TaxTMI 
TaxTMI 
2023 (5) TMI 1350
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....ection 10A. The Adjudicating Authority by the impugned order dated 30.03.2023 rejected the application I.A. 34/2022 holding that the Section 7 application is not barred by Section 10A. Aggrieved by the said order this Appeal has been filed. Brief facts of the case necessary to be noticed for deciding this Appeal are: i. The Appellant to meet the company's requirement issued 2500 secured, unlisted, rated, redeemable, Non-Convertible Debentures (NCDs) each having a face value of Rs.10 Lakhs in five series viz. Series A, Series B, Series C, Series D and Series E. ii. A Debenture Trust Cum Mortgage Deed was executed on 06.12.2018 between the Appellant - Corporate Debtor and the Respondent - Axis Trustee Services Ltd. (Financial Creditor). Details of the debentures in five series with the details of principal repayment date, tenure and redemption details were mentioned in Schedule V of the Debenture Trust Cum Mortgage Deed. iii. The Appellant on 13.04.2020 wrote to the Debenture Holder seeking a moratorium of five months of repayment of dues. By letter dated 27.04.2020, the Financial Creditor granted three months moratorium for all payments obligations due bet....
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.... mentioned in Debenture Trust Deed that the Financial Creditor elected to issuing notice under Clause 13.1(a), the secured obligations immediately became due and payable. Event of default occurred as per notice dated 22.10.2020 and the entire amount became due and payable. The date of default which was fully covered under 10A period could not have been changed by any subsequent notice and the application filed under Section 7 was barred by Section 10A. The Adjudicating Authority committed error in rejecting I.A. No. 34/2022. Relying on the judgment of Hon'ble Supreme Court in "Ramesh Kymal versus Siemens Games Renewable Power Private Ltd., (2021) 3 SCC 224". It is submitted that embargo contained in Section 10A must receive purposive construction which was sought to be achieved by enacting the provision. Once a default takes place, the right to file application accrues and it is not discretion of the Tribunal to accept one date or the other. Learned counsel for the Appellant placed reliance on judgment of this Tribunal in "Next Education vs. K12 Techno Services, Company Appeal (AT) (Ins.) No. 98 of 2019". 4. Shri Krishnendu Datta, learned senior counsel appearing for the Respond....
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....of the Company held on September 24, 2018, had issued 2500 (Two Thousand Five Hundred) rated unlisted secured redeemable non-convertible debentures each having a face value of Rs. 10,00,000/- (Rupees Ten Lakhs only) in 5 (Five) Series, being Series A, Series B, Series C. Series D and Series E each of an amount and tenor as set out in Schedule V hereto, of the aggregate value of Rs. 250,00,00,000/- (Rupees Two Hundred and Fifty Crores only) (hereinafter referred to as the "Debentures"), for cash, at par on a private placement basis in dematerialised form ("Issue") to the persons more specifically identified in Schedule I hereto. The Company had also issued a disclosure document, dated September 27, 2018 ("Disclosure Document") and a private placement offer cum application letter, dated September 27, 2018, in the form and manner provided for in the Companies (Prospectus and Allotment of Securities) Rules, 2014 ("Offer Letter") setting out the broad terms on which the Debentures were issued;" 7. Schedule V is referred to in above Clause B is as follows: "SCHEDULE V PRINCIPAL REPAYMENT DATES Coupon Type Fixed subject to any revision in terms of paragraph 2.2(c) of Schedu....
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.... 30- Sep22 6.25 00 30- Sep23 7.81 67 8. Now we come to the notice dated 22.10.2020 on which much reliance has been placed by counsel for the Appellant. The reference and subject of the notice dated 22.10.2020 is as follows: "Reference: Debenture Trust Cum Mortgage Deed dated 6 December, 2018 executed between NuFuture Digital (India) Ltd. and Axis Trustee Services Ltd. ("Deed"). Sub: Breaches under the Transaction Documents (as defined in the Deed) resulting in occurrence of Event of Default under Clause 13 of the Deed." 9. Paras 7 to 19 of the notice dated 22.10.2020 are as follows: 7. Per the Transaction Documents, the Company made a representation and confirmed that the Debentures have been rated 'BWR A+ (SO)' by the Rating Agency namely Brickwork Ratings India Pvt. Ltd. It was covenanted between the Company and our client that in the event the credit rating assigned by the Rating Agency is revised doe to any reason, the Company shall promptly intimate, in writing, to our client and each of the Debenture Holders of such revision. 8. The Transaction Documents contemplate that in the event, and during the tenor of the Deben....
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....ment Option Threshold, and which entitles our client to trigger the Mandatory Prepayment Option, and our client reserves its rights to exercise the same, as and when required. 13. From the foregoing, it is manifest that the Company has committed several breaches under the Transaction Documents and failed to make payment of the scheduled amounts on the due dates. Our client is compelled to record that the above breaches are continuous, subsisting and un-remedied till date. 14. In view of what is stated hereinabove, the Event of Default has occurred under the Deed and our client, in accordance with the terms of the terms of Transaction Documents, reserves its right to accelerate the redemption of the Debentures. 15. Our client finds it pertinent to point out that by email dated 31" August 2020, Mr. Akhilesh Kalra, on behalf of the Issuer and Future group, had confirmed that all the amounts due and payable by the Company shall be paid off upon completion of the ongoing transaction between Future Group and Reliance Retail Ventures Ltd. The Company is, therefore, obligated to honor its commitment to our client in respect of the Debentures. 16. In ligh....
