TMI Blog2019 (5) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... nce guarantee as defined and in the manner as given in clause 14 of the process memorandum and that clause has already been referred while narrating the facts of the case. There is no indication in these communications that LHG does not understand the import of the word performance guarantee or the process memorandum to be a bank guarantee. The very use of the word performance guarantee implies that it is to be in the form of bank guarantee as it is preceded by the word performance. It cannot be accepted that for the total amount to be made available by LHG for the resolution plan of ₹2505 crore, the guarantee can be furnished by way of simple contract of guarantee and not the bank guarantee of ₹ 100 crores for the purpose of meeting out the requirement of performance guarantee. The prayer made by the applicant-Financial Creditor submitted by the Resolution Professional for withdrawal of CA No.364 of 2018 being basically not contested, deserves to be allowed. Exclusion of the time period spent, in negotiating with LHG and in litigation w.e.f. 18.05.2018 till passing of the final order - HELD THAT:- The proposition which emerges therefore is that certain period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.592 of 2018 on behalf of the CoC of Castex Technologies Limited under Section 30 read with Sections 31 and 60 (5) of the Code with a prayer to permit the CoC to withdraw CA No.364 of 2018 and to exclude the time period spent, in negotiating with LHG and in litigation w.e.f. 18.05.2018 till passing of the final order in the instant application, from the corporate insolvency resolution process period. This application is supported by the affidavit of Mr.Vinod Kumar, Assistant General Manager of State Bank of India, Stressed Assets Management Branch-1, Connaught Place, New Delhi. 4. The facts of the case, briefly stated, are that CP (IB) No.116/Chd/Hry/2017 filed by State Bank of India against Castex Technologies Limited (for short the corporate debtor), was admitted by this Tribunal on 20.12.2017 declaring moratorium in terms of Section 14 (1) of the Code. By another order dated 22.12.2017, Mr.Dinkar Tiruvannadapuram Venkatasubramanian resolution professional bearing IP Registration No. IBBI/IPA-001/IP-P00003/2016-17/10011 was appointed as Interim Resolution Professional with necessary directions. 5. The resolution professional made compliance of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by DVI was not commercially comparable with the higher bid of LHG and that no revised offer was provided by DVI after 03.05.2018. Even in the current state, the resolution plan presented by the LHG was found better than the resolution plan submitted by DVI. In the said meeting, the CoC classified LHG as the preferred bidder and it was granted time till 25.05.2018 for submission of the resolution plan after addressing the issues raised by the CoC. 10. On the basis of the decision taken by the CoC in its meeting held on 18.05.2018, it was resolved to seek extension of 90 days more in terms of Section 12 (2) and (3) of the Code. For the said purpose CA No.221 of 2018 was filed. It was stated that the initial period of 180 days for completion of insolvency resolution process was expiring on 18.06.2018. That application was allowed vide order dated 13.06.2018 and the period for completion for the insolvency resolution process was extended by 90 days. So, the maximum period of 270 days for completion of insolvency resolution process was to expire on 13.09.2018. 11. The final resolution plan dated 21.08.2018 as amended by first addendum, dated 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Adjudicating Authority. CA No.592 of 2018 was filed by State Bank of India, a Financial Creditor on behalf of the CoC in respect of the corporate debtor, under Section 30 read with Section 31 and 60 (5) of the Code by diary No.4789, dated 06.12.2018 supported by the affidavit of Vinod Kumar, Assistant General Manager of the Bank with the prayer for withdrawal of CA No.364 of 2018 and to exclude the time period spent in negotiating with LHG and in litigation from 18.05.2018 till passing of the final order on this application. The application has been filed in view of the decision taken by the CoC in its 18meeting held on 19.11.2018 Annexure A-1. It was resolved for invocation of Bid Bond Guarantee and to file an application before the National Company Law Tribunal for withdrawal of the application filed by the Resolution Professional for approval of the resolution plan and seeking exclusion/extension of CIRP process. By this resolution, the CoC authorized the State Bank of India, Stressed Asset Management Branch to file the relevant application before this Tribunal. 