ATS Infrabuild to undergo insolvency process for Rs 5-crore default
The National Company Law Tribunal (NCLT), New Delhi Bench, has admitted an insolvency petition filed by IDBI Trusteeship Services Private Limited against ATS Infrabuild Private Limited for a default of Rs. 5 crore. The petition was filed under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016.
Background of the Case
IDBI Trusteeship, acting as the debenture trustee for ASK Wealth Advisors Private Limited, initiated the Corporate Insolvency Resolution Process (CIRP) against ATS Infrabuild, a real estate developer. The dispute arose over the non-payment of dues related to 50 non-convertible debentures (NCDs) worth Rs. 5 crore issued by ATS Infrabuild for the development of a real estate project named ‘Casa Espana’ in Mohali.
Key Allegations
IDBI Trusteeship alleged multiple events of default by ATS Infrabuild, including:
- Failure to Infuse Capital: The promoter of ATS Infrabuild was obligated to infuse Rs. 18 crore within 90 days of the debenture allotment, but only Rs. 8 crore was infused, leading to a breach of the Debenture Trust Deed (DTD).
- Expiry of RERA and PAPRA Licenses: The licenses for the project expired on December 31, 2022, and were not renewed within the stipulated time, violating the terms of the DTD.
- Default in Interest Payments: ATS Infrabuild failed to pay the interest due on June 12, 2023, resulting in a shortfall of Rs. 6,17,614.
- Non-Payment of Principal Amount: The company also failed to repay the principal amount of Rs. 5 crore, which was due on September 12, 2023.
ATS Infrabuild’s Defense
ATS Infrabuild contested the petition, arguing that the alleged defaults were not valid. The company claimed that IDBI Trusteeship had failed to follow the proper procedure for issuing a default notice and had not obtained the necessary consent from the debenture holder before filing the petition. Additionally, ATS Infrabuild alleged that IDBI Trusteeship had deliberately withheld funds, leading to the default.
NCLT’s Decision
After reviewing the submissions, the NCLT bench comprising Shri Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member) found that IDBI Trusteeship had established the existence of a financial debt and a default in repayment. The tribunal noted that even a single event of default is sufficient to trigger insolvency proceedings under Section 7 of the IBC.
The NCLT admitted the petition and declared a moratorium under Section 14 of the IBC, prohibiting any legal actions against ATS Infrabuild, including the transfer of assets or recovery of property. The tribunal also appointed Nirmal Kumar Bhesoni as the Interim Resolution Professional (IRP) to oversee the CIRP.
Intervention Petition Dismissed
In a related development, the NCLT dismissed an intervention petition filed by Mr. Rajinder Singh, who claimed that ATS Infrabuild had unlawfully mortgaged his land to IDBI Trusteeship. The tribunal ruled that the issue of property ownership could not be adjudicated at this stage and should be addressed in a separate civil proceeding.
Next Steps
The IRP is required to make a public announcement regarding the admission of the insolvency petition within three days. The management of ATS Infrabuild will now vest in the IRP, who will take charge of the company’s assets and documents. The IRP is also expected to submit periodic reports to the NCLT on the progress of the CIRP.
Also See: NCLT orders liquidation of Ernakulam-based Greenlace Builders and Developers
