TMI Blog2023 (12) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... 10A period and subsequent to Section 10A period, application is fully maintainable for any default subsequent to Section 10A period - The Application under Section 7 being filed for default which was on basis of default occurred subsequent to Section 10A period, it is opined that application was not hit by Section 10A. Whether the Debenture Holders have right to initiate proceedings under Section 7 of the Code? - HELD THAT:- It is already noticed that Altico i.e. majority Debenture Holder has already initiated Section 7 proceeding hence all Debenture Holders were unanimous in their view to proceed against the Corporate Debtor and this Tribunal upheld the initiation of proceeding against the Corporate Debtor by the Financial Creditors. Whether the Facility Acceleration Notice dated 30th May, 2021/31st May, 2021 was incompetent and not in accordance with Debenture Trust Deed dated 19th March, 2018? - In event, Facility Acceleration Notice dated 30th May, 2021/31st May, 2021 is held to be not in accordance with Debenture Trust Deed, whether the Application under Section 7 deserves to be dismissed? - Whether the Order passed by the Adjudicating Authority admitting Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t K contains the details of interest accrued interest paid and interest outstanding even if we take period after 10A period i.e. period from 31st March, 2021 as mentioned in the tabular chart total overdue interest after 10A period is much more than threshold amount of Rs.1 Crore. Details of overdue interest has been captured in the tabular form in exhibit K - The date of default in payment of interest after there are several date of default in payment of interest after Section 10A period which is captured in the tabular form filed as Exhibit K in Part-IV of the Application, Financial Creditors have also filed the working for computation of the amount and days of default in tabular form thus the date of default cannot be confined only to date 1st June, 2021 as mentioned in Part-IV. The date of default which is mentioned in the tabular form cannot be ignored it is clear that there was default of more than Rs.1 Crore i.e. threshold period in payment of default by the Corporate Debtor after Section 10A period. The above default is very much there even if the default is ignored on the basis of Facility Acceleration Notice dated 30th May, 2021/31st May, 2021 - even after Section 10A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 2 mentioning that total overdue being Rs.58,45,30,759/- facility is accelerated and entire amount be paid within one business day. II. After Facility Acceleration Notice, the Respondent Nos. 1 and 2 the Financial Creditors (Debenture Holders) filed Section 7 Application before the Adjudicating Authority claiming total amount as on 31st March, 2022 is Rs.77,59,57,957/- and date of default was mentioned as 01st June, 2021. Along with Section 7 Application working for computation of amount and days of default in tabular form was also annexed as Exhibit K. Reply was filed to Section 7 Application by the Corporate Debtor. Corporate Debtor in its Reply has taken the plea that the application is barred by Section 10A and further Debenture Holders the Respondent Nos. 1 and 2 had no right to file Section 7 Application. It was pleaded that it is only Debenture Trustee who can file the Section 7 Application after receiving the approved instructions from Debentures Holders. The Respondent Nos. 1 and 2 being minority debenture holders could not themselves have initiated Section 7 Proceedings. III. The Adjudicating Authority after hearing the parties, by impugned order, admitted Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for such default. The Facility Acceleration Notice could never be the date of default. The Facility Acceleration Notice itself mentioned that default interest has been levied and is unpaid. Obviously, the date of default is prior to May, 2021. Referring to the table of computation filed by the Financial Creditors along with Section 7 Application it is submitted that date of default is actually October, 2020 to December, 2020 i.e. during 10 A period. The right of Debenture Holders to initiate Section 7 Proceedings is not in doubt but the question is whether minority Debenture Holders could have issued a Facility Acceleration Notice contrary to the Debenture Trust Deed and make it basis for default claimed in the petition. The Financial Creditors reliance on Clause 9.8 of Debenture Trust Deed is misplaced. 