16. The prayer in this application is for withdrawal of CA No.364 of 2018 in the light of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of Intent ( Performance Guarantee Validity Period ) and shall be extended / renewed by the Successful Applicant for such period until 100% (one hundred percent) of the Applicant Contribution is made by the Successful Applicant in accordance with the Plan. The Performance Guarantee shall have a claim period of 30 (thirty) days after the Performance Guarantee Validity Period. State Bank of India will hold the Performance Guarantee in trust on behalf of the Committee of Creditors. 14.2 The Committee of Creditors shall have the right to invoke the Performance Guarantee by issuance of a written demand in the prescribed format to invoke Performance Guarantee. The Performance Guarantee can be invoked at any time, if (a) any of the conditions IN under the Letter of Intent or Resolution Plan are breached; or (b) non-receipt of required approvals within the timelines specified in the Resolution Plan or if the Resolution Plan is not effective due to any approval required by the Successful Applicant to give effect to the Resolution Plan. The Performance Guarantee shall be returned upon infusion of Applicant Contribution by the Successful Applicant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its combined reply to CA Nos.364 of 2018 and 592 of 2018 by diary No.130, dated 10.01.2019. It is admitted that the corporate debtor (Castex Technologies Limited) forms part of the larger Amtek Group of Companies. 25. It is alleged that the parties continued to negotiate with respect to the nature and method of an escrow account or providing a performance Bank guarantee. However, LHG received a letter dated 21.11.2018 that the State Bank of India has arbitrarily invoked the bid bond guarantee of ₹40,00,00,000/-. The same was attacked as an illegal action as the CoC of the Resolution Professional did not make any attempt to resolve the issue with the LHG as agreed on the terms of submission of the performance guarantee as per clause 6.4 of the resolution plan. LHG challenged the arbitrary invocation of bid bond guarantee before the Hon ble High Court of Delhi by way of CS (COMM) 1246 of 2018 and the notice of demand was stayed by the Hon ble High Court of Delhi vide order dated 26.11.2018. 26. Reference has been made in detail to the discussion and deliberation held in respect of the resolution plan submitted by LHG in the matter of Amtek Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor were detailed in the process memorandum. 31. We have heard the learned Senior Counsel for the applicant Bank, learned senior counsel for the resolution applicant-LHG and the learned counsel for the Resolution Professional and carefully perused the records. 32. The learned senior counsel for LHG submitted that the respondent does not have any objection to the withdrawal of CA No.364 of 2018 or with regard to exclusion of certain period spent in the litigation for the purpose of calculating 270 days in the completion of the insolvency resolution process. It was contended with vehemence, however, that the resolution applicant (LHG) is not a defaulter because the Resolution Professional or the CoC have changed the terms and conditions of the LoI by demanding the performance bank guarantee instead of performance guarantee as envisaged in the LoI and the process memorandum. 33. In response thereto, the learned senior counsel for the CoC contended that there was a clear default of the terms and conditions of the resolution plan and LoI in view of non-furnishing of the performance bank guarantee. 34. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are providing the following solution and provide a win-win solution for all stakeholders; 1. Amtek, we will go ahead and complete set up of escrow for ₹500 cr, basis the escrow agreement circulated on 14 September 2018, this will take 1-2 weeks to complete 2. ARGL and Castex, further to our letter of 15 September, 2018, we should issue instructions to convert existing bid bonds to performance guarantee immediately. For the balance we request you and lenders to allow us to set up performance escrow in UK now which will take up 2 weeks, as we can not immediately bring these funds to India due to lack of respective entities and regulatory processes. We will circulate this performance escrow agreement on 25 September, 2018. We will set up the necessary entities needed for ARGL and Castex in UK and India for closing our transaction, this will take up 2-3 weeks (we will start on this step immediately), thereafter it will take us upto 2 weeks to open the respective bank accounts and 1 week from there to bring the performance escrow funds to India. Thus it will take us upto 5-6 weeks to complete this process shift the UK escrow to India. This meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the bid bond guarantee of ₹ 40 crores by the Bank, a challenge was laid by the respondent by filing CS (COMM) 1246/2018 titled as Liberty House Group PTE Ltd. Versus State Bank of India and Ors in respect of the corporate debtor and also another CS (COMM) 1247/2018 titled as Liberty House Group PTE Ltd. Versus State Bank of India and Ors. in the matter of ARGL Ltd., another corporate debtor for which LHG also submitted the resolution plan before the Hon ble High Court of Delhi. The Hon ble High Court of Delhi held that it has no jurisdiction to entertain the dispute, which is subject matter of these suits and the plaints were liable to be rejected. 