9911796707
TMI Blog2023 (5) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... y by the impugned order dated 30.03.2023 rejected the application I.A. 34/2022 holding that the Section 7 application is not barred by Section 10A. Aggrieved by the said order this Appeal has been filed. Brief facts of the case necessary to be noticed for deciding this Appeal are: i. The Appellant to meet the company's requirement issued 2500 secured, unlisted, rated, redeemable, Non-Convertible Debentures (NCDs) each having a face value of Rs.10 Lakhs in five series viz. Series A, Series B, Series C, Series D and Series E. ii. A Debenture Trust Cum Mortgage Deed was executed on 06.12.2018 between the Appellant - Corporate Debtor and the Respondent - Axis Trustee Services Ltd. (Financial Creditor). Details of the debentures in five series with the details of principal repayment date, tenure and redemption details were mentioned in Schedule V of the Debenture Trust Cum Mortgage Deed. iii. The Appellant on 13.04.2020 wrote to the Debenture Holder seeking a moratorium of five months of repayment of dues. By letter dated 27.04.2020, the Financial Creditor granted three months moratorium for all payments obligations due between 01.04.2020 to 30.06.2020. iv. The Financial Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice under Clause 13.1(a), the secured obligations immediately became due and payable. Event of default occurred as per notice dated 22.10.2020 and the entire amount became due and payable. The date of default which was fully covered under 10A period could not have been changed by any subsequent notice and the application filed under Section 7 was barred by Section 10A. The Adjudicating Authority committed error in rejecting I.A. No. 34/2022. Relying on the judgment of Hon'ble Supreme Court in "Ramesh Kymal versus Siemens Games Renewable Power Private Ltd., (2021) 3 SCC 224". It is submitted that embargo contained in Section 10A must receive purposive construction which was sought to be achieved by enacting the provision. Once a default takes place, the right to file application accrues and it is not discretion of the Tribunal to accept one date or the other. Learned counsel for the Appellant placed reliance on judgment of this Tribunal in "Next Education vs. K12 Techno Services, Company Appeal (AT) (Ins.) No. 98 of 2019". 4. Shri Krishnendu Datta, learned senior counsel appearing for the Respondent refuting the submissions of learned counsel for the Appellant submits that the Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isted secured redeemable non-convertible debentures each having a face value of Rs. 10,00,000/- (Rupees Ten Lakhs only) in 5 (Five) Series, being Series A, Series B, Series C. Series D and Series E each of an amount and tenor as set out in Schedule V hereto, of the aggregate value of Rs. 250,00,00,000/- (Rupees Two Hundred and Fifty Crores only) (hereinafter referred to as the "Debentures"), for cash, at par on a private placement basis in dematerialised form ("Issue") to the persons more specifically identified in Schedule I hereto. The Company had also issued a disclosure document, dated September 27, 2018 ("Disclosure Document") and a private placement offer cum application letter, dated September 27, 2018, in the form and manner provided for in the Companies (Prospectus and Allotment of Securities) Rules, 2014 ("Offer Letter") setting out the broad terms on which the Debentures were issued;" 7. Schedule V is referred to in above Clause B is as follows: "SCHEDULE V PRINCIPAL REPAYMENT DATES Coupon Type Fixed subject to any revision in terms of paragraph 2.2(c) of Schedule II of this Deed. Day Count Basis Actual/Actual Issue Price Rs.10,00,000/- per Debenture Face Valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments (as defined in the Deed) resulting in occurrence of Event of Default under Clause 13 of the Deed." 9. Paras 7 to 19 of the notice dated 22.10.2020 are as follows: 7. Per the Transaction Documents, the Company made a representation and confirmed that the Debentures have been rated 'BWR A+ (SO)' by the Rating Agency namely Brickwork Ratings India Pvt. Ltd. It was covenanted between the Company and our client that in the event the credit rating assigned by the Rating Agency is revised doe to any reason, the Company shall promptly intimate, in writing, to our client and each of the Debenture Holders of such revision. 8. The Transaction Documents contemplate that in the event, and during the tenor of the Debentures, the credit rating assigned to the Debentures by the Rating Agency is lower than the Original Rating, the Coupon Rate applicable to the Debentures shall be revised upwards by 25 bps (Twenty Five basis points) for each level of downgrade from the Original Rating. Furthermore, it has been agreed that all interest on the Debentures along with all other monies shall, in case the same is not paid on the respective due dates, carry further interest at the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of what is stated hereinabove, the Event of Default has occurred under the Deed and our client, in accordance with the terms of the terms of Transaction Documents, reserves its right to accelerate the redemption of the Debentures. 15. Our client finds it pertinent to point out that by email dated 31" August 2020, Mr. Akhilesh Kalra, on behalf of the Issuer and Future group, had confirmed that all the amounts due and payable by the Company shall be paid off upon completion of the ongoing transaction between Future Group and Reliance Retail Ventures Ltd. The Company is, therefore, obligated to honor its commitment to our client in respect of the Debentures. 16. In light of the above, our client hereby calls upon you to confirm full repayment of all dues pertaining to the above Debentures from the proceeds of any transaction between Future Group and Reliance Retail Ventures Ltd, and/or any other prospective investor, or by January 31, 2021, whichever is earlier, time being the essence hereof. 17. Additionally, our client also hereby calls upon you to forthwith furnish the certificate of the independent Chartered Account certifying the adherence of the financial covenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 6th December 2018." 