ICICI Prudential Venture Capital Fund Real Estate Scheme-I vs M/s Anand Divine Developers Private Limited

PER- ORAL ORDER: RAMALINGAM SUDHAKAR, PRESIDENT

The present Application is filed under section 7 of Insolvency and Bankruptcy Code, 2016 ('for brevity IBC, 2016') read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 by the Petitioner/ Financial Creditor ICICI Prudential Venture Capital Fund Real Estate Scheme I through its Investment manager of M/s. ICICI Prudential Asset Management Company Limited.

ICICI Prudential Venture Capital Fund Real Estate Scheme I, is a scheme under ICICI Prudential Venture Capital Fund, which is a venture capital fund established under the provisions of Securities & Exchange Board of India (Venture Capital Fund) Regulations 1996 acting through investment Manager of M/s. ICICI Prudential Asset Management Company Limited (for brevity "IPRU AMC"). IPRU AMC has been appointed as the Investment Manager of the Financial Creditor to act on behalf of the Financial Creditor, including to institute and to conduct legal proceedings for and on behalf of the Financial Creditor.

The Financial Creditor has been established as a trust under the provisions of the Indian Trusts Act, 1882, by M/s. ICICI Prudential Trust Limited as a general-purpose fund, with the objective of seeking capital commitments from contributors under multiple schemes and investing such contributions in accordance with the investment objective of each scheme.

The trustee, ICICI Prudential Trust Limited, has entered into an Investment Management Agreement (for brevity “IMA”) dated 15.10.2012, with IPRU AMC, appointing it as the Investment Manager of the Financial Creditor. Further, the IMA, inter alia, authorized and empowered the Investment Manager to institute and to conduct legal proceedings for and on behalf of the Financial Creditor.

The Corporate Debtor is a private limited company incorporated on 27.04.2011 having the CIN No. U70101DL2011PTC218192 under the provisions of the Companies Act, 1956. The Corporate Debtor is engaged in the business of real estate development.

It is further stated that, on 24.07.2014, (a) the Financial Creditor (acting through IPRU AMC), (b) the Corporate Debtor, (c) ATS Infrastructure Limited (Promoter) and (d) Mr. Getamber Anand (Promoter & Personal Guarantor) executed an Investment Agreement dated 24.07.2014 ("IA"), Pursuant to this Investment Agreement, the Financial Creditor subscribed to 75,00,000/- (Seventy Five Lacs only) unlisted, secured, cumulative, redeemable and optionally convertible debentures ("Debentures") issued by the Corporate Debtor having a face value of INR 100/- (Rupees One Hundred only) each, aggregating to a total of INR 75,00,00,000/- (Rupees Seventy Five Crore only) subject to the terms and conditions set out under the IA. Further on 24.07.2014 itself, the Corporate Debtor executed the Debenture Trust Deed with IDBI Trusteeship Services Limited appointing IDBI Trusteeship Services Limited as the Debenture Trustee.

The Financial Creditor transferred the aforesaid amount aggregating to INR 75,00,00,000/- (Rupees Seventy-Five Crore only) ("Debenture Subscription Amount") to the account of the Corporate Debtor on 25 July 2014.

The Debentures and obligations of the Corporate Debtor were secured. inter alia, by (i) a mortgage (ranking second) over property situated at Village Dhanwapur, Sector-104, Gurgaon, Haryana admeasuring approximately 14.09 acres ("ATS Triumph Land"); (ii) hypothecation of receivables from the said property/ project to be constructed thereon, (iii) the development rights of the Corporate Debtor pertaining thereto on which the Corporate Debtor is undertaking a residential project with saleable area of approx. 12,10,286 square feet ("Project ATS Triumph"); and (iv) personal guarantee of director of the Corporate Debtor; namely Mr. Getamber Anand (who has represented himself to be the promoter of the Corporate Debtor).

The Corporate Debtor and the landowners of the property registered the charge created over the property with the Ministry of Corporate Affairs pursuant to which the Ministry of Corporate Affairs issued certificate of registration of charge on (i) 19 September 2014 (charge identification no. 10520519 – Corporate Debtor); (ii) 26.08.2014 (charge Identification no. 10515838 - Kaanha Infrastructure Private Limited); and (iii) 26.08. 2014 (charge Identification no. 10515840-Wonderworld Infratech Private Limited).

Further, the Corporate Debtor issued 15 (fifteen) debenture certificates in favour of the Financial Creditor as detailed below, aggregating to INR 75,00,00,000 (Rupees Saventy-Five Crore Only):

Further, on 03.05.2017, the Financial Creditor, the Corporate Debtor, ATS Infrastructure Limited and Mr. Getamber Anand entered into an Amendment Agreement dated 03.05.2017 pursuant to which certain terms of the Investment Agreement (“IA”), were amended as detailed therein, including the returns payable on the Debentures and the repayment date of the Debentures was agreed to be of 30.09.2018 (The Amendment Agreement").

