This order rejected the applicant's application to be admitted as a financial creditor and stay the corporate insolvency resolution process, finding no merit in the claim due to lack of establishment of debt under the applicable agreement clauses.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH-IV
IA.580/2023 IN CP. No. 1123/MB-IV/2020
Under Section 60(5) of the Companies Act, 2013
In the matter of:
Vistra ITCL (India) Limited
…Applicant V/s Bhrugesh Amin (Resolution Professional) Respondent In the matter of: Yes Bank Limited
…Financial Creditor
V/s Radius Infra holdings Private Limited
…Corporate Debtor
Order Dated: 17.03.2023
Coram:
Mr. Prabhat Kumar Hon’ble Member (Technical)
Mr. Kishore Vemulapalli Hon’ble Member (Judicial)
Appearances (via videoconferencing):1 For the Applicant(s) : Mr. Aditya Shiralkar, Adv.
For the Resolution Professional(s): Ms. Mitali Bhatt, Adv.
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IN THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH-IV
IA.580/2023 IN CP. No. 1123/MB-IV/2020
ORDER
Per: Kishore Vemulapalli, Member (Judicial)
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IN THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH-IV
IA.580/2023 IN CP. No. 1123/MB-IV/2020
Deed dated 03.08.2019 (“DTD”). Further, by an under clause 4 of the agreement dated 29.03.2019 (“Agreement”), M/s Radius Infra Holdings Private Limited (“Corporate Debtor” or RIHPL”) had undertaken to repay the secured obligations as defined under DTD and the failure of the Corporate Debtor to repay the same to amount an event of default. Clause 8 of the agreement further stipulated that the Debenture Trustee on the instructions of Debenture Holders shall be entitled to enforce security given by RIHPL. This Guarantee was provided by the Corporate Debtor in terms of clause 7.1 (iii) which stipulated corporate guarantee of the developer (Radius and Deserve Builders LLP, a group company of the Corporate Debtor) and such other entities as may be specified by the Debenture Holders. In terms of annexure-D to the DTD (specifying terms and conditions of the Debentures).
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IN THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH-IV
IA.580/2023 IN CP. No. 1123/MB-IV/2020
under the said agreement. Clause 13 of the DTD provides consequences of an event of default wherein the debenture trustees are entitled to enforce the charge and the mortgage properties are any part thereof, cause the sale, assignment and transfer thereof and also to enforce the Corporate Guarantee.
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IN THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH-IV
IA.580/2023 IN CP. No. 1123/MB-IV/2020
Contract Act, 1872 without appreciating the fact that the obligation of surety cannot be created after the event of default has occurred. He has submitted various dates in this relation as (a) DTD is dated 03 August 2018; (b) Event of default is dated 04 November 2018; and (c) the guarantee agreement with the Corporate Debtor is dated 29th March 2019. Also, DTD nowhere states that the Corporate Debtor has any obligation or guarantee to secure the debt. The Respondent Resolution Professional has also submitted that incompliance to order dated 16.11.2022 passed by this Bench. He had placed the claim of the applicant before COC in the 6th meeting held on 28.11.2022 and thereafter, in 7th meeting held on 27.12.2022 where at the claim of Applicant in the capacity of Financial Creditor was rejected due to negative vote casted by Respondent No. 2 and R-3. He has also drawn our attention to clause 4 of the agreement which only states that “failure to repay the same shall result in event of default” cannot be construed to mean that the Corporate Debtor stood as Guarantor to the amounts due on debentures issued by the company and the applicant can only be entitled to enforce RIHPL security {provided in clause 2 (a) & (b) of the agreement} in terms of clause 6 of the agreement on the occurrence of default is stated in clause 4 thereof.
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IN THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH-IV
IA.580/2023 IN CP. No. 1123/MB-IV/2020
developing a slum rehabilitation scheme in phased manner and had appointed the company as a Development Manager whereby the company was required to provide non-interest-bearing deposit of Rs.50 Crores and interest-bearing loan of Rs. 345 Crores to the developer. Further, we find from clause 2 of the agreement that the applicant had bound the Corporate Debtor to deposit all amounts to be paid to the promoters from time to time by whatever name called in whatever form in a company escrow account and such money is referred as RIHPL security in the agreement. Besides it, this clause also stipulated obligation on the part of RIHPL to create mortgage over RIPHL project and obligation on the part of the promoters not to create any encumbrance on the shares. Clause 4 is obliged to Corporate Debtor to pay the secured obligations under DTD. However, its further states that the failure to repay the same shall result in an Event of default, the consequences to follow on such occurrence are provided in clause 6 which empowers the applicants to enforce RIHPL security only. In other words, on combined reading of clause 2(a), 2(b) 4 & 6, it follows that the obligations of the Corporate Debtor was limited to the extent of RIHPL security, Mortgage on RIHPL project if any created and shares of the promoters. It is undisputed fact that no mortgage was created on the RIHPL project. Accordingly, RIHPL’s obligation under the agreement is only to the extent of amounts stated under clause 2 (a) and 2(b) thereof.
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IN THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH-IV
IA.580/2023 IN CP. No. 1123/MB-IV/2020
Sd/- Sd/Prabhat Kumar Kishore Vemulapalli Member (Technical) Member (Judicial) SVR.17.03.2023
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2 issues framed by the court
Whether the applicant is a 'financial creditor' based on a guarantee provided after the event of default and lack of mortgage on the corporate debtor's property.
Whether the Corporate Debtor's obligation to the Debenture Trustee extends beyond the corpus of escrow funds and uncreated security.
Vistara ITCL (India) Limited
Bhrugesh Amin
Radius Infra Holdings Private Limited
Prabhat Kumar
Kishore Vemulapalli
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
