TMI Blog2019 (3) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... y this Appellate Tribunal. This Appellate Tribunal is only to find out whether the parties have settled the matter in terms of the order dated 30th May, 2018 or have failed to settle. On failure, it is open to this Appellate Tribunal to vacate the interim order of stay dated 30th May, 2018 and in absence of any merit, the appeal can be dismissed. As per the interim order, the ‘Financial Creditors’/ ‘Joint Lenders Forum’ with whom the assets of the ‘Corporate Debtors’ have been mortgaged have been allowed to sell the assets of the ‘Corporate Debtors’ and to deposit the total amount in the ‘Joint Lenders Forum’ subject to the decision of these appeals. It was made clear that if the appeals are rejected, the ‘Financial Creditors’/ ‘Joint Lenders Forum’ and other Banks with whom the amount is deposited, will have to return the total amount in the respective accounts of the ‘Corporate Debtors’. Admittedly, the ‘Financial Creditors’/ ‘Joint Lenders Forum’ and other Banks have failed to recover any amount by selling the mortgaged properties of the ‘Corporate Debtors’ in spite of the interim order of stay passed on 30th May, 2018. We have also noticed that the ‘Corporate Debtors’- ‘R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Sanjay Kapur, Mr. Megha Karnwal, Mr. Bharath Gangadharan, Mr. Kauser Husain, Advocates for UCO Bank Ors, Mr. Anil K. Kher and Mr. Dushyant Dave, Senior Advocates with Ms. Dee pali Mittal, Mr. Praveen Kumar Mittal, Advocates For The LIC Ors. : Mr. Vikramjit Banerjee, ASG, Mr. Sanjay Kapur, Mr. Kauser Husain, Ms. Megha Karnwal, Mr. Bharath Gangadharan, Mr. Kauser Husain, Advocates For The Canara Bank Ors. : Mr. Sanjay Kapur, Ms. Megha Karnwal and Mr. Bharath Gangadharan, Advocates For The UCO Bank Ors : Mr. Sidharth Luthra, Senior Advocate with Mr. Sanjay Kapur, Mr. Megha Karnwal, Mr. Bharath Gangadharan, Mr. Kauser Husain, Advocates For The JLF ECB Lenders : Mr. Amit Singh Chaddha, Senior Advocate with Mr. Shubh Chakraborti, Mr. Dhruv Malik and Ms. Shrishti Govil, Advocates JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. Pursuant to an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 ( I B Code for short) filed by Ericsson India Pvt. Ltd. - ( Operational Creditor ), the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai, passed three different orders on 15th 18th May, 2018 initiati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revive the Interlocutory Application for contempt, if payment is not being made. 6. Interlocutory Applications were also filed before this Appellate Tribunal for extension of time but in view of the pendency of the matter before the Hon ble Supreme Court, those Interlocutory Applications were adjourned. 7. Subsequently, the Writ Petition (Civil) No. 845 of 2018 filed by Reliance Communication Limited Ors. was taken up along with Contempt Petition (Civil) Nos. 1838 of 2018, 55 of 2019 and 185 of 2019 by the Hon ble Supreme Court. 8. In those Contempt Petitions, the Hon ble Supreme Court by Judgment dated 20th February, 2019 held that these three Reliance Companies were guilty of contempt of the Hon ble Supreme Court. However, with a view to allow the RCom Group to purge the contempt of the Hon ble Supreme Court it allowed payment to Ericsson India Private Limited of a sum of ₹ 453 Crores within a period of four weeks from the date of the said order and in default of such payment, their Chairmen who had given the undertakings to the Hon ble Supreme Court have been ordered to suffer three months imprisonment. In addition to the aforesaid sum being paid, a fine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the release of the amounts in the three TRAs is not required. 14. The grievance of the Appellants is that the respective Directors of the RCom Group have filed applications for withdrawal of their Company Appeals against the orders dated 15th and 18th May, 2018 but the same have not been allowed to be withdrawn till date. It is submitted that despite 47 lenders meeting having taken place, the Asset Monetization Process has been stalled. The consent of the 100% of the lenders has not been received on any issue due to lenders inter-se disagreement. In view of the said non-provision of NOCs/ Consents from the lenders, the intent of Asset Monetization Scheme to resolve the debt outside the scope of the I B Code has been defeated. Thus, according to the Appellants, the debt of the RCom Group is contemplated to be resolved as per the IBC Process in the interest of all stakeholders, which will be stalled if the amount is not released for payment in favour of Ericsson India Private Limited . 