National Level Moot Court Competition 2024
Veridia’s auto sector is a dynamic hub, contributing significantly to the country’s economic growth. Prominent companies like Stellar Motors, Galactic Automotives, and Autocraft dominate the market. These companies showcase innovation, producing a diverse range of vehicles from affordable small cars to robust SUVs. The industry plays a crucial role in job creation and technological advancements, fostering a robust manufacturing ecosystem. With a focus on electric vehicles and sustainable practices, Veridia’s auto sector aligns with global trends, ensuring a promising future for both the industry and the nation’s economic landscape.
AutoCraft, an Veridian company specializing in the production of automobile components with its primary facility located in Bengalurum. In 2017 , the company drew up expansion plans to establish a new plant in the state of Webangalam. To fund this expansion, the company entered into various agreements with multiple banks and financial institutions between March and January 2022 .
One of the lenders, Global Trust Finance, headquartered in Cyprus but with a branch office in Mumba Bay, entered into a Facility Agreement with AutoCraft on April , for the disbursement of £15 million. Crown Financial Services, an Veridian financial institution, was appointed as a facility agent and security trustee for this loan. However due to protests in Webangalam in early led to the withdrawal of permission for the plant setup, causing significant losses and a sharp decline in AutoCraft’s share value.
Following an invitation from the Government of Gajland to set up the plant near Oasis City, AutoCraft and Global Trust Finance (GTF) entered into another Facility Agreement on July 23, 2021, for £2 million. Additionally, on August 20,2021 , AutoCraft signed a loan agreement with All Veridiana Capital (AVC) for an amount of 7 Million. Crown Financial Services continued its role as a debenture trustee for both agreements.
In the midst of a global crisis triggered by the collapse of the subprime lending markets in the US in mid-2022 and the subsequent downturn of the automobile sector in September 2022, AutoCraft defaulted on payments to Global Trust Finance (GTF) and All Veridiana Capital (AVC). Consequently, the company opted for a Corporate Debt Restructuring scheme to settle its outstanding debts.
On March 13, 2023, a meeting of all creditors convened to propose the restructuring plan. Unsecured creditors agreed to receive reduced amounts with a 30% hair cut, whilesecured creditors were eligible for a 20% repayment within 2 months of High Court approval.
AutoCraft approached the Oasis High Court to convene a meeting of the four classes of creditors, which took place on April 13, 2023.
Global Trust Finance, now positioned as the sole objector to the Corporate Debt Restructuring proposal, was classified as a secured creditor with a floating charge for the April 22,2021 agreement and with a fixed charge for the July 23, 2021, agreement. Global Trust Finance filed objections with the High Court against the scheme, but the Single Judge rejected all objections, approving the classification. Crown Financial Services was appointed as a supervisor to oversee the repayment of 20% of debts to secured creditors.
To repay debts, Crown Financial Services decided to auction AutoCraft’s assets, including part of the Manufacturing Plant in Bengalurum. Global Trust Finance was unhappy with the action and filed a petition, alleging a violation of natural justice. The Chief Justice consolidated the appeals, bringing the matter before the High Court under relevant laws.
– Drafted by
Prof. Sapresh Devidas, VVM’s Govind Ramnath Kare College of Law, Margao-Goa