IDBI Trusteeship Service Ltd. vs Santur Infrastructures Pvt. Ltd.

ORDER

"3.2

The Guarantor agrees and confirms that:

(i)

The Guarantor's liability hereunder is co-extensive with that of the Company;

(ii)

The Guarantor shall not revoke this Guarantee Agreement and this Guarantee Agreement shall remain in force until all the Secured Obligations under the Series A Debentures have been finally paid/performed in full;"

a)

The captioned petition preferred by the Respondent is not maintainable, as the allegations made therein are false, frivolous, incorrect and misleading.

b)

The petition preferred by the Applicant is vexatious and has been preferred for oblique purpose i.e. other than to seek resolution of corporate insolvency.

c)

The application preferred is in contravention of the object and intent of IBC, thus the provisions of Section 65 of IBC need to be resorted against the Petitioner.

d)

The Applicant is working in the position of a trustee and has been entrusted with fiduciary duty towards debenture holders, but acting in derogation of its contractual obligations. It has indulged in unauthorized use and diversion of funds by despotic exercise of the authority vested under the Debenture Trust Deed to control the project account of the Respondent.

e)

The claim of the Applicant is founded on corporate guarantees dated 27.05.2016, 20.07.2016, 27.09.2018, 04.11.2019 and 11.03.2020, executed by the Respondent in favour of the Applicant. The Respondent is fully owned subsidiary of Shree Vardhman Infraheights Pvt. Ltd. (Borrower).

f)

The Borrower is engaged in construction and development of group housing project on the land admeasuring 10.9687 acres situated at Village Badshapur, Gurgaon (Project Land) in the name and style of “Shree Vardhman-Victoria” with an approved FAR of 77,580.04 square meters.

g)

The Project Land comprises of land admeasuring approximately 3.9812 acres owned by individual landowners and land admeasuring approximately 6.9875 acres owned by the Respondent.

h)

Pursuant to the Collaboration Documents executed between the Borrower, Respondent and Individual Landowners, the Respondent and the Individual Landowners have unconditionally and irrevocably transferred all the Development Rights over the Project Land in favour of the Borrower.

i)

The petition filed by the Petitioner is liable to be dismissed as the Applicant is guilty of suppression veri suggestion falsi, as it has failed to disclose the pendency of the execution petition filed by it before the Hon’ble High Court, wherein it has sought execution of the Settlement Agreement and control of the entire project including but not limited to representation on behalf of the Respondent before all authorities and permission to negotiate with the customers on behalf of the Respondent.

j)

As on date, it is the Petitioner who is controlling the entire project. The same is even evident from the fact that one of the terms of the Settlement Agreement dated 04.11.2019 entered into between the Petitioner and the Borrower was to constitute the Project Monitoring Committee that shall monitor the whole project. The PMC consists of 3 members of the Applicant and 2 members of the Borrower. Thus, the Applicant being in majority is taking all the decision with respect to the project including but not limited to cashflow of the project.

k)

On the one hand, the Petitioner has come before this Tribunal seeking initiation of Corporate Insolvency Resolution Process against the Respondent and on the other hand, the Petitioner itself is controlling the whole Project of the Respondent. The Petitioner has not come before this Tribunal for resolution of the Respondent but only with ulterior motive to put undue pressure on it to take complete control of the project without any interference of the Borrower.

l)

The conduct of the Petitioner clearly reflects that it is not only a lender but has sought to be partner in the project by becoming part of the PMC and taking decisions with respect to development of the Project and consequently delaying the same.

m)

The parties undertaking joint development with a Corporate Debtor cannot invoke proceedings under Section 7 of the Code.

n)

The Borrower has also filed a petition under Section 9 of the Arbitrator and Conciliation Act, 1996, before the Hon’ble High Court of Delhi, titled as “Shree Vardhman Infraheights Pvt. Ltd. vs. IDBI Trusteeship Services Limited & Anr.” viz. OMP (I) COMM 166 of 2023 to highlight the atrocities and conduct of the Petitioner who had in extremely non-transparent, high-handed manner abused its position by maliciously trying to take control of the entire Project Land of the Respondent.

o)

The Borrower has also preferred an application under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the disputes for arbitration in terms of Clause 4.4 of the Settlement Agreement. Part arguments have already been heard by the Hon'ble High Court of Delhi on Section 8 Application.

p)

The very fact that the Applicant had suppressed material fact(s) which has direct bearing on the present proceedings, amounts to playing fraud on this Hon'ble Tribunal and disentitles the Applicant for any relief. The Execution Petition filed by the Applicant, Section 8 Application and the Section 9 Petition filed by the Borrower · is pending consideration before the Hon'ble High Court of Delhi and is next listed on 28.02.2024.

q)

It is a settled position of law that a litigant should disclose all the material information and come before the court with clean hands. Any suppression of material fact shall be construed as playing fraud on the court.

r)

Further, it is imperative to mention herein that the Applicant in the Execution Petition before the Hon'ble High Court of Delhi had filed an application seeking permission to file an appeal on behalf of the Borrower before the Hon'ble Haryana Real Estate Appellate Tribunal with respect to the Additional FAR against the Order dated 20.03.2023 passed by the Ld. HARERA, Gurugram. The Hon'ble High Court of Delhi vide Order dated 04.09.2023 made it clear that the Applicant has no right to file any appeal on behalf of the Borrower and the same shall not be treated as the appeal filed on behalf of the Borrower.

