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TMI Blog2021 (5) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... er called as the 'Code') read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Contentions of the Petitioner: 2. The Counsel for the Petitioners submits that Reliance Capital AIF Trust (through its trustee and AMC) is a SEBI registered Alternate Investment Fund (AIF). Petitioner No. 1, Reliance AIF Management Company Limited, is the investment manager of Reliance Capital AIF Trust. Reliance Capital AIF Trust provides various differentiated investment opportunities through unique offering to make investments in various different schemes across asset classes. For portfolio management, Petitioner No. 2, Reliance Nippon Life Asset Management Limited (formerly known as Reliance Capital Asset Management Limited) - PMS Division, is the portfolio manager for portfolio management of clients which is a SEBI registered Asset Management Company (AMC). The Corporate Debtor, Bharucha & Motivala Infrastructure Private Limited, is a part of the PRA group of companies. Its sister concerns, Lake District Realty Private Limited (hereinafter called as 'LDR'/'Issuer Company') and Pune Kondhwa Realty Private Limited (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and created charge over certain parts of the Project along with the development rights of the Mortgagor on the Project and all benefits and advantages arising out of the development of the Project. A Deed of Pledge, dated 06.10.2016, was also entered into between the Promoters, Issuer Company and the Debenture Trustee by which the Promoters of Issuer Company pledged 100% of the shares of the Corporate Debtor collectively held by the Promoters. 7. The Counsel for the Petitioners further submits that to secure the repayment of the Non-Convertible Debentures, the Corporate Debtor and PRA Realty (India) Private Limited issued a common Deed of Irrevocable and Unconditional Corporate Guarantee dated 06.10.2016. Also, the Corporate was the co-obligor as per the Debenture Trust Deed entered into with the Debenture Trustee. Furthermore, the Promoters of LDR namely, Mr. Rustom Bharucha and Mr. Zubin Bharucha issued a Deed of Irrevocable and Unconditional Personal Guarantee dated 06.10.2016. 8. In due course, the Issuer Company had repaid a total sum of Rs. 6,99,50,684 to Reliance Capital AIF Trust through Petitioner No. 1 and to Petitioner No. 2 till 30.09.2019. The default in repayment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debtor further submits that the Petitioners have failed to disclose the following important and material facts: a. PKR is the owner of a property situated in Village of Yeolewadi, Taluka Haveli, District Pune. Then, PKR entered into a Joint Development Agreement with the Issuer Company wherein PKR and Issuer Company agreed to jointly develop the said property. The Issuer Company was also entitled to the exclusive development rights to develop and construct on the said property. PKR also executed a Power of Attorney in favor of the Issuer Company pertaining to the development of the said property. b. The Issuer Company was desirous of raising money for the development of the said property and hence, the Issuer Company intended to issue, by way of private placement, debentures to the Debenture Holders. Pursuant to the same, the Issuer Company entered into a Debenture Trust Deed whereby the NCDs upto an aggregate amount of Rs. 40 Crores were to be issued to the Debenture Holders on a private placement basis. The said Debenture Trust Deed provided that an amount of Rs. 35 Crores was to be utilized for meeting the expenses of the project as per the Business Plan. The Debenture Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fire NOC as it was getting difficult to follow up on the 'issues that were committed & documented' and that the same was actually slowing down the progress of the project and delaying the start of construction. The Issuer Company also called upon the petitioners to make a commitment as to whether they were willing to support the project or not. Thereafter, the Petitioners belatedly released the said fees. During this time, as RERA had come into force, the Issuer Company had to comply with various provisions of RERA. So, the Petitioners insisted that a new Escrow Account be opened for deposit of amount received from the flat purchasers in accordance of RERA. e. The setting up of the said Escrow Account by the Petitioners took nine months to be operational due to which the Issuer Company could not collect monies from the flat purchasers during the said period. The said delay by the Petitioners led to huge financial difficulties for the Issuer Company. As the Issuer Company could not collect any monies from the flat purchasers in the said Escrow Account, the