Phoenix ARC Limited vs Virgo Realtors Private Limited

By this common order, We shall dispose of two petitions i.e. CP/71/2022 & CP/28/2022 filed under Section 7 of Insolvency and Bankruptcy Code (IBC), 2016 by the Financial Creditor Phoenix ARC Limited against the Corporate Debtors Virgo Realtors Private Limited (CP/71/2022) & Virgo Properties Private Limited (CP/28/2022) for initiating Corporate Insolvency Resolution Process (CIRP) since both the petitions relate to a single loan agreement dated 23.06.2017 sanctioned to the Corporate Debtors Virgo Realtors Private Limite, (Borrower) and Virgo Properties Private Limited (Co-Borrower).

L&T Housing Finance Limited sanctioned a term loan of Rs. 107,00,00,000/- vide sanction letter dated 15.06.2017 (annexed as Annexure 3) to the Corporate Debtors Virgo Realtors Private Limited (Borrower) and Virgo Properties Private Limited (Co-Borrower). They executed the loan documents including loan agreement dated 23.06.2017. The loan was assigned by L&T Housing Finance Limited to L&T Finance Limited vide assignment deed dated 29.03.2019. Later, L&T Housing Finance Limited merged with L&T Finance Limited under a scheme of merger and amalgamation vide an order dated 19.03.2021 (annexed as Annexure 4). L&T Finance Limited thereafter assigned the loan to Phoenix ARC Private Limited vide assignment agreement dated 29.03.2022.

As per the loan agreement, both Borrower and Co-Borrower have joint and several liability towards any or every amount due under the loan agreement (annexed as Annexure 5). The loan was granted for the construction projects interalia as under:

Corporate Debtor (Virgo Realtors Private Limited):

Co-Borrower (Virgo Properties Private Limited):

It is alleged that as of 15.02.2022, amongst other defaults, the Corporate Debtor Virgo Realtors Private Limited failed in repayment of installments due and payable as on 15.08.2021, 15.09.2021, 15.10.2021, 15.11.2021, 15.12.2021, 15.01.2022 and 15.02.2022 amounting to Rs. 19,43,35,289/-. The computation is annexed as Annexure 6. (CP/71/2022)

Similarly, the Corporate Debtor Virgo Properties Private Limited failed in repayment of installments due and payable as on 15.08.2021, 15.09.2021, 15.10.2021, 15.11.2021, 15.12.2021, 15.01.2022 and 15.02.2022 amounting to Rs. 16,75,27,204.78. The computation is annexed as Annexure 6. (CP/28/2022)

It is alleged that despite several reminders and follow ups, the Corporate Debtors continued to remain in default. Some of the letters / notices issued by the erstwhile lender before recalling the entire loan are detailed below.

Part I of the petition provides the particulars of the Financial Creditor (L&T Finance Limited). It was incorporated on 24.11.1993 having its registered office at No. 62, 6^th Floor, KGN Towers, Ethiraj Salai, Egmore, Chennai – 600 008.

Part II sets out the details of the Corporate Debtor Virgo Realtors Private Limited (Borrower). It was incorporated on 22.03.2006 with authorized share capital of Rs. 10,00,00,000/- and paid up capital of Rs. 2,77,96,660/-. Its registered address is at Plaza House, New No. 5, Old No. 3, Thirumurthy Street, T.Nagar, Chennai – 600 017 within the jurisdiction of this Tribunal. Part II also sets out the details of the Corporate Debtor Virgo Properties Private Limited (Co-Borrower). It was incorporated on 14.09.2004 with authorized share capital of Rs. 5,00,00,000/- and paid up capital of Rs. 4,50,60,000/-. Its registered office is at Plaza House, New No. 5, Old No. 3, Thirumurthy Street, T.Nagar, Chennai – 600 017 within the jurisdiction of this Tribunal.

In Part III of the petition, the Petitioner has proposed the name of Ms. Renuka Devi Rangaswamy with IP Registration No. IBBI/IPA-001/IP-P01862/2019-2020/12871 and email ID: jrassociatesbe@gmail.com.

In Part IV of the petition, the Petitioner has given the particulars of debt, amount claimed in default and date of default which are respectively Rs. 19,43,35,289/- (Virgo Realtors Private Limited) and Rs. 16,75,27,204.78 (Virgo Properties Private Limited). Date of defaults are 15.02.2022 and 15.01.2022 respectively.