5. Mr. Ramji Srinivasan, Learned Sr. Counsel refuting the submissions of Learned Sr. Counsel for the Appellant submits that Debenture Holders have rightly proceeded to initiate Section 7 Proceeding. He has referred to Clause 9.8 of Debenture Trust Deed to support his submissions. It is submitted that Debenture Holders have unqualified right to independently and separately ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sr. No. 2 of the Application is as follows: 2. AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED (ATTACH THE WORKINGS FOR COMPUTATION OF AMOUNT AND DAYS OF DEFAULT IN TABULAR FORM) AMOUNT CLAIMED TO BE IN DEFAULT The total amount claimed to be in default as on March 31, 2022 is Rs. 30,90,63,124/- (Rupees thirty crores ninety lakhs sixty three thousand one hundred and twenty four) for Clearwater Capital Partners Singapore Fund IV Private Limited. The total amount claimed to be in default as on March 31, 2022 is Rs. 1,77,59,51,957/- (Rupees one hundred and seventy seven crores fifty nine lakhs fifty one thousand nine hundred and fifty seven) for Clearwater Capital Partners Singapore Fund V Private Limited. DATE OF DEFAULT The date of default is considered as June 1, 2021 i.e. the due date for payment of outstanding amount demanded vide the Acceleration Notices dated May 31, 2021, whereunder the entire outstanding amount was repayable within 1 (one) day from date of the notice. The notice was emailed and couriered to the Corporate Debtor on June 1, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for an amount of Rs.1,12,73,387/-. The learned counsel for the financial creditor submitted that even after the period covered by Section 10A came to an end, no payments are yet been made to the Financial Creditor by the Corporate Debtor. It is submitted by Financial Creditor that huge dues have been accumulated against the corporate debtor as on date. In the 3rdstatus report, the IRP has stated that in pursuance of the Public Announcement claims of Financial Creditors have been received of Rs. 1930 crores in addition to claims of homebuyers of Rs. 29,43,69,469/- . There is no material brought on record except to the letter of the Swamih Investment Fund dated 03.06.2021, which provided for approval of fund subject to several conditions. The Financial Creditor submits that one o the condition was that NOC of Financial Creditor was required to be obtained, whereas no NOC have been obtained from Financial Creditor for the said fund. 11. The Application under Section 7 being filed for default which was on basis of default occurred subsequent to Section 10A period, we are of the view that application was not hit by Section 10A. Question No. ii 12. In the present case, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the right of the 2nd and 3rd Respondent is very much saved in the Debenture Trust Deed . It is to be remembered that in the present case the Section 7 Application under the Code was filedby the 100% Debenture Holders and they are the Financial Creditors under the I B Code. As such, this Tribunal holds that they do have a valid and legal right to file the Section 7 Application under the I B Code, 2016. 15. Another Judgment relied by Learned Counsel for the Respondent is Mayur Suchak Vs. Catalyst Trusteeship Limited Anr. C.A.(AT) Ins. No. 448 of 2023 in which case Debenture Holders have assigned their rights in favour of Catalyst Trusteeship Limited who filed the Application under Section 7 where this Tribunal had occasion to consider similar clause like clause 9.8. In the above case, it is also relevant to notice that acceleration notice given by Financial Creditor was also held to be justified noticing all other creditor i.e. Clearwater Capital Partner Singapore Fund V Pvt Ltd have also initiated proceeding under Section 7. We may notice paragraph 14 of the Judgment which is to the following effect: 14. After looking into the different clauses of the Debenture Trust D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d instruction has been defined as following: approved instruction shall mean the prior written instructions of the Debenture Holders to the Debenture Trustee which has been approved pursuant to provisions has to be in Schedule III 19. Clause 9 of the Debenture Trust Deed defines events of default. Clause 9.1(a) which is relevant for present case is as follows: 9.1 Events of Default The occurrence of any of the events specified below shall constitute an Event of Default: (a) Non Payment Failure of the Issuer or any other Obligor or any Land Owner to make payments of the Secure Obligations on any Due Date or otherwise, when due, of any amounts in relation to the Debentures or under any of the Transaction Documents in accordance with the terms thereof on the relevant due date at the place and in the currency in which it is expressed to be payable. 20. Clause 9.2 deals with consequence of default which is as follows: 9.2 Consequences of Default On and at any time after the occurrence of a Default, in addition to the levy of Default Interest in accordance with Clause 9.6 (Default Interest), the Debenture Trustee may upon the delivery of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny or more than one or all of the rights stated in this Clause 9.2 simultaneously or in any order of priority at the sole discretion of the Debenture Trustee. The Issuer agrees that all costs and expenses in relation to the foregoing shall be to the account of the Issuer. 