Tribunal allows 6 months for settlement in debenture case, prioritizing stakeholder interests

The Tribunal granted the respondent company six months to explore settlement possibilities for non-payment of interest and redemption of debentures, considering financial distress and proposing arbitration. The judgment highlighted the company's efforts, affecting multiple stakeholders, and found reasons for default plausible. No costs were awarded, emphasizing the need to consider all stakeholders' interests before ordering repayment solely to the petitioners.

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Issues Involved:
1. Non-payment of interest and redemption of debentures.
2. Financial distress of the respondent company.
3. Proposal for settlement and arbitration.

Issue-wise Detailed Analysis:

1. Non-payment of Interest and Redemption of Debentures:

The petitioners filed C.P. No. 73/BB/2019 under section 71(10) of the Companies Act, 2013, seeking repayment of deposits/debentures along with interest due from the respondent company, M/s. Tierra Farm Assets Co. P. Ltd. The petitioners subscribed to secured non-convertible debentures issued by the company, which were confirmed via allotment letters in March 2017. The company initially made interest payments but defaulted on subsequent payments due in March, June, September, and December of 2018. Despite repeated correspondence, the company failed to redeem the debentures or make the due interest payments.

2. Financial Distress of the Respondent Company:

The respondent company acknowledged its failure to meet financial obligations due to substantial losses and financial distress. The company shut down its projects in early 2017 due to non-availability of water, resulting in significant financial losses. The company proposed a compromise to settle dues and suggested arbitration for dispute resolution. The company also proposed selling immovable properties to settle the dues but faced delays in obtaining necessary governmental approvals.

3. Proposal for Settlement and Arbitration:

The respondent company expressed willingness to resolve the dispute through arbitration, despite the debenture trust deed not containing an arbitration clause. The company proposed to repay the dues by allotting plots of land to investors equivalent to their investment value. The company outlined a detailed procedure for obtaining necessary approvals and completing the allotment, requiring at least one year. The company sought permission to proceed with arbitration to settle the issue.

Judgment:

The Tribunal acknowledged the financial distress of the company and the efforts being made to explore settlement possibilities. The Tribunal noted that the issue affected multiple stakeholders, not just the petitioners. Considering the financial status of the company and the interests of all stakeholders, the Tribunal found the company's reasons for failing to redeem the debentures and pay interest plausible.

The Tribunal granted the respondent company six months to explore all possibilities of settling the claims of the petitioners and other similarly situated claimants. No order as to costs was made. The judgment emphasized the need to consider the financial status of the company and the interests of all stakeholders before ordering repayment exclusively to the petitioners.

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