IDBI Trusteeship filed the case on behalf of DB International (Asia), an affiliate of Deutsche Bank, seeking the court’s intervention to get Rs 293 crore under the Trust and Retention Account (TRA) Agreement from the IDBI Bank. The bondholders are claiming that being priority lenders, they have right over the money over the banks.
Apart from this, the bondholders are also seeking interim relief in the form of appointment of a court receiver for the TRA. The amount is currently lying in an account with IDBI Bank.
Those particular series of bonds offered rates as high as 13.99% and will mature on May 12, 2021. Those were sold in the first half of the decade. IDBI Trustees could not be contacted immediately.
“It is a dispute between Senior Lenders and Priority Lenders and the company will not interfere in this matter,” a GVK spokesperson said,
“The trustee has filed a petition acting on behalf of bondholders. Deutsche Bank, Singapore insisted on it as they did not receive interest payment,” said a person with direct knowledge of the matter.
On June 26, Justice BP Colabawalla, after hearing from both the sides, directed the lenders to maintain a balance of Rs 293 crore in the bank account linked with the TRA Agreement until further order. The court also observed that it has not gone into merits at this stage and has directed the bank to file a reply.
Senior counsels, Janak Dwarkadas and Harish Salve are representing offshore lenders in the case, while IDBI Bank is being represented by senior counsel Birendra Saraf and Nishit Dhruva, managing partner of MDP & Partners.
“The defendant No 1 (IDBI Bank) has deliberately withheld payments in brazen breach of its contractual and fiduciary duties and the plaintiff (IDBI Trusteeship) verily believes that if the said account continues to remain within the control of Defendant No 1, then it may illegally debit the said account and withhold the monies,” said the bondholders in their petition.
In the year 2017, the local subsidiary of Deutsche Bank had extended a priority facility of Rupee Term Loan Facility and had also issued non-convertible debentures where DBIA subscribed to the Priority Bonds for a face value of Rs 307.
The bondholders, arguing that the existing creditors on July 30, 2017, had executed an Inter Creditor Agreement (ICA), with bondholders (DBIA), defendant No 1 (IDBI Bank) and the plaintiff (IDBI Trusteeship) in its capacity as the security trustee, consenting to the priority facility and categorically recognising that the bondholder has a priority of payments and security over all the existing creditors.
In December 2019, the country’s third-largest private sector lender Axis Bank had approached the Hyderabad-bench of the National Company Law Tribunal (NCLT) against GVK Power after it failed to repay its dues.
Subsequently, the offshore lenders sent a bond acceleration notice in January and demanded to immediately apply all outstanding amounts lying to the credit of the TRA towards repayment of the due amounts under the priority bonds.
The offshore lenders have claimed that they have sent several reminders between January and May to the IDBI Bank to release the amount in the TRA account but so far the bank has not responded and hence they had approached the Bombay High Court to recover the money.