In Part V of the petition, the Petitioner has given the details of securities and their valuation as Annexure 20, copy of charge certificates along with modification as Annexure 21, record of default with information utility as Annexure 22, deed of hypothecation dated 23.06.2017 as Annexure 23, deed of personal guarantee dated 23.06.2017 issued by the Guarantors Mr. T. Shyam Prasad, Mrs. T. Radhika and Mr. B.V.V. Prasad as Annexure 24 collectively, deed of mortgage dated 27.07.2017 as Annexure 25. It has also placed copy of bank statements reflecting non-payment since August 2021 as Annexure 26 (collectively) with other documents as detailed below:

After the debt was assigned by the erstwhile Financial Creditor to Phoenix ARC Private Limited (now Phoenix ARC Limited). Phoenix ARC Private Limited filed an application for substitution in place of erstwhile Financial Creditor vide IA/824/2022 which was allowed by this Tribunal vide an order dated 05.08.2022 giving reference to Clause 17.4 of the loan agreement dated 23.06.2017 and the assignment agreement dated 29.03.2022 holding that Phoenix ARC Private Limited acting in its capacity as Trustee of Phoenix Trust FY 22-16, has all the rights, title and interest which were vested in the original petitioner against the Corporate Debtor and it is therefore entitled to pursue / continue, initiate any legal action against the Corporate Debtor in order to recover the financial debt legally owed by them. Against this order, the Corporate Debtor preferred an appeal before Hon'ble NCLAT which was dismissed as withdrawn by an order dated 04.11.2022 with the following observations:

The Corporate Debtor then filed an IA/1513/2022 in IA/824/2022 for setting aside the order dated 05.08.2022 in IA/824/2022. The application IA/1513/2022 was dismissed with the observations that since the application was disposed of on merits and appeal was dismissed as withdrawn, the application is not maintainable. It was held that under the garb of the application, the Applicant seeks review of the order dated 05.08.2022 which is not permissible. Permission was however granted to the Applicant / Corporate Debtor to file reply in the main petition.

The Respondent / Corporate Debtors filed the reply along with additional reply statement. On 01.08.2023 and 22.09.2025, it was submitted by the Corporate Debtors through the memo Sr. No. 3235 dated 01.08.2023 that the deed of assignment dated 29.03.2022 has still not been registered with the SRO as mandated under Section 28 of the Registration Act. SRO has refused to register vide an order dated 24.01.2023 against which the Financial Creditor has preferred an appeal which is pending before the District Registrar. It was also submitted that the Financial Creditor had filed an application before the Arbitrator in IA/5/2022 for substitution which was also dismissed. Against the same, an appeal has been preferred by the Financial Creditor in C.M.A. No. 1602 of 2023 before the Hon'ble High Court where the Hon'ble High Court has stayed the arbitral proceedings. The Corporate Debtor also challenged the order of this Tribunal dated 05.08.2022 before the Hon'ble High Court in W.P. No. 22380 of 2023.

On 22.09.2023, the Petitioner filed the amended Form 1 (Amended Petition) under sub Rule 1 and 4 along with the affidavit and Board Resolution vide Sr. No. 2143 dated 25.05.2023.

Ld. Counsel for the Corporate Debtors submits that the accounts of the Corporate Debtors are independent and to be operated independently. Account No. 6240063869 corresponds to Virgo Properties Private Limited and Account No. 6240063870 corresponds to Virgo Realtors Private Limited. The loan was subsequently assigned to L&T Finance Limited through an unregistered deed of assignment dated 29.03.2019. Later, the original lender as well as the erstwhile Financial Creditor merged through an order dated 19.03.2021.

Ld. Counsel submits that substantial payment of Rs. 60.0 Crores was made towards the debt due on 01.07.2021 by the sale of a property of the Corporate Debtor to Sri Kaveri Medical Care India Limited. Against the notice dated 17.12.2021 sent by the Financial Creditor to pay Rs. 29,81,27,441/-, the Corporate Debtors sent a detailed response stating that the debt due has already been discharged from the sale of the property. Only Virgo Properties might have some undischarged debt and hence the Financial Creditor cannot proceed against Virgo Realtors Private Limited. However, the Financial Creditor has filed the petitions against both the Corporate Debtors to enforce the very same debt. Ld. Counsel submits that the Financial Creditor assigned the debt to Phoenix ARC Private Limited on 29.03.2022 but the account No. 6240063870 corresponding to Virgo Realtors was not assigned under the alleged documents. Substitution was ordered on 05.08.2022. The Corporate Debtor was not a party to the proceedings. Ld. Counsel submits that the assignment deed through which the Petitioner claims its right is pending registration.