15. It is alleged that the Asset Monetization as proposed by the Joint Lenders Forum has failed only because of the lender inter-se disagreement. Not a single resolution put forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other lenders to release any amount for compliance of agreement between the Appellants and the Ericsson India Private Limited . 20. Referring to the guidelines issued by the Reserve Bank of India and the agreement reached between the Corporate Debtors and the Joint Lenders Forum , learned counsel for the State Bank of India submitted that the amount deposited in three TRAs cannot be withdrawn by the Corporate Debtors , therefore, no prayer can be made by them for payment out of the three TRAs including the amount of ₹ 259.22 Crores deposited pursuant to refund of the Income Tax of the Corporate Debtors . 21. Referring to the judgment of the Hon ble Supreme Court dated 20th February, 2019, it was contended that the Hon ble Supreme Court recognizes the independent nature of the two- sale of assets by Lenders and payment of ₹ 550 Crores by RCom Group to Ericsson India Private Limited . Reliance has been placed on different parts of the Judgment of the Hon ble Supreme Court which will be noticed and discussed at appropriate stage. 22. It was submitted that no action taken against the RCom Group or its Chairmen who have been found guilty in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner and that of the workmen. 29. Mr. Krishnan Venugopal, learned Senior Counsel appearing on behalf of the IDBI , Central Bank of India , Union Bank of India and Corporation Bank submitted that under Section 43 of the I B Code , no preferential payments are permissible to any creditor. Reliance has been placed on the decision of the Hon ble Supreme Court in Swiss Ribbons v. Union of India W.P. 99 of 2018 and Chitra Sharma and Ors. v. Union of India and Ors. Writ Petition (Civil) No. 744 of 2017 30. In Chitra Sharma and Ors. v. Union of India and Ors. (Supra), the Hon ble Supreme Court by Judgment dated 9th August, 2018 while dealing with the case of home buyers, left the question open as to whether the home buyers are unsecured creditors or secured creditors and observed that directing disbursement of the amount of ₹ 750 Crores to the home buyers who seek refund would be manifestly improper and cause injustice to the secured creditors since it would amount to a preferential disbursement to a class of creditors. 31. For proper appreciation of the case, it is necessary to quote the relevant portion of the interim order dated 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of ₹ 550 Crores (Rupees five hundred fifty Crores only) (jointly) in favor of Ericsson India Pvt. Ltd. - ( Operational Creditor ) and sought for 120 days time to pay the total amount. 10. Learned Senior Counsel appearing on behalf of Ericsson India Private Limited - ( Operational Creditor ), on instructions from the Respondent, informed that the 1st Respondent has agreed to receive a sum of ₹ 550 Crores (Rupees Five hundred fifty Crores only), if the total amount is paid within 120 days as proposed by the learned Senior Counsel for the Appellants. 11. Taking into consideration the stand taken by the parties and the fact that if the Corporate Insolvency Resolution Process is allowed to continue, all the Financial Creditors as also the Operational Creditors may suffer more loss and the Appellants have made out a prima facie case, as agreed and suggested by learned Senior Counsel for the Appellants and learned Senior Counsel for the Joint Lenders Forum and the learned Senior Counsel for the Operational Creditor - Ericsson India Pvt. Ltd. , we pass the following orders: i. Until further orders, the impugned orders dated 15th May, 2018 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on if orders and directions given above are not complied. Interlocutory Application Nos. 701-702, 709-710 and 712-713 of 2018 stand disposed of with aforesaid observations and directions. 