Srei Equipment Finance Limited vs Nurit Properties Private Limited

The Applicant submitted that pursuant to a request by the Corporate Debtor, SEFL/Applicant disbursed a loan of ₹40,00,00,000 (Rupees Forty Crore only) ("Loan 1") under a Rupee Loan Agreement, subject to the terms and conditions therein. As of 23 September 2019, an amount of ₹35,04,00,000 (Rupees Thirty-Five Crore Four Lakh only) remained outstanding towards the principal, and ₹6,69,00,822 (Rupees Six Crore Sixty-Nine Lakh Eight Hundred Twenty-Two only) was due towards interest.

The Applicant also stated that pursuant to the Corporate Debtor’s request, SEFL disbursed a loan of ₹300,00,00,000 (Rupees Three Hundred Crore only) (“Loan 2”) under a Rupee Loan Agreement dated 28 March 2018, on the terms and conditions contained therein. As on 23 September 2019, ₹289,23,00,000 (Rupees Two Hundred Eighty-Nine Crore Twenty-Three Lakh only) remained outstanding towards principal and ₹19,50,31,429 (Rupees Nineteen Crore Fifty Lakh Thirty-One Thousand Four Hundred Twenty-Nine only) was due towards interest.

Following the Corporate Debtor’s default in repayment of the earlier loans, SEFL entered into an Inter-Creditor Agreement dated 30 July 2019. In furtherance of a resolution plan submitted by Stesalit Infotech Limited on 4 September 2019, SEFL sanctioned two restructured facilities in favour of the Corporate Debtor—namely, a loan of ₹43,00,00,000 (Rupees Forty-Three Crore only) (“New Loan 1”) and another of ₹318,15,00,000 (Rupees Three Hundred Eighteen Crore Fifteen Lakh only) (“New Loan 2”).

On 23 September 2019, the Corporate Debtor executed a Mortgage Deed in favour of SEFL, creating a mortgage over 7/8th undivided and undemarcated share of land admeasuring 1.088 acres, situated at Plot No. 1 (residential), Kasturba Gandhi Marg, New Delhi–110001, including all structures thereon. The mortgage was created to secure the repayment obligations of the Corporate Debtor under:

the Remaining SEFL Facility of ₹289,23,00,000 (Rupees Two Hundred Eighty-Nine Crore Twenty-Three Lakh only),

the Existing SEFL Facility of ₹300,00,00,000 (Rupees Three Hundred Crore only), and

the New SEFL Facility of ₹318,15,00,000 (Rupees Three Hundred Eighteen Crore Fifteen Lakh only).

The Corporate Debtor availed New Loan 1 and New Loan 2 from SEFL in accordance with the terms of the Master Debt Restructuring Agreement executed between the Corporate Debtor and the Applicants (“Debt Restructuring Agreement”). Pursuant to the Sanction Letter dated 23 September 2019, the Applicant disbursed a Term Loan of ₹43,00,00,000 (Rupees Forty-Three Crore only) to the Corporate Debtor, subject to the terms and conditions set out therein.

An unattested Deed of Hypothecation dated 26 November 2019 was executed by the Corporate Debtor in favour of the Applicant, thereby creating a charge by way of hypothecation over the Assets defined in Schedule I of the said deed.

In furtherance of the Resolution Plan, a Share Purchase Agreement was executed dated 03.09.2020, pursuant to which Infrastructure Resurrection Fund, the holding company of the Corporate Debtor, acquired 4,67,500 fully paid-up equity shares of ₹10 each (“Pledged Shares”) of the Corporate Debtor from the Resolution Applicant, towards repayment of the Total Loans along with applicable interest.

In accordance with the Resolution Plan, Infrastructure Resurrection Fund (“Pledgor”) and the Corporate Debtor entered into a Pledge Agreement in favour of SEFL, securing the Rupee Loan of ₹318.15 crore availed by the Corporate Debtor. Under the said agreement, the Pledgor agreed to pledge the Pledged Shares as security in favour of the Applicant.

