NCLAT Dismisses Appeal by Suspended Company Director: Upholds Insolvency Against the Company [Read Order]

The case revolves around ₹122.83 crore in unpaid dues arising from non-convertible debentures (NCDs) issued by Future Ideas. The Section 7 application was filed by Axis Trustee Services Ltd., acting as the debenture trustee on behalf of Franklin Templeton Mutual Fund.

Biyani challenged the NCLT’s decision, arguing that the debt in question had already been transferred to Rivaaz Trade Ventures Pvt. Ltd. (RTVPL) through an Acquisition Agreement dated 29 August 2020. He claimed that the liabilities no longer rested with Future Ideas and, therefore, the insolvency application was not maintainable.

GST READY RECKONER: Complete Topic wise Circulars, Instructions & Guidelines Click here

He also submitted that the agreement had been shared with the debenture holders and that no objections were raised at the time. He contended that both Future Ideas and RTVPL had recorded the transaction in their financials, treating the liability as transferred. Several email communications between the Future Group and Franklin Templeton were cited to demonstrate that the acquisition had been acknowledged, if not formally approved.

However, the NCLAT disagreed, noting that the Debenture Trust-cum-Mortgage Deed (DTMD) dated 15 October 2018 explicitly prohibited the company from assigning any of its obligations without the written consent of the debenture trustee. Clause 2.2 of the Acquisition Agreement itself mentioned that such consent from Axis Trustee was a precondition, a requirement that, as per the record, was never fulfilled. The tribunal also observed that none of the emails or financial statements produced by the appellant amounted to a formal waiver or approval from the debenture trustee. The NCLAT found that the trustee and the debenture holders had consistently maintained their rights and had not acted in a manner that would constitute legal acquiescence.

The NCLAT further dismissed Biyani’s claim that the Section 7 application was barred under Section 10A of the IBC, which provides temporary protection from insolvency proceedings for defaults during the COVID-19 lockdown. The tribunal found that the date of default, as pleaded in the application, was 30 April 2021, which was well after the Section 10A protection period ended. It asserted that defaults occurring after that window can still give rise to valid insolvency applications.

How to Audit Public Charitable Trusts under the Income Tax Act Click Here

The appellate bench also clarified that it was well within the jurisdiction of the Adjudicating Authority to look into the contractual and transactional context of the debt in question. It rejected the argument that the dispute should have been dealt with in a civil court and not in the insolvency forum. The NCLAT held that the Adjudicating Authority had rightly admitted the Section 7 application and found no merit in the appeal. As a result, the appeal was dismissed.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates