Contractual Amendment Procedure: informal creditor exchanges cannot defeat admission where Debenture Trust Deed amendment steps were not followed.

The article addresses whether informal restructuring communications can prevent admission of a petition under the Insolvency and Bankruptcy Code where the Debenture Trust Deed (DTD) prescribes a written amendment/waiver procedure. It explains that clause-based DTD requirements for express written consent and prescribed meeting/resolution processes cannot be bypassed by unilateral or informal exchanges with a single debenture holder; such communications do not negate existence of financial debt or default. The operative effect: failure to comply with the DTD amendment procedure does not bar Section 7 admission, and the challenged refusal to admit was set aside with the petition restored.

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Issues: (i) Whether the refusal by the adjudicating authorities to admit an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (seeking initiation of corporate insolvency resolution process) was legally sustainable where there was alleged restructuring communications with one debenture holder but no compliance with the amendment/waiver procedure in the Debenture Trust Deed.

Analysis: Clause 33 of the Debenture Trust Deed prescribed a written, specified procedure for amendment or waiver requiring approved instructions of debenture holders and execution of written deeds; clause 37 prohibited implied waivers and required express written consent. The communications relied upon by the corporate debtor were exchanged only with a single debenture holder and there was no evidence of express authorization by other debenture holders or of compliance with the DTD's meeting and special resolution requirements. The questioned conduct (release of certain funds and property transactions) was shown to be referable to distinct provisions of the DTD and independent disbursements rather than a consensual modification of the DTD. Governing principles for Section 7 admission require the adjudicating authority to satisfy itself that a financial debt exists and that default has occurred; a placarded or asserted restructuring not formalised in accordance with contractual procedure does not negate default. Authorities recognising that a corporate debtor may establish that a debt is not due were applied, but such a defence cannot be sustained by unilateral or informal exchanges that do not comply with the contractually mandated amendment process.

Conclusion: Issue (i): Decision set aside and the Section 7 petition restored and to be admitted; outcome is in favour of the appellant.

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