TMI Blog2022 (1) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... the admission of Application under Section 7 of the Code. The three loans which were assigned by Altico in favour of Respondent No.2 were severable and even if the Facility Agreement dated 14th May, 2018, which was sought to be given effect to be excluded from consideration, the assignment cannot be held to be illegal with regard to other two transactions that is Debenture Trust Deeds dated 04.12.2015 and 24.11.2016. There being default under the above two transactions being INR 111,55,88,511 + INR 2,73,76,59,666 as mentioned in Column 2 of Part-IV of the Section 7 Application and default being more than ₹ 1 crore, the Application has rightly been admitted by the Adjudicating Authority. No error has been committed by the Adjudicating Authority in admitting the Section 7 Application - appeal dismissed. - Company Appeal (AT) (Insolvency) No. 359 of 2021 - - - Dated:- 24-1-2022 - [Justice Ashok Bhushan] Chairperson And [Dr. Ashok Kumar Mishra] Member (Technical) For the Appellant : Ms. Pooja M. Saigal, Ms. Anshul Bajaj, Simrat Singh Pasay, Mr. Chaitanya Pandey, Advocates For the Respondent : Mr. Bhargav K.Hemmige, Advocate for R1 Mr. Arun Kathpalia, Sr. Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convertible debentures worth INR 220 crores were issued by the Corporate Debtor and purchased by Altico. (iii) A Facility Agreement dated 14.05.2018 had been executed amongst SARE Gurugram (Corporate Debtor), KKR India Asset Finance Private Limited (KKR) and Altico, in pursuant to which loan facility for an amount of INR 100 crores was being advanced by KKR and Altico to SARE Gurugram. Altico was to advance INR 60 crores and KKR to INR 40 crores. Securities were created by the Company forming part of SARE Group. (iv) On 30.06.2018 an amount of US $ 60,162,463 was due and payable by SARE Public to Wafra on account of outstanding Bonds. Due to repeated defaults of SARE Public, Wafra had exercised its right to appoint a Receiver as per the terms of the Debenture Deed dated 28.04.2011 and had appointed Mr. Augoustinos Papathomas as Receiver and Manager on all secured assets of SARE Public on 10.08.2018. Receiver issued letters to SARE Public and subsidiaries of SARE Public informing about his appointment as Receiver / Manager of SARE Public. (v) Wafra had initiated proceedings against SARE Public before the Hon ble Supreme Court of the State of New York, claiming a sum of USD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vention Application being I.A. No.3783 of 2020 in the Company Petition (IB)-300(PB)/2020 seeking intervention as well as dismissal of Section 7 petition. Reply to the intervention was filed by Respondent No.2. (xiii) The Adjudicating Authority vide its order dated 09.03.2021 admitted Section 7 petition filed by Respondent No.2 and rejected the Intervention Application filed by the Appellant. Aggrieved against the order dated 09.03.2021, this Appeal has been filed by SARE Public. 3. We have heard Ms. Pooja M. Saigal, learned Counsel for the Appellant, Shri Arun Kathpalia, learned Senior Counsel appearing for Respondent No.2 (ACRE), both of them have placed their submissions with ability and clarity. Mr. Ritin Rai, learned Senior Counsel appearing for Intervener and Mr. Bhargav K. Memmige, learned Counsel for Respondent No.1 SARE Gurugram. 4. Learned Counsel for the Appellant challenging the impugned order stated that Adjudicating Authority committed error in entertaining the Application of Respondent No.2 under Section 7 of the Code, which was filed on the strength of Assignment Agreement 23.03.2019. The Assignment dated 23.03.2019 in favour of Respondent No.2 was in violat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has no locus to challenge the order dated 09.03.2021. There is no dispute raised by the Corporate Debtor or the Appellant with respect to the debt owed by the Corporate Debtor. At the stage of proceeding under Section 7 of the Code, Adjudicating Authority is only required to examine the existence of debt and whether there has been a default by the Corporate Debtor in repayment of the debt. The Corporate Debtor or other subsidiaries of SARE Public were not party to Purchase Agreement dated 28.04.2011. There were three financial debts owned by the Corporate Debtor namely (i) Debenture Trust Deed dated 04.12.2015 worth ₹ 95 crores; (2) Debenture Trust Deed dated 24.11.2016 worth ₹ 220 crores; and (3) Facility Agreement dated 14.05.2018 for a facility of ₹ 100 crores. The Delhi High Court