14. The notice mentions that Appellant has failed to adhere to the financial obligations by committing defaults in payment of the scheduled amounts. Reference of notice dated 22.10.2020 was also mentioned. It was stated that the Debenture Holders are still awaiting payment of their rightful and legally enforceable dues. By the notice, the Appellant was called upon to make repayment of the amount due and default as on 20.05.2022, failing which the Financial Creditor shall be compelled to take appropriate legal action under I&B Code. After notice dated 01.07.2022, the application under Section 7 has been filed by the Financial Creditor. Part IV of the Section 7 application is as follows: Part-IV PARTICULARS OF FINANCIAL DEBT 1 TOTAL AMOUNT OF DEBT GRANTED Rs. 250,00,00,000/- (Rupees Two Hundred Fifty Crores Only) [With respect to 2500 (Two Thousand Five Hundred) rated, unlisted, secured, redeemable Non-Convertible Debentures each having a face value of Rs. 10,00,000/-(Rupees Ten lakh only) in 5 series viz. Series A, Series B, Series C, Series D, Series E aggregating to Rs. 250,00,00,000/- (Rupees Two Hundred Fifty Crores Only)] DATE(S) OF DISBU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as mentioned hereinabove, has made a contradictory reference to the date of default as 31 March, 2021 in Part IV of the same Company Petition. It is stated that the Financial Creditor upon seeking full repayment for the event of default as stated by them in the notice dated 22 October, 2020 and in effect invoking the mandatory prepayment clause, cannot now take a stand that the payments became due and payable in March, 2021. This clearly is a mischief played on the part of the Financial Creditor to circumvent Section 10A of the Code. 7. In the above circumstances, wherein it is the case of the Financial Creditor itself that the defaults have occurred around October 2020, it is submitted that the claim of the Financial Creditor is clearly hit by section 10A of the Insolvency and Bankruptcy Code, 2016. A reference can be made to the notice dated 22nd October, 2020 which states that Event of Default has occurred as on that date and thus the Default Period falls under the period contemplated by section 10A of the Code, which starts from 25th March 2020. The relevant extract of Section 10A is reproduced hereinbelow- "Notwithstanding anything contained in sections 7, 9 and 10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. 30 September 2021 4,16,66,875 Not paid 8. 31 October 2021 4,16,66,875 Not paid 9. 30 November 2021 4,16,66,875 Not paid 10. 31 December 2021 4,16,65,625 Not paid 11. 31 January 2022 6,25,00,000 Not paid 12. 28 February 2022 6,25,00,000 Not paid 13. 31 March 2022 6,25,00,000 Not paid 14. 30 April 2022 6,25,00,000 Not paid 15. 31 May 2022 6,25,00,000 Not paid 16. 30 June 2022 6,25,00,000 Not paid 17. 31 July 2022 6,25,00,000 Not paid 18. 31 August 2022 6,25,00,000 Not paid 19. 30 September 2022 6,25,00,000 Not paid 20. 31 October 2022 6,25,00,000 Not paid 21. 30 November 2022 6,25,00,000 Not paid 22. 31 December 2022 6,25,00,000 Not paid 23. 31 January 2023 7,81,66,667 Not paid 24. 28 February 2023 7,81,66,667 Not paid 25. 31 March 2023 7,81,66,667 Not paid 26. 30 April 2023 7,81,66,667 Not paid 27. 31 May 2023 7,81,66,667 Not paid 28. 30 June 2023 7,81,66,667 Not paid 29. 31 July 2023 7,81,66,667 Not paid 30. 31 August 2023 7,81,66,667 Not paid 31. 30 September 2023 7,81,66,667 Not paid 32. 31 October 2023 7,81,66,667 Not paid 33. 30 November 2023 7,81,66,667 Not paid 34. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso to Section 10A stipulates that "no application shall ever be filed" for the initiation of the CIRP of a corporate debtor "for the said default occurring during the said period". The explanation which has been inserted for the removal of doubts clarifies that Section 10A shall not apply to any default which has been committed under Sections 7, 9 and 10 before 25 March 2020. 24. The substantive part of Section 10A adverts to an application for the initiation of the CIRP. It stipulates that for any default arising on or after 25 March 2020, no application for initiating the CIRP of a corporate debtor shall be filed for a period of six months or such further period not exceeding one year "from such date" as may be notified in this behalf. The expression "from such date" is evidently intended to refer to 25 March 2020 so that for a period of six months (extendable to one year by notification) no application for the initiation of the CIRP can be filed. The submission of the appellant is that the expression "shall be filed" is indicative of a legislative intent to make the provision prospective so as to apply only to those applications which were filed after 5 June 2020 when the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate debtor or the right of creditors to recover it." 20. Present is a case where date of default is claimed as 31.03.2021 in Part IV of the application and the application is filed including the default amount as per the Debenture Trust Deed, Schedule V, the default from 31.03.2021 onwards. We have noticed Para 5 of Reply to the application where it was clearly stated that while the total claim would be higher, the present Petition is filed only with respect to the default committed after the 10A period was over i.e. for the default on 31st March 2021 and thereafter. What is prohibited by Section 10A is that no application shall ever be filed for the default which occurred during the period of Section 10A i.e. from 25th March, 2020 to 25th March, 2021. Section 10A has no application when an action is initiated for default which occurred subsequent to 10A period. Section 7 application as well as Reply filed to I.A. No. 34/2022 clearly indicate that Section 7 application which was filed by the Financial Creditor wad confined to the default committed by the Appellant on 31.03.2021 and thereafter. In Para 7 of the Reply total calculations have been mentioned for arriving at th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