44. The Hon ble High Court of Delhi also discussed the merits of the case by observing that the rejection of the plaints was subject to the right of plaintiff to prefer appeal to the Division Bench following the law of procedure requiring all the aspects to be returned, to avoid remand for hearing application for interim relief in the event of the Division Bench holding the suits to be maintainable. The Hon ble High Court of Delhi also decided the merits of the case and held that the plaintiffs are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion Bench of the Hon ble High Court of Delhi in RFA (OS) (COMM) 11/2019 titled as Liberty House Group PTE Ltd. Vs. State Bank of India Ors and RFA (OS) (COMM) 12/2019 and the connected matter has passed the order dated 28.02.2019 on the interim applications, holding that no interim orders are called for in these matters. At the same time, it was directed that in the event of appeals ultimately succeeding, the respondent/Resolution Professional and the respondent/Bank should be directed to appropriately restitute the appellant. The appeal is still pending. So, this aspect of the matter raised by the respondent in these applications does not require any further discussion. 48. Therefore, the prayer made by the applicant-Financial Creditor submitted by the Resolution Professional for withdrawal of CA No.364 of 2018 being basically not contested, deserves to be allowed. 49. With regard to the exclusion of certain time for counting the period of 270 days in completion of the insolvency resolution process, reference can be made to the judgment of the Hon ble National Company Law Appellate Tribunal, in Company Appeal (AT) (Insolvency) No.185 of 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Law Appellate Tribunal, but the matter in this case is required to be considered under principal Point No. (vi) to see whether the circumstances in the present case are such which would justify the exclusion of certain period. 51. The learned Senior Counsel for the Applicant has also referred to judgment passed by the Hon ble Supreme Court in Arcelormittal India Private Limited Versus Satish Kumar Gupta and Others , Civil Appeal Nos.9402-9405 of 2018 , wherein the Hon ble Supreme Court held that the time taken by a Tribunal should not set at naught the time limits within which the Corporate Insolvency Resolution Process must take place. It was further observed that consequence of the chopper falling is corporate death. The only reasonable construction of the Code is the balance to be maintained between timely completion of the Corporate Insolvency Resolution Process, and the corporate debtor otherwise being put into liquidation. The Hon ble Supreme Court further observed that it cannot forget that the corporate debtor consists of several employees and workmen, whose daily bread is dependent on the outcome of the Corporate Insolvency Resolution Process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e advertisement as required for inviting the Expression of Interest or for submission of the resolution plan etc. if we so decides, the specific notice be also sent by the Resolution Professional to DVI at their e-mail address available with the Resolution Professional to participate in the process. 55. The other question, which we deem important to consider is whether the respondent-LHG should be burdened with costs for the default. We are of the opinion that exemplary costs should be imposed upon the respondent-LHG for making mockery of the entire system of CIR Process, for which the strict timelines are provided by the Code in completion of the whole process, LHG seems to have submitted the resolution plan with the highest bid has committed the default in complying with the essential terms of the plan and LoI and has come up with some excuse or the other to avoid it. 56. The prayer made by State Bank of India on behalf of the Financial Creditor in the application, however, was that the bank reserves its right to file separate application to seek appropriate relief at a later stage in the nature of damages and costs before the Adjudicating Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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