Pentakota Appala Visvesvaraya & Anr. vs Sai Shraddha Vivek Projects Developers Private Limited

Per: H.V. Subba Rao, Member (Judicial)

The above Company Petition is filed by Pentakota Appala Visvesvaraya & Anr., hereinafter called as “Petitioner” consist of two individuals as Pentakota Appala Visvesvaraya hereinafter called as “Petitioner 1” and Mr. Mayank Harshad Talati hereinafter called as “Petitioner 2”, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Sai Shraddha Vivek Projects Developers Private Limited hereinafter called as “Corporate Debtor” by invoking the provisions of Section 7 Insolvency and Bankruptcy code (hereinafter called “Code” read with rule 4 of Insolvency & Bankruptcy (Application to Adjudication Authority) Rules, 2016 for a Resolution of an unresolved Financial Debt of Rs. 21,98,968/-.

Pentakota Appala Visvesvaraya and Mr. Mayank Harshad Talati, Financial Creditors, are Individuals, having addres at 2380 1^st Main 3^rd Cross BDA Layout HAL 3^rd Stage Bangalore – 560017 and P-801, Tower -7, Adarsh Palm Retreat, Deverabisanahalli, Outer Ring Road, Bangalore, KA – 560103 respectively.

Sai Shraddha Vivek Projects Developers Private Limited, Corporate Debtor is a private limited company incorporated under the Companies Act, 1956 having its office at 1, Ram Krupa, Devji Bhimji Lane, Mathuradas Road Kandivali West Mumbai- 400067, Maharashtra (India).

The Corporate Debtor is engaged in infrastructure development in Mumbai and surrounding areas and has undertaken two projects by the name of Dwarka and Kapilvastu. For developing the said project, the Corporate Debtor issued Three product notes inviting interested persons to invest in the Company vide subscription to Non-Convertible Debentures (hereinafter referred to as “NCD”) as detailed below:

As per the said product note the Debenture Holder’s representative and calculating agent was to be M/s Karvy Realty (India) Ltd., a Financial Management firm which was handling the investment portfolio of the Petitioners.

On advice of M/s Karvy Private Wealth, Petitioner No. 1 has invested Rs. 90,00,000/- on 25.02.2015 by subscribing to 900 NCDs under Product note 1 having maturity on 23.02.2018 and further Rs. 35,00,000/- on 16.04.2015 by subscribing to 350 NCDs under Product note 2 having maturity on 13.04.2018.

On advice of M/s Karvy Private wealth, Petitioner No. 2 has invested Rs. 25,00,000/- by subscribing to 125 NCDs under product note 3.

The investment portfolio of Petitioner 1 is reflected in the Wealth Statement as prepared by Karvy Private Wealth, is annexed to the petition.

As per the terms and conditions of the subscription of NCDs the petitioner herein were entitled for an interest on Principal Amount, as invested, at the rate of 18.5%, 16% and 18% per annum respectively. The said payment was to be made to the Petitioners on a monthly basis. The Petitioners were also entitled to re-payment of Principal Amount in 18 Equal Monthly Instalments starting from the end of the 19^th month.

In case of the Petitioner No. 1 the payment is made as per the schedule till 31.06.2016. However post June 2016, the Corporate Debtor has been continuously defaulting in making payment of interest.

In case of Petitioner No. 2 the payment towards interest is made till August 2016. However post August 2016, no payment is made towards interest due.

The Corporate Debtor vide Emails dated 02.09.2016, 28.11.2016 and 18.01.2017 addressed to the Petitioner, has admitted the delay in repayment of interest.

The Petitioner enclosed the following details of documents, records and evidence of default:

The Corporate Debtor vide email dated 10.03.2017 assured Petitioner No.1 that the Principal Amount will be disbursed on the same day and interest will be further be cleared by April 2017.

The Corporate Debtor started making payment towards the re-payment of Principal Amount however the default in respect to the interest component continued.

The Petitioners were regularly following up with the Corporate Debtor as well with M/s Karvy Realty, regarding the payment of Interest Component. However, no positive response was provided. M/s Karvy Realty vide an email dated 19.07.2017, assured the Petitioners that it will ensure payment of interest.

Till date the dues with respect to payment of interest, have not been cleared by the Corporate Debtor. The Corporate Debtor has paid the Principal Amount. However the interest as was to be paid under the Agreement, has not been paid till date.

Even though no payment of interest was made in favour of the Petitioners, the Corporate Debtor deposited TDS for the said payment with the Tax Authorities, as if the said payment has been made in favour of the Petitioners. No Corresponding entry is reflected in the bank account of the Petitioners to show the payment has been made in their favour. Therefore not only did it make the payment, the Corporate Debtor has tried to play a fraud with the Tax Authorities.

As on the date the total payment outstanding in favour of the Petitioner No. 1, from the Corporate Debtor is Rs. 18,06,517/-, under both the investments inclusive of the penal interest as is required to be made on the delayed payment.

As on the date the total payment outstanding in favour of the Petitioner No. 2, from the Corporate Debtor is Rs. 3,92,451/-, The said amount is inclusive of the penal interest required to be made on the delayed payment.

The Corporate Debtor in its reply has denied each and every statement, contention, allegation and averment contained in the Petition.