s)

The Applicant, having failed in their alleged malicious attempt to take control of the Project, has now filed the present Section 7 Petition against the Borrower and Respondent. It is evident that the Applicant exhausted all other remedies before approaching this Hon’ble Tribunal, seemingly with a fraudulent intent to exert undue pressure on the Respondent and Borrower to meet their unlawful demands. Notably, the Applicant itself had filed the Execution Petition, making it essential that the same be placed before this Tribunal. Additionally, the Applicant sought permission to represent the Respondent in an appeal before the RERA Appellate Tribunal, Haryana, concerning the restoration of registration, and was allowed co-representation.

t)

Despite the pendency of the Execution Petition, the Applicant has engaged in forum shopping by approaching this Tribunal to execute the Settlement Agreement. By deliberately suppressing material facts, the Applicant has misled the Tribunal and acted in bad faith.

u)

The Section 7 Petition, therefore, appears to be an abuse of the legal process and an attempt to manipulate proceedings. The Applicant’s actions demonstrate clear mala fide intent, as they have withheld relevant information and misrepresented facts before this Hon’ble Tribunal.

v)

It is well-established in law that a litigant guilty of suppresio veri suggestio falsi is not entitled to any relief. Section 65 of the IBC provides for stringent action against parties initiating CIRP with fraudulent or malicious intent. Given the Applicant's deliberate suppression of material facts and fraudulent conduct, strict action must be taken against them, and the present Application deserves to be dismissed on this ground alone.

w)

Even otherwise, the Application filed by the Applicant is liable to be dismissed on the following grounds:

I. Conduct of the Applicant and Debenture Holder after becoming Member of the PMC and taking Control of the Project. The Applicant and Debenture Holder allegedly acted in a high-handed manner, abusing their position to take control of the Project. A PMC was created to oversee the Project, comprising 3 members appointed by the Applicant and 2 representatives by the Borrower, effectively placing the entire Project under the Applicant’s control. By misusing this control, the Applicant deliberately delayed the Project to extract additional interest payments from the Respondent, causing unnecessary setbacks. The various acts of abusive and highhanded approach adopted by the Applicant and Debenture Holder are detailed hereinbelow:-

(i)

Dominating and abusing their position while dealing with · additional FAR. The initial Project consisted of 8 towers, but the Respondent later acquired Additional FAR, which included Towers G1, G2, and J. The Borrower, via email on 30.03.2023, instructed the Applicant and Debenture Holder to halt any work or sales related to these towers since no approvals or RERA registrations were in place. Instead of complying, the Applicant and Debenture Holder proceeded with vendor negotiations for their construction without the Borrower’s consent, as confirmed in an email dated 17.04.2023. The, funds from the escrow account, meant exclusively for the 8 approved towers, were misused by the Applicant and Debenture Holder for the unauthorized construction of Towers G1, G2, and J, violating RERA provisions and the Second Amended DTD. The Borrower’s intent was to complete the first 8 towers and hand over possession to customers before beginning work on the additional towers, ensuring no defaults in customer commitments.

(ii)

Illegal and wrongful utilization of money deposited in the escrow Account, as per the agreed arrangement, 70% of the escrow account funds was to be utilized for constructing the first 8 towers, while the remaining 30% was allocated for the Applicant’s repayment. However, the Applicant is intentionally not utilizing the 30% account for repayment, causing unnecessary interest accrual and increasing the Borrower’s financial burden. Notably, the Applicant is the sole signatory to both the utilization escrow Account and the Project Revenue Escrow Account. Instead of allowing the Borrower to use the funds for completing the 8 towers, the Applicant is diverting escrow monies toward vendors for the development of additional FAR towers, which is beyond their obligation.

(iii)

Negotiating with customers without consent of Borrower. The Borrower came to know that the Applicant was unilaterally negotiating with customers and offering large discounts on interest for delayed payments, despite having no authority under the Settlement Agreement or Second Amended DTD to do so. Clause 4.11(iii) of the Second Amended DTD states that PMC can register sale deeds only if the Borrower fails to do so within 5 business days of a written request, but no such request was made.

(iv)

Applicant's refusal to sign the cheques presented for payment in compliance of RERA orders. As per Clause 9.3(i) of the Second Amended DTD, the Applicant and Borrower were joint signatories to the Project Operating Account. However, when the Borrower presented cheques for customer repayments in compliance with RERA orders, the Applicant refused to sign, resulting in penalties from the Real Estate Regulatory Authority against the Borrower. The Borrower vide Email dated 09.03.2023, informed the Applicant about transferring funds from the 70% RERA Account to the 30% escrow account for approved contractor and supplier payments. However, in utter disregard to the terms of the Settlement Agreement and Second Amended DTD, the Applicant failed to make any payment to the vendors and contractors, despite multiple reminder emails on 13.03.2023 and 14.03.2023, the Applicant failed to release the payments, violating RERA rules.

(v)

Applicant’s ulterior motive to gain control of the entire project by placing its staff permanently on the Project site allegedly to oversee and monitor the development and construction of the Project. Pertinently, the PMC was constituted for the purpose of monitoring the Project. Therefore, there was no need for Applicant to send their men at the Project Site. The representatives of the Applicant at the site only create confusion and delay works by issuing conflicting instructions to the Borrower's staff carrying out the work.

