Proposal for a court sanctioned compromise and failure to note security result in adjournment of bankruptcy petition of not less than six months

Dr Mallya objected to the petition on two primary grounds:

1. The Petitioning Creditors had the benefit of security (albeit in the form of a personal guarantee that gave rise to a specific form encumbrance recognised as security by the DRT, being a competent court) which, in breach of Section 269 of the Insolvency Act 1986 (the Act) was not identified on the Petition.
    
2. The Debtor had petitioned the Supreme Court of India seeking a court sanctioned settlement, which, if granted, would compromise the judgment debt and mean that the settlement was supervised by the courts in India as a collective procedure.

Chief ICC Judge Briggs considered that where there is a breach of Section 269, the court should take account of the following factors in exercising its discretion to cure the omission by amendment:

1. The consequence of the breach
    
2. The conduct of the parties
    
3. All the circumstances of the case

Accepting that the Petitioning Creditors had security over some of Dr Mallya’s assets, ICCJ Briggs considered that the assets secured were unlikely to represent the entirety of Dr Mallya’s assets. Further, the assets over which there was security had a value of less than the DRT debt.

The hearing was adjourned to allow the Petitioning Creditors to amend the petition (thereby correcting the defect), and to allow time to pay the debts in full (or the Supreme Court of India to make a ruling regarding the proposed compromise). Adjournment caused no prejudice to other creditors; any prejudice to Dr Mallya could be compensated by an appropriate cost order.

State Bank of India and 12 others v Vijay Mallya [2020] EWHC 96 (Ch)