TMI Blog2021 (9) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.41/- as on 15.10.2019 - The events of default as contemplated under the DTD stipulate that on occurrence of default and nonpayment of coupon, the entire amount of outstanding loan became due and payable. Thus, the rights of the Debenture Holder/Debenture Trustee crystallized immediately upon default and the rights of the Petitioners are well defined under the DTD. The essential ingredients of Section 7 Application, i.e., financial debt under Section 5(8) of the Code and the default under Section 3(2) of the Code are met. The Petition was filed on 28.11.2019. Thereafter, the Corporate Debtor has invoked the Arbitration Clause under Section 9 of the Code and the Arbitrator was appointed by the Bombay High Court. The Interim Award was passed by the Arbitrator wherein he has directed the Corporate Debtor to pay an amount of ₹ 72,06,99,224/- with further interest - this petition is not maintainable under section 7 and has to be treated as an application of section 9 of the code, the petition was filed prior in time before the commencement of arbitration proceedings and the Petitioners have exercised their rights of initiation of CIRP against the Corporate Debtor under the Cod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 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 ₹ 2,18,95,890.41/- despite granting an extended grace period till 15.10.2019. This act of non-payment of the first coupon resulted in the Event of Default under the said Deed. Consequently, the Petitioners issued notices dated 16.10.2019 calling upon the Corporate Debtor to make payment of the entire redemption amount of ₹ 77,94,92,513/- on or before 17.10.2019, but the Corporate Debtor failed to do so. 4. The Counsel for the Petitioners further submits that the Corporate Debtor had simultaneously invoked arbitration against the Petitioners alleging breach of the said Deed and thereby claiming damages. The Petitioners filed their counter-claim seeking a monetary award of a sum of ₹ 73,56,59,238/- against the Corporate Debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 counter claim for an award of a sum of ₹ 73,56,59,238/-. The Petitioners have themselves admitted that the sum claimed by them under the DTD is subject to adjudication and will be due and payable only if they succeed in the arbitration after the trial is complete. Thus, there is no debt due to the Petitioners by the Corporate Debtor as on the date of filing of the present Petition. e. The Petitioner No. 2 filed a Term Sheet dated 07.02.2019 committing to invest an aggregate sum of ₹ 100 Crores in the form of ₹ 20 Crores towards CCPS and ₹ 80 Crores towards NCDs. At the instance of the Petitioner No. 2, the NCDs investment of ₹ 80 Crores was split ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pledge for the purposes of sale of the shares. The Petitioners did not follow this mechanism provided under the Share Pledge Agreement and unilaterally transferred these abovesaid 26,60,000 shares to themselves. Accordingly, upon this unilateral transfer of shares by the Petitioners to themselves, the Petitioners became owners of these Equity Shares as on the date of transfer and accordingly, had also acquired the right to exercise voting rights with respect to these Equity Shares. So, the Petitioners actually exercised their option to convert their investment into equity shares. Therefore, the value to be prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes and brought the share price to as low as ₹ 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 on the date of the transfer, the value of these shares was ₹ 91,78,33,000/- and therefore, after adjusting the alleged outstanding amount of ₹ 91,78,33,000/-, the entire purported debt of the Petitioners stands extinguished and it is the Petitioners who are liable to refund the balance amount of ₹ 13,83,40,487/- to Mr. Ashok Rajani, the erstwhile holder of these shares. Admittedly, the Petitioners are also holding 10,23,495 shares out of these shares of the Corporate Debtor. Therefore, since there is no debt due and payable by the Corporate Debtor, the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 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 Petitioner by the Corporate Debtor and that the coupon interest amount of ₹ 2,18,95,890.41/- though was not paid, the Petitioner invoked a pledge of shares and transferred themselves 26,60,000 shares of the Corporate Debtor Company. The Petitioner did not follow the mechanism relating to Share Pledge Agreement and unilaterally transferred these shares to themselves. By virtue of transfer of shares, the Petitioners have acquired the voting rights to this equity shares. 14. Further the Corporate debtor also claimed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 2,18,95,890.41/- as on 15.10.2019. The non-payment of the coupon interest rate triggered the event of default and the Petitioners issued notice dated 16.10.2019 calling upon the Corporate Debtor to pay the entire redemption amount of ₹ 77,94,92,513/- on or before 17.10.2019. The events of default as contemplated under the DTD stipulate that on occurrence of default and nonpayment of coupon, the entire amount of outstanding loan became due and payable. Thus, the rights of the Debenture Holder/Debenture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate 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 satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority....... 29....... 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 during moratorium period. (III) That the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (IV) That the order of moratorium shall have effect from the date of pronouncement of this order till the completion of the corporate insolvency resolution process or until this Bench appro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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