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TMI Blog2021 (9) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016. Submissions made by the Petitioners: 2. The Petition reveals that the Corporate Debtor had issued secured, unrated, redeemable, non-convertible debentures of an amount aggregating to Rs. 72,00,00,000/- to Petitioner No. 3 on private placement basis and on terms and conditions as set out in a Debenture Trust Deed (DTD) dated 08.03.2019. Under the said Deed, the Petitioner No. 1 was appointed as the Debenture Trustee by the Corporate Debtor, to act for and on behalf of the Petitioner No. 3. The said Deed was amended by way of First Supplemental Agreement dated 22.03.2019 and specific dates for payment of installments/coupons were provided therein. 3. The Counsel for the Petitioners submits that the Petitioner No. 3 paid a sum of Rs. 72 Crores to the Corporate Debtor on 11.03.2019. As per Clause 5.4 read with Schedule 3 of the said Deed, the Corporate Debtor was liable to pay the first installment/coupon to Petitioner No. 3 on 11.09.2019. But, the Corporate Debtor couldn't paid on 11.09.2019 so a grace period till 15.10.2019 was granted to the Corporate Debtor. However, the Corporate Debtor defaulted in making this very first payment of the coupon amount of Rs. 2,18,95,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able and is therefore, liable to be dismissed. b. The Petitioners have claimed different amounts in both the present Petition and in the counter claim filed in the arbitration proceedings. Hence, the Petitioners are themselves not clear as to the total debt due and payable by the Corporate Debtor. c. The existence of the debt and default is also seriously disputed by the Corporate Debtor and the same is evident from the documents which form a part of the Arbitration Proceedings between the parties. In the present case, there neither exists any debt nor default with the mere fact that whether there was a default committed by the Corporate Debtor and whether there exists a debt due and payable by the Corporate Debtor to the Petitioners is being adjudicated upon in the Arbitration Proceedings between the parties. The Petition is therefore clearly devoid of any merits and ought to be dismissed when there is sufficient doubt with respect to the Petitioners' case. d. The arbitration proceedings between the parties arose out of same DTD and for the same allegations as raised in the present Petition. In the said arbitral proceedings, the Petitioners are Respondents having filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioners failed to make payment of the second tranche investment amount of Rs. 8 Crores, the coupon/interest amount of Rs. 2,18,95,890.41/- which was factored to be paid by the Corporate Debtor from this amount itself could not be paid. Therefore, since the failure to make interest payment was on account of the Petitioners and these obligations were interlinked, when the Petitioners had themselves not complied with their obligation under the DTD, the Corporate debtor also could not perform its obligation of making payment of coupon/interest amount of Rs. 2,18,95,890.41/-. Therefore, there is no default on the part of the Corporate Debtor and accordingly, the present Petition is not maintainable. g. The Petitioners invoked pledge of shares of the Corporate Debtor created by Mr. Ashok Rajani and transferred to themselves 26,60,000 shares of the Corporate Debtor upon issuance of the Recall Letter dated 16.10.2019. However, the Petitioners had a right to either invoke the pledge and sell the shares directly or transfer the same to them as per the Share Pledge Agreement. There is a mechanism provided under the Share Pledge Agreement in case the Petitioners intended to invoke the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Petitioners started to sell the shares, the price dropped from Rs. 353.95 on 22.10.2019 to Rs. 66.10 as on 10.12.2019. As soon as the Petitioners stopped selling the shares w.e.f. 10.12.2019, the price went up to Rs. 130.75 as on 27.12.2019. The share markers, both global and domestic, had been severely impacted due to the outbreak of Covid-19 pandemic. The Petitioners in complete defiance to a normal and logical trading practice, from March 16, 2020 onwards (i.e. after the outbreak of Covid-19 pandemic), again started selling the Corporate Debtor's shares in very high volumes and brought the share price to as low as Rs. 36.50 per share. All throughout, the Petitioners had been selling the Corporate Debtor's shares below the Last Traded Price so as to ensure that price of the Corporate Debtor's scrip is anyhow brought down. It is therefore, submitted that the so-called debt is artificially created on account of indiscriminate and arbitrary sale of shares, and hence the Petitioner has only itself to blame. In the circumstances, there exists no actual or real debt. It is therefore requested that the above Company Petition be dismissed in limine with costs. i. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Petitioners. 11. The Corporate Debtor claimed that the Petition is not maintainable and the Petitioners has no authority to file the Petition. The Petitioners had subscribed to the first tranche of NCDs of Rs. 72 crores but failed to subscribe the second tranche of Rs. 8 crores. The Corporate Debtor further claim that there is no default as per the provisions of DTD r/w contemporaneous correspondences exchanged between the parties prior and post execution of DTD. 12. The present Petition was filed on 27.11.2019, however, prior thereto the Arbitration Clause in DTD was invoked by the Corporate Debtor on 12.09.2019 and an Application under Section 9 of the Arbitration Act before Hon'ble Bombay High Court. By orders dated 18.11.2019, the Hon'ble Bombay High Court recorded the consent of both the parties to proceed the arbitration and appointed the Arbitrator. The Learned Arbitrator had passed an Interim Award on 24.03.2021. The Corporate Debtor claimed that the Petitioners had elected to have their claim adjudicated by the Learned Arbitrator and cannot agitate the present action. 13. The Corporate Debtor further contended that there is no debt due and payable to the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned why we have not disbursed the balance Rs. 8 crore. I had also mentioned in the past that we were trying to sell down some portion of our current exposure to make room for the balance of Rs. 8 crore. Unfortunately, the general market liquidity, as you are aware, has been tight. Let us know whether you want us to amend the NCD document down to Rs. 72 crore?" 16. Given the factual matrix, it can be said that the execution of DTD dated 08.03.2019 and Supplementary Trust Deed dated 22.03.2019 demonstrate existence of Financial Debt in pursuance of Section 5(c) of the Code and the essential ingredients of debt which is disbursed against consideration of time value and money is thus satisfied. It is undisputed fact that an amount of Rs. 72 crores was disbursed by the Petitioner No. 3 to the Corporate Debtor as on 11.03.2019. The Petitioner No. 3 further was not able to disburse the second tranche and sought amendment of the DTD vide email dated 26.07.2019. The first coupon was payable by the Corporate Debtor as on 11.09.2019, however, despite extension of grace period till 15.10.2019, the Corporate Debtor failed to make the payment of Rs. 2,18,95,890.41/- as on 15.10.2019. The no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Corporate Debtor under the Code. In view of the Judgment of the Hon'ble Supreme Court in Innoventive Industries Ltd. vs. ICICI Bank and Ors. (MANU/SC/1063/2017), wherein the Hon'ble Supreme Court has held that: "28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor - it need not be a debt owed to the applicant financial creditor.......... The speed, within which the adjudicating authority is to ascertain the existence of a default from there cords of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 here by 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 security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act); (d) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor. (II) That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted dur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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