Vide letter dated 20.12.2021, the Applicant requested the Pledgor, Infrastructure Resurrection Fund (“IRF”), to complete all formalities for marking the pledge in favour of the Applicant and to provide the Pledge Master Report at the earliest. Upon default by the Corporate Debtor in repaying its dues under the Debt Restructuring Agreement, SEFL, through its letter dated 16 May 2022, issued a demand to the Corporate Debtor to discharge its contractual obligations by paying the outstanding financial debt of ₹11,27,06,084 (Rupees Eleven Crore Twenty-Seven Lakh Six Thousand Eighty-Four only) within seven days thereof.

In its reply, the Ld. Counsel for the respondent submitted that the petition is devoid of merit and is a misuse of the insolvency process intended to coerce NPPL into unwarranted repayment of amounts that are neither due nor payable.

That it has been stated that the Financial Creditor, SREI Infrastructure Finance Limited, was itself undergoing Corporate Insolvency Resolution Process (CIRP), and only pursuant to the Order dated 11 August 2023 passed in CP(IB) Nos. 294 and 295 of 2021, the resolution plan submitted by National Asset Reconstruction Company Limited (NARCL) was approved by the NCLT, Kolkata Bench.

M/s Evershine Buildcon Private Limited had availed loan facilities from the Financial Creditor and its sister concern, SREI Infrastructure Finance Limited (“SIFL”). Pursuant thereto, a Master Debt Restructuring Agreement (“MDRA”) dated 23 September 2019 was executed among NPPL, the Financial Creditor (as Lender 2), and SIFL (as Lender 1), collectively referred to as “SREI” under the MDRA. Due to default in repayment, both lenders invoked the pledge of 93.50% equity shares of Evershine Buildcon. Subsequently, M/s Stesalit Infotech Ltd., a company incorporated under the Companies Act, 1956, submitted a Resolution Plan, which was unanimously accepted by the lenders following mutual discussions.

That in accordance with MDRA, the Initial Disbursement Date of New Loan 3 was the business day on which the first disbursement was made. As per Schedule II of the MDRA, the outstanding amounts of Remaining Loan 1 and New Loan 1 are repayable by way of a bullet payment in a lump sum at the end of five years from the Initial Disbursement Date. It is submitted that the loan has not yet matured. Further, NPPL mortgaged its immovable property, being undivided and undemarcated 7/8 part of 1.88 acres situated at Plot No. 1, Kasturba Gandhi Marg, New Delhi – 110001, as security for the loan. According to the valuation report dated 4 March 2019 by Talbot & Co., the land and structures thereon have been duly valued.

Pursuant to the MDRA, the Initial Disbursement Date of Remaining Loan 1 and New Loan 1 was 30th September 2019, with repayment due after five years from that date. M/s SREI Alternative Investment Trust – Infrastructure Resurrection Fund acquired 4,67,500 equity shares (93.50% of the total 5,00,000 shares) of NPPL from Stesalit Infotech Limited by Share Purchase Agreement dated 3rd September 2020. The shares were subsequently transferred to the Demat Account of SREI Alternative Investment Trust – Infrastructure Resurrection Fund on 9th July 2021.

That on 8th September 2023, NPPL received a Demand Notice under Section 13(2) of the SARFAESI Act, 2002, issued by the Financial Creditor in relation to the MDRA. As per the notice, the loan account was classified as NPA on 30th September 2022, and the total outstanding amount as on 31st August 2023 stood at ₹485,61,60,018/- (Rupees Four Hundred Eighty-Five Crores Sixty-One Lakhs Sixty Thousand and Eighteen Only). The Demand Notice further states that failure to repay the said amount within 60 days would entitle the Financial Creditor to invoke remedies under Section 13(4) of the Act, including taking possession of the mortgaged secured asset—Plot No. 1, Kasturba Gandhi Marg, New Delhi – 110001.