21. The submission of Learned Counsel for the Appellant is that the Debenture Trust Deed can initiate proceeding only on the basis of approved instructions which approved instructions has to be issued by majority of Debenture Holders. Provisions of meeting the Debenture Holders is provided in Schedule III and as per Part-B of the Schedule III provision of written consent of the Debenture Holders following is provided: PART B PROVISIONS FOR THE WRITTEN CONSENT OF THE DEBENTURE HOLDERS For any written consent of the Debenture Holders, the Debenture Trustee (or as applicable the Issuer or a Debenture Holder) shall provide a notice in writing to the last available address of each Debenture Holder at least 10 (ten) calendar days prior to the date on which any decision is required to be made or consent to be provided, or such shorter time period if consent is accorded thereto by the holder(s) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the loan and therefore, the restructured loan package did not materialise. We are of the opinion that this issue is not relevant in the adjudication of section 7 application and would like to leave this issue at this stage only. We also feel that the arguments of the Learned Counsel for Appellant regarding the applicability of sections 129 and 133 of the Indian Contract Act in the present case would not be relevant in so far as adjudication of application 7 is concerned. 23. From the facts and sequence of events as noticed above it is clear that the facility acceleration notice issued by the Debenture Holders cannot be said to be in accordance with the Debenture Trust Deed. The notice was not issued by Debenture Trustee and issued by Debenture Holders. 24. We having held that Facility Acceleration Notice was not issued in accordance with the terms and conditions of Debenture Trust Deed, the next question to be considered is as to whether after the aforesaid holding whether the Section 7 Application deserves dismissal. 25. While noticing the clauses of Debenture Trust Deed, we have noticed that Debenture Trustee has to initiate proceeding after occurrence of event of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact exercised by all the NCD holders. This is what was contractually agreed between the parties. If not for this understanding/agreement, the Corporate Debtor would have immediately responded to the Acceleration Notice and contended that it is defective as is south to be now alleged. ACRE has also filed its claims before the IRP. 26. When the majority Debenture Holder has already initiated Section 7 Proceeding against the Corporate Debtor prior to filing of Section 7 Application by the present Financial Creditors Respondent No. 1 and 2 it is clear that majority Debenture Holder has decided to proceed against the Corporate Debtor in insolvency proceedings and the submission of the Appellant that notice for acceleration of facility was required to be given only by Debenture Trustee on approved instructions of Debenture Holders is only an argument of the Appellant that Majority Debenture Holder has not given approved instruction to Debenture Trustee to accelerate facility. The fact remains that majority Debenture Holder having already initiated Section 7 Proceeding, all debenture holders are unanimous in their actions to proceed against the corporate debtor for the defaults ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod for the Debentures shall start from the first day of the calendar quarter and shall end on the final settlement date. 28. For sake of argument if we do not take 1st June, 2021 as date of default, the default on the payment of interest after end of the 10A period i.e. after 24th March, 2021 there is clear default on the payment of interest and payment of default in the interest of both the Financial Creditors is more than Rs. 1 Crore which is threshold amount for filing of the Application under Section 7. The tabular chart given in Exhibit K contains the details of interest accrued interest paid and interest outstanding even if we take period after 10A period i.e. period from 31st March, 2021 as mentioned in the tabular chart total overdue interest after 10A period is much more than threshold amount of Rs.1 Crore. Details of overdue interest has been captured in the tabular form in exhibit K. For example, with regard to Respondent No. 1 overdue interest on 31st March, 2021 was Rs.4,17,36,492/- and overdue interest on 30th June, 2021 was Rs.5,45,41,732/- thus the defaulted amount during this quarter was itself more than Rs. 1 Crore. Similarly, with regard to Respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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