Former Supreme Court judge Justice MR Shah appointed as arbitrator in dispute between Vistra ITCL and Ansal Properties

The Delhi High Court on Tuesday appointed retired Supreme Court judge Justice MR Shah as the sole arbitrator in a dispute between Vistra ITCL (India) Private Limited and Ansal Properties & Infrastructure Limited (APIL)..Justice V Kameswar Rao passed the order on a plea by Vistra, a debenture trustee..A project was undertaken by APIL involving development of a group housing project, spread over 41.16 acres situated in Ghaziabad, Uttar Pradesh..The project was implemented by an entity called Ansal Urban Condominiums Private Limited (AUCPL), majorly owned by Ansal Landmark Townships Private Limited (ALTPL) and Ansal Landmark (Karnal) Townships Private Limited (ALKTPL), associates of APIL.Indostar Capital Finance Limited, a non-banking financial corporation, agreed to invest an amount of ₹150 crore in AUCPL, the principal borrower, by subscribing to 1,50,00,000 secured, unlisted, redeemable, non-convertible debentures at the face value of ₹100 each. AUCPL agreed and accepted to repay the amounts due, which included the subscription amount, interest and default interest on due dates..AUCPL was supposed to repay one-third of the amount on the last day of the 24th month from the closing date. On the last day of the 30th month, it was expected to repay half of the amount. The remaining balance was to be repaid on the last day of the 36th month from the closing date.During the execution of the debenture subscription agreement (DSA), a debenture trust deed (DTD) was also executed where Vistra was appointed as the trustee of the debentures to act on behalf of the debenture holders which included Indostar.The debentures being transferable, were subsequently sold by Indostar to IIFL Income Opportunities Fund (IIFL) in October 2015..By December 2015, AUCPL had redeemed 50,00,000 debentures held by IIFL, leaving IIFL with 1,00,00,000 debentures. In 2016, ICICI Prudential Real Estate AIF-II (IPRU), another debenture holder, informed the obligors including APIL that an amount of ₹6,23,25,599 was due and payable on account of unpaid interest on 57,00,000 debentures. AUPCL was then called upon to make the payment to IPRU within a week, which it failed to do. On July 31, 2017, AUCPL was to redeem a third of the outstanding face value of the debentures along with accrued and unpaid interest. This deadline was breached by AUCPL which resulted in an event of default..On October 16, 2017, IPRU issued a notice to obligors including AUCPL to repay an amount of ₹60,07,15,385 in respect of unpaid interest and redemption amount within 7 days.In response to the letter on December 8, 2017, the respondent requested further time to make payments, citing a financial slump.On December 15, 2017, on the occurrence of the default, IPRU accelerated the repayment of 83,00,000 debentures under the DSA and called upon AUCPL and each of the guarantors including APIL to repay the entire outstanding face value of debentures along with default IRR of 27% within 7 days..On account of the failure of AUCPL to make payments, Vistra, on instructions of debenture holders invoked the deeds of personal guarantee (DPG) by issuing a letter on February 12, 2018. Thereafter, Vistra and the personal guarantors entered into arbitration proceedings and a sole arbitrator passed an award against the personal guarantors to jointly and severally make payments of ₹187,50,93,000, along with default annual IRR of 27% from December 11, 2018 till repayment. .Between 2016 and 2020, the debentures were transferred to Palm Products Pvt. Ltd.On August 24, 2020, SREI, another one of the debenture holders, instructed the petitioner to ask AUCPL and the personal guarantors to repay the outstanding payments by August 31, 2020. However, only an amount of ₹22.5 crore was deposited with the debenture holder till the date of filing the petition. Aggrieved by the non-payment of dues, Vistra approached the High Court..Advocates Sidhant Kumar, Manyaa Chandok, Gurpreet Singh Bagga and Vidhi Udayshankar appeared for Vistra.Senior Advocate Ashwini Kumar Mata along with Advocates Sujoy Datta, Nishtha Khurana, Mahima Shekhawat and Karan Gaur represented APIL..[Read Order]