Ld. Counsel submits that there are contradictions between assignment deed dated 29.03.2019 and merger dated 19.03.2021. The assignment does not transfer the mortgage but only the debt. Further, there is no document to reconvey the property back to the original lender. Pending registration, the documents do not confer any rights. Even if the documents are subsequently registered, the rights do not relate back to the date of execution. Hence the Petitioner never had the right to get substituted in place of erstwhile Financial Creditor. Reference is made of the case reported in titled Ramasinghu Buchanna and another Vs. Joint Sub Registrar, 2005 SCC Online AP 865 where it was held that a document pending registration holds no evidentiary value and no rights flow from it until it is registered. The Hon'ble Supreme Court in the case titled Har Narain Vs. Mam Chand, 2010 (13) SCC 128 has clarified that the rights accrue only upon registration completion and not on the execution date. Ld. Counsel submits that when an interest in immovable property is transferred, documents require registration with specific reference to transfer of mortgage asset. Apart from registration, the document should also be adequately stamped as per Article 23 of Indian Stamp Act, 1899. Non-stamping would make the document inadmissible in evidence. Ld. Counsel submits that the first assignment is opposed to Section 23 of the Indian Contract Act. There cannot be any transfer of interest from L&T Housing Finance Limited to L&T Finance Limited nor the L&T Finance Limited had any right to assign the debt to Phoenix ARC Private Limited.

Ld. Counsel submits that the Petitioner has suppressed the material fact about receipt of Rs. 60.0 Crore regarding repayment of loan in the year 2021 vide sale of property to Sri Kauvery Medical Care (India) Limited. The Petitioner has not produced the Trust Deed to prove the relationship of the Trustee-Beneficiary. Reference is made of the case Phoenix ARC Private Limited Vs. M/s. Cherupushpam Films Pvt. Ltd. CP(IBC)/51/KOB/2022, where NCLT Kochi has held that the trust must prove its existence by producing a trust deed as per Rule 4(2) of Adjudicating Authority Rules to ascertain beneficiaries. Ld. Counsel submits that as per the Trust Act, trustees are only the custodian or manager of the trust property. In the absence of the Trust Deed, it is difficult to ascertain whether Phoenix ARC Private Limited has any authority to pass any resolution. Ld. Counsel submits that Rs. 59.40 Crores were paid to the notified account operated by L&T Finance Limited. Ld. Counsel submits that a tri-partite agreement was entered into and the amount of Rs. 59.40 Crores was deposited in the notified account by way of electronic transfer to Virgo Realtors Private Limited, Tranquil Square, Escrow Account No. 91702007083022 on 01.07.2021.

Ld. Counsel also filed a clarificatory memo vide Sr. No. 2484 dated 10.06.2026 and submitted that the Petitioner has produced different statement of accounts at different point of time. The statements are also incomplete and do not reflect the entirety of transactions between the parties particularly in relation to receipts arising from the sale transactions and adjustments towards the loan accounts. The Petitioner has not furnished a complete reconciliation as on the alleged date of default.

Ld. Counsel submits that sale of Sriperumbudur Land – I on 05.02.2018 and receipt of approximately Rs. 6.15 Crores is not reflected in the statements. Sale of Sriperumbudur Land – II on 29.09.2018 and receipt of Rs. 6.04 Crores is also not reflected. Remittance aggregating approximately Rs. 8.27 Crores made by Virgo Realtors is also not reflected. He submits that the receipts aggregating approximately Rs. 80.46 Crores require proper accounting and reconciliation. Ld. Counsel submits that the petition does not demonstrate any clear outstanding amount capable of constituting a financial debt under Section 7 of IBC. The payment details and ledger account maintained by the Corporate Debtors are reproduced as under.

Ld. Counsel submits that arbitration is subsisting under the loan agreement, yet the Financial Creditor invoked the jurisdiction of this Tribunal. It amounts to forum shopping. Ld. Counsel also submits that as per the report of Economic Times dated 03.04.2022, L&T Finance Limited sold Rs. 3463.0 Crores of distress portfolio for Rs. 1120.0 Crores under the conventional 15:85 structure. Under the structure, the Asset Reconstruction Company would pay L&T Finance Limited 50% of the consideration upfront and redeem the security receipt when they recover their dues from the defaulting borrowers. It sold the assets which comprise of security assets both movable and immovable. It is not an assignment but a sale in the open market which requires registration under Section 17 of the Registration Act and remittance of Stamp Duty.

Ld. Counsel for the Petitioner per contra argued that both the Corporate Debtors had approached L&T Housing Finance Private Limited for availing financial assistance. After scrutiny of documents, it sanctioned the financial assistance to the tune of Rs. 107.0 Crores. In consideration of the same, both entered into a loan agreement dated 23.06.2017. The Borrowers failed to repay the loan despite reminders. In the meantime, L&T Housing Finance Limited assigned the financial assets pertaining to the loan vide assignment agreement dated 29.03.2019 to L&T Finance Private Limited. Soon thereafter, L&T Housing Finance Limited merged with L&T Finance Limited vide an order dated 19.03.2021 and the entire financial assets vested absolutely in L&T Finance Limited. Since the Borrowers had not repaid the entire outstanding in full, L&T Finance Limited issued a demand notice dated 03.05.2021. The account was classified NPA on 13.11.2021. Thereafter, L&T Finance Limited assigned the loan to Phoenix ARC Private Limited vide assignment agreement dated 29.03.2022 which was registered as Doc. No. 6703 / 2023 in the office of SRO, Virudachalam.

