Tribunal upholds Assignment Agreement validity despite unenforceability of Facility Agreement. Admitted default leads to Section 7 Application acceptance.

The tribunal upheld the validity of the Assignment Agreement regarding the two Debenture Trust Deeds, despite the unenforceability of the Facility Agreement due to a court order. It found an admitted default under the valid transactions, leading to the acceptance of the Section 7 Application under the Insolvency and Bankruptcy Code. The tribunal dismissed the appeal, ruling in favor of the Respondent and emphasizing the principle of severability in financial transactions.

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Issues Involved:
1. Validity of the Assignment Agreement dated 23.03.2019.
2. Compliance with the interim order dated 12.10.2018 by the Delhi High Court.
3. Admissibility of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016.
4. Severability of financial transactions under the Assignment Agreement.

Detailed Analysis:

1. Validity of the Assignment Agreement dated 23.03.2019:
The Appellant argued that the Assignment Agreement dated 23.03.2019 in favor of Respondent No.2 (ACRE) was void and unsustainable as it violated the interim order dated 12.10.2018 passed by the Delhi High Court. The Respondent countered that the Appellant had no locus to challenge the order and that the assignment did not violate any court orders. The tribunal noted that the assignment included three financial transactions: two Debenture Trust Deeds (DTD1 and DTD2) and a Facility Agreement. The tribunal found that even if the Facility Agreement was under cloud due to the interim order, the other two transactions were validly assigned.

2. Compliance with the interim order dated 12.10.2018 by the Delhi High Court:
The interim order restrained Altico from giving effect to the Facility Agreement dated 14.05.2018. The tribunal agreed with the Appellant that the assignment of the Facility Agreement was in violation of the interim order. However, the tribunal observed that the interim order did not affect the assignment of the other two Debenture Trust Deeds, which were separate and independent transactions.

3. Admissibility of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016:
The tribunal examined whether the Section 7 Application was maintainable based on the existence of debt and default. The tribunal noted that the application included three financial transactions with a total default amount of INR 462,34,02,742. The tribunal emphasized that the Adjudicating Authority only needed to ascertain the existence of a default from the records or other evidence furnished by the Financial Creditor. The tribunal found that there was an admitted default under the two Debenture Trust Deeds, which was sufficient to admit the Section 7 Application.

4. Severability of financial transactions under the Assignment Agreement:
The tribunal considered the severability clause in the Assignment Agreement, which allowed for the severance of any illegal, invalid, or unenforceable provisions without affecting the remaining provisions. The tribunal concluded that even if the Facility Agreement was unenforceable due to the interim order, the other two transactions were valid and enforceable. The tribunal referred to precedents that supported the principle of severability, allowing the valid parts of a transaction to be enforced independently.

Conclusion:
The tribunal held that the Assignment Agreement was valid concerning the two Debenture Trust Deeds and that there was an admitted default under these transactions. Therefore, the Section 7 Application was rightly admitted by the Adjudicating Authority. The appeal was dismissed, and the tribunal found no merit in the Appellant's arguments.

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