(vi)

Paying exorbitant amounts to vendors and siphoning of funds by Applicant. The Respondent has come to know that Applicant paid exorbitant amounts to vendors and contractors from the Project Revenue Escrow Account without consulting the Borrower, despite being the sole signatory. It is pertinent to mention that it failed to deduct TDS on multiple occasions, exposing the Borrower to penalties. The Borrower raised concerns via email on 08.02.2021, highlighting that the TDS liability would ultimately fall on them despite having no knowledge of these payments. Furthermore, the Borrower requested refunds of excess amounts to customers through emails on 01.05.2023 and 13.05.2023, but the Applicant neither responded nor processed the refunds.

(vii)

Failure to circulate any agenda for the Project Monitoring Committee Meeting or take any steps to monitor the project. PMC was constituted with 5 members—3 representing the Applicant on behalf of the Debenture Holders and 2 nominated by the Borrower—to oversee the Project, enhance sales and collections, and ensure its completion. However, after its constitution, the Applicant and its representatives failed to circulate meeting agendas or minutes, despite repeated requests from the Borrower.

(viii)

Cancellation of registration of 8 towers by HRERA owing to adamant approach by Applicant in not letting the Borrower appear before the Authority. The Haryana RERA Appellate Authority cancelled the Project registration on account of failure to remove the deficiencies as pointed by the Authority. Had the Promoters of the Borrower Company been allowed to approach the Authority and rectified the defects, such situation would never have occurred. Admittedly, on 28.10.2021, the Borrower had filed an application for extension of registration of the Project. Subsequently, after scrutinizing the Application, the Authority had pointed out certain defects and gave several opportunities to the Promoters of the Borrower Company to remove the defects. However, the Applicant/Debenture Holder prevented the Borrower from appearing before the Authority and failed to coordinate in resolving the issues, as evidenced by the Order dated 18.04.2022. Consequently, the Authority rejected the extension application on 20.03.2023, as the Borrower's promoters were unrepresented in the hearings. The Applicant/Debenture Holder neither rectified the defects nor let the Borrower appeared before the HRERA Authority. In view of such compelling circumstances, the Authority vide Order dated 20.03.2023 rejected the application seeking extension qua the Project on account of failure to remove the defects.

II. The Claim of the Applicant Under Section 7 Petition Emanates from a Settlement Agreement entered between the Applicant, Borrower and the Respondent. The provisions of Insolvency and Bankruptcy Code, 2016 cannot be invoked to seek execution of a settlement agreement. In this regard, it is relevant to place the facts/events before this Hon'ble Tribunal:

(ix)

The Applicant was appointed as Trustee to debentures issued in terms of the Debenture Trust Deed dated 19.04.2016 for financing the Project. The Debentures so issued, were subscribed by Kautilya Finance BV.

(x)

To raise funds, the Borrower agreed to issue and allot 140 Non-convertible Debentures of face value of INR 1,00,00,000/-(Rupees One Crore only) each, aggregating up to 140,00,00,000/- (Rupees One Hundred and Forty Crores only), in 2 (two) series being Series A - Up to INR 90,00,00,000/(Rupees Ninety Crores only) and Series B - Up to INR Sci,00,00,000 (Rupees Fifty Crore Only) to Debenture Holder.

(xi)

Subsequently, the Applicant and the Borrower revised the terms of the Original Debenture Trust Deed (DTD) and executed a Restated and Amended DTD on 27.09.2018. Under this agreement, the Borrower agreed to issue 125 non-convertible debentures, each with a face value of INR 1,00,00,000 (Rupees One Crore), totaling INR 125,00,00,000 (Rupees One Hundred Twenty-Five Crores), divided into three series: Series A (INR 90,00,00,000), Series B (INR 10,00,00,000), and Series C (INR 25,00,00,000).

(xii)

To secure the obligations under the Restated and Amended DTD, the Borrower, under Clause 4.6, created securities in favor of the Applicant, including a Corporate Guarantee executed by the Respondent.

(xiii)

As per Schedule 2 of the Restated and Amended DTD, the Series A, B, and C Debentures were to be redeemed 72 months after their respective Allotment Dates.

(xiv)

In addition to above, the Debentures carried an interest to be paid to the Applicant on quarterly basis. Schedule 14 to the Amended DTD provided for repayment structure of the Interest and principal amount. Significantly, for Series A debentures, interest was to be paid starting from 30.06.2016 till 31.03.2022. Similarly, for Series C Debentures, interest was to be paid from 30.09.2017 till 31.12.2022.

(xv)

Pursuant thereto, disputes arose between the Debenture Holder and the Borrower regarding the payment of the Principal Amount and Interest as per Schedule 14 of the Restated and Amended DTD. Consequently, the Applicant, acting on the Debenture Holder's instructions, filed a suit for permanent injunction (CS (COMM) No. 411 of 2019) against the Borrower and its Promoters/Directors.

(xvi)

During the pendency of the Suit, the parties decided to amicably settle the disputes. Accordingly, the Borrower and the Applicant entered into and executed the Settlement Agreement dated 04.11.2019 ("Settlement Agreement").

(xvii)

The Settlement Agreement was executed between the Applicant and the Borrower to resolve disputes regarding Series A, B, and C Debentures. By executing the Settlement Agreement, the Applicant and the Borrower revised and restructured the repayment schedule of Series A, Series B and Series C Debentures, for which the Applicant has filed the present Section 7 Petition.