Ld. Counsel submits that the Borrowers had also made offers seeking a One Time Settlement (OTS) of the outstanding debt due vide offer letters dated 07.12.2023, 08.03.2024 and 27.06.2024 which offers were not accepted by Phoenix ARC Private Limited and the debts continue to remain outstanding. There is no dispute as to existence of loan agreement. Ld. Counsel submits that the debt was validly assigned in favour of Phoenix ARC Private Limited under the registered assignment agreement whereby all rights, title and interest stood transferred to Phoenix ARC Private Limited.

Ld. Counsel submits that Section 185 of the Companies Act, 2013 regulates loans, guarantees and securities given by the Company to its Directors or to any person in whom the Director is interested. In the present case, the borrowing was between the lender and the borrower companies. As a security, deed of personal guarantee was executed by the Guarantors in their individual capacity and therefore provisions of Section 185 are not applicable. As regards objection that debt is an excluded debt under Section 79(15) of IBC and the Corporate Debtor is not required to make any repayment, Ld. Counsel submits that the definition 'excluded debt' includes limited categories such as debts arising out of fines, penalties, maintenance obligations or other statutory exclusions and not the financial debt on the ground of unenforceability. In the present case, the debt arises out of the executed financial documents.

Ld. Counsel submits that present case does not involve any transaction relating to immovable property so as to attract Section 28(2) of the Registration Act. The scheme of amalgamation was approved by the NCLT vide an order dated 19.03.2021 whereby all assets and liabilities stood vested in L&T Finance Limited by operation of law. Ld. Counsel placed the order of Hon'ble High Court in W. P. No. 24969 of 2023 dated 21.09.2023 whereby direction was given to the Registering Authority to return the pending documents to the Petitioner (Financial Creditor) who on receipt shall re-present the documents by deleting the survey number and on such re-presentation, the Registering Authority shall proceed with the registration by following the procedure including recovery of applicable stamp duty under the provisions of statutes. The direction was given to complete the process within a period of two weeks. Phoenix ARC Private Limited has also filed certificate of incorporation consequent upon conversion of Phoenix ARC Private Limited into Phoenix ARC Limited vide dated 19.02.2026.

Ld. Counsel filed a memo vide Sr. No. 5160 dated 02.12.2025 stating that there is a stay of arbitral proceedings from the Hon'ble High Court vide an order dated 25.07.2023. W.P. No. 22380 of 2023 and C.MA. No. 1602 of 2023 were tagged together and were last listed on 11.11.2025. He stated that certain properties belonging to the Corporate Debtor were sold to Shell India Market Private Limited and Sri Kauvery Medical Care (India) Limited for Rs. 6,73,14,000/-, Rs. 6,91,20,000/- and Rs. 60.0 Crore respectively and the proceeds were adjusted towards the dues jointly and severally payable by the Corporate Debtors. The details of securities such as mortgaged assets and hypothecated assets are described in the assignment agreement dated 29.03.2022 which was registered as Doc. No. 6701 of 2023.

Ld. Counsel submits that prior to sale of the property to Sri Kauvery Medical Care (India) Limited on 05.03.2021, Virgo Realtors and Sri Kauvery Medical Care (India) Limited entered into a term sheet and in terms of Clause 12 of the Term sheet, the amount of Rs. 60.0 Crores from the sale of the property was adjusted proportionately for the amounts due and payable by the Corporate Debtors respectively. He enclosed the term sheet as Annexure G. He submits that since the liability of both the Corporate Debtors are joint and several, Virgo Realtors is not liquidated in full. He placed on record the ledger statements of the accounts as Annexure H.

Ld. Counsel submits that the loan granted to the Corporate Debtors was towards refinancing the existing facilities of JM Financials of Rs. 76.50 Crores and balance towards DSRA. By merger order dated 19.03.2021, all the rights and liabilities of the Transferor Company i.e. L&T Housing Finance Limited were successfully merged and transferred to the Transferee Company L&T Finance Private Limited. Since the Corporate Debtors failed to comply with the repayment schedule, L&T Finance initiated the CIRP. Subsequently, it assigned the rights, title and benefits in the financing documents including agreements, deeds and documents collateral, underlined security interest of pledges created to secure and guarantees to Phoenix ARC Private Limited by virtue of an assignment agreement dated 29.03.2022. Corporate Debtors had mortgaged the immovable properties which were registered as Doc. No. 5937 of 2017 before the SRO. Ld. Counsel submits that as per Section 5(7) of IBC, Financial Creditor includes a person to whom such debt has been legally assigned or transferred. Further, as per Section 5(4) of the SARFAESI Act, 2022, the assignee can continue and prosecute any proceeding. Phoenix ARC Private Limited is the trustee of Phoenix Trust and as per Clause 2.1.1 of the registered assignment agreement, the Assignee shall forever hold the loan interest for the benefit of the holder of the security receipts. Trust deed is not a prerequisite document and need not be produced with the assignment agreement as held by NCLT, Kolkata in IA/563/2023 in CP/325/2022 between J.C. Flowers Assets Reconstruction Private Limited Vs. Shristi Investment Development Corporation Limited. In the present case, the Corporate Debtors failed to repay the debt which are also reflected in the information utility and record of default certificates issued by NeSL.

