2,00,00,000 to the Petitioner No. 2. 4. The Series I debentures were redeemable in 10 equal quarterly installments commencing from 30 June 2018 till 30 Sep 2020 whereas Series II debentures were redeemable in 14 equal quarterly installments commencing from 30 June 2018 till 30 Sep 2020. Reliance Capital AIF Trust, under i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust through Petitioner No. 1 and to Petitioner No. 2 till 30.09.2019. The default in repayment of the remaining sum took place on behalf of the Issuer Company. Hence, on 06.04.2018, the Petitioner Nos. 1 and 2 wrote to the Issuer Company, its Promoters, Corporate Debtor and PRS Realty (India) Private Limited listing the material breaches of the various documents, which remain unsecured, and requested them to remedy the breaches immediately. The default on interest took place from quarter ending December, 2018 and continues till date. Further, default on principal took place from quarter ending June, 2018 and continues till date. 9. Thereafter, Petitioner Nos. 1 and 2 issued an event of default notice dated 02.01.2019 to the Issuer Company, its Promoters, the Corporate Debtor and PRA Realty (India) Private Limited. The same notice was issued by the Debenture Trustee on 21.02.2019. Owing to the persistent default of the Issuer Company, Debenture Trustee issued two separate notices dated 14.05.2019 to the Promoters and Corporate Debtor with copy to PRA Realty (India) Private Limited, recording the default in making repayments of the Non-Convertible Debentures and enclosing a dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 35 Crores was to be utilized for meeting the expenses of the project as per the Business Plan. The Debenture Trust Deed further set out the disbursement of amounts where inter alia an amount upto ₹ 60 lakhs was to be disbursed to the Issuer Company for payments to be made to PRA Realty Private Limited and towards the Project Management Fees. The said fees was to be discharged per month upto a period of nine months commencing from November, 2016. Simultaneously, the Petitioners insisted on the execution of the following documents on 06.10.2016 as security for the said NCDs: i) Corporate Guarantee by the Corporate Debtor and PRA Realty Private limited in favor of the Debenture Trustee; ii) An Indenture of the Mortgage between the Issuer Company, PKR, Corporate Debtor, PRA, the Promoters and Debenture Trustee; and iii) A Deed of Pledge between the Promoters, the Issuer Company and the Debenture Trustee. c. As stated above regarding the disbursement of Project Management Fees, accordingly, for the months of October, 2016 to December, 2016, an aggregate amount of ₹ 94,27,000/- was disbursed to the Issuer Company. However, the Petitioners refused to release th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id Escrow Account, the servicing of the interest of the said NCDs was delayed by the Issuer Company. f. While the project was still ongoing, the Hon'ble National Green Tribunal (NGT) passed an Order dated 19.05.2015 restraining construction within 30 meters (100 ft.) of the base of hills. As the Issuer Company already had plans that were issued by the Pune Municipal Corporation, the said Order did not affect the project of the Issuer Company and the Issuer Company continued construction activities on the said project. However, sometimes around November, 2017, the State of Maharashtra through the Urban Development Department issued a Notification to give effect to the directions contained in the said Order dated 19.05.2015 of the NGT whereby all the construction activities which were within 100 ft. of the base of a hill were restrained. Accordingly, the Issuer Company had to stop construction activities. g. The Issuer Company, verbally as well as through an email dated 16.02.2018, informed the Petitioners about the stoppage of the construction activities and that it had to demolish the plinth which was already constructed in view of the said notification. The Issuer Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative master layout for the urgent approval of the Petitioners in the same email. The Petitioners, through their reply email dated 27.09.2018, stated that they were in agreement with the change in the layout plan so as to enable repayment to them. j. During all this time, the Issuer Company was negotiating with Provident to finalize a business plan. While the negotiations were going on, the Petitioners issued an Event of Default Notice on 2nd January 2019, to the Issuer Company, its Promoters, PRA and the Corporate Debtor calling upon to repay the debenture outstandings of ₹ 32,15,34,305/- payable as on 31.12.2018. The said notice was issued on the basis that the project activities had stopped even after knowing the above mentioned facts and force majeure situation. Subsequently, another Event of Default Notice dated 21.02.2019 was issued to the Issuer Company, its Promoters, PRA and the Corporate Debtor. In pursuant to it, the Issuer Company transferred a sum of ₹ 80,32,506/- on 14.03.2019 to the Petitioners. k. Thereafter, the Debenture Trustee issued a Demand Certificate dated 14.05.2019 under the said Debenture Trust Deed to the Corporate Debtor invoking t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that the present Petition is maintainable as the Corporate Debtor did not deny the execution of the Irrevocable and Unconditional Deed of Guarantee dated 06.10.2016. Also, the Corporate Debtor has not denied that the said Deed of Guarantee had been invoked in accordance with the terms and conditions stipulated therein. The Corporate Debtor did not even deny the amount in default. The Corporate Debtor itself admitted that there was a delay by the Issuer Company in servicing the interest of the said debentures by the Issuer Company for which the Corporate Debtor is a Corporate Guarantor and therefore, the Corporate Debtor is liable for the financial debt owed to the Petitioners. 