TaxTMI 
TaxTMI 
2023 (9) TMI 1382
X X X X Extracts X X X X
X X X X Extracts X X X X
....sel Infraprojects Limited (hereinafter referred to as "Essel") proposed to issue 425 rated, unlisted, redeemable, non-convertible debentures (hereinafter referred to as "NCD") in two series being series No. I-Debentures and series No. II-Debentures having face value of Rs. 1 crore each aggregating nominal value of Rs. 425 Crores. ii. The Appellant agreed to act as Debenture Trustee for the benefit of the Debenture Holders on 22nd May, 2015. A share pledge agreement was also executed on 22nd May, 2015. A corporate guarantee was also executed on 22nd May, 2015 by the Corporate Debtor, Direct Media Distribution Venture Pvt. Ltd. and another Guarantor namely Cyquator jointly irrevocable and unconditional guaranteed obligation of Essel with respect to debentures as well as to make payments under Debenture Trust Deed. iii. On 22nd May, 2015, Debenture Holders subscribed to 200 debentures under the first series and on 24th June, 2015 subscribed to 225 debentures under the second series. Debenture trustee deed was amended by virtue of supplemental and amended debenture trustee deed dated 25th June, 2019. 74 out of 425 NCDs were redeemed by Essel in September, 2019. On 22n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eptember, 2020 hence after giving credit of realized amount, a notice has been issued to the Appellant on 13th May, 2022 which notice is the basis of filing of Section 7 Application. Date of Default in Section 7 Application was claimed as 15th May, 2022 which is consequent to default in making the payment in pursuance of notice dated 13th May, 2022. It is submitted that the Adjudicating Authority committed error in rejecting the Application as barred by Section 10A. Section 10A did not apply to the default occurring post suspension period. Embargo under Section 10A did not apply to the default occurring post suspension period. It is submitted that date of default does not necessarily be singular default, subsequent event can rise to fresh cause of action. Cause of action accrued subsequent to the sale of shares and after giving credit of the amount, notice dated 13th May, 2022 was issued. It is submitted that the Adjudicating Authority committed error in rejecting Section 7 Application. 4. We have considered the submissions of Learned Sr. Counsel for the Appellant and perused the record. 5. The Application under Section 7 having been dismissed on the ground that Application i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s with redemption premium and the default interest in respect of the said NCDs aggregating to an outstanding amount of Rs. 616,09,48,616/-. iii. Pledge Invocation Notice dated 12th June, 2020 thereby invoking the pledged shares under the Share Pledge Agreement to recover the amounts due and payable by Essel. iv. Invocation of Corporate Guarantee Notice dated 12th June, 2020 addressed by the Financial Creditor to the Corporate Debtor for an amount of Rs. 616,09,48,616/- with a demand to comply with the requisition as contained therein. However, the Corporate Debtor has failed to make good the default committed by Essel and defaulted in making payment of the outstanding amount. v. Pursuant thereto, in furtherance of the Invocation of pledge by the Financial Creditor, the Financial Creditor sold the pledged shares of ZEEL in open market in various tranches and realized a sum of Rs. 92,34,61,401/- and was accordingly appropriated towards outstanding dues pertaining to the said NCDs. vi. In furtherance of the Invocation of pledge by the Financial Creditor, 6,25,11,000 pledged shares of DTIL were sold by the Financial Creditor in November and December 2020 in open market and total amount....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... confirms that demand made herein relates to the obligation of the Issuer Company under and in relation to the Transaction Documents and other related documents. Needless to state that this notice is without prejudice to, and does not impair or affect, the rights of ITSL or the Debenture Holders. This notice does not and shall not be construed as waiver of any rights or remedies, accruing to ITSL or the Debenture Holders whether presently or in the future, under any applicable law or in equity and does not bar Trustee or the Debenture Holders of any legal action, that may be taken by them, against you in relation to the amounts, due, payable under the said Transaction documents. (Capitalized terms used but not defined hereunder shall have the meaning assigned to them under the Debenture Trust Deed/other security and/or financing documents in relation to the Debenture Trust Deed.) PARTICULARS OF CLAIM Heading Amount (Rs.) Principal Outstanding 3,51,00,00,000/- Redemption Premium Outstanding 2,64,62,26,032/- Default Interest outstanding as on 5^th June, 2020 47,22,584/- Total outstanding 616,09,48,616/- Please deposit the said ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....our client. Accordingly, you in your capacity as a Corporate Guarantor are jointly and severally liable to make payment of the said amount of Rs. 591,81,92,216/- inclusive of interest @12% per annum along with other contractual charges. ........... 