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2021 (5) TMI 306 - Tri - Insolvency and BankruptcyLiquidation process - priority of settlement of claim of creditors - Financial Creditors or not - prior to the commencement of CIRP against the Corporate Debtor, the maturity date of the subject CCCDs has long expired - consideration of CCCD holder as Financial Creditor or other Creditor/stakeholder? - HELD THAT:- The Applicant has issued a letter to AMW Auto Component Limited on 28.07.2016, whereby the Applicant confirmed the role over of the CCCDs on or after 01.07.2017 on the request made by the Corporate Debtor (Auto Component Limited) with respect to CCCDs held by Essar Steel India Limited that are compulsorily converted into equity shares of AACL on or after 01.07.2017. All the other terms and conditions of CCCD's will remain same. Admittedly, the same was not converted into equity share till Corporate Debtor went into CIRP. Further, RP in his reply admitted the fact that CCCD was issued primarily to raise capital and not to raise the money by way of a loan/debt. The terms of CCCDs never postulated any payment of interest or repayment of principal, other than for the initial period of 2 years when the CCCDs could be redeemed at the option of the Corporate Debtor until 22.12.2013. Even if it is assumed for the time being that it is not a loan/debt, then even it attracts interest for the initial period of 2 years when the CCCDs could be redeemed at the option of the Corporate Debtor. Evidently, provisions of the IB Code, categorically recognises that a debt disbursed against the time value of money and includes any amount raised by debtors (Corporate Debtor) pursuant to any note purchase facility or the issue of bonds, notes, debentures (CCCD), loan stock or any similar instrument would fall under Financial Debt - Further, as per the terms given in the Certificate, it provides that an IRR at the rate of 9% face value of the debentures from the date of issue to the date of conversion. That further meets all the requirements to be classified as 'Financial Debt' under the IB Code. That apart, CCCD continue to be recorded as debt in the books of the Corporate Debtor and have not been converted into equity till date (page No. 53 of the application). It can be seen from the Second CoC meeting that CCCD continue to be reflected in the books of the Corporate Debtor. Therefore, it is an admission of debt liability of the Corporate Debtor towards AMNS. The debenture holder of GCCD will be considered as Financial Creditor under the IB Code - Application allowed.
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