in its order dated 08.01.2020 has also clearly held that the Purchase Agreement between Plaintiff (SARE Public) and Defendant No.20-Wafra was executed by Defendant Nos. 1 to 15 and there is no commitment or promise by Defendant Nos.1 to 15 of the suit. In the suit, which was filed in Delhi High Court, only document sought to be challenged by the Intervener was the Facility Agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor in its capacity as borrower and Altico Capital India Ltd. and KKR India Asset Finance Limited for extending a Term Loan Facility for aggregating INR 100 crores, out of which ₹ 60 crores was to be financed by Altico. The total defaulted amount claimed in Section 7 Application is INR 462,34,02,742. The learned Counsel for the Appellant s argument is based on the interim order dated 12.10.2018 passed by the Delhi High Court in CS (COMM) No.1179 of 2018. It is useful to extract the entire order dated 12.10.2019 passed in the above suit and in I.A. No.14239 of 2018 filed by the Plaintiff under Order 39 Rule 1 and 2 CPC to the following effect: IA No.14239/2018 Issue notice to the defendants by ordinary process and speed post, returnable for the date fixed above. This application is filed under Order 39 Rule 1 and 2 CPC seeking ex parte ad interim injunction restraining the defendants No.1 to 15 from pledging, mortgaging, encumbering, disposing of, selling or alienating any of their assets, shares, properties (movable and immovable) in any manner whatsoever without obtaining the prior written permission of the Receiver of the plaintiff. Other connected reliefs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any Lien upon any of its property, assets or revenues etc. It is also pointed out that this agreement is signed on behalf of the subsidiaries. It is pleaded that a Facility Agreement has now been executed on 14.5.2018 by defendant No.3/ SARE Gurugram Private Limited with defendants No.16 and 17 pursuant to which the loan facility vide an aggregate amount of INR 100 Crores is proposed to be advanced to defendant No.3 on security of the assets of defendant No.3 and other subsidiaries of SARE Group. It is pleaded that this arrangement which has yet not been completed is wholly contrary to the Agreement between the parties and will cause irreparable loss and injury to the WAFRA Group if the securities are allowed to be further pledged or given as lien. Plaintiff has made out a prima facie case in its favour. Defendants No.1 to 10 are restrained from creating any encumbrance/charge or lien or mortgage of any of their assets, shares, properties (movable or immovable) to any third party till the next date of hearing. Defendants 16 and 17 are also restrained from giving effect to the Facility Agreement dated 14.5.2018 to the extent of their taking lien charge, security, mortgag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 7 of the Code? 12. As noted above, the Application under Section 7 in Part-IV contains three separate transactions, on the basis of which default was claimed. Copies of Debentures Trust Dees dated 04.12.2015 as well as 24.11.2016 were part of the Section 7 Application. The Facility Agreement dated 14.05.2018 was also filed along with Section 7 Application. Total default on the basis of the aforesaid three financial transactions were amounting to INR 462,34,02,742. On 01.10.2019, Respondent No.2 issued an acceleration cum enforcement notice to the Corporate Debtor recalling all financial assistance and declaring outstanding amount as on 16.09.2019 as due and payable. As per Section 7, sub-section 4, the Adjudicating Authority has to ascertain the existence of a default from the records of the information utility or on the basis of other evidence furnished by the Financial Creditor. Under Section 7, sub-section (5) it is mentioned when the Adjudicating Authority is satisfied that a default has occurred and the application under sub-section (2) is complete . it may, by order, admit such application . The Hon ble Supreme Court in (2018) 1 SCC 407 in Innoventive Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dification as directed by the Delhi High Court on 08.01.2020 did not modify or vacate the interim direction and modification was to the limited extent that Defendant No.1 to 10 were permitted to mortgage, charge or create a lien on their movable/ immovable assets. In paragraph 49 of the judgment, following has been held: 49. I accordingly modify the interim order dated 12.10.2018 read with order dated 01.11.2018. Subject to further orders of the