(xviii)

The Settlement Agreement was executed on 04.11.2019, and on the same day, the Applicant and the Borrower executed the Restated and Amended Debenture Trust Deed ("Second Amended DTD") to incorporate the Settlement Agreement's terms.

(xix)

The Borrower also agreed to raise additional funds aggregating to Rs. 30 crores by issuing 30 number of senior, fully secured, redeemable, transferable, interest bearing, nonconvertible debentures of INR 1,00,00,000/- (Rupees One Crore only) each ("Series D Debentures").

(xx)

Further, Subject to approvals for acquiring Additional FAR, the Borrower could raise further funds by issuing 8 Series E Debentures, each valued at INR 1,00,00,000, totaling Rs. 8,00,00,000 (Rupees Eight Crore).

(xxi)

The Second Amended DTD also stipulated that the representatives of the Applicant shall be the co-signatory to the Project Operating Account.

(xxii)

Therefore, the present Section 7 Petition filed by the Applicant is emanating from the Settlement Agreement through which the Applicant and the Borrower revised the repayment schedule and now the Applicant has filed the present Section 7 Petition.

III. The Settlement Agreement cannot be executed under the Insolvency and Bankruptcy Code, 2016.

(xxiii)

The Applicant has filed Execution Proceedings before the Hon’ble Delhi High Court to enforce the Settlement Agreement, which also forms the basis of the present Section 7 Petition under the IBC, arising from disputes over Series A, B, and C Debentures.

(xxiv)

The Applicant being a decree holder cannot initiate a corporate insolvency process on the basis of alleged default in repayment under the Settlement Agreement.

(xxv)

The Applicant’s actions, including pursuing execution before the Delhi High Court, reveal its intent to recover amounts rather than resolve insolvency, indicating misuse of the IBC for indirect recovery. It is well-established that the provisions of the IBC are not a recovery mechanism but a tool for insolvency resolution. Section 65 of the IBC applies to dismiss applications filed for non-insolvency purposes, as in this case.

(xxvi)

Applications under the IBC that seek to execute awards or decrees are considered mala fide and liable for dismissal. The conduct of the Applicant in pursuing Execution Proceedings available under the law, in respect of the Settlement Agreement clearly shows that the Applicant itself expects the monies claimed to be recoverable in execution. This is thus not a situation wherein the Applicant has filed the application under the IBC on the bona fide belief that the alleged monies are irrecoverable.

(xxvii)

The application clearly having been filed for debt recovery and not for any bona fide resolution of the Respondent or Borrower, the Application is liable to be dismissed on this ground alone. Hence, the present application falls foul of the purposes of the IBC and is liable to be outrightly dismissed.

IV. The Application has been filed with the sole intent to recover Monies from the Respondent.

(xxviii)

The Applicant has filed this Petition to cause wrongful loss to the Respondent. Admitting the Petition would exceed the Code’s mandate, which aims at resolving insolvency rather than facilitating debt recovery.

(xxix)

The Respondent is financially sound, and subjecting it to CIRP would harm stakeholders. The Respondent has also approached the Applicant with a settlement offer, but the Applicant has not responded.

(xxx)

The provisions of IBC are designed to assess a Companies viability early and ensure a time-bound resolution process to preserve its economic value. The Adjudicating Authority has the discretion under Section 7 of the Code to reject the Petition while examining the issues, facts, and objections raised by the Respondent.

(xxxi)

The Petition is essentially a dispute between the Applicant and the Borrower, aimed at dragging a solvent company into insolvency proceedings.

(xxxii)

The Applicant has separately filed a Section 7 Petition against the Borrower for default in repayment.

(xxxiii)

The Applicant has concealed from the Tribunal that while multiple legal proceedings are pending, the Respondent has also claimed losses against the Applicant. A demand notice dated 14.09.2023 has been issued, and the Respondent awaits arbitration under the Settlement Agreement to pursue its claims.

(xxxiv)

The Applicant's petition is an abuse of process aimed at harassing the Respondent and Borrower into yielding to undue demands, forcing them to pay more for the current and other projects.

(xxxv)

The Borrower has been committed to project completion and timely repayment, but the Applicant’s malafide actions have obstructed these efforts. The Applicant’s conduct shows it is not genuinely interested in repayment but intends to harm the Borrower and Respondent for undue gain.

(xxxvi)

The Petition should be dismissed as it was filed maliciously to damage the Respondent’s reputation and extract money.

V. Demand Certificate was never issued to the Respondent in terms of the Corporate Guarantee.

(xxxvii)

The present application under Section 7 of the Code is not maintainable as there is no default by the Respondent under Section 3(12), nor any "debt" due and payable under Section 3(11). It was filed merely to pressure the Respondent without any valid cause of action.

(xxxviii) It is the case of the Applicant that the Respondent herein has executed Corporate Guarantee to secure repayment of the Non- Convertible Debentures ("NCDs") issued by the Borrower and subscribed to by the Debenture Holder.