The Respondent submitted that vide reply dated 7th November 2023, it had informed the Financial Creditor that the Secured Asset—Plot No. 1, Kasturba Gandhi Marg, New Delhi—is subject to a pending dispute before the Hon’ble Delhi High Court in RFA No. 188 of 1982 titled Sudhir Kumar Gupta Through LRs v. Dr. Indira Chand Jain, and thus, any coercive action would be barred by the doctrine of lis pendens. Additionally, the Directorate of Enforcement (ED), through Original Complaint No. 2085 of 2023 dated 25.10.2023, has provisionally attached the said property, purchased by NPPL via three separate deeds (Deed Nos. 11600 and 11602 dated 23.05.2006, and 11562 dated 06.12.2004). NPPL has challenged the attachment by filing a writ petition before the Hon’ble Calcutta High Court, which, by interim order, has stayed the provisional attachment. The matter remains pending adjudication.

The Respondent submitted that as per the terms of the Master Debt Restructuring Agreement (MDRA) dated 23rd September 2019, particularly Schedule I, the Borrower, NPPL, is required to make a single bullet repayment of the loan amount at the end of five years from the initial disbursement date. As per the Financial Creditor’s own computation, the disbursement date is 30th September 2019, thereby making the repayment due only after five years. Further, Schedule I stipulates that interest at the rate of 1% compounded monthly is payable upon the final settlement date.

It is respectfully submitted that no payment was due prior to 30th September 2024, and accordingly, no default has been committed by the alleged Corporate Debtor to date. The Financial Creditor has, however, sought to prematurely and prejudicially fasten liability upon NPPL in contravention of the terms of the loan agreements and associated financial documents. In fact, NPPL has made several ad hoc advance payments to the Financial Creditor. Hence, the outstanding amount as claimed is not due or payable, and the present application is premature and intended solely to exert undue pressure and harass NPPL.

It is submitted by Respondent that an application under Section 66 of the IBC, 2016, being I.A. No. 1245 of 2022 in C.P. (IB) No. 294/KB/2021, has been filed by the Administrator of the Financial Creditor, appointed by the Reserve Bank of India, during the CIRP of the Financial Creditor itself. A bare perusal of the said application reveals serious allegations of “potential evergreening and round-tripping of loans,” as per the findings of the BDO Report. It is further submitted that the alleged debt is already under judicial scrutiny before the NCLT, Kolkata Bench, and no final adjudication has taken place. The initiation of the present proceedings is not only premature, given that the bullet repayment under the MDRA is not yet due, but also reflects mala fide intent to harass NPPL and wrongfully invoke insolvency as a tool for recovery. The Company Petition deserves to be dismissed on the ground of maintainability, as no default has occurred.

The Applicant submitted that the Master Debt Restructuring Agreement ("MDRA") expressly stipulates that non-payment of interest constitutes an event of default, as evident from Clause 8.1.2. Further, Clause 2.4 of the MDRA mandates payment of interest from the initial date of disbursement. Although both the loan facilities were structured to be repaid in bullet at the end of five years from the date of initial disbursement, the obligation to service interest on a quarterly basis remained independent and ongoing.

It is submitted that due to the Corporate Debtor's failure to service the interest as required, an event of default has occurred under Clause 8.1.2 of the MDRA. Consequently, in terms of Clause 8.3 and 8.3.1, the Financial Creditor was entitled to recall the entire loan, which it did vide notice dated 16.05.2022.

The Applicant submitted that the provisions of the MDRA clearly indicate that interest was required to be paid on a quarterly basis. Therefore, the assertion that interest was payable only upon the final settlement date is contrary to the express terms of the agreement, and it stands admitted that the Corporate Debtor has defaulted in making the requisite interest payments. Moreover, the Corporate Debtor, vide its communication dated 16.06.2022, unequivocally admitted to the default in payment of interest, thereby affirming the occurrence of default.

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

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

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

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

The IB Code 2016 also prohibits Suspension or termination of any license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concessions, clearances or a similar grant or right during the moratorium period.