Debenture Holders' IBC Section 7 Petition Rejected: Lacked Majority Resolution, Time-Barred, and Violated Debenture Trust Deed

The NCLAT rejected Section 7 proceedings initiated by debenture holders against a corporate debtor on multiple grounds. The Tribunal determined that the proceedings were procedurally defective as they failed to comply with conditions in the Debenture Trust Deed, which required authorization by majority resolution of debenture holders before the Debenture Trustee could initiate insolvency proceedings. Additionally, the application was time-barred as it was filed on September 7, 2023, well beyond the limitation period that expired on September 30, 2022, even after accounting for COVID-19 extensions granted by the SC. The NCLAT also found the proceedings were initiated without valid authority and potentially malicious, violating Section 65 of the IBC. .....

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