Tribunal upholds sale of TIFC property by dismissing HDFC Ltd.'s appeal

The Tribunal dismissed HDFC Ltd.'s appeal and upheld the Adjudicating Authority's approval of the sale of the TIFC property. It found no violation of natural justice as HDFC Ltd. participated in the Creditors Committee's decision-making. The sale process followed the Revised Resolution Framework. The Supreme Court's stay order on debited amounts did not affect the property sale approval. Proceeds distribution awaits further orders, ensuring compliance with future Supreme Court decisions.

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Issues Involved:
1. Loan Sanction and Facility Agreement
2. Tribunal's Stay Order and Escrow Account Debits
3. IL&FS's Sale of TIFC Property
4. Approval of Sale by Creditors Committee and Adjudicating Authority
5. Alleged Violation of Principles of Natural Justice
6. Effect of Supreme Court's Stay Order

Detailed Analysis:

1. Loan Sanction and Facility Agreement:
The Housing Development Finance Corporation Ltd. (HDFC Ltd.) sanctioned a loan of Rs.400 crores to IL&FS under a lease rental discounting transaction. The repayment was to be sourced from cash flows generated from the TIFC property, which were assigned to HDFC Ltd. A Master Facility Agreement, Assignment and Administration Agreement, Escrow Account Agreement, and Power of Attorney were executed on 25.06.2018.

2. Tribunal's Stay Order and Escrow Account Debits:
On 15.10.2018, the Tribunal stayed the initiation or continuation of suits or proceedings against IL&FS and its group companies, including foreclosure, recovery, or enforcement of any security interest. Post this order, IL&FS informed the Escrow Bank, requesting the reversal of debits amounting to Rs.6.24 crores. Hon'ble Justice (Retd.) D. K. Jain subsequently directed the Escrow Bank and lenders to maintain the status quo and later held that the debits violated the Tribunal's orders.

3. IL&FS's Sale of TIFC Property:
IL&FS issued an advertisement on 14.10.2020 inviting expressions of interest for the sale of the TIFC property. Despite objections from HDFC Ltd., the Creditors Committee approved the highest bid of Rs.1080 crores from Project Holding Seven (DIFC) Ltd. This resolution was approved by the Board of Directors and Hon'ble Justice (Retd.) D. K. Jain, subject to the Tribunal's final decision in I.A. No. 2966 of 2020.

4. Approval of Sale by Creditors Committee and Adjudicating Authority:
The Creditors Committee, with a majority vote of 73.57%, approved the sale of the TIFC property. The Adjudicating Authority later approved the proposed transaction, directing that the amounts received be paid into a designated bank account and held in trust for relevant stakeholders, with distribution subject to further orders.

5. Alleged Violation of Principles of Natural Justice:
HDFC Ltd. argued that the Adjudicating Authority's order was passed without impleading them as a necessary party, violating principles of natural justice. However, the Tribunal noted that HDFC Ltd. was a member of the Creditors Committee and had participated in the meeting where the sale was discussed. Thus, it concluded that there was no violation of natural justice as HDFC Ltd. had the opportunity to raise objections and vote.

6. Effect of Supreme Court's Stay Order:
The Supreme Court stayed the Tribunal's judgment dated 13.05.2022, which directed the reversal of debited amounts. The Tribunal clarified that a stay does not nullify the order but renders it inoperative temporarily. The pending adjudication before the Supreme Court does not hinder the approval of the TIFC property sale, which was conducted as per the Revised Resolution Framework approved by the Tribunal.

Conclusion:
The Tribunal dismissed the appeal by HDFC Ltd., upholding the Adjudicating Authority's order approving the sale of the TIFC property. It emphasized that the sale process adhered to the Revised Resolution Framework and that the principles of natural justice were not violated as HDFC Ltd. was involved in the Creditors Committee's decision-making process. The distribution of sale proceeds remains subject to further orders, ensuring compliance with any future Supreme Court rulings.

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