Ld. Counsel has given breakup of the proceeds from the sale to Sri Kauvery Hospital as under:

Ld. Counsel submits that for a petition under Section 7, the Financial Creditor has to show the existence of debt and default. In the present case, the OTS was given by the Corporate Debtors on 27.06.2024 which proves the acknowledgment of debt. He submits that the debt is more than the threshold limit of Rs. 1.0 Crore as envisaged in the Act and invocation of Arbitration against the Corporate Debtor shall not per se bar initiation of CIRP under Section 7 of IBC.

We have given our thoughtful consideration to the rival contentions and perused the record and the written synopsis.

A perusal of the pleadings and the documents would reveal that the Corporate Debtors Virgo Realtors Private Limited (Borrower) and Virgo Properties Private Limited (Co-Borrower) had availed credit facilities for a sum of Rs. 107.0 Crores from the L&T Housing Finance Limited and executed a single loan agreement dated 23.06.2017. Out of the sanctioned loan, an amount of Rs. 44,70,34,770/- was disbursed to Virgo Realtors Private Limited and an amount of Rs. 56,85,98,313/- was disbursed to Virgo Properties Private Limited. This loan was availed to repay the facilities taken from JM Financials and for financing the balance construction cost and DSRA. As per Clause 2.18 of the loan agreement, the liability of the Borrower and Co-Borrower is joint and several to the fullest liability or obligation towards the lender. As per Clause 10.2, the Borrower shall open and maintain an escrow account for depositing all the project receivables from the project with the lender. The Borrowers also agreed that a debt service reserve equivalent to three months interest shall be created upfront in such form and manner as applicable to the lender in the form of fixed deposit with the Bank. If the Borrowers fail to adhere to the terms, the same shall constitute an event of default. The lender shall have option to recall the credit facilities and the Borrowers shall also ensure deduction of TDS in respect to payment of TDS to the Government Authorities. Clause 17.4 of the agreement provides for assignment which is extracted as under:

The loan agreement was signed by the Managing Director of both the Corporate Debtors. The loan was guaranteed by three persons namely Mr. T. Shyam Prasad, Mrs. T. Radhika and Mr. B.V.V. Prasad which was for the projects Bounty Acres executed by Virgo Properties Private Limited and Tanquil Square executed by Virgo Realtors Private Limited. The loan was carrying an interest @14.75% per annum payable monthly. Tenor is also mentioned in the loan agreement. The loan agreement also contains the repayment schedule which is as under:

Record shows that L&T Housing Finance Limited assigned the loan to L&T Finance Limited vide assignment deed dated 29.03.2019. In addition to the assignment, a scheme of merger and amalgamation was submitted with the NCLT Kolkata whereby L&T Housing Finance Limited merged with L&T Finance Limited vide an order dated 19.03.2021 and the entire financial assets of L&T Housing Finance Limited vested absolutely in L&T Finance Limited. Considering the merger, we are of the view that the assignment in favour of L&T Finance Limited does not require any registration.

The email communications since 22.07.2019, the notices / letters during the period from 26.08.2019 till 17.12.2021 and the replies of the Corporate Debtors dated 23.12.2021 and 13.01.2022 would show that the Corporate Debtors did not adhere to the repayment schedule and committed defaults in repayment of debts. This is also evident from the record of default with information utility submitted by L&T Finance Limited. The Bank statements placed as Annexure 26 do not reflect payments towards repayment of debt by the Corporate Debtors after August 2021.

Record shows that L&T Finance Private Limited assigned the debt to Phoenix ARC Private Limited vide assignment agreement dated 29.03.2022 who was acting in a capacity as Trustee of Phoenix Trust FY 22-16. As per the assignment agreement, it is having all the rights, title and interest which was vested with the L&T Finance Private Limited against the Corporate Debtor and it is thus entitled to pursue, continue / initiate any legal action against the Corporate Debtor and to recover the financial debt legally owed to it. This Tribunal allowed the application for substitution filed vide IA/824/2022 in terms of the loan agreement Clause 17.4 against which the Corporate Debtor preferred an appeal which it withdrew vide an order dated 04.11.2022. It thereafter filed IA/1513/2022 against the order dated 05.08.2022 which was also dismissed.

