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TMI Blog2023 (5) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... s case in appeal before the Hon ble Supreme Court was that since the application was filed on 11.05.2020 i.e. before insertion of Section 10A on 05.06.2020, the application is not hit by Section 10A, although the default was dated 30.04.2020. Present is a case where date of default is claimed as 31.03.2021 in Part IV of the application and the application is filed including the default amount as per the Debenture Trust Deed, Schedule V, the default from 31.03.2021 onwards - What is prohibited by Section 10A is that no application shall ever be filed for the default which occurred during the period of Section 10A i.e. from 25th March, 2020 to 25th March, 2021. Section 10A has no application when an action is initiated for default which occurred subsequent to 10A period. Section 7 application as well as Reply filed to I.A. No. 34/2022 clearly indicate that Section 7 application which was filed by the Financial Creditor wad confined to the default committed by the Appellant on 31.03.2021 and thereafter. The judgment of this Tribunal in M/s Next Education India Pvt. Ltd. vs. M/s K12 Techno Services Pvt. Ltd. [ 2021 (3) TMI 767 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of principal repayment date, tenure and redemption details were mentioned in Schedule V of the Debenture Trust Cum Mortgage Deed. iii. The Appellant on 13.04.2020 wrote to the Debenture Holder seeking a moratorium of five months of repayment of dues. By letter dated 27.04.2020, the Financial Creditor granted three months moratorium for all payments obligations due between 01.04.2020 to 30.06.2020. iv. The Financial Creditor issued notice dated 22.10.2020 to the Appellant pointing out breaches and default on part of the Appellant. The Notice called upon the Appellant to confirm full payment of all dues pertaining to the Debentures from the proceeds of any transaction between the Future Group and Reliance Retail Ventures Ltd. and or any other prospective investor by January, 31, 2021. v. On 01.07.2022, the Financial Creditor issued a notice calling upon the Appellant to make payment of Rs.322,00,09,322/- due and payable as on 20.05.2022, failing which the Financial Creditor was to take appropriate legal action including initiation of proceedings under the I&B Code. The notice dated 01.07.2022 was replied by the Appellant on 07.07.2022. The Financial Creditor issued a Rejoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to file application accrues and it is not discretion of the Tribunal to accept one date or the other. Learned counsel for the Appellant placed reliance on judgment of this Tribunal in "Next Education vs. K12 Techno Services, Company Appeal (AT) (Ins.) No. 98 of 2019". 4. Shri Krishnendu Datta, learned senior counsel appearing for the Respondent refuting the submissions of learned counsel for the Appellant submits that the Financial Creditor vide notice dated 22.10.2020 did not exercise its right to accelerate repayment and expressly reserved its right to do so. The notice dated 22.10.2020 cannot be read to be notice for mandatory prepayment. Emphasis on Para 16 of the notice has been laid by learned counsel for the Appellant is baseless. By the notice, the Corporate Debtor was called upon to confirm that it would repay amount from the proceeds of such deal by 31.01.2021. The notice was in relation to the transaction which the Corporate Debtor was proposing to enter into. It is an admitted position that neither did the transaction entered between Future Group and Reliance Group fructify nor did the Corporate Debtor provided any confirmation as called by notice dated 22.10.2020. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for in the Companies (Prospectus and Allotment of Securities) Rules, 2014 ("Offer Letter") setting out the broad terms on which the Debentures were issued;" 7. Schedule V is referred to in above Clause B is as follows: "SCHEDULE V PRINCIPAL REPAYMENT DATES Coupon Type Fixed subject to any revision in terms of paragraph 2.2(c) of Schedule II of this Deed. Day Count Basis Actual/Actual Issue Price Rs.10,00,000/- per Debenture Face Value Rs.10,00,000/- per Debenture Issue Amount Rs.250,00,00,000 The Issue Amount is of Rs.250,00,00,000 and has been structured in 5 series (Series A - Series E) Series Series-A Series-B Series-C Series-D Series-E Series Amount (Rs. In Cr) 6.20 25.00 50.00 75.00 93.80 Tenure of Days 367 733 1,098 1,463 1,828 Coupon 12.80% 12.80% 12.80% 12.80% 12.80% Frequency of coupon payment Monthly Monthly Monthly Monthly Monthly Date of Coupon Payments On last day of every month and on redemption On last day of every month and on redemption On last day of every month and on redemption On last day of every month and on redemption On last day of every month and on redemption Redemption Details Date (dd/ mm/ yy) Amt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the Debentures by the Rating Agency is lower than the Original Rating, the Coupon Rate applicable to the Debentures shall be revised upwards by 25 bps (Twenty Five basis points) for each level of downgrade from the Original Rating. Furthermore, it has been agreed that all interest on the Debentures along with all other monies shall, in case the same is not paid on the respective due dates, carry further interest at the rate of 2% per annum over and above the Coupon Rate for the defaulting period. 9. The Coupon and Default Interest accruing on the face value of the Debentures shall accrue from day to day and be calculated on the basis of the actual number of days elapsed at the applicable rate and rounded off to the nearest Rupee. 10. It has to the knowledge of our client that the Original Rating of the Debentures has been downgraded during the period March, 2020 through August, 2020, Whilst the Original Rating of the Company at the time of issuance of the Debentures was BWR A+ (SO), the present Original Rating by Brickwork Ratings India Pvt. Ltd. is BWRD (CE). The Company has also failed to inform our client of the downgrading of the Original Rating. As a result, a clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all dues pertaining to the above Debentures from the proceeds of any transaction between Future Group and Reliance Retail Ventures Ltd, and/or any other prospective investor, or by January 31, 2021, whichever is earlier, time being the essence hereof. 17. Additionally, our client also hereby calls upon you to forthwith furnish the certificate of the independent Chartered Account certifying the adherence of the financial covenants by the Company as on 31st March, 2020." 10. In the above notice, after narrating certain clauses on transaction document it was stated that company has committed certain breaches in transaction document and failed to make payment. In Para 14, it was clearly stated that the Event of Default has occurred under the Deed and the Financial Creditor in accordance with the terms of the Transaction Documents, reserves its right to accelerate the redemption of the Debentures. The above clause makes it clear that exercise to accelerate redemption of debentures was not done by the notice itself rather right was reserved. 11. Para 15 and 16 of the notice are relevant. What was called upon from the Appellant in the notice is clearly mentioned in Para 16. Para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OF FINANCIAL DEBT 1 TOTAL AMOUNT OF DEBT GRANTED Rs. 250,00,00,000/- (Rupees Two Hundred Fifty Crores Only) [With respect to 2500 (Two Thousand Five Hundred) rated, unlisted, secured, redeemable Non-Convertible Debentures each having a face value of Rs. 10,00,000/-(Rupees Ten lakh only) in 5 series viz. Series A, Series B, Series C, Series D, Series E aggregating to Rs. 250,00,00,000/- (Rupees Two Hundred Fifty Crores Only)] DATE(S) OF DISBURSEMENT Purpose: For general corporate purposes including without limitation the acquisition of movable assets and repayment of existing borrowings. Date of Disbursement/ Subscription of NCDs: 28 September 2018 2 AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED A. Default Amount: Total amount payable as on 27th September 2022 is Rs. 275,43,28,128/- (Rupees Two Hundred Seventy-Five Crores Forty-Three Lakhs Twenty-Eight Thousand One Hundred TwentyEight) 3 (ATTACH THE WORKING FOR COMPUTATION OF AMOUNT AND DAYS OF DEFAULT IN TABULAR FORM) B. Date of Default: 31st March2021 [when Debentures were to be redeemed as per the Debenture Trust Cum Mortgage Deed dated 6thDecember 2018]. The Computation of Claim Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly hit by section 10A of the Insolvency and Bankruptcy Code, 2016. A reference can be made to the notice dated 22nd October, 2020 which states that Event of Default has occurred as on that date and thus the Default Period falls under the period contemplated by section 10A of the Code, which starts from 25th March 2020. The relevant extract of Section 10A is reproduced hereinbelow- "Notwithstanding anything contained in sections 7, 9 and 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25 March 2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf; Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period. Explanation: For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25 March, 2020."" 16. The Financial Creditor has replied the I.A. No. 34/2022. Paras 5 to 8 of the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not paid 24. 28 February 2023 7,81,66,667 Not paid 25. 31 March 2023 7,81,66,667 Not paid 26. 30 April 2023 7,81,66,667 Not paid 27. 31 May 2023 7,81,66,667 Not paid 28. 30 June 2023 7,81,66,667 Not paid 29. 31 July 2023 7,81,66,667 Not paid 30. 31 August 2023 7,81,66,667 Not paid 31. 30 September 2023 7,81,66,667 Not paid 32. 31 October 2023 7,81,66,667 Not paid 33. 30 November 2023 7,81,66,667 Not paid 34. 31 December 2023 7,81,66,667 Not paid 8. Given the default committed on March 31, 2021, the Financial Creditor by a notice dated July 01, 2022, called upon the Corporate Debtor to make repayments of amounts due under the NCDs. Copy of the notice dated July 01, 2022, is annexed as Annexure-D." 17. We have noticed the relevant part of the notice dated 22.10.2020 and the pleading in the I.A. No. 34/2022 and its reply by the Financial Creditor. Now we proceed to consider the rival submissions of the parties, whether application filed by the Financial Creditor under Section 7 was barred by Section 10A. Section 10A provides as follows: "10A. Notwithstanding anything contained in sections 7, 9 and 10, no application for initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; as may be notified in this behalf. The expression "from such date" is evidently intended to refer to 25 March 2020 so that for a period of six months (extendable to one year by notification) no application for the initiation of the CIRP can be filed. The submission of the appellant is that the expression "shall be filed" is indicative of a legislative intent to make the provision prospective so as to apply only to those applications which were filed after 5 June 2020 when the provision was inserted. Such a construction cannot be accepted." 19. Hon'ble Supreme Court further in Para 27, 28 and 29 laid down following: "27. Adopting the construction which has been suggested by the appellant would defeat the object and intent underlying the insertion of Section 10A. The onset of the Covid-19 pandemic is a cataclysmic event which has serious repercussions on the financial health of corporate enterprises. The Ordinance and the Amending Act enacted by Parliament, adopt 25 March 2020 as the cut-off date. The proviso to Section 10A stipulates that "no application shall ever be filed" for the initiation of the CIRP "for the said default occurring during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which occurred during the period of Section 10A i.e. from 25th March, 2020 to 25th March, 2021. Section 10A has no application when an action is initiated for default which occurred subsequent to 10A period. Section 7 application as well as Reply filed to I.A. No. 34/2022 clearly indicate that Section 7 application which was filed by the Financial Creditor wad confined to the default committed by the Appellant on 31.03.2021 and thereafter. In Para 7 of the Reply total calculations have been mentioned for arriving at the default amount of Rs.210,46,66,250/-. The defaulted amount included for the calculation are the defaulted amount beginning from 31.03.2021 till end of December, 2023. No defaulted amount included in the Section 7 application is for the period covered by Section 10A, hence, there is no occasion to hold that Section 7 application is barred by Section 10A. 21. We have already noticed the contents of the Notice dated 22.10.2020 which Notice although noted that Appellant has committed default but by the said Notice rights were reserved to take proceedings and the Notice only asked for confirmation from the Appellant, as noted in Para 16 of the Notice. The Notice dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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