32. The aforesaid agreement has been affirmed by the Hon ble Supreme Court in Civil Appeal Nos. 9337-9338 of 2018 Indus Towers Limited v. Punit Garg and Ors. read with order passed in Writ Petition (Civil) No. 845 of 2018 Reliance Communication Limited Ors. v. State Bank of India Ors. 33. From the aforesaid order, it is clear that the Joint Lenders Forum - ( Financial Creditors ) informed that their interests are involved and they intend to recover the amount. They highlighted that in terms of their agreement with the Corporate Debtors , if the assets of the Corporate Debtors are sold, the Financial Creditors can recover a sum of ₹ 18,100 Crores approximately. It was also informed that on restructuring and sale of further assets, the Financial Creditors can recover a sum of ₹ 37,000 Crores approximately. In fact, the Bank asked for passing an interim order as otherwise they will not be in a position to recover the amount and there is recurring loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to file an affidavit stating the total amount received from sale of assets of the corporate debtors post the settlement dated 30.05.2018. Equally, prayer (j), asking for a direction for SBI to bring in amounts due and payable so as to purge itself of contempt does not lie against the Joint Lenders Forum in view of the fact that the Ericsson transaction is wholly independent of sale of assets. 37. Having noticed such submissions, the Hon ble Supreme Court observed: . We have seen that right from the beginning, the sum of INR 550 crore was undertaken to be paid, without having to depend upon any act or omission of a third party. To say that the sum of INR 550 crore would be paid only out of sale of assets of the three Reliance Companies is a deliberate misstatement made in the undertakings as well as the applications for extension of time filed before this Court, which was done with the purpose of circumventing the orders of this Court. We are also of the view that in the facts of the present case, wilful default is made out, as has been pointed out in this judgment. 38. The Hon ble Supreme Court further observed: 22. At this stage, we may point out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another who are third party, nor contingent on each other inasmuch as the sale of assets by the Lenders / Financial Creditors was not connected with or affected by the condition of payment of ₹ 550 Crores by the RCom Group Companies or their Directors, Shareholders etc. Thereby, while staying the Corporate Insolvency Resolution Process concerning the Financial Creditors and Joint Lenders Forum , without any caveat of payment of any money to Ericsson India Private Limited or otherwise, it independently permits the Financial Creditors / Joint Lenders Forum to sell the assets of the Corporate Debtors and to deposit the same in an Escrow Account of the lead Bank i.e. the State Bank of India, subject to outcome of the appeal pending before this Appellate Tribunal. 41. From the findings of the Hon ble Supreme Court, it is also clear that the payment of dues of ₹ 550 Crores to Ericsson India Private Limited - ( Operational Creditor ) by three Reliance Companies has not been linked with the assets of the State Bank of India / Joint Lenders Forum or any other Bank, who are third party to the settlement between the three Reliance Companies and the Ericss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t possible for them to sell the assets and, therefore, suggested that the Corporate Insolvency Resolution Process may continue. No specific reply has been given by the counsel appearing on behalf of the Ericsson India Private Limited when we asked that once we dismiss the appeals and allow the Corporate Insolvency Resolution Process to continue, then in terms of the order dated 30th May, 2018, the Ericsson India Private Limited - ( Operational Creditor ) will have to pay back the total amount to the Corporate Debtors through the Resolution Professional . In this background, we are of the view that the parties should take steps to ensure that settlement in terms of the order dated 30th May, 2018 is made in its letter and spirit to save three Corporate Debtors from the Corporate Insolvency Resolution Process enabling the Financial Creditors i.e. the State Bank of India and other Banks and Ericsson India Private Limited - ( Operational Creditor ), to recover maximum dues. Otherwise this Appellate Tribunal will have no option but to vacate the interim order dated 30th May, 2018. 45. In view of the observations made above, in an appeal filed under Section 61 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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