In terms of clause 3 of Schedule IV of the Investment Agreement, the Debentures carried an Interest at the rate of 14% (fourteen percent) per annum ("Interest") on the face value of the Debentures, payable by the Corporate Debtor on a bi-annual basis.

In terms of clause-6 of Schedule IV of the Investment Agreement, the Corporate Debtor was required to repay the amounts due in connection with the Debentures as and when they become payable and redeem the Debentures on the repayment date by payment of the Debenture Subscription Amount along with any accrued but unpaid Interest on the outstanding Debentures. In terms of clause 1(f) of the Amendment Agreement, whereby Annexure-I of Schedule IV of the Investment Agreement was amended to the effect that the Debentures were required to be re-paid by 30.09.2018 ("Repayment Date").

In terms of clause 1 of the Amendment Agreement, whereby clause 4.2 (ii) of the IA was amended to the effect that the Debentures had to be redeemed at a price which would entitle the Financial Creditor to receive the Revised Return (as defined under the Amendment Agreement) i.e.,(i) an IRR of 22.50% on the Debenture Subscription Amount calculated from the Closing Date (i.e., 25 July 2014) till 30.11.2015 ("First Hurdle Amount") and (ii) an IRR of 20.00% on the First Hurdle Amount from 01.10.2015 till the date of redemption of the Debentures.

It is further submitted that on 30.12.2017, the Corporate Debtor (through L&T Infrastructure Finance Company Limited) paid the Financial Creditor, an aggregate amount of INR 92,51,38,658 (Rupees Ninety Two Crore Fifty One Lac Thirty Eight Thousand Six Hundred and Fifty Eight Only) towards (a) principal amount of INR 65,62,50,000/- (Rupees Sixty Five Crore Sixty Two Lac Fifty Thousand Only) towards face value of 65,62,500 Debentures, (b) an amount of INR 5,26,43,336 (Rupees Five Crore Twenty Six Lacs Forty Three Thousand Eight Hundred and Thirty Six Only) towards Interest (inclusive of TDS) on the Debentures due as on 30.09.2017 and (c) a gross amount (inclusive of TDS) of INR 21,62,44,822/- (Rupees Twenty One Crore Sixty Two Lacs Forty Four Thousand Eight Hundred Twenty Two Only) towards part payment of the Revised Return (as defined under the Amendment Agreement). Post redemption of such 65,62,500 Debentures by the Corporate Debtor, the Financial Creditor is currently holding 9,37,500 (Nine Lac Thirty-Seven Thousand Five Hundred) Debentures of the face value of INR 100/- each ("Outstanding Debentures"), thus aggregating to INR 9,37,50,000/- (Rupees Nine Croce Thirty-Seven Lac Fifty Thousand Only) ("Outstanding Debenture Subscription Amount") as on 30.12.2017.

A default under the Investment Agreement occurred on 31 March 2018, when the Corporate Debtor failed to pay Interest due for the period 01.10.2017 to 31.03.2018 in terms of the Investment Agreement.

On account of such default by the Corporate Debtor, the Financial Creditor, by way of a notice dated 08.05.2018 ("Interest Payment Notice") called on the Corporate Debtor to make payment of the outstanding Interest due and payable as the Outstanding Dentures for the period from 01.10.2017 is 31.03.2018, within seven (07) days from the date of the issuance of Interest Payment Notice. The Corporate Debtor, in spite of receipt of the Interest Payment Notice, not only failed to make payment of the Interest in respect of the Outstanding Debentures but also failed to reply to the Interest Payment Notice.

Despite the aforesaid notice, the Corporate Debtor continued to default is making payment of the outstanding amounts in respect of the Outstanding Debenture under the Investment Agreement. The interest payable on the Outstanding Debentures remained unpaid by the Corporate Debtor despite repeated reminders, follow-ups and demands by the Financial Creditor.

In any event, the Corporate Debtor was required to redeem the Outstanding Debentures on the Repayment Date i.e. 30.09.2018 as per the Investment Agreement, however, the Corporate Debtor failed to redeem the Outstanding Debentures.

Accordingly, the Financial Creditor issued another notice on 11.12.2019 ("Default Notice No. 1"), to the Corporate Debtor stating that the Corporate Debtor's failure to redeem the outstanding debentures and failure to make payment of the outstanding amounts due to the Financial Creditor constitutes an event of Default under the Investment Agreement. The Financial Creditor called upon the Corporate Debtor to redeem the outstanding debentures and to make payment of the Outstanding Debentures Subscription amounts along with the Revised Return within 14 (fourteen) days from the date of the Default Notice No. 1. The Financial Creditor also stated that due to the occurrence of the Event of Default, if the Corporate Debtor fails to make the payment within the given timelines, then the Corporate Debtor shall be liable to make payment of the Outstanding Debate Subscription Amount along with the default internal rate of return @ 30% (“Default IRR”) till the date of actual payment, as per the Investment Agreement.

