Information To The NeSL/Information Utility Is Not Mandatory For Ascertainment Of Default: NCLT Mumbai
The National Company Law Tribunal (NCLT), Mumbai Bench of Ms. Reeta Kohli, Member (Judicial) and Ms. Madhu Sinha, Member (Technical) admitted the Section 7 application filed by Asset Care and Reconstruction Enterprise Ltd on seeking to initiate Corporate Insolvency Resolution Process against Rajesh Buildspace Private Limited due to default in payment of interest.
Brief Facts
The present application filed before the National Company Law Tribunal, Mumbai Bench, by Assets Care & Reconstruction Enterprise Ltd. against Rajesh Buildspace Private Limited to initiate corporate insolvency resolution process.
The dispute arose back to the debenture trust deed executed between Vistra ITCL (India) Limited and the Corporate Debtor for the issuance of non-convertible debentures (NCDs) worth INR 144 crores. Altico Capital India Limited subscribed to these debentures to the extent of 11 crores and disbursed amount to the corporate debtor under the agreement. Simultaneously similar DTDs were executed with other entities of the Rajesh Group leading to an aggregate issuance of debentures worth INR 1135 crores.
As per clause 4.3.2 of the DTD, the interest period commenced from the allotment date. Clause 4.3.4 also stated that upon default, the corporate debtor was liable to pay default interest. The corporate debtor failed to make the required payment leading to Altico issuing the default notice and subsequently a guarantee invocation notice. Consequently, the present petition was filed.
The default date was established with no payments made thereafter. During the proceedings, Altico assigned its debt to the financial creditor via an assignment agreement. The corporate debtor raised multiple objections. It stated that the record of default was not registered with the information utility as mandated under the IBC, that the default amount claimed was below INR 1 crores and that the guarantee obligation was not properly invoked. It also challenged the validity of the assignment agreement arguing that Altico financial commitments were not fully met leading to the termination of the DTD.
NCLT Judgement
The Tribunal dismissed the Corporate Debtor's objections stating that at the time of filing in 2019, the default threshold was INR 1 lakh making the petition maintainable. The tribunal also clarified that the information with an information utility is not mandatory under IBC and upheld the financial creditors right to proceed against the corporate debtor and noted that similar defaults by Rajesh Group companies had led to CIRP admissions.
The court in its judgement stated that;
“Appreciate the Corporate Debtor's contention with respect to the record of default not having been registered with Information Utility, it deserved to be taken note of that the information to the NeSL/Information Utility is not mandatory for ascertainment of default of the Respondent/Corporate Debtor but only directory. The same has been held by the Hon'ble NCLAT in the matter of Vijay Kumar Singhania v/s Bank of Baroda & ors. Company Appeal (AT) (Insolvency) No.1058 of 2023”
As a result with lack of credible defence from the corporate debtor, the tribunal admitted the petition and initiated CIRP against Rajesh Buildspace Private Limited and appointed an Interim Resolution Professional (IRP) and also declared moratorium in accordance with Section 14 of IBC.
Case Title: Assets Care & Reconstruction Enterprise Ltd. Vs Rajesh Buildspace Private Limited
Case Number: C.P. (I.B) No. 444/MB/2020
Tribunal: National Company Law Tribunal, Mumbai
Coram: Ms. Reeta Kohli, Hon'ble Member (Judicial) and Ms. Madhu Sinha, Hon'ble Member (Technical)
For the Petitioner: Adv. Pulkit Sharma (PH)
For the Respondent: None
Date of Judgement: 18.02.2025