The record shows that the assignment agreement was not registered when the debts were assigned to Phoenix ARC, however, it was subsequently registered vide Doc. No. 6703 of 2023 on the directions issued by Hon'ble High Court in W.P. No. 24969 of 2023 vide order dated 21.09.2023. By that time, the petitions had already been filed by L&T Finance Limited. Substitution with Phoenix ARC Private Limited was allowed subsequent to the filing of the petitions. Subsequent registration thus cured the defect / objection raised by the Corporate Debtors.

Section 5(7) of IBC defines Financial Creditor which includes a person to whom such debt has been legally assigned or transferred. Section 5(4) of SARFAESI Act, 2022 provides that assignee can continue and prosecute any proceeding. Since Phoenix ARC Limited is the Trustee of Phoenix Trust so as per Clause 2.1.1 of the registered assignment agreement, it could hold the loan interest for the benefit of the holder of the security receipts. We do not find merits in the contention of the Corporate Debtors that the Trust Deed should be filed with the assignment agreement. It was held by NCLT, Kolkata in J.C. Flowers supra that Trust Deed is not a prerequisite document and it need not be produced with the assignment agreement. The Petitioner has also placed the copy of the Board Resolution authorizing the person who filed the petition and substitution and thus complied with the requirements as contemplated under the IBC and the Regulations.

The Corporate Debtor has contended that the debts of the Financial Creditor have already been settled. He has placed a statement showing the amounts received and the payments made. Ld. Counsel also submitted that in addition to payment of installments, the Financial Creditor realized Rs. 6.91 Crore from the sale of Sriperumbudur Land – I on 05.02.2018 and Rs. 6.73 Crores from the sale of Sriperumbudur Land – II on 29.09.2018, remittances aggregating approximately Rs. 8.27 Crores made by Virgo Realtors till 29.03.2019 and Rs. 59.40 Crores from the sale to Sri Kauvery Hospitals. To this, the Petitioner has explained that the sale proceeds of Rs. 59.40 Crores were adjusted towards principal and interest besides other payments. Further, the amounts towards sale of land and receivables were adjusted towards the principal and interest payable by the Corporate Debtors. The amounts in default as claimed in the petitions are after the adjustments of all the receipts.

The Petitioner has also filed a memo of clarifications pursuant to the order dated 07.07.2026 on 16.07.2026 enclosing the statement of loan account No. 6240041370 (Virgo Properties with L&T Housing Finance Limited Annexure 1 from 30.06.2017 till 30.03.2019), loan account No. 6240063869 (Virgo Realtors Private Limited with L&T Finance Limited Annexure 3 from 29.03.2019 till 01.04.2022), loan account No. 6240041381 (Virgo Realtors Private Limited with L&T Housing Finance Limited Annexure 2 from 30.06.2017 till 29.03.2019), loan account No. 6240063870 (Virgo Realtors Private Limited with L&T Housing Finance Limited Annexure 4 from 29.03.2019 till 01.07.2021) and statement of account of Virgo Properties Private Limited with Phoenix ARC Private Limited (Annexure 5 from 21.03.2022 till 30.06.2026) stating that after the adjustments, the account of Virgo Realtors Private Limited was closed and the loan account of Virgo Properties Private Limited was assigned to Phoenix ARC Private Limited. He submitted that the liability of Virgo Realtors Private Limited and Virgo Properties Private Limited are joint and several as per the loan agreement dated 23.06.2017, so the petitions against both the Corporate Debtors are maintainable until the loan amount is fully discharged.

The Petitioner has filed the clarifications by a memo dated 23.07.2026 in continuation to the memo of clarifications dated 16.07.2026 stating that the loan accounts were originally maintained by L&T Housing Finance Limited. Pursuant to the assignment agreement dated 29.03.2019, the loan accounts were assigned to and maintained by L&T Finance Limited. Thereafter, L&T Finance Limited assigned the debts to Phoenix ARC Limited by virtue of the registered assignment agreement dated 29.03.2022 (which was registered pursuant to the order dated 02.11.2022 passed by Hon'ble Madras High Court in W.P. No. 27492 of 2022). The first loan account No. 62400413370 was maintained by L&T Housing Finance Limited with starting entry on 30.06.2017. Various entries thereon were made towards debits and credits on account of disbursments, repayments, interest including TDS entries which were satisfied by the Corporate Debtor by remitting the TDS to the authorities. The last entry ended on 29.03.2019 and the closing balance was Rs. 36,83,79,890.35. After the assignment dated 29.03.2019, the loan account was maintained by L&T Finance Limited under the loan account No. 6240063869 with starting entry from 29.03.2019 showing the outstanding balance being the opening entry as Rs. 36,83,79,890.35, being the same as the closing balance of loan account No. 62400413370. Thereafter, the entries of debit and credit continued as reflected in the book entries. On account of cut off date, as specified in the assignment agreement dated 29.03.2022, the outstanding balance was reckoned as on 21.03.2022 as per clause 1.1g of the assignment agreement, the last payment made by the Corporate Debtor before the assignment was on 20.07.2021. Therefore, the balance outstanding towards principal was reckoned as on that date. The closing balance was shown as Rs. 29,81,47,441/- as on 20.07.2021. Since the registered assignment in favour of the Petitioner specifies the cut off date as 21.03.2022, the interest for the period 15.08.2021, 15.09.2021, 15.10.2021, 15.11.2021, 15.12.2021, 15.01.2022, 15.02.2022, 15.03.2022 and 31.03.2022 to the tune of Rs. 2,22,96,111/- was calculated. Further, an amount was due in the nature of delayed interest on the principal amount and overdue charges calculated as Rs. 1,56,49,593/- and reflected in the registered assignment agreement which is also mentioned in the books of accounts as on 31.03.2022. A tabulation is given showing the outstanding principal, interest and delayed interest and other charges with TDS as below.

