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Company Appeal (AT) (Ins.) No. 713 of 2020

4. The Appellant has stated that the debentures could not be redeemed in accordance with the redemption schedule provided in the Debentures Subscription Agreement due to financial difficulties being faced by him, and hence the date of redemption of debentures was revised on 12.2.2015 and it was decided that 4330 debentures which remained to be redeemed (after some debentures were redeemed) would be redeemed as provided in the revised redemption schedule communicated through letter dated 24.2.2017. He has stated that, in the meanwhile, the escrow account of the corporate debtor was frozen by Maharashtra VAT authorities around November 2017 and thereafter the corporate debtor started depositing the monies due to be deposited in the escrow account, in the current bank account of Satra Properties (India) Ltd. He has further claimed that from October, 2017 onwards the Satra Group (which includes the corporate debtor Satra Properties (India) Limited) entered into negotiations with MJS Group (to which Respondents No. 2 and 3 belong) and IIFL group for amicable settlement of liabilities and a settlement was arrived at (hereinafter called "Settlement"), in the course of a meeting held on 31.1.2018, which is recorded in the minutes of this meeting. He claims that the remaining 4330 NCDs amounting to Rs.43.30 crores which remained to be redeemed were part of the overall settlement between Company Appeal (AT) (Ins.) No. 713 of 2020 the Satra Group, MJS group and IIFL. The Appellant has further stated that in accordance with the "Settlement", the Satra group took various steps, which included appointment of MJS group representatives on the board of Satra Property Developers Pvt. Ltd. (in short 'SPDPL'), transfer of 49% of the shareholding in SPDPL to MJS Group, and procuring NOC from Airports Authority of India for SPDPL project. Thereafter, in two other meetings held between the representatives of Satra Group and MJS group, some more actions were taken in pursuance of the settlement by the parties. The Appellant has claimed that section 7 application filed by Respondents No. 2 and 3 (petitioners of section 7 application) is not maintainable because the debt relating to redemption of NCDs had been settled as part of "Settlement" and therefore, and moreover the two documents viz. Debenture Subscription Agreement and Debenture Trust Deed were insufficiently stamped, as is required under the Maharashtra Stamp Act, and therefore they could not be considered as evidence of the debt and default on the part of the corporate debtor regarding its payment.

mentioned documents should be impounded by the Adjudicating Authority and forwarded to the competent judicial authority for adequate stamping.

(ii) Whether, in view of the settlement arrived at between the Satra Group, MJS Group and IIFL in meeting dated 31.1.2018, the debt relating to NCDs survive of the NCD Subscription Agreement and Debenture Trust Deed stand novated?

8. We heard arguments advanced by the Learned Counsels for the parties and the IRP-in-person, and also perused the record.

9. The Learned Senior Counsel for Appellant has argued that the issue framed by the original two-member bench for adjudication by a third member was regarding the impounding of the two above- mentioned documents and sending them for payment of requisite stamp duty, whereas the third member did not give his opinion on this point, but rather held that the issue of stamp duty is irrelevant and the petitioner/corporate debtor were at liberty to raise the issue of insufficient stamping before the appropriate authority in front of whom the financial creditor would present these documents for Company Appeal (AT) (Ins.) No. 713 of 2020 enforcing their claim. He has further argued that there has been novation of the Redeemable Non-Convertible Debenture Subscription Agreement through settlement arrived at between the corporate debtor, MJS Group and IIFL in meeting held on 31.1.2018, which is recorded in the minutes of said meeting (in short 'MoM'), which has not been considered in the Impugned Order. He has explained that the MoM held between the representatives of Satra Group, MJS Group and IIFL clearly establishes a comprehensive settlement regarding the financial loans of the Satra Group received from MJS Group and IIFL and in accordance with the decision taken in the meeting follow-up actions were taken, which are recoded in the minutes of the meetings on 17.9.2018 and 27.9.2018. More specifically, he has referred to the transfer of 49% shares of SPIL in favour of MJS Group or their nominees, providing NOC for release of pledge on 49% equity shares by IIFL and transfer of SPIL's Ghatkopar project to MJS Group as proof of the settlement, which meant that the debenture subscription agreement and debenture trust deed stood novated, a fact which should have been considered by the Adjudicating Authority while admitting the section 7 application.

Moreover, the said debentures is to be secured through first equitable mortgage of a commercial plot in Jodhpur ad-measuring 4,141 square yards, personal guarantee of Mr. Praful N. Satra and deposit of title deeds of Jodhpur plot.

18. The minutes of the meeting dated 31.1.2018 (attached at page 497 of appeal paper book, Vol. III) shows that Mr. Praful Satra and/or his different entities have availed finance from MJS Group across several entities, out of which only INR 200 crore is recorded to be adjusted against the Ghatkopar Project. Similarly, the MoM also state that Mr. Praful Satra and/or his entities availed certain credit facilities from IIFL which would be settled fully and finally through this settlement. The MoM of "Settlement" dated 31.1.2018 goes on to mention that a new SPV shall acquire development rights of project Satra Hills and Satra Group shall ensure transfer of the development rights of project Satra Hills to the new SPV. It also Company Appeal (AT) (Ins.) No. 713 of 2020 mentions that Satra Group shall procure a no-objection certificate from Airport Authority of India (AAI) to construct upto a height of 103 meters (Phase A), and upto a height of 150 meters (Phase B) and once the NOC towards phase A has been procured by Satra Group, release of the security over the entire Kalina Project ad- measuring 8300 square meters will be released and furthermore, once NOC towards phase B has been procured by Satra Group. security over (Borivali and Washi project receivables, along with all funds received after 1 January 2018) will be released. It is noted that the MoM dated 30 1.2018, which according to the Appellant purports to establish a larger settlement covering the Debenture Subscription Agreement and the Jodhpur Project is not supported by the recording in the said minutes where neither the Debenture Subscription Agreement and Jodhpur project find any mention. The "Settlement" record mentions the Satra Hills project in Ghatkopar and security related to Borivali and Washi Projects receivables but nowhere it mentions the Jodhpur Project for which money was raised to issuance of non-convertible debentures. Moreover, even this settlement (which does not cover the NCDs) was cancelled vide letter dated 17.1. 2019 of IIFL informing of default in compliance of the corporate debtor's obligations and a letter dated 21.1.2019 of the MJ Shah Infra LLP addressed to M/s Sameer Sanghvi and Company Appeal (AT) (Ins.) No. 713 of 2020 Associates, (the escrow agent) stating that the transaction as contemplated under the purported "Settlement" stood cancelled. All these developments and circumstances/actions are very clear indication of the fact the Debenture Subscription Agreement and Debenture Trust Deed were not supposed to be part of the purported overall settlement dated 31.1.2018.