8. In these circumstances, we hereby call upon you to make payment of the balance sum of Rs. 591,81,92,216/- inclusive of interest @12% per annum with all other costs, charges and expenses under the corporate guarantee dated 22nd May, 2015, to ITSL/our client with further interest as per the particulars of claim appended hereunder within 2 business days of the receipt of this notice, failing which ITSL/our client shall be constrained to adopt appropriate proceedings in Law as advised including but not limited to the insolvency and bankruptcy code, 2016, which proceedings shall be entirely at your cost and consequence thereof. 9. Needless to say that this shall not be construed and/or deemed as waiver in any manner whatsoever of any rights or remedies, accruing to ITSL/our client or the Debenture Holders whether presently or in the future, under any applicable law or in equity and does not bar Trustee or the Deb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ure to deposit the Outstanding Amounts in the Designated Account, upon the exercise of Put Option or Call Option (as the case may be), 5 (Five) Business Days before the Put Option or Call Option date (as the case may be) or (c) upon any default in making Payments, issue a notice to the Guarantors In writing, in the form given in Schedule II hereto {Notice of Demand'} upon the receipt of which the Guarantors agrees and undertakes that the Guarantors shall, without any demur or protest and on first demand, make payment of the amount demanded thereunder within 2 (Two} Business Days of receipt of the Notice of Demand, which payment shall be made for the amount mentioned in the Notice of Demand without any deduction whatsoever. The Guarantor consents that 2 (Two) Business Days is a just and reasonable time to arrange for the funds in case of an Event of Default. 5. In the event the Guarantors fail to make payment of any amount due under this Guarantee, the Guarantors shall be liable to make payment of the Default Interest for the period commencing from the date on which such payment was due and expiring on the date on which such payment is made by the Guarantors: Provided, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be default by the Principal Borrower and the Guarantor on the same date or date of default for both may be different depending on the terms of contract of guarantee. It is well settled that the loan agreement with the Principal Borrower and the Bank as well as Deed of Guarantee between the Bank and the Guarantor are two different transactions and the Guarantor's liability has to be read from the Deed of Guarantee. .. 32. In view of the foregoing discussion, we arrive at following conclusions: (i) The Corporate Guarantee Deed dated 17.05.2019 is on demand guarantee deed and the default shall arise on the part of the Guarantor only when demand notice is issued as contemplated in the Deed of Guarantee. When the State Bank of India invoked the guarantee vide notice dated 01.10.2020, demand on the part of the Corporate Guarantee shall arise only subsequent to the notice dated 01.10.2020 i.e. non-payment of the amount within seven days i.e. default arise on 08.10.2020. (ii) Default on the part of the Guarantor having arisen on 08.10.2020 i.e. within the period which is covered as prohibited period under Section 10A, application under Section 7 was clea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y Section 10A cannot be accepted. 15. Learned Counsel for the Appellant has relied on Judgment of this Tribunal in "Ramji Power Construction Ltd. Vs. M/s. Jharkhand Urja Sancharan Nigam Ltd." C.A.(AT) Ins. No. 596 of 2020 which was a case where this Tribunal has examined the contention regarding the limitation for filing Section 9 Application. In the above case, there was an arbitral award dated 14.02.2008 which was a date mentioned as a date of default in Section 8 Notice. This Tribunal noticed that the arbitral award was challenged and ultimately dismissed on 06.10.2018. The award was implemented and there was fresh default arose. In paragraph 10 to 12, following was held: "10. The part payment made on 31.03.2016 further extends the 'date of default' keeping in view the facts and circumstances of the attendant case on hand. The challenge to the Arbitral Award was dismissed on 06.10.2018. The recovery made in 2016 was provisional, subject to the challenge against the Arbitral Award, which got dismissed on 06.10.2018 and the same was not challenged further. The Application was filed on 04.06.2019 which is within three years of this date. 11. The contention of t....