court, defendants No.1 to 10 are permitted to mortgage, charge or create a lien on their movable/ immovable assets subject to filing an undertaking in the court by way of an affidavit that the same is being done bonafidely for the purpose of completion of the pending real estate projects of defendants No.1 to 10 or for its day to day operations. Any such lien, mortgage or charge would be created only to complete the pending projects or for carrying out normal day to day running of the companies. Full amounts of the funds so generated by creation of such lien, mortgage or charge including how the amounts are expanded shall be filed in court on an affidavit of a director every quarterly. Subject to above modification, the interim order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven effect to and the Facility Agreement, thus, can be held to be unenforceable under the applicable law. There being three financial transactions dated 04.12.2015, 24.11.2016 and 14.05.2018, even if, 18.05.2018 was unenforceable, there was no cloud on the enforceability of other two transactions i.e. 04.12.2015 and 24.11.2016 and they were clearly severable by virtue of Clause 10.5 as noted above. The Adjudicating Authority, thus, has not committed any error in taking the view that even if, the Facility Agreement dated 14.05.2018 is ignored, there was still default on the part of the Corporate Debtor on the basis of which IBC proceedings under Section 7 can be proceeded. The findings in the above context recorded by the Adjudicating Authority in paragraph 22 of the judgment. 20. The learned Counsel for the Appellant submits that Clause 10.5 did not permit any severability into three facilities. In support of her submission, learned Counsel Ms. Pooja M. Saigal relied on judgment of Hon ble Supreme Court in (1972) 3 SCC 799, Mattapalli Chelamayya and Another vs. Mattapalli Venkataratnam and Another. Hon ble Apex Court in the above case had occasion to consider the severability w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay the transaction, not being required to be compulsorily registered, the award was admissible in evidence. 12. It was further contended for the appellants that an award is one and indivisible and to direct that effect be given to a part of the award and not to the whole of the award would amount to modifying the award and that was impermissible. We do not think that there is any substance in this contention also. Where a severable part of an award cannot be given effect to for a lawful reason, there is no bar to enforce the part to which effect could be justly given. See Mst Amir Begam v. Badr-ud-din Hussain [AIR 1914 PC 105 : 12 ALJ 537 : 16 Bom LR 413] where as a general principle it is laid down that when a separable portion of an award is bad, the remainder of the award, if good, can be maintained. By giving effect to a part of the award in this case no prejudice is caused to the appellants. In fact they stand to benefit. As the award stands, the appellants would have been responsible not only to pay the amounts personally, but also from the property which was charged. Since the charge part is eliminated for want of registration, they are freed from the additional liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d property, the second transaction with regard to the charge being a severable transaction can be validly ignored and the award to the extent it declares the personal obligation to pay is admissible in evidence the transaction not being required to be compulsorily registered. 15. The counsel submits that part which provides for interest can be severed and the document can be used even without registration. Here also, the plaintiff has got another difficulty that there is a charge by the document Ext. A2. 16. If applying the principle of separability, this part also is severed, the plaintiff has to fall back on the charge in the original mortgage. If he wants to enforce the charge created on the property by the original mortgage as stated earlier, it is not enforceable in this suit since it is barred by limitation .. 17. We also agree that if a transaction is distinct and divisible and one part of the transaction can be validly effected by an unregistered instrument and the other part requires registration, the instrument may be used as evidence of the part which does not require registration. We are of opinion that the part which is not required to be registered mus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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