Delhi High Court Dismisses Avantha Group’s Plea Against KKR, Vistra ITCL
Avantha Group sought an order against the debenture trustee to restrain it from disposing pledged shares of Ballarpur Industries.
In a setback for the Gautam Thapar-led Avantha Holdings, the Delhi High Court refused to restrain Vistra ITCL Ltd., the trustee for its debenture holders, from selling pledged shares of Ballarpur Industries Ltd.
A single-judge bench of Justice C Hari Shankar observed that Avantha’s petition is nothing more than a “shot in the dark” and lacks any sustainable cause of action. And so, the pleas for an interim relief preventing the sale of pledged shares can’t be granted, the court said in its order.
In 2017, a consortium of KKR India and its Debt Opportunities Fund, three L&T group entities and the BOI Axa Corporate Credit Spectrum Fund had subscribed to Avantha Holdings’ debentures worth Rs 1,400 crore. Vistra ITCL was appointed as the debenture trustee.
As a security against this transaction, Avantha Holdings created a charge over its designated bank accounts and pledged scrips of its two group entities—CG Power & Industrial Solutions Ltd. and Ballarpur Industries.
Problems started in September 2018 when the debenture trustee approached Avantha Holdings to point out various breaches. Avantha also defaulted on repayment of Rs 666 crore, the outstanding amount as on July 10, 2019—the final redemption date of the debentures.
This led the debenture trustee to sell the pledged shares of Ballarpur Industries. Avantha Holdings moved the Delhi High Court seeking an interim relief under Sec. 9 of the Arbitration and Conciliation Act until an arbitral tribunal was constituted as per the trust deed for resolution of the dispute.
The high court refused to exercise its power under Sec. 9 of the Arbitration Act, which allows it to grant interim relief before the constitution of an arbitral tribunal. It observed that such reliefs can be granted only on the ground of an emergent necessity.
Pointing out that Avantha’s plea became ineffective as a substantial part of the pledged shares was already disposed of, the court observed that Avantha Holdings had acknowledged its failure to pay the outstanding amounts in various communications with the debenture trustee and subscribers.