The National Company Law Tribunal (NCLT) has accepted an application of IIFL Finance to admit its claim against Satra Properties under the category of financial debt in an ongoing case between the property developer and its financial creditor Vistra ITCL (India).
In 2022, the National Company Law Appellate Tribunal (NCLAT) had rejected a plea filed by the promoter of Satra Properties and upheld the ruling of the NCLT Mumbai bench to admit the company under the corporate insolvency resolution process (CIRP).
IIFL Finance had extended debt to Satra Properties in two tranches between November 2015 and September 2016. The loans were secured through mortgages of certain properties and land parcels in Mumbai’s Ghatkopar and Borivali suburbs, pledges of nearly 62% equity stake of the company’s promoters, personal guarantees, and promissory notes, etc.
IIFL’s financial claim amounts to more than Rs 185 crore including principal amount and interest thereon as of August 2020. The developer had also agreed and acknowledged debt of more than Rs 148 crore as of August 2019.
Following Satra Properties’ default on both the loan facilities, IIFL Finance had moved the tribunal in 2019, after which the developer and the lender entered into consent terms in September 2019.
As a part of these consent terms, it was agreed that the developer will also acknowledge and repay the amounts due to the lender’s subsidiary, IIFL Home Finance.
As per these terms, the developer’s sister concern Satra Property Developers agreed to reserve an area of 200,000 sq ft in its ongoing project in Ghatkopar along with pro-rata car parking space and create a first and exclusive charge by way of a registered mortgage in respect of this area in favour of IIFL Finance and IIFL Home Finance as additional security.
In March 2020, the lender and Satra Property Developers entered a registered deed of security in furtherance of the consent terms dated September 2019.
In August 2020, the developer was admitted to insolvency process and IIFL also filed its claim along with all the relevant documents. However, the resolution professional rejected the claim citing the consent terms and deed of security, wherein both the parties agreed to modify the developer’s obligations.
The tribunal, however, stated that Satra Property Developers had agreed to provide its property as mortgage and proceeds from such mortgaged property were to be first appropriated towards repayment of debt due to IIFL Finance.
The deed of security, according to the tribunal, only clarifies a position that in case the debt is discharged out of proceeds of security interest, the same shall not be claimable from the borrower.
In substance, the transaction was to provide additional security only, and the source of cash flows to pay the debt due to the applicant, the tribunal said, while admitting IIFL Finance’s claim as financial debt.
