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TMI Blog2020 (6) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... way, it is not just and proper for the petitioners to plead first to initiate CIRP as prayed for, and thereafter, all issues can be resolved during CIRP proceedings. It is true that since the default occurred prior March 25, 2020 it would not cover by the said amendment. Since the case is not yet admitted by the Adjudicating Authority and the respondent expressed its willingness to settle the issue in the light of earlier offer of one-time settlement as offered by the petitioners, it would be just and proper for the financial creditor to take it into consideration the prevailing economic situation while considering settlement proposal, as debt and default in question is continuous cause action till date. The initiation of the CIRP against the corporate debtor, at present not is at all justified, and the parties have to resolve the issue by coming to a new settlement basing on the prevailing economy situation in the country - the petitioners/financial creditors, are hereby directed to re-consider the settlement proposal made by the respondent by taking into con sideration of present severe economic conditions and also the corporate debtor being going concern having several sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n object of the company is engaged inter alia in the business of real estate and property development. (3) The trustee, under the investment management agreement dated January 15, 2013 and November 20, 2015 has appointed the Essel Finance Advisors and Managers LLP, as the investment manager of the fund. The AIF Trustee has by a letter dated April 15, 2019 authorized the investment manager to file the present proceedings. (4) The corporate debtor, being a real estate developer has approached the financial creditors in order to raise fund for its projects. Accordingly, the corporate debtor issued non-convertible debentures (herein after referred to as NCDs ) in two (2) series-A Series up to 65 NCDs of ₹ 1,00,000 each ; and B series-up to 2635 NCDs of ₹ 1,00,000 each. Accordingly, NCDs were subscribed by the financial creditor, vide DSAs and the fund holds NCDs in the capacity of the debenture holder. VISTRA ITCL has been appointed as debenture trustee for the said NCD issuances to act on behalf of and for the benefit of debenture holders by entering debenture trust deed dated April 7, 2017 (hereinafter referred to debenture trustee ) is registered as a debenture t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent by, inter alia, calling upon the combined debt along with coupon. Redemption premium and default interest totalling to ₹ 14,79,88,695 within seven days from that failing which they would be compelled to exercise their rights. However, after a lapse of one year of the notice, without taking any legal course of action in the meanwhile before any legal forum, the instant company petition is filed, under the provisions of the Code, by seeking to initiate the CIRP in respect of the corporate debtor. 3. The respondent/corporate debtor, after taking so many adjournments on the pretext of settling the dispute, has filed memo dated June 2, 2020 by, inter alia, stating as follows : (1) The corporate debtor is a company incorporated under laws of India, engaged, inter alia, in the business of real estate and property development. The corporate debtor has entered into agreements with land owners and is undertaking construction of projects in the name and style of CMRS Moonstone, CMRS Misty Winds, CMRS Grandeur, Northstar Project and Radhakrishna Enclave Property. (2) Out of total sanctioned amount of ₹ 13 crores the financial creditor deducted ₹ 92,84,775 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to obtain funding for completion of its projects from the SWAMIH Investment Fund. (5) The corporate debtor is a commercially solvent company and is currently undertaking development of projects. Any adverse orders at the hands of this Tribunal will not only prejudicially affect the corporate debtor company but will also adversely affect the various agreement holders and purchasers dealing with the corporate debtor company. There are several consultants, workers, vendors and other creditors who are dependent on the business of the corporate debtor. 4. Heard Shri Tarunn Surana, learned counsel for the petitioner and Shri Abhijit Atur, learned counsel for the respondent, through video conference. We have carefully perused pleadings of both the parties and extant provisions of the Code and Rules made thereunder. 5. After arguing the case by learned counsels, have filed their respective pleadings as mentioned below. 6. In reply to above memo dated June 2, 2020 learned counsel for the petitioner/financial creditor, has filed a reply dated June 7, 2020 by, inter alia, stating as follows : (1) The memo under reply is false, frivolous, vexatious and not maintainable either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial has lost faith in the corporate debtor, due to its deceptive conduct. In order to save the investment made by the Investors it is just and necessary that the present matter be admitted and CIRP of the corporate debtor be initiated. If the corporate debtor has any intention to settle and reply the financial creditors of its dues, the same can be made before the resolution professional. 7. Learned counsel for the corporate debtor has filed another memo dated June 15, 2020 by, inter alia, stating as follows : (1) Earlier, the financial creditor, vide its e-mail dated January 10, 2020 proposed one-time settlement to the tune of ₹ 14,50,00,000 and the said proposal was also acceptable to the corporate debtor, as the circumstances were much amenable during the said period. However in view of the outbreak of Covid-19 across the world and subsequent announcement of lockdown by the Government of India, the corporate debtor was unable to implement the proposal. Due to various financial implications of the lockdown, the third party developers were constrained to re-evaluate their commitment. Based on their subsequent evaluation, the corporate debtor had revised the settlemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o consolidate and amend the laws relating to re-organisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues, etc. ; (2) Whether the initiation of CIRP is only alternative, efficacious and effective remedy available for the petitioner, especially in the present chaos economic conditions prevailing in the Country due to Pandemic ; (3) Whether the petitioners satisfied the Adjudicating Authority for initiation of CIRP, in terms of section 7 of the Code ; (4) Whether the parties can be given one more chance to find solution to the issue in question, in the light of present economic scenario, as the respondent still expressed its willingness to settle the issue. 10. As detailed supra, the corporate debtor issued the non-convertible debentures ( NCDs ) in two (2) series-A Series-up to 65 NCDs of ₹ 1,00,000 each and B Series-up to 2,635 NCDs of ₹ 1,00,000 each. Accordingly, the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its promoters and Essel Finance Advisors and Managers LLP, contains promoters and Essel Finance Advisors and Managers LLP, contains several terms and conditions and Schedules, which includes detailed mechanism to deal with default committed by the corporate debtor. Schedule 10 of the agreement deals with payment default and material default ; clause 23 deals with events of default ; and clause 24 deals with consequences of event of default. There are several remedies available to the financial creditors to deal with the events of default, as it is absolutely empowered by virtue of the trust deed. However, clause 24.21 says that rights set out hereunder, are cumulative in nature and are in addition to any other rights and remedies available to the debenture holders, either under contract law or otherwise. However, without invoking the remedies available to the financial creditors, under the said trust deed, they have issued notice dated August 24, 2018 to the corporate debtor, and after a lapse of one year, has instituted the instant company petition seeking to initiate CIRP against the corporate debtor by, inter alia, contending that it would get recovery of outstanding amount dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue that since the default occurred prior March 25, 2020 it would not cover by the said amendment. Since the case is not yet admitted by the Adjudicating Authority and the respondent expressed its willingness to settle the issue in the light of earlier offer of one-time settlement as offered by the petitioners, it would be just and proper for the financial creditor to take it into consideration the prevailing economic situation while considering settlement proposal, as debt and default in question is continuous cause action till date. 16. For the aforesaid reasons and circumstances of the case, and the law on the issue, we are of the considered opinion that the initiation of the CIRP against the corporate debtor, at present not is at all justified, and the parties have to resolve the issue by coming to a new settlement basing on the prevailing economy situation in the country. After exhausting all remedies, including proposed settlement available under debenture trust deed in question, the financial creditors can invoke provisions of the Code seeking to initiate CIRP against the corporate debtor. Therefore, by invoking inherent powers conferred on this Adjudicating Authority, bei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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