The National Company Law Tribunal (NCLT) has granted approval for IIFL Finance's claim against Satra Properties as financial debt, following an insolvency resolution dispute. IIFL Finance's claim, surpassing Rs 185 crore, includes principal amounts and interest. The loan was secured through various means, including mortgages and pledges, and later Satra Properties' defaulted on these loans. Despite a consent agreement in 2019, the resolution professional rejected IIFL's claim during insolvency proceedings. NCLT's recent decision emphasizes that Satra Property Developers had agreed to mortgage its property, prioritizing proceeds for repaying IIFL Finance, reinforcing the financial nature of the claim by IIFL Finance.
The National Company Law Tribunal (NCLT) has greenlit IIFL Finance's application to acknowledge its claim against Satra Properties as financial debt in an ongoing legal battle between the property developer and its financial creditor, Vistra ITCL (India).
The roots of this dispute can be traced back to when National Company Law Tribunal’s (NCLT) Mumbai bench admitted the company under the corporate insolvency resolution process (CIRP). The promoter of Satra Properties filed an appeal with the National Company Law Appellate Tribunal (NCLAT) against this order. In 2022, the NCLAT rejected the plea and upheld the earlier ruling of the NCLT .
IIFL Finance had extended debt to Satra Properties in two tranches between November 2015 and September 2016. The financial claim by IIFL Finance exceeds Rs 185 crore, covering both principal amounts and interest as of August 2020. Notably, Satra Properties had acknowledged a debt of more than Rs 148 crore as of August 2019.
These loans were secured through various means, including mortgages of specific properties and land parcels in Mumbai's Ghatkopar and Borivali suburbs, pledges of almost 62% equity stake of the company's promoters, personal guarantees, and promissory notes.
Problems arose when Satra Properties defaulted on both loan facilities. IIFL Finance took the matter to the tribunal in 2019, leading to a consent agreement between the developer and the lender in September 2019. As per the consent terms, Satra Property Developers, a sister concern of the developer, agreed to reserve an area of 200,000 sq ft in its ongoing project in Ghatkopar, along with proportional car parking space. It also committed to creating a first and exclusive charge through a registered mortgage in favor of IIFL Finance and IIFL Home Finance as additional security. In March 2020, a registered deed of security was executed between the lender and Satra Property Developers in line with the earlier consent terms.
The developer was admitted to the insolvency process in August 2020, prompting IIFL Finance to file its claim with all relevant documents. However, the resolution professional rejected IIFL’s claim citing the consent terms and deed of security, arguing that both parties had agreed to modify the developer's obligations. The tribunal, however, emphasized that Satra Property Developers had agreed to mortgage its property, and the proceeds from such mortgaged property were to be prioritized for repaying the debt owed to IIFL Finance. The deed of security, the tribunal clarified, merely outlined that if the debt is discharged from the proceeds of the security interest, it should not be claimable from the borrower.
In essence, the transaction was to provide additional security only, and the source of cash flows to pay the debt due to IIFL Finance. Consequently, the tribunal accepted IIFL Finance's claim as financial debt in the ongoing legal proceedings.
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