NCLT Erred in Denying Opportunity of Hearing to Debenture Holders in Plea Filed u/s 71 | NCLAT

Case Details: Bank of Baroda v. IDBI Trusteeship Services Ltd. - [2024] 158 taxmann.com 73 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Rakesh Kumar Jain, Judicial Member & Dr. Alok Srivastava, Technical Member
  • Kumar Kislya, Adv. for the Appellant.
  • Ms Moulshree Shukla & Vaijayant Poliwal, Advs. for the Respondent.

Facts of the Case

In the instant case, a company issued Non-Convertible Debentures (NCDs) for which the respondent was appointed as a debenture trustee vide debenture trust deed, entered into between the company and respondent.

The Appellant bank and other lender banks of the company executed an Inter Creditors Agreement (ICA) signed by all debenture holders of the company. The respondent called upon the company to make payment of the principal amount payable in respect of secured NCDs which became due for redemption.

Since a response from the company was not received by the respondent, the respondent filed a petition under section 71 of the Companies Act, 2013 alleging that the company was liable and obligated to redeem secured NCDs and make payment of the principal amount due and payable to debenture holders.

Later, the appellant filed an intervention application seeking to intervene in section 71 petition but same was rejected by NCLT holding that as per section 71(10), the ICA lenders, did not have a right to be heard.

Also, the appellant filed an instant appeal against the impugned order submitting that the impugned order would cause a hurdle in the finalization of the bid leading to an unsuccessful resolution of corporate debtor.

Further, it was noted that NCLT denied an opportunity to be heard to ICA lenders, since ICA lenders were important parties in the financial resolution of the company, they should be provided with an opportunity to be heard in the said petition as the redemption of NCDs would have an impact on the financial condition of the company, which would deeply affect implementation of resolution plan.

In view of public interest and involvement of public money in the company, the NCLAT observed that ICA lenders i.e. debenture holders were to be given an opportunity of hearing.

NCLAT Held

Thus, the NCLAT held that the impugned order was incorrect and the instant case was to be remanded back to NCLT to hear the matter afresh.

List of Cases Reviewed

• • Orders passed by NCLT (Mumbai) in [C.P. No. 138/MB/2020, dated 21-6-2021 and dated 27-5-2021] (paras 32 and 33) matter remanded.

List of Cases Referred to

• • Rajinder Mohan Rana v. Prem Prakash Chaudhary 2011 SCC Online Del 3684 (para 23)
  • Jamatraj Kewalji Govani v. State of Maharashtra [1967] 3 SCR 415 (para 24)
  • Vidya Drolia v. Durga Trading Corpn. [2021] 2 SCC 1 (para 26).