servicing of the interest of the said NCDs was delayed by the Issuer Company. f. While the project was still ongoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the timelines of the project due to these force majeure circumstances. But, the Issuer Company was hopeful of the deal with Provident so it entered into a Supplementary Memorandum of Understanding with the Provident incorporating changes of plans and updated about it to the Petitioners as well. By the same email dated 15.08.2018, the Issuer Company shared with the Petitioners a draft Joint Development Agreement to be executed between the Provident, PKR and the Issuer Company. i. Thereafter, by a further email dated 27.09.2018, the Issuer Company informed the Petitioners that most of the buildings in the approved plan of the project as passed in the year 2016 could not be constructed due to the said Order passed by the Hon'ble Bombay High Court. It was also informed by the Issuer Company that the master layout of the project had to be altered to ensure that the buildings which had been previously sanctioned were moved away from the buffer zone so that the same could be re-approved. The Issuer Company also attached the tentative master layout for the urgent approval of the Petitioners in the same email. The Petitioners, through their reply email dated 27.09.2018, stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2021 and these are redeemable not later than the above mentioned dates. Thus, the said NCDs are not to be paid as on date in view of the above fact and the Petitioners can initiate any action either through the Debenture Trustee and/or themselves only after 30.09.2021 when the said NCDs become due and payable. It is submitted that the Petitioners are seeking to invoke the guarantee against the Corporate Debtor under the said Guarantee Agreement dated 06.10.2016 which was pertinently entered between the Corporate Debtor and the Debenture Trustee whereas the Petitioners were not parties to the said Agreement. The Petitioners cannot seek to invoke an Agreement which it was not even party to. Even the Demand Certificate under the said Guarantee Agreement was issued by the Debenture Trustee and not by the Petitioners. In view of the same, the Petitioners do not have any locus to fie the present Petition and hence, it is not maintainable. Rejoinder filed by the Petitioners: 13. The Counsel for the Petitioners submits that the present Petition is maintainable as the Corporate Debtor did not deny the execution of the Irrevocable and Unconditional Deed of Guarantee dated 06.10.2016. Also, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 19.05.2015 was much prior to the Debenture Trust Deed dated 06.10.2016 so there was no impossibility in completing the Project. As per the Debenture trust Deed, in case there was any Order issued by any Court of competent jurisdiction affecting the Project, then the same would constitute an Event of Default under the Debenture Trust Deed and result in the redemption of the NCDs. Moreover, if there was any inability to proceed with the Project then the same would also constitute an Event of Default which is given under Clause 17 of the Debenture Trust Deed. This Clause 17 clearly envisages the fact in which if there is any legal restrain put in place by a court of competent jurisdiction then the same leads to the impairing of the Project. Now at this stage, when monies are to be paid to the Petitioners, the Corporate Debtor cannot make a plea that the Project suffered from force majeure and resultantly, the payments to the Petitioners have been delayed. 17. The Counsel for the Petitioners submits that the allegation by the Corporate Debtor that the present proceedings are premature as the Debenture Trust Deed provided the final settlement date for the redemption of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present Petition would be resolved if the said transactions between the Issuer Company and Provident is successfully completed. In the last 12 months, the Petitioners had requested further comfort from the Provident regarding the transaction with the Issuer Company. The Issuer Company had accordingly arranged such meetings/calls where Provident had reassured the Petitioners that Provident will continue the transaction with the Issuer Company and that Provident was only waiting for the buildings plans to be sanctioned by the authorities. Even the building plans are ready, and the Issuer Company is now awaiting the layout sanction approval from the Pune Municipal Corporation in order to be able to submit the final building plans for approval. 20. The Issuer Company had also offered various options for settlement of the issues in the present Petition, one of them about a private investor who is desirous of investing monies in the Issuer Company which would assist in getting the Petitioners out of the current transaction. The Petitioners had initially rejected the proposals. Subsequently, the Issuer Company and Petitioners have had further discussions pursuant to which the Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor is jointly and severally liable to repay all outstanding amounts under the NCDs. Under the terms of the Debenture Trust Deed, the Corporate Debtor agreed to make payments to the debenture holders by way of issue of an unconditional, irrevocable Corporate Guarantee. The Bench notes that as per Clause 2 of the Corporate Guarantee dated 06.10.2016, the Corporate Debtor is not only liable as a surety but also as a primary obligor. As per Clause 2 of the Deed of Guarantee, the obligation on part of the Corporate Debtor is unconditional and irrevocable. Further, the Corporate Debtor is liable as if it is the Principal Debtor under the Debenture Trust Deed as per Clause 16 of the Deed of Guarantee. Also, as per Clause 20 of the Deed of Guarantee, the Corporate Debtor is liable to pay, irrespective of any dispute between LDR, the Corporate Debtor and the Debenture Holders. 24. The Bench notes that the Debenture Trustee is duly registered with the RoC and certification of charge has been annexed in the Petition. A Bank statement reflecting disbursal of monies has also been annexed in the Petition. We note that Corporate Debtor has not denied the execution of the trust deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t maintainable because the Debenture Trust Deed dated 26/03/2015 and the Deed of Guarantee dated 27/03/2015 authorises IL&FS to invoke corporate guarantee, whereas the present petition is filed by the petitioner for which there is no privity of contract and in absence of it, the contract cannot be enforced by any third party. This contention does not stand because clause 18.2.1 of the Debenture Subscription Agreement clearly entitles the petitioner to exercise rights upon the occurrence of an event of default, being, inter alia, accelerating the redemption of the debentures, enforcing the security documents." Therefore, the ground taken by the Corporate Debtor that only the debenture trustee can file the Petition under the Debenture Trust Deed is not tenable. 25.2. The Corporate Debtor has contended that on account of force majeure condition he has been forced to delay the liability as per the Debenture Trust Deed to repay the monies due. The Corporate Debtor mentions that it could not proceed with the construction work on account of certain Government Orders and also because of Orders dated 19.05.2015 of the Hon'ble National Green Tribunal (NGT). The Bench notes that takin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to PRA Realty/Company towards Project Management Fees which shall not exceed Rs. 60,00,000/- per month inclusive of service tax and or any other government taxes/charges ("PM Fees"), the payment/reimbursement will be made on actual cost/expense incurred for the Project from the Project Escrow Account on instructions of the Trustee, acting upon instructions from the Debenture Holders. ... (emphasis supplied)" Therefore, it is clear to the Bench that payment of PM fees to the Issuer Company was subject to actual cost or expenses incurred. Therefore, since no actual work was carried out it was correct not to pay payment towards the PM fees from the Project's Escrow Account. The Bench also would like to mention that in the present Petition the Corporate Debtor is a Guarantor in unconditional and irrevocable Deed of Guarantee and, therefore, as long as the Deed of Guarantee is in accordance with procedure prescribed, no dispute can be raised by the Corporate Debtor. 25.4. The Corporate Debtor has also taken a view that the NCDs are not due and payable. He mentions that as per the Debenture Trust Deed the tenure of the NCDs ends only on 30.09.2020 and 30.09.2021 respectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioners/Debenture Holders are entitled to recover the money paid towards the NCDs. Therefore, the Bench notes that in this case an 'event of default' has occurred in terms of Clause 8.8 of the Debenture Trust Deed when accrued interest was not paid when it became due and payable and therefore the Corporate Debtor was entitled to redeem the NCDs. 27. In the light of above facts and circumstances, the existence of debt and default is reasonably established by the Petitioner as a major constituent for admission of a Petition under Section 7 of the Code. Therefore, the Petition under sub-section (2) of Section 7 is taken as complete, accordingly this Bench hereby admits this Petition prohibiting all of the following of item-(I), namely: (I) (a) The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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