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2020 (5) TMI 248 - Tri - Insolvency and BankruptcyMaintainability of application - Financial Creditor seeks to appoint Insolvency Professional for the company and start of Corporate Insolvency Resolution Process - It is further stated that on the failure of Corporate Debtor, the Financial Creditor had moved Madras High Court for the recovery of interest and restraining corporate debtor from alienating the assets of the Corporate Debtor. Application filed by Corporate Debtor for opposing the suit had been dismissed by Madras High Court on the ground that suit is continuing breach of tort and every act of breach giving rise to fresh cause of action. HELD THAT:- This Tribunal hereby is of the opinion that the intention of both the parties is manifested in the Master Facility Agreement and the Debenture Subscription Agreement. The parties have made arrangement for an investment in the business of the Corporate Debtor in order to scale up their business operations. The investment was sought to be made by the Financial Creditor by way of subscribing to the Debentures in consideration of the money brought in by the Financial Creditor into the coffers of the Corporate Debtor. Fully convertible debentures are a financial instrument within the meaning of section 5(8) of the Insolvency and Bankruptcy Code, 2016 - Convertible Debenture is in the nature of financial debt; though it is hybrid in nature, it cannot be treated as equity unless converted into equity; it cannot par take the characteristics of equity until the conversion is done. The Financial Creditor has taken all precautions to safeguard his interest so long as the Convertible Debenture remains as debenture. It is also seen from the documents that a Simple Mortgage is seen to have been created in favour of the Financial Creditor which shows that there is debt which is a financial debt based on the principle that "once a mortgage; always mortgage". It postulates that unless and until a mortgage is discharged it remains as a mortgage and as such the financial debt - On a perusal of clause 8.1.2 of the Master Facility agreement, a "default" is said to have occurred when there is non-payment in full, any of the interest amount that becomes due within a period of 30 days on which such amounts become payable. Therefore, it cannot be contented by the Respondent that no sum was liable to be returned or repaid. Apart from payment of a sum of ₹ 39,86,371.36 for the quarter ending September, 2007, interest amount was not paid for the remaining period by the Respondent and there is a clear default on part of the Respondent. This Application as filed by the Applicant - Financial Creditor is required to be admitted under section 7(5) of the I&B Code, 2016 - Application admitted - moratorium declared.
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