‘Pref share owners aren’t fin creditors’
₹310 crore on matured cumulative redeemable preference shares (CRPS) since 26 August 2018. Such shares give holders the right to receive dividends even if the issuing company has missed out on paying them in the past, as per broking firm Angel One. The ₹310 crore liability arises out of the contract signed between the two firms in 2010.
The NCLT clarified that under the current company law provisions, the holder of redeemable preference shares (EPC) cannot sue Matix Fertilisers and Chemicals for redeeming its shares unless it was done from the firm’s profits or from the proceeds of a new share issuance specifically for this purpose. EPC Constructions(formerly Essar Projects) is a Ruia Group company, while Matix is headed by Nishant Kanodia, the son-in-law of Essar Group vice-chairman Ravi Ruia. EPC is undergoing liquidation under the Insolvency and Bankruptcy Code (IBC) after its lenders did not receive any acceptable resolution plan.
After hearing both sides, the tribunal rejected EPC’s prayer and dismissed the plea. NCLT was hearing the matter on whether Section 7 was maintainable against Matix. “Such being the factual and legal position, we are constrained to hold that no case of any debt due to the applicant and no existence of default on the part of respondent within the meaning ascribed to the terms debt and default in the code, is made out.
We hold that this petition, filed under Section 7 of IBC, 2016, is not maintainable," said a bench comprising justices Balraj Joshi and Bidisha Banerjee. Legal experts said the ruling has set a precedent. “This judgement will certainly have a bearing on other cases and will be considered a precedent where institutions have filed petitions on redeemable preference shares.
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