14. The Counsel for the Petitioners submits that the Debenture Trustee had been appointed by the Issuer Company only for the benefit of the Petitioners in order to secure the payment and other obligations of the Issuer Company. The Debenture Trust Deed itself records that the Debenture Trustee had been appointed only to facilitate the process of issuance of debentures and it cannot be stated that the Petitioners who are Debenture Holders can only initiate proceedings through the Debenture Trustee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners submits that the allegation by the Corporate Debtor that the present proceedings are premature as the Debenture Trust Deed provided the final settlement date for the redemption of the said NCDs to be 30.09.2021 is wrong. It is submitted that the Debenture Trust Deed provided for payment of principal and interest commencing June, 2018 and there was a default with respect to the same on the part of the Issuer Company and the Corporate Debtor. Clause 8.9 of the Debenture Trust Deed provided for the Premature Redemption of the debentures on Event of Default and in such scenario, the Petitioners were entitled to recover the money paid towards the NCDs. In the present case, the Event of Default occurred prior to the issuance of the Event of Default notice and the Petitioners had served the Event of Default notice on the Corporate Debtor and the Issuer Company only on 02.01.2019 and therefore, the Petitioners were entitled to redeem the NCDs as per the terms of Clause 8.9 of the Debenture Trust Deed. The Debenture Trust Deed also provided the consequences of Event of Default under Clause 18 and provided that in case there was any Event of Default in the view of the Petitioners the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners out of the current transaction. The Petitioners had initially rejected the proposals. Subsequently, the Issuer Company and Petitioners have had further discussions pursuant to which the Petitioners have requested for a meeting with the private investor. The Issuer Company had arranged for a meeting in March, 2020. However, the meeting could not happen due to Covid-19. Subsequently, another private investor has expressed its willingness and the Issuer Company is in talks with the said private investor to invest in the Issuer Company. The Issuer Company is willing to setup a meeting with the Petitioners once the ongoing Covid-19 situation in Maharashtra is under control. Findings: 21. The Counsel for the Petitioners submits that Reliance Capital AIF Trust (through its trustee and AMC) is a SEBI registered Alternate Investment Fund (AIF). Petitioner No. 1, Reliance AIF Management Company Limited, is the investment manager of Reliance Capital AIF Trust. Petitioner No. 2, i.e., Reliance Nippon Life Asset Management Limited is a SEBI registered Asset Management Company. The Corporate Debtor, Bharucha Motivala Infrastructure Private Limited is a part of PRA group of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and certification of charge has been annexed in the Petition. A Bank statement reflecting disbursal of monies has also been annexed in the Petition. We note that Corporate Debtor has not denied the execution of the trust deed or the deed of guarantee. It is also not disputed by the Corporate Debtor regarding the monies disbursed and the quantum of debt due and computation of interest. 25. The Corporate Debtor had raised basically four defenses. The defenses raised by the Corporate Debtor, the response of the Petitioner on the same and findings of the Bench are as under:- 25.1. The Bench notes that the Corporate Debtor had contended that the Petitioners are only holders of the NCDs and are not parties to the debenture trust deed and therefore the debenture holders do not have any locus to file the present Petition as only debenture trustee can file the present Petition. The Bench finds this argument taken by the Corporate Debtor to be untenable as it is a fact that the Debenture Trustee is for the convenience of the Debenture Holders and their benefit. It is for this reason that the Debenture Trustee is only an agent of the Debenture Holders. The presence of a Trustee in no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due. The Corporate Debtor mentions that it could not proceed with the construction work on account of certain Government Orders and also because of Orders dated 19.05.2015 of the Hon'ble National Green Tribunal (NGT). The Bench notes that taking shelter under the Orders of 19.05.2015 is improper on part of the Corporate Debtor as this Order was in existence at the time of execution of the Debenture Trust Deed dated 06.10.2016. Therefore, the Corporate Debtor was while executing the Debenture Trust Deed and Guarantee was fully aware of the implication of the said Order and therefore, cannot rely on a pre-existing limitation as a force majeure condition. In addition, the Corporate Debtor had no right to raise any dispute as its obligation towards honoring the payment obligation was unconditional . The Bench notes that not to proceed with the construction work for any reason whatsoever it may be, triggers the Petitioner's right to invoke Guarantee as per the Deed of Guarantee. In this regard, Para 17.1.32 of the Deed of Guarantee is reproduced below: 17.1.32 Inability to proceed with the Project due to termination of any material contract or for any other reason. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with procedure prescribed, no dispute can be raised by the Corporate Debtor. 25.4. The Corporate Debtor has also taken a view that the NCDs are not due and payable. He mentions that as per the Debenture Trust Deed the tenure of the NCDs ends only on 30.09.2020 and 30.09.2021 respectively and that the NCDs can be redeemable only after these dates. In this regard, the Bench notes that vide Para 18 of the Debenture Trust Deed provides for 'Event of Default' and consequences falling out of an 'Event of Default'. The relevant portion of Para 18 is as under:- 18 CONSEQUENCES OF AN EVENT OF DEFAULT 18.1 Without prejudice to the rights and remedies of the Debenture Holders under Applicable Law, upon occurrence of any of the Event of Default which has not been cured within the Cure Period, the Debenture Trustee shall if so directed by the Majority Debenture Holders, be entitled to exercise any of the following rights: (a) call upon the Company to forthwith redeem and/or the other Security Providers to forthwith purchase all the outstanding NCDs and in such a case the Company will be liable to redeem and/or the other Security Providers will be, jointly an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor. (II) That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period. (III) That the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (IV) That the order of moratorium shall have effect from the date of pronouncement of this order till the completion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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