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....s in 5 Series Aggregating to Rs. 250,00,00,000 (Rupees Two Hundred Fifty Crores only) (hereinafter referred to as "NCDs"). 2) Debenture Trust Cum Mortgage Deed dated 6 December 2018 executed between NuFuture Digital (India) Ltd. and Axis Trustee Services Ltd.; 3) Event of Default Notice dated 22nd October 2020 bearing Ref. No. VBT/ST/AT/1845 (hereinafter referred to as the "EOD Notice"); Sub: Continuing breaches culminating into occurrence of subsequent Event of Default under the Debenture Trust Cum Mortgage Deed dated 6th December 2018." 14. The notice mentions that Appellant has failed to adhere to the financial obligations by committing defaults in payment of the scheduled amounts. Reference of notice dated 22.10.2020 was also mentioned. It was stated that the Debenture Holders are still awaiting payment of their rightful and legally enforceable dues. By the notice, the Appellant was called upon to make repayment of the amount due and default as on 20.05.2022, failing which the Financial Creditor shall be compelled to take appropriate legal action under I&B Code. After notice dated 01.07.2022, the application under Section 7 has been filed by the Fi....
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....ing 'full repayment of all dues' pertaining to all the debentures. Thus, such alleged default falls under the purview of Section 10A of the Insolvency and Bankruptcy Code, 2016 ("Code") and accordingly the Financial Creditor could not have initiated proceedings under the Code. Hereto annexed and marked as Exhibit B is a copy of the notice dated 22nd October, 2020 issued by the Respondent. 5. It is stated that the Financial Creditor, being well aware of and despite admitting in the present Company Petition, that the default period is within the purview of Section 10A of the Code as mentioned hereinabove, has made a contradictory reference to the date of default as 31 March, 2021 in Part IV of the same Company Petition. It is stated that the Financial Creditor upon seeking full repayment for the event of default as stated by them in the notice dated 22 October, 2020 and in effect invoking the mandatory prepayment clause, cannot now take a stand that the payments became due and payable in March, 2021. This clearly is a mischief played on the part of the Financial Creditor to circumvent Section 10A of the Code. 7. In the above circumstances, wher....
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....April 27, 2020 are annexed as Annexure B & C respectively. 7. Accordingly, each repayment date from April 2020, under Schedule 5 of the DTD, stood shifted by 3 months. The calculation of the Principal Amount of Rs.210,46,66,250 as per the revised schedule provided in the Letter dated 27th April 2020 (the Schedule) is set out below for convenience. Sr. Date Amount (in Rs.) Status of payment 1. 31 March 2021 4,16,66,875 Not paid 2. 30 April 2021 4,16,66,875 Not paid 3. 31 May 2021 4,16,65,625 Not paid 4. 30 June 2021 4,16,66,875 Not paid 5. 31 July 2021 4,16,66,875 Not paid 6. 31 August 2021 4,16,66,875 Not paid 7. 30 September 2021 4,16,66,875 Not paid 8. 31 October 2021 4,16,66,875 Not paid 9. 30 November 2021 4,16,66,875 Not paid 10. 31 December 2021 4,16,65,625 Not paid 11. 31 January 2022 6,25,00,000 Not paid 12. 28 February 2022 6,25,00,000 Not paid 13. 31 March 2022 6,25,00,000 Not paid 14. 30 April 2022 6,25,00,000 Not paid 15. 31 May 2022 6,25,00,000 Not paid 16. 30 June ....
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....al versus Siemens Games Renewable Power Private Ltd." (supra) had noticed the objects and purpose of enactment of Section 10A. In the case before the Hon'ble Supreme Court in "Ramesh Kymal versus Siemens Games Renewable Power Private Ltd.", the application under Section 9 was filed by the Operational Creditor on 11.05.2020. An ordinance was passed on 05.06.2020 by which Section 10A was inserted in the I&B Code. The Corporate Debtor sought dismissal of Section 9 application by filing an application which was allowed by the Adjudicating Authority which order was also affirmed in appeal. Appellant's case in appeal before the Hon'ble Supreme Court was that since the application was filed on 11.05.2020 i.e. before insertion of Section 10A on 05.06.2020, the application is not hit by Section 10A, although the default was dated 30.04.2020. The said argument was rejected by the Hon'ble Supreme Court. In Para 19 and 24 following has been laid down: "19. The proviso to Section 10A stipulates that "no application shall ever be filed" for the initiation of the CIRP of a corporate debtor "for the said default occurring during the said period". The explanation which has been inserted fo....
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....he filing of applications for the commencement of the CIRP in respect of a corporate debtor for a default occurring on or after 25 March 2020; the embargo remaining in force for a period of six months, extendable to one year. Acceptance of the submission of the appellant would defeat the very purpose and object underlying the insertion of Section 10A. For, it would leave a whole class of corporate debtors where the default has occurred on or after 25 March 2020 outside the pale of protection because the application was filed before 5 June 2020. 29. We have already clarified that the correct interpretation of Section 10A cannot be merely based on the language of the provision; rather it must take into account the object of the Ordinance and the extraordinary circumstances in which it was promulgated. It must be noted, however, that the retrospective bar on the filing of applications for the commencement of CIRP during the stipulated period does not extinguish the debt owed by the corporate debtor or the right of creditors to recover it." 20. Present is a case where date of default is claimed as 31.03.2021 in Part IV of the application and the application is filed includi....