2019 (10) TMI 500 - Tri - Insolvency and Bankruptcy

Tribunal upholds entitlement to Maturity Premium & part of Default Interest in favor of Financial Creditor

The Tribunal held that the Corporate Debtor was obligated to pay Maturity Premium to the Financial Creditor even before the maturity period completion, as ... Entitlement to Maturity Premium and Default Interest - HELD THAT:- Since the debenture holders are entitled to get this Maturity Premium amount over and above the principal and interest, it cannot be said that this Applicant is not entitled to claim maturity premium just because CIRP has been initiated against the corporate Debtor. An agreement between the parties is a document sacrosanct deciding the rights of the parties and the same will remain binding upon the parries, therefore when the obligations created upon themselves are violated, unless and until law prohibits from enforcing such obligations, the consequences of violation will automatically follow - By the language of this agreement between the parties, the Maturity Premium is to be construed as amount due as stated under this document, because the corporate debtor admittedly defaulted in repaying as agreed, therefore in the event of default, this debenture holders are entitled to claim even Maturity Premium as well. The debenture holders are only entitled to ₹ 20,94,152 default interest upon the default amount, as to the remaining balance default interest claim of ₹ 1,94,72,660 the debenture holders are not entitled because the remaining balance of default interest claim is not due as on the date of admission of this case, therefore, the claim of ₹ 1,94,72,660 as default interest is hereby rejected. Application disposed off. Issues:1. Entitlement to Maturity Premium and Default Interest by the Financial Creditor.2. Rejection of part of the claim by the Resolution Professional.3. Interpretation of the clauses in the debenture agreement.4. Obligations of the Corporate Debtor regarding payment defaults.5. Decision on inclusion of Maturity Premium and Default Interest in the claim.Analysis:1. The Financial Creditor moved an MA challenging the rejection of part of their claim by the Resolution Professional, focusing on the entitlement to Maturity Premium and Default Interest as per the debenture agreement clauses.2. The Resolution Professional admitted a portion of the claim but rejected the rest, arguing that the Financial Creditor was not entitled to Maturity Premium and Default Interest due to the initiation of the Corporate Insolvency Resolution Process (CIRP) before the maturity period completion.3. The Financial Creditor contended that as per the debenture agreement, debenture holders were entitled to Maturity Premium to achieve a specific Internal Rate of Return (IRR) even if the maturity period had not ended, emphasizing that it was a separate entitlement from default scenarios.4. The Resolution Professional's stance was that since the maturity period had not concluded, the Corporate Debtor was not obligated to pay Maturity Premium, leading to its rejection from the claim.5. The Tribunal, after considering the arguments, held that the Corporate Debtor had agreed to pay Maturity Premium in case of default as per the debenture agreement, making it a due amount even before the maturity period completion, thus directing its inclusion in the claim.6. Regarding Default Interest, the Tribunal clarified that debenture holders could claim it only on defaulted amounts, not beyond that, leading to a specific calculation and rejection of part of the Default Interest claim.7. The decision emphasized the sanctity of agreements between parties, enforcing obligations created therein, and holding that the debenture holders were entitled to Maturity Premium and a portion of Default Interest as per the terms agreed upon.8. Consequently, the Tribunal directed the Resolution Professional to include the Maturity Premium in the claim while specifying the entitlement to Default Interest on defaulted amounts, thereby disposing of the matter.