(xxxix)

The Petition is not maintainable as the Applicant failed to follow the required procedure under the Corporate Guarantees. Specifically, Clause 6.6 which mandates issuing a "Demand Certificate" before seeking repayment, which the Applicant has not done. However, in the present case, the Applicant has failed to issue any demand certificate in terms of Clause 6.6 of the Corporate Guarantees and therefore there is no amount due and payable by the Respondent, as on date. The relevant clause of the Corporate Guarantee is reproduced herein below for reference: -

“6.6

Any demand made under this Guarantee Agreement shall be deemed to have been duly given to the Guarantor by the Trustee, by sending the same substantially in the form of the Demand Certificate annexed at Schedule- I ("Demand Certificate”), by e-mail, or sent by courier, registered post and/ or hand delivery at the address or e-mail id, as provided below, marked for the attention of the person(s) or department specified herein......"

[……]

(iii)

Permit the representatives of the Decree Holder to represent the Judgment Debtor No. l before all authorities including DTCP, RERA and other authorities;

(v)

Direct the Judgment Debtor No.1 to appoint the representatives of the Decree Holder as the sole signatory to the any escrow bank accounts of the Judgment Debtor No.1 including for the Additional FAR

(vi)

Restrain the Judgment Debtors from interfering in any manner with the construction, sales of units and collection of monies with respect to the Additional FAR Towers being undertaken by the PMC

ANALYSIS & FINDINGS IN C.P.(IB)/752/2023

“32.

It could also be one of the contentions raised on behalf of the Respondent that the Debenture Holder and the Applicant were in control and management of the finances as well as affairs of the Principal Borrower and that such control led to mismanagement of the Principal Borrower’s finances. In this regard, it is relevant to refer to the order dated 11.09.2024 passed by this court in IB-541/ND/2022 where the application filed under Section 7 of the Code against the Principal Borrower was admitted. In passing the said order, this court had rejected the plea raised by the Principal Borrower that the default in debt could not be attributed to it since it was the Applicant/ Debenture Trustee which operated the escrow account. Relevant excerpt of the order dated 11.09.2024 reads thus: -

“17.

Having drawn our attention to Exhibit-34 to Rejoinder i.e Escrow Account Agreement, the Ld. Counsel for the Corporate Debtor submitted that since in terms of Clause 3.2 of the Agreement, it was the Applicant i.e. Debenture Trustee who was operating the escrow account, the default occurred in redeeming non-convertible debentures cannot be attributed to the Respondent/CD. The Clause 3.2 relied upon by him reads thus: -

“3.2 Operation of the Escrow Accounts

(a)

Each of KIPL, GPPL, and NBPL hereby unconditionally and irrevocably delegates to the Escrow Agent the authority to operate the Escrow Accounts in accordance with the terms of this Agreement, Applicable Law, and in accordance with the instructions of the Debenture Trustee (acting at all times in accordance with the Transaction Documents). It is hereby clarified that each of the RERA Designated Accounts shall be operated in accordance with the terms of this Agreement and the RERA Act. Save as provided for in this Agreement and in the RERA Act no Person shall be entitled to issue instructions in relation to any of the RERA Designated Accounts.

(b)

All transfers from the Escrow Accounts shall be made by the Escrow Agent in India only and the Escrow Agent is not permitted to make any transfers from the Escrow Account in any other jurisdiction, unless such transfer to another jurisdiction is permitted by Applicable Law. Nothwithstanding anything contained in this Agreement, in the event any instruction or directions received by the Escrow Agent from the Uttar Pradesh Real Estate Regulatory Authority pertaining to any of the RERA Designated Accounts, such instruction or direction issued by the Uttar Pradesh Real Estate Regulatory Authority shall prevail over any conflicting instructions provided by the Promoter. The Escrow Agent shall promptly, a having received any such instruction or direction from the Uttar Pradesh Real Estate Regulatory Authority, inform the Debenture Trustee and the Promoter of such instruction or direction.

(c)

The Promoters shall only be entitled to issue instructions to the Escrow Agent in relation to the RERA Designated Accounts and for the limited purpose of transferring any and all sums of money from the RERA Designated Accounts to the corresponding Debenture Trustee Escrow Account. Any such. instruction issued by any Promoter shall be in the format as set out in Schedule III hereto and shall mandatorily be accompanied by (i) a certificate in the format as prescribed under the RERA Act from the project engineer of the specific RERA Project: (ii) a certificate in the format as prescribed under the RERA Act from the project architect of the specific RERA Project; and (iii) a certificate in the format as prescribed under the RERA Act from the chartered account of the specific RERA Project. It is clarified that any sum of money withdrawn from any RERA Designated Account shall mandatorily be transferred to the corresponding Debenture Trustee Escrow Account only.

(d)

It is clarified that neither the Promoters nor any of their Affiliates will be permitted to issue any instructions or operate in any manner whatsoever the Debenture Trustee Escrow Accounts or the Collection Escrow Accounts. Any transfer of sums from the Collection Escrow Accounts to the corresponding RERA Designated Account and the corresponding Debenture Trustee Escrow Account will strictly be in accordance with this Agreement and Schedule II hereto. Any transfer of sums from the Debenture Trustee Escrow Accounts will strictly be in accordance with the instructions issued solely by the Debenture Trustee (acting at all times in accordance with the Transaction Documents) to the Escrow Agent.

(e)

Prior to the occurrence of an Event of Default, the names of the authorised signatories of each of KIPL, GPPL, and NBPL for the sole purpose of issuing instructions in relation to withdrawal of sums from the RERA Designated Accounts to the corresponding Debenture Trustee Escrow Account and their specimen signatures for the purpose of standing instructions, notices and other related instructions to the Account Bank or to the Escrow Agent for this limited purpose shall be in accordance with the resolutions passed by the board of directors of each of the Promoters and annexed to this Agreement hereto. Notwithstanding anything to the contrary stated in this Agreement, upon the occurrence of an Event of Default under the Debenture Trust Deed, in case of each of the RERA Designated Accounts, the Account Bank shall, immediately upon being informed of the occurrence of any such Event of Default by the Debenture Trustee (acting at all times in accordance with the terms of the Transaction Documents) and after having received a board resolution passed by the respective Promoter in this regard, revoke the authority granted to the existing signatories of each of KIPL, GPPL, and NBPL under Clause 3.2(e) above. On and from the occurrence of an Event of Default, each of the RERA Designated Accounts shall be operated solely by such director or key managerial personnel of the Promoter that is in accordance with the Transaction Documents, and each Promoter undertakes to submit a board resolution to the Account Bank and to the Escrow Agent in this regard. The signatory of each of the Promoters authorised to operate the RERA Designated Accounts upon the occurrence of an event of default and thereafter shall issue instructions substantially in the form set out in Schedule III hereto. On and from the occurrence of an Event of Default, the Escrow Agent and the Account Bank shall act on the sole instruction of only the authorised signatory of the Promoters so specified in the board resolutions passed by the Promoters upon the occurrence of an Event of Default, and the Escrow Agent and the Account Bank, shall in no way be bound by or act as per any other instructions received from any other Person, including any other signatory of KIPL, GPPL or NBPL, their Affiliates or their authorised representatives.

(f)

The name of the authorised signatory of the Debenture Trustee for the purpose Debenture of issuing instructions in relation to withdrawal of sums from each of the Debenture Trustee Escrow Accounts and his specimen signature for the purpose of standing instructions, notices and other related instructions to the Account Bank or to the Escrow Agent shall be in accordance with the resolution passed by the Debenture Trustee and annexed to this Agreement hereto.

(g)

The Debenture Trustee and the Promoters undertake to give the Escrow Agent. 5 (five) clear Business Days' notice in writing of any change to their authorised signatories.

(h)

Amounts shall only be withdrawn from the Escrow Accounts to the extent such withdrawal does not cause any of the Escrow Accounts to have a negative balance and the Account Bank shall not have any obligation to monitor any of the Escrow Accounts for this purpose or incur any liability whatsoever from any non-distribution in such circumstances. Notwithstanding the above, the Account Bank shall be liable in an event of wilful default, gross negligence. and fraud.

(i)

Upon the receipt of an occupancy certificate in relation to the Sikkd Kaamna Project, the Account Bank shall. and the Escrow Agent shall procure that the Account Bank does, transfer all funds lying, from time to time, to the credit of the KIPL RERA Designated Account and the KIPL Collection Escrow Account to the KIPL Debenture Trustee Escrow Account on a daily auto-sweep basis at the close of each Business Day during the term of this Agreement. It is hereby clarified that required instruction shall be provided by the Debenture Trustee to the Account Bank for activating such auto-sweep. The Account Bank and the Escrow Agent shall not take instructions from any other Person or entity in this regard. Upon the transfer of all funds from the KIPL RERA Designated Account and the KIPL Collection Escrow Account to the KIPL Debenture Trustee Escrow Account, the Debenture Trustee, upon receiving such request from KIPL and subject to clause 7.6 below, shall be entitled to (but not obliged to) issue a confirmation to the Account Bank to close the KIPL RERA Designated Account only. It is hereby clarified that upon the closure of the KIPL RERA Designated Account. all amounts lying, from time to time, to the credit of the KIPL Collection Escrow Account shall be transferred only to the KIPL Debenture Trustee Escrow Account on a daily auto-sweep basis at the close of each Business Day during the term of this Agreement.

(j)

Upon the receipt of an occupancy certificate in relation to the Sikka Karmic Project, the Account Bank shall, and the Escrow Agent shall procure that the Bank does, transfer all funds lying, from time to time, to the credit of the GGPL RERA Designated Account and the GPPL Collection Escrow Account to the GPPL Debenture Trustee Escrow Account on a daily auto-sweep basis at the close of each Business Day during the term of this Agreement. It is hereby clarified that required instruction shall be provided by the Debenture Trustee to the Account Bank for activating such auto-sweep. The Account Bonk and the Escrow Agent shall not take instructions from any other Person or entity in this regard. Upon the transfer of all funds from the GPPL RERA Designated Account and the GPPL Collection Escrow Account to the GPPL Debenture Trustee Escrow Account, the Debenture Trustee, upon receiving such request from GPPL, and subject to clause 7.6 below, shall be entitled to (but not obliged to) issue a confirmation to the Account Bank to close the GPPL RERA Designated Account only. It is hereby clarified that upon the closure of the GPPL RERA Designated Account, all amounts lying, from time to time, to the credit of the GPPL Collection Escrow Account shall be transferred only to the GPPL Debenture Trustee Escrow Account on a daily auto-sweep basis at the close of each Business Day during the term of this Agreement.

(k)

Upon the receipt of an occupancy certificate in relation to the Sikka Kirat Project, the Account Bank shall, and the Escrow Agent shall procure that the Account Bank does, transfer all funds lying, from time to time, to the credit of the NBPL RERA Designated Account and the NBPL Collection Escrow Account to the NBPL Debenture Trustee Escrow Account on a daily auto-sweep basis at the close of each Business Day during the term of this Agreement. It is hereby clarified that required instruction shall be provided by the Debenture Trustee to the Account Bank for activating such auto-sweep. The Account Bank and the Escrow Agent shall not take instructions from any other Person or entity in this regard. Upon the transfer of all funds from the NBPL RERA Designated Account and the NBPL Collection Escrow Account to the NBPL Debenture Trustee Escrow Account, the Debenture Trustee, upon receiving such request from NBPL, and subject to clause 7.6 below, shall be entitled to (but not obliged to) issue a confirmation to the Account Bank to close the NBPL RERA Designated Account only. It is hereby clarified that upon the closure of the NBPL RERA Designated Account, all amounts lying, from time to time, to the credit of the NBPL Collection Escrow Account shall be transferred only to the NBPL Debenture Trustee Escrow Account on a daily auto-sweep basis at the close of each Business Day during the term of this Agreement.”

“18.

In terms of the aforementioned clause, the power to operate escrow account was given to some agent nominated by the Applicant, but merely because certain person nominated by the bankruptcy trustee is authorised to operate the account, it cannot be said that there is no default on behalf of the Corporate Debtor as it is not the case of the Corporate Debtor that there was sufficient amount available in the account to redeem the debentures on due dates. Thus, we do not find any force in the plea on behalf of the Corporate Debtor that merely because the Applicant was allowed to nominate a person to operate the escrow account, the present application is not maintainable for the reasons that the operator of account could not make the payment.”

33.

In terms of the aforesaid order of this court, the contention raised by the CD that the default in repayment occurred to mismanagement on the part of the Applicant in managing the finances of the Principal Borrower is not tenable.”

“5. Definitions.—

…..

(8)

financial debt means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes—

….. (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;”

“Explanation- For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.”

"29.

The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing - i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code. 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise."

"30.

On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved· to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise."

“11.

Thus, once NCLT is satisfied that the default has occurred, there is hardly a discretion left with NCLT to refuse admission of the application under Section 7. "Default" is defined under sub-section (12) of Section 3 IBC which reads thus:

"3.

Definitions. In this Code, unless the context otherwise requires-……

(12)

"default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be;"

Thus, even the non-payment of a part of debt when it becomes due and payable will amount to default on the part of a corporate debtor. In such a case, an order of admission under Section 7 IBC must follow. If NCLT finds that there is a debt, but it has not become due and payable, the application under Section 7 can be rejected. Otherwise, there is no ground available to reject the application.”

“8A. (2) The existence of debt due to a creditor in a class may be proved on the basis of –

(a)

the records available with an information utility, if any; or”

“6. ORDER

1.

In light of the above facts and circumstances, it is hereby ordered as follows: -

i.

The Application bearing (IB)–751PB)/2023 filed by the Applicant under Section 7 of the Insolvency & Bankruptcy Code, 2016 for initiating CIRP against CD i.e. M/s Shree Vardhman Infraheights Private Limited is hereby ADMITTED.

ii.

As a consequence of the Application being admitted in terms of Section 7 of the Code, the moratorium as envisaged under the provisions of Section 14(1) of the Code, shall follow in relation to the Respondent/(CD) as per clauses (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 into force.

iii.

The Financial Creditor has proposed the name of M/s Ducturus Resolution Professionals Pvt. Ltd. through its Director Mr. Jalesh Kumar Grover registration number IBBI/IPA-001/IPP00200/2017- 2018/10390, as the Interim Resolution Professional of the Corporate Debtor. The proposed Interim Resolution Professional has given his written communication in Form 2 as required under rule 9(1) of the Insolvency and Bankruptcy [Application to Adjudicating Authority] Rules, 2016 along with a copy of registration annexed as Annexure-2 (pg. 6 to 12) of IA 1527/2024.

iv.

M/s Ducturus Resolution Professionals Pvt. Ltd. through its Director Mr. Jalesh Kumar Grover; Registration number IBBI/IPA001/IPP00200/2017-2018/10390; Address: SCO 818 1st Floor NAC Manimajra Chandigarh; Email id j.kgrover27@gamil.com;Contact No. 9501018808 is appointed as the Interim Resolution Professional (“IRP”).

v.

In pursuance of Section 13(2) of the Code, we direct the IRP to make a public announcement immediately with regard to the admission of this application 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.

vi.

During the CIRP period, the management of the CD shall vest in the IRP/RP, in terms of Section 17 of the IBC. The officers and managers of the CD shall provide all documents in their possession and furnish every information in their knowledge to the IRP within one week from the date of receipt of this Order, in default of which coercive steps will follow. There shall be no further opportunity given in this regard.

vii.

The IRP is expected to take full charge of the CD’s assets, and documents without any delay whatsoever. He is also free to take police assistance and this Court hereby directs the Police Authorities to render all assistance as may be required by the IRP in this regard.

viii.

The IRP or the RP, as the case may be shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIRP in respect of the CD.

ix.

The Applicant shall deposit a sum of Rs 5,00,000/-(Rupees Five Lakhs only) with the IRP to meet the expenses arising out of issuing public notice and inviting claims. These expenses are subject to the approval of the Committee of Creditors (“COC”).

x.