The Corporate Debtor, however, failed to make payment of the Outstanding Debenture Subscription Amount along with the Revised Return/Default IRR to the Financial Creditor in accordance with the Default Notice No. 1, issued by the Financial Creditor. The Corporate Debtor, in spite of receipt of the aforesaid Default Notice No. 1, also failed to reply to the said Default Notice No 1. Consequently, on 26.10.2020, the Financial Creditor (jointly with AIF II, acting through IPRU AMC) issued default notice dated 26 October 2020 Default Notice No. 2), to inter alia the Corporate Debtor and called upon the Corporate Debtor to make payment of INR 25,16,82,462/- (Rupees Twenty Five Crore Sixteen Lac Eighty Two Thousand Four Hundred and Sixty Two Only) due as on 26.10.2020 in respect of the Outstanding Debentures along with the Default IRR thereon, within 7 (seven) days of the Default Notice No. 2.

The Corporate Debtor in response to the Default Notice No. 2 issued a letter dated 02.11.2020 to the Financial Creditor (Response to Default Notice No. 2"). The said Response to Default Notice No. 2 raises frivolous issues as an afterthought and shows the malafide intent of the Corporate Debtor in honouring its payment obligations in respect of the Outstanding Debentures in accordance with the terms of the Investment Agreement. The defence sought to be made by the Corporate Debtor in the Response to Default Notice No. 2 is a moonshine defence which has been made with the futile intent of denying its liability.

Accordingly, on 17.11.2020, the Financial Creditor replied to the response to Default Notice No. 2, responding to the allegations made by the Corporate Debtor therein which were entirely baseless and outrightly rejected by the Financial Creditor.

Therefore, by not fulfilling the payment obligations set out under the Investment Agreement, the Corporate Debtor has acted in utter violation of the Investment Agreement. Further, Section 71 (8) of the Companies Act, 2013 makes it obligatory for the Company (Corporate Debtor herein) to pay interest and redeem the Debentures in accordance with the term and conditions of their issues.

Consequently, by not paying the outstanding amounts, which has become due and payable, the Corporate Debtor has committed an 'Event of Default' under the provisions of the Investment Agreement and 'default' under the provisions of the Code.

It is to be noted that the Corporate Debtor is liable to pay to the Financial Creditor, a total outstanding sum of INR 25,46,33,221/-(Rupees Twenty-Five Crore Forty-Six Lacs Thirty-Three Thousand Two Hundred Twenty-One Only) as on 20.11.2020, which includes the Default IRR. The Default IRR shall continue to add up till the date of realization of the payment from the Corporate Debtor.

Therefore, in the light of the Judgment of Hon'ble Supreme Court in Innovative Industries Limited. vs. ICICI Bank and another in Civil Appeals Nos. 8337 of 2017, decided on 31.08.2017 (2018) 1 Supreme Court Cases 407, which reads as follows:

In the present case, the corporate debtor has not filed any reply and written submissions till now. However, in view of the debt and default clearly mentioned in the part IV of the application u/s 7, this bench is inclined to admit the present petition.

The petitioner has proposed the name of Insolvency Resolution Professional, Mr. Harish Taneja, having registration no. IBBI/IPA-002/IP-N00088/2017-18/10229, and the E-mail [email protected]. A written communication sent by her in terms of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has also been placed on record. There is a declaration made by him that no disciplinary proceedings are pending against him in the Insolvency and Bankruptcy Board of India or ICSI. In addition, further necessary disclosures have been made by Mr. Harish Taneja as per the requirement of the IBBI Regulations. Accordingly, he satisfies the requirement of Section 7 (3) (b) of the Code. Hence, we appoint Mr. Harish Taneja as the IRP of the Corporate Debtor.

In pursuance of Section 13 (2) of the Code, we direct that Interim Insolvency Resolution Professional to make public announcement immediately with regard to admission of this Petition under Section 7 of the Code. The expression 'immediately' means within three days as clarified by Explanation to Regulation 6 (1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

As a consequence of the application being admitted in terms of Section 7(5) of IBC, 2016 moratorium as envisaged under the provisions of Section 14(1) of the Code, shall follow in relation to the Respondent as per proviso (a) to (d) of section 14(1) of the Code. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(3) of the Code shall come in force.

We direct the petitioner to deposit a sum of Rs. 2 lacs with the Interim Resolution Professional Mr. Harish Taneja to meet out the expenses to perform the functions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The needful shall be done within three days from the date of receipt of this order by the Petitioner. The amount however, will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Petitioner.

The registry is directed to communicate a copy of the order to the Petitioner, the Corporate Debtor, the Interim Resolution Professional and the Registrar of Companies, NCR, New Delhi at the earliest but not later than seven days from today. The Registrar of Companies shall update his website by updating the status of 'Corporate Debtor' and specific mention regarding admission of this petition must be notified.