It is stated that upon assignment to the Petitioner, the loan account No. 6240063869 was carried forward to the Petitioner vide account No. 1269-10697-TL-869 and the opening balance was Rs. 35,30,74,357/-. It is stated that further entries in the loan account No. 6240063869 were for the purposes of closing the books of accounts such as principal waiver, interest waiver etc which do not impact the outstanding balance due from the Corporate Debtors as the account were already been transferred to the Petitioner. The memo of clarifications dated 16.07.2026 shows the amount received as on 21.03.2022 being Rs. 28,43,85,975.37 which was the consideration towards assignment of loan account of the Corporate Debtor by the Petitioner to L&T Finance.

With regards to loan account No. 6240041381 and loan account No. 6240063870, the starting entry was of 30.06.2017. Various entries thereon towards debits and credits on account of disbursements of loan, repayments, interest and TDS were made. The last entry in account No. 6240041381 ended on 29.03.2019 showing the closing balance of Rs. 34,41,95,014.05. Pursuant to assignment dated 29.03.2019 by L&T Housing Finance to L&T Finance, the loan account No. 6240041381was transferred to L&T Finance and it was maintained under the loan account No. 6240063870 with starting date as 29.03.2019 showing the outstanding balance being the opening entry as Rs. 34,41,95,014,.05 being same as the closing balance of L&T Housing Loan account No. 6240041381. Thereafter, debit and credit entries continued in the loan account No. 6240063870 reflecting the book entries for interest and TDS etc.,. It is stated that since the amount was realized in respect of loan account No. 6240063870 and the balance became nil, the loan account was not transferred to Phoenix ARC Private Limited.

The Petitioner has also explained the appropriation of proceeds from sale of secured assets in the same clarificatory memo dated 23.07.2026. It is stated that the securities were released and ‘No Objection Certificate’ was given by the lender on the understanding that upon sale of securities, the sale consideration would be used as payment towards the outstanding dues of the Corporate Debtors in accordance with Clause 2.17(b) of the loan agreement and accordingly, monies were apportioned as under.

Note: Page Nos. referred above are of the clarificatory memo filed by the Petitioners on 16.07.2026.

From the clarifications filed vide memo dated 16.07.2026 and 23.07.2026, it became clear that the loan advanced to the Corporate Debtor Virgo Properties Private Limited had not been fully discharged. Since the amounts transferred to the Corporate Debtor Virgo Realtors Private Limited was satisfied, so its loan account was closed before assigning the debts to Phoenix ARC Private Limited by L&T Finance Limited. It is pertinent to mention that loan was granted through a single loan agreement dated 23.06.2017 to the Corporate Debtors Virgo Realtors Private Limited (Borrower) and Virgo Properties Private Limited (Co-Borrower) and as per the loan agreement, the liability of the Borrower and Co-Borrower is joint and several, so even closing of the account of Virgo Realtors Private Limited towards the loan agreement would not absolve the Corporate Debtor Virgo Realtors Private Limited from its liability being joint and several with the Co-Borrower Virgo Properties Private Limited until the loan is fully discharged which as per the statements placed on record is still subsisting. The clarificatory memos filed by the Petitioner have also answered the queries raised by the Corporate Debtors regarding adjustment of receipts against sales of properties and transfer of an amount of Rs. 2,37,17,410/- etc.,.

The Respondent / Corporate Debtors have also filed a common memo of clarifications vide dated 16.07.2026 placing on record the audited financial statements / balance sheets since the financial year 2019 till 2023. Under the head of ‘Borrowing Analysis’ at page 169 of the clarificatory memo in respect of the Corporate Debtor Virgo Properties Private Limited, it is stated that the outstanding balance of L&T Finance Limited as per the books of accounts was unable to reconcile since the statement of accounts was not received from L&T till date. The dispute has been referred to the Arbitrator in OP (Commercial No. 4 of 2022). Therefore, it is a disputed liability raised by the sole Arbitral Tribunal. The audited financials placed by the Respondents do not support the claim of the Corporate Debtors that the loan towards the loan agreement has been fully discharged by the Corporate Debtors. Rather, the statements support the case of the Petitioner towards the pending liabilities of the Corporate Debtors to repay being joint and several.

It is also pertinent to mention that during the pendency of the petition, an OTS proposal was given by the Corporate Debtors and Guarantors where the existence of the debt was not denied either by the Borrowers or the Guarantors. In fact, the Borrowers had made offers seeking one time settlement towards the outstanding debt due vide offer letters dated 07.12.2023, 08.03.2024 and 27.06.2024 offering Rs. 3.50 Crores as full and final settlement which offers were not accepted by the Petitioner. The above offers clearly negate the stand of the Corporate Debtors that there was no proper assignment of debt in favour of Phoenix ARC Private Limited. Rather they recognized the assignment in favour of Phoenix ARC Private Limited and thereafter gave the OTS which Phoenix ARC Private Limited did not accept.

As regards initiation of arbitral proceedings, the same can run parallelly. Initiation of arbitral proceedings would not bar the Petitioner from initiating insolvency proceedings against the Corporate Debtors under Section 7 of IBC.

In the instant case, as evident from the statement of accounts, there was a debt more than Rs. 1.0 Crore and there was a default in repayment of debt. The petitions are well within the period of limitation. The Petitioners have also filed the record of default issued by NeSL showing the debt and the default.

It has been ruled by the Hon'ble NCLAT in Vipul Himlatal Shah vs. Teco Industries in Company Appeal (AT) (Insolvency) No. 470 of 2022 [(2022) ibclaw.in 379 NCLAT, that the report of information utility (NeSL) is sufficient evidence to arrive at the conclusion qua the amount of debt and default. Para 16 of the order reads as under:

The Hon’ble Supreme Court in the case of Innoventive Industries Limited -Vs- ICICI Bank & Anr., (2018) 1 SCC 407 has held that Tribunal is required to see whether there is a ‘debt’ which is due and payable under the law and whether the default is more than Rupees One Lakh (now Rupees One Crore). The moment the default amount exceeds rupees one crore, this Tribunal is required to initiate a Corporate Insolvency Resolution Process as against the Corporate Debtor.

For the foregoing discussions, we admit the petitions filed under Section 7 of IBC against the Corporate Debtors Virgo Realtors Private Limited CP(IB)/71(CHE)/2022 and Virgo Properties Private Limited CP(IB)/28(CHE)/2022 and initiate Corporate Insolvency Resolution Process against both the Corporate Debtors.

In the present case, the Petitioner / Financial Creditor has proposed the name of Ms. Renuka Devi Rangaswamy with IP Registration No. IBBI/IPA-001/IP-P01862/2019-2020/12871 and email ID: jrassociatesbe@gmail.com as the Interim Resolution Professional (IRP). She has also given her consent to act as the IRP. Her AFA is valid till 30.06.2027. We therefore appoint Ms. Renuka Devi Rangaswamy as the IRP to conduct the CIRP of the Corporate Debtors (individually). The proposed IRP who is appointed shall take forward the process of Corporate Insolvency Resolution of the Corporate Debtors. The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15,17,18 of the Code and file her report within 20 days before this Bench. The powers of the Board of Directors of the Corporate Debtors shall stand superseded as a consequence of the initiation of the CIRP in relation to the Corporate Debtors in terms of the provisions of IBC, 2016.

The Financial Creditor is directed to pay a sum of Rs. 3,00,000/- (Rupees Three Lakhs Only) each to the Interim Resolution Professional of the Corporate Debtors to meet out the expenses and to perform the functions assigned to him in accordance to Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

As a consequence of the petitions being admitted in terms of Section 7 of the Code, the moratorium as envisaged under the provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtors:

However, during the pendency of the moratorium period in terms of Section 14(2) (2A) and 14(3) as extracted hereunder:

The duration of the period of moratorium shall be as provided in Section 14(4) of the Code and for ready reference reproduced as follows:

Based on the above terms, both the petitions CP(IB)/71(CHE)/2022 & CP(IB)/28(CHE)/2022 stand admitted in terms of Section 7 (5) of IBC, 2016 and the moratorium shall come in to effect as of this date. A copy of the Order shall be communicated to the Petitioner as well as to the Corporate Debtors above named by the Registry. In addition, a copy of the Order shall also be forwarded to IBBI for its records. Further, the Interim Resolution Professional above named who is figuring in the list of Resolution Professionals forwarded by IBBI be also furnished with copy of this Order forthwith by the Registry, who will also communicate the initiation of the CIRP in relation to the Corporate Debtors Virgo Properties Private Limited and Virgo Realtors Private Limited to the Registrar of Companies.