The Registry is hereby directed to communicate a copy of the order to the FC, the CD, the IRP and the Registrar of Companies, NCR, New Delhi, by Speed Post and by email, at the earliest but not later than seven days from today, and upload the same on website immediately after pronouncement of the order. The Registrar of Companies shall update his website by updating the status of the CD and specific mention regarding admission of this petition must be notified.

7.

The registry is further directed to send the copy of the order to the IBBI also for their record.

8.

Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.

9.

List the matter on 10.02.2025.”

“18.

Counsel for the Respondent is right in his submission that in Section 7 application the Adjudicating Authority was obliged to determine whether default has occurred or whether debt was due as remained unpaid. The Hon’ble Supreme Court in “E.S. Krishnamurthy and Others vs. Bharath Hi-Tech Builders Private Limited- (2022) 3 SCC 161” referring to the earlier judgment of the Hon’ble Supreme Court in “Innoventive Industries Ltd. vs. ICICI Bank- (2018) 1 SCC 407” held following in paragraph 32:-

“32.

In Innoventive Industries [Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, paras 28 and 30 : (2018) 1 SCC (Civ) 356] , a two-Judge Bench of this Court has explained the ambit of Section 7 IBC, and held that the adjudicating authority only has to determine whether a “default” has occurred i.e. whether the “debt” (which may still be disputed) was due and remained unpaid. If the adjudicating authority is of the opinion that a “default” has occurred, it has to admit the application unless it is incomplete. Speaking through Rohinton F. Nariman, J., the Court has observed : (SCC pp. 438-39, paras 28 & 30)

“28.

When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to [Ed. : The word between two asterisks has been emphasised in original.] any [Ed. : The word between two asterisks has been emphasised in original.] financial creditor of the corporate debtor — it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. A debt ma not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.

* * *

30.

On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.”

“11.

Thus, once NCLT is satisfied that the default has occurred, there is hardly a discretion left with NCLT to refuse admission of the application under Section 7. “Default” is defined under sub-section (12) of Section 3 IBC which reads thus:

“3.

Definitions.—In this Code, unless the context otherwise requires— * * *

(12)

“default” means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be;” Thus, even the non-payment of a part of debt when it becomes due and payable will amount to default on the part of a corporate debtor. In such a case, an order of admission under Section 7 IBC must follow. If NCLT finds that there is a debt, but it has not become due and payable, the application under Section 7 can be rejected. Otherwise, there is no ground available to reject the application.”

“x.

Therefore, on the basis of arguments advanced and documents on record, the DSA and DTD as amended on 04.11.2019 and 23.11.2021 shall stand as valid and enforceable. That is the underlying factor for the debt and default that remains unpaid. All other interim arrangements basis court proceedings in multiple forums does not vanquish the debt. It lends credence to the continuing default and attempt to extricate but in vain. There are other additional documents like emails.”

51.

After perusal of submissions and documents placed on record, we are satisfied that the present Application is complete in all respects and the Financial Creditor is entitled to claim its outstanding financial debt from the Corporate Debtor and that there has been default in payment of the Financial Debt. Therefore, on the basis of discussion in the aforesaid paragraphs, we are satisfied that the present application is complete in all respects. The Applicant is entitled to move the application against the Corporate Debtor in view of outstanding Financial Debt in default which is above the pecuniary threshold limit as provided under Section 4 of the Code, 2016. Nevertheless, in the wake of the order passed in respect of the Principal Borrower initiating the CIRP qua it and the order being upheld by the Hon’ble NCLAT, Ms. Pooja Sehgal, Ld. Senior Counsel for the CD submitted that she is left with no scope to oppose the admission and the captioned application has to be admitted. In view of the aforementioned, we are left with no option but to admit the present petition. Ordered accordingly.

52.

In the wake, moratorium as provided under Section 14 of IBC, 2016 is declared qua the CD and as a necessary consequence thereof the following prohibitions are imposed, which must be followed by all and sundry:

(a)

The institution of suits or continuation of pending suits or proceedings against the Respondent including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b)

Transferring, encumbering, alienating or disposing of by the Respondent any of its assets or any legal right or beneficial interest therein;

(c)

Any action to foreclose, recover or enforce any security interest created by the Respondent in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(d)

The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Respondent.

IA. NO. 1530/ND/2024

IA. NO. 1430/ND/2024

(i)

Allow the present Application and take on record the additional facts and documents filed along with the instant Application; or

(ii)

Pass such other order(s), directions(s), relief(s) as deemed fit and proper by this Hon'ble Tribunal in the fact and circumstances of the present case and in the interest of justice.

IA. NO. 3855/ND/2024

“A. restrain the Corporate Debtor from alienating, encumbering, or creating any third-party interest on the assets of the Corporate Debtor;

B. restrain the Corporate Debtor to carry out Project Related Financial transaction (sales, collections and cancellation) out of any Bank Account other than the agreed Escrow Accounts and in terms of the DTD dated 19.04.2016, Amended DTD dated 27.09.2018, Third DTD dated 04.11.2019. and Amended Third DTD dated 23.11.2021;

C. appoint an Interim Resolution Professional (IRP) to monitor and control the affairs of the Corporate Debtor;

D. pass such orders, as this Hon'ble Tribunal deems fit and proper in the circumstances of the case and thus render justice.”