The Corporate Debtor submits that M/s. Karvy Realty was the representative of the debenture holders and also managed the investment portfolio of the Petitioner Company; and Vistra ITCL was appointed as the Debenture Trustee of the Corporate Debtor. Corporate Debtor has entered into a Debenture Trust Deed dated 09.07.2015 (“DTD-1”) and on 20.02.2015 (“DTD-2”) for the facility of Rs. 35,00,0000/- and Rs. 40,00,000/-respectively which was granted.

The Corporate Debtor further submits that under the DTD-1 and DTD-2 the payments were made through karvy vis-à-vis the Corporate Debtor and payments were not made directly by the Corporate Debtor to the Debenture holder.

It is submitted that the Corporate Debtor has executed and provided a registered Power of Attorney (“POA”) dated 30.03.2017 and executed an Agreement for Sale in respect of office premises in favour of the Debenture Holders Representative on the agreed terms that the sale of the Office Premises and clarity on/working of the interest amount mentioned in the Letters so exchanged between the Corporate Debtor and Debenture Holder Representative, the same shall be discharged (if any) from the sale of the said Office Premises and The remainder amount from the sale proceeds was to be returned to the Corporate Debtor.

It is further submitted that the Debenture Holder representative vide letter dated 30.03.2017, after discharge of the payment obligations under the Debenture trust deed i.e. DTD-1 and DTD-2, Issued “No Dues letter/Certificate” to the Debenture Trustee.

The Corporate Debtor submits that as per the agreement dated 30.03.2017 with Karvy & Debenture Trustee the interest payment obligation of the Corporate Debtor is discharged in lieu of the documents executed & exchanged between the Corporate Debtor, Karvy & Debenture Trustee wherein it was agreed that only TDS amount was to be credited by Corporate Debtor against the concerned debenture holders for IT purposes. However, the obligation for payment of requisite interest for which TDS was deducted is to be borne/discharged by Karvy.

Heard the arguments on both sides and perused the material available on record. The undisputed facts of the case are as follows:

Both the petitioners are debenture holders who have purchased Non-Convertible Debentures, issued by the Corporate Debtor. M/s. Vistra ITCL is the debenture trustee. The petitioner made the investment in the debentures through their representative M/s. Karvy Realty through cheques. All the debentures were issued for raising the working capital requirement of the Corporate Debtor. It is also undisputed fact that both the petitioners have received the entire principal amount and the present company petition is filed for the un-paid interest.

It is the contention of the Corporate Debtor that the whole transaction was routed by the petitioners through their authorized representative M/s. Karvy Realty and there is no privity of contract between the Petitioners and the Corporate Debtor and therefore the above Company Petition without impleading M/s. Karvy Realty is not maintainable. It is his further contention that the Corporate Debtor executed and provided a registered Power of Attorney dated 30.03.2017 and also an agreement for sale in respect of office premises situated at one of the project in Goregaon “A” wing, 1st Floor, CTS No. 27 (pt), Siddharth Nagar, Off S.V. Road, Opp. to Ram Mandir Signal, Goregaon West, Mumbai-400104 admeasuring area about 3141 sq. ft. Carpet area in favour of the debenture holders representative and it was agreed between all concerned parties (including the debenture trustee) that upon the sale of the office premises and clarity on working of the interest amount mentioned in the letters so exchanged between the Corporate Debtor and the debenture holder representative, the same shall be discharged if any from the sale of the said office premises at a price having a market value not less than Rs. 24 Crores and the remaining amount from the sale proceeds was to be returned to the Corporate Debtor upon such sales and therefore it was the duty of M/s. Karvy Realty to give clarity about the outstanding interest due and payable. However till date M/s Karvy Realty has neither sold the office premises nor provided the exact outstanding interest if any due and payable and M/s Karvy Realty has not even raised or communicated any alleged outstanding claims to the Corporate Debtor. It is appropriate to mention here that the sale transaction in respect of the above office premises has not yet been finalised even 5 years after executing the alleged power of attorney in favour of M/s. Karvy Realty by the Corporate Debtor and the Corporate Debtor continues to be the owner even today. Therefore it is very clear from the above that M/s. Karvy Realty and the Corporate Debtor are duping the investors by throwing blame on each other.

In this regard it is important to look at the following emails at Page Nos. 132 to 135 annexed by the Petitioner in the company petition.

It is very clear from the above email correspondence that the Corporate Debtor is in direct touch with the petitioners with regard to non-payment of interest payable to the petitioners and in fact the Corporate Debtor assured the petitioners for early settlement of interest part also. Therefore, it is very clear that the stand of the Corporate Debtor with respect to lack of privity of contract between them is out and out false, more so in the absence of any evidence to the effect that the Corporate Debtor has not utilized the fund raised from the issue of non-convertible debentures.

Hence this tribunal after carefully examining the contest of both parties and their respective documents, is of the view that there is an existence of “Financial Debt” due and payable by the Corporate Debtor to the petitioners and the Corporate Debtor has committed “default” in payment of such debt. It has been also observed that the above Company Petition being filed on 25.10.2019 is well within limitation. The Petitioners have also suggested the name of proposed Interim Resolution Professional in Part-3 of the Petition along with his consent letter in Form-2.

When the petitioner satisfies the above legal requirements, this bench has no option except to admit the Company Petition as per the settled proposition of law.

Accordingly, the above Petition is admitted by passing the following: