Charu Mathur: Hello and welcome to EBC Learning. Today we have a very special guest with us, Manisha Chaudhary. She is a young, dynamic and if I may say, a pioneer lawyer as far as IBC is concerned. She has got a collective investment scheme, investment in the collective investment scheme as a financial guide. Now, this is a big thing, she will be explaining to us in a while.

Hi Manisha! Welcome to EBC Learning. I was telling my viewers that you have handled the case of HBN Dairies. This is a case where the investment in the collective investment scheme has been classified as a financial debt.

Manisha Chaudhary: Right

Charu Mathur: Why don’t you tell them about what was it all about?

Manisha Chaudhary: Right. So HBN—We have done this case since NCLT, since the inception of the matter, and today it is in the Supreme Court. Unfortunately, a resolution plan could not come through. So the company now going into liquidation and filings have been done by the RB, who will then be the liquidator, hopefully. The matter is now seized with the Supreme Court. So with that respect, we will have to tone down what we discuss on that aspect. However, when they first came to us; and this is quite funny and we had discussed and we were not very convinced to file HBN. And we were not sure whether this investment can be considered a financial debt or not. And believe me, it took us 1 month or 1.5 month, just to convince myself. And then along with other seniors, we had quite a bit of discussion with the RPs—whom we plan to hire, with the investors themselves, with certain brokers—who were out of the scheme (not the brokers involved in this scheme) and other people who are day-to-day working on SEBI laws. And how to just make sure that this was something that we could pass as financial debt and file a Section 7. Seeing that the law was entirely new on IBC, it was also very difficult to understand and take a step back to see how and where can we fit it in the definition given in the insolvency act itself. After much deliberation, I had first said no. Then, my partner was also working and Raja Singh who also works on this matter with me. He sat me down for two hours after a work day, and he was like—we have to file this, we have to go through this, we have to ensure that this is filed in and I’m convinced. And I was like, I’m not. And we had a discourse on this matter for about two hours, till about 12 in the night. And we decided that yes, let’s go ahead. I mean, at the most, it will get rejected, nothing less than that can happen.

So post me and Raja Singh having a discussion on how we are going to file this, we gathered about 30-35 odd investors to a tune of about Rs 90 lakh. We filed this case to cross the Rs 1 lakh threshold. We did not have the time to gather the entire outstanding debt of Rs 1136 crore, but it was just so not possible to do so. Even to get power of attorneys would be very very difficult.

Charu Mathur: Yes, that is what I was about to ask.

Manisha Chaudhary: Yes, it would be very very difficult. So we had about 35 people. We filed our case, it was presented before the president, Justice M M Kumar. He was very receptive to at least hear out what we had to say. And I believe he is a very learned man, he has propelled IBC to the place where it is today.

Charu Mathur: True 

Manisha Chaudhary: After passing brilliant judgements. Of course, they all have to go into appeal and further final appeal with the Supreme Court. But then, it has to be done. The law is new, nascent and it's the best thing to do for the law. To build it up with judgements and try it out in courts. 

Once we filed, it took us about 8 months—odd 8 months to get this matter at its final hearing. There was a lot of opposition, even from SEBI, because SEBI believed that it is seized of the assets—rightly or wrongly will obviously have to be decided by the Supreme Court. One of the few instances, how we convinced the judge in the NCLT was that this is an assured return and all the rigours which have been put up in the innoventive judgements and in the Mobilox judgement and how a financial debt is going to be determined, can be done by this amount or this collective scheme. What we said is that it is an assured return, there is an outstanding interest on it. This is not an investment in any manner. Furthermore, there has to be that it has now become due and payable because the SEBI has passed an order. So to say that SEBI has passed an order, the debt is now due and payable and a default has already occurred. So all those three parameters have been passed and that is good to go. That is how we convinced. There were opposition form the SEBI, there were opposition form the corporate debtors itself. Once it went through, we were able to get an order, it went into appeal. The appellate court also upheld the judgement of the NCLT, and now we are before the Supreme Court. Notices have been issued, everybody has filed their reply. Of course it is the RP, who is the main respondent now since he is seized of the company. However, we as financial creditors have also filed our reply as interveners. We were represented by Mr Puneet Bindra as our AOR and the reply (petition) was drawn up by my partner and I. And we will now be looking for the matter to be heard anytime. It is before Justice Rohinton and it should come up soon. 

Charu Mathur: Right.

Manisha Chaudhary: So with regards to those points we will not be able to discuss.

Charu Mathur: Yes, obviously.

Manisha Chaudhary: Because the matter is seized with the Court.