Tribunal Admits Petition, Initiates Corporate Insolvency Resolution Process

The Tribunal found in favor of the Petitioners, admitting the Petition and initiating the Corporate Insolvency Resolution Process against the Corporate Debtor. The Tribunal determined the existence of debt and default, appointing an Interim Resolution Professional and directing communication of the order to the relevant parties.

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Issues Involved:
1. Maintainability of the Petition.
2. Execution and invocation of the Debenture Trust Deed and Guarantee.
3. Alleged force majeure conditions.
4. Disbursement of Project Management Fees.
5. Maturity and redemption of Non-Convertible Debentures (NCDs).

Issue-wise Detailed Analysis:

1. Maintainability of the Petition:
The Corporate Debtor contended that the Petitioners, being only holders of the NCDs and not parties to the Debenture Trust Deed, lacked the locus to file the Petition. The Tribunal found this argument untenable, stating that the Debenture Trustee acts for the benefit of the Debenture Holders and their presence does not limit the rights of the debenture holders. The Tribunal referenced a similar case, Bennet Property Holdings Company Limited v. Brick Eagle Affordable Housing, where it was upheld that debenture holders have the locus to file an application under Section 7 of the Insolvency and Bankruptcy Code (IBC).

2. Execution and Invocation of the Debenture Trust Deed and Guarantee:
The Tribunal noted that the Debenture Trust Deed was executed between LDR and the Debenture Trustee for issuing 20,000 secured, unrated, redeemable NCDs. The Corporate Debtor was a party to the Deed in its capacity as a security provider and co-obligor. The Deed included an unconditional and irrevocable Corporate Guarantee, making the Corporate Debtor liable as a primary obligor. The Tribunal observed that the Corporate Debtor did not deny the execution of the Trust Deed or the Deed of Guarantee, nor did it dispute the disbursed monies, debt quantum, or interest computation.

3. Alleged Force Majeure Conditions:
The Corporate Debtor argued that force majeure conditions, such as government orders and an NGT order, delayed the project. The Tribunal dismissed this argument, noting that the NGT order existed before the execution of the Debenture Trust Deed. The Tribunal emphasized that the Corporate Debtor's payment obligations were unconditional and that force majeure is not an inherent right but must be explicitly included in the contract. The Tribunal cited Clause 17.1.32 of the Deed of Guarantee, which triggers the Petitioners' right to invoke the Guarantee if the project cannot proceed for any reason.

4. Disbursement of Project Management Fees:
The Corporate Debtor claimed that the Petitioners breached the Debenture Trust Deed by refusing to disburse Project Management Fees (PM Fees). The Petitioners countered that PM Fees were contingent on actual project expenses, which were not incurred due to halted construction. The Tribunal referred to Clause 8.8 of the Debenture Trust Deed, which stipulates that PM Fees are payable based on actual costs. Since no work was carried out, the Tribunal found it correct not to release PM Fees. The Tribunal reiterated that the Corporate Debtor, as a Guarantor, could not dispute the unconditional and irrevocable Deed of Guarantee.

5. Maturity and Redemption of Non-Convertible Debentures (NCDs):
The Corporate Debtor contended that the NCDs were not due and payable until 30.09.2020 and 30.09.2021. The Tribunal referred to Clause 18 of the Debenture Trust Deed, which outlines the consequences of an Event of Default, including immediate payment of accrued interest, outstanding principal, and default interest upon default. The Tribunal determined that an Event of Default occurred when the accrued interest was not paid, entitling the Petitioners to redeem the NCDs.

Conclusion:
The Tribunal found the existence of debt and default reasonably established by the Petitioners, fulfilling the major requirement for admitting a Petition under Section 7 of the IBC. Consequently, the Tribunal admitted the Petition, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, effective from the date of the Order. The Tribunal also appointed an Interim Resolution Professional and directed the Registry to communicate the order to the parties involved.

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