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TMI Blog2020 (2) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... ed (EARC - in short) is having 25% voting share. In the 6th meeting of COC dated 2nd August, 2019 (Annexure A-3), the Appellant - "EARC" participated in the meeting. COC took decision regarding interim finance with regard to:- "Agenda B2 - To approve interim finance In furtherance to the discussion in Agenda A6, the RP requested the members of the CoC to vote on the following resolution through e-voting facility as per the instructions provided E-Voting Agenda - B2 To approve interim finance RESOLVED THAT pursuant to the provisions of the Insolvency and Bankruptcy Code, 2016 and in accordance with rules and regulations made thereunder, the members of the CoC hereby approve interim finance as defined under section 5(15) of the Insolvency and Bankruptcy Code, 2016, amounting to INR 35,25,80,379 for the non-fund based requirement towards GAIL and ONGC. FURTHER RESOLVED that Mr. G. Ramachandran, RP, be and is hereby authorized to do all such acts and deeds as maybe required for giving effect to the above said resolution." The Appellant - EARC objected to the resolution but it is stated that the resolution was passed by COC with 75% voting. 2. The Resolution Professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the MA filed before the Adjudicating Authority, the relief sought was:- "Issue a certification that approved Interim Finance and any costs related to Interim Finance, since it forms part of the insolvency resolution process cost, has to be shared between all the members of the Committee of Creditors, in the proportion of their voting rights". The Adjudicating Authority passed the following Order for reasons recorded and allowed the Application, which reads as under:- "4. It is obvious that all the members of the CoC are bound by the resolution approved by the CoC with requisite majority as mentioned under the code. That being so, all the members of the CoC including M/s. Edelweiss Asset Reconstruction Company Limited and Axis Bank shall release the Letter of Comfort in favour of the lead bank M/s. Punjab National Bank within 24 hours from thereof or on or before by 5.00 p.m. on 22.08.2019. The reason for passing this order even without waiting for the appearance of the Financial Creditors, who are not inclined to release the Letter of Comfort is in the event if this interim finance is not released, the Corporate Debtor will not be in a position to participate in the Tender fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at each of the COC member should provide Letter of Comfort to provide guarantee in proportion to their voting share in the event of invocation of the Letter of Comfort to be furnished by Punjab National Bank. According to the Appellant, it declined to provide the Letter of Comfort because the Corporate Debtor was highly leveraged and there was no point in providing additional interim finance to the Corporate Debtor for procuring gas and overhauling. The Appellant claims that there would be little or no value maximization even if the interim finance could be provided. The Appellant claims that in view of the amendment in IBC, it is for the secured creditors who ought to contribute, if at all, for the provision of interim finance and there was little hope of realisation for the Appellant (unsecured creditor) through CIRP. According to the Appellant, only the consenting members of the COC ought to be directed to provide Letters of Comfort to raise interim finance. 4. The learned Senior Counsel for the Appellant has argued the Appeal referring to averments made in Appeal. According to him, the Appellant cannot be forced or compelled to pay. He referred to the various provisions under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor remains a going concern so as to maximise the value of the Corporate Debtor, the Appellant should not have objected and cannot resist liability when it is part of the COC. The COC decision taken with requisite voting majority is binding on everybody including the Appellant. The Counsel referred to various provisions of IBC which permit raising of interim finance to keep the Corporate Debtor a going concern till resolution becomes possible. The primary object of IBC is to make efforts for resolution and not liquidation. 6. The learned Counsel for the Respondent further submitted that there was urgency for seeking orders of the Adjudicating Authority due to the approach of the Appellant which was not ready to release the Letter of Comfort as the default would have led to render the Corporate Debtor ineligible to participate in tender for power supply for which the last date was 23rd August, 2019. In any case, (it is argued by the Counsel for Respondent that) the Appellant has now been heard and according to the Counsel, even now no good reasons are shown as to how and why the Appellant would not be liable to abide by the COC decision. 7. We have heard Counsel for bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 33(1) arise and order of liquidation is to be passed, even then Section 53(1) makes it clear that in the waterfall mechanism, the first in order of priority is "the insolvency resolution process costs" and the liquidation costs paid in full. 9. Keeping in view all these provisions, it is surprising that the Appellant should be apprehensive regarding Letter of Comfort sought for by the Committee of Creditors. 10. The learned Counsel for the Appellant relied on the Judgement in the matter of "ICICI Bank Ltd. Versus Sidco Leathers Ltd. and others" - (2006) 10 SCC 452 and referred to para - 41 of that Judgement to submit that while enacting a statute, Parliament cannot be presumed to have taken away a right in property, and that right to property is a constitutional right. The Counsel then relied on para - 43 of the judgement which reads as follows:- "43. If Parliament while amending the provisions of the Companies Act intended to take away such a valuable right of the first charge-holder, we see no reason why it could not have stated so explicitly. Deprivation of legal right existing in favour of a person cannot be presumed in construing the statute. It is in fact the other way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plus of Rs. 5 Crores every month. RP has argued that the Corporate Debtor was regularly paying the salaries and meeting other expenses from the revenue generated. The RP referred to the Power Purchase Agreement with consumers pursuant to which Corporate Debtor had been supplying electricity to the consumers and that to generate electricity, the Corporate Debtor requires gas. According to the RP, this was being procured mainly from ONGC and balance quantity was being procured from GAIL (India) Ltd. in terms of respective Gas Supply Agreements. On 30th April, 2019, the Gas Supply Agreement executed between Corporate Debtor and ONGC completed its entire term but on mutual understanding, ONGC continued to supply gas to the Corporate Debtor until 10th May, 2019. However, due to ongoing disputes between Corporate Debtor and ONGC with respect to applicability of GDU charges, ONGC stopped supply of gas on 10th May, 2019. This, inter alia, explains as to why the RP moved the COC for necessary support to keep the Company a going concern. If the Corporate Debtor has been a going concern generating cash surplus of Rs. 5 Crores every month, it would be unwise to let it come to a grinding halt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been accepted by COC in its collective decision, what is enforceable is only the collective decision. When the law provides that a decision taken by majority would be binding, the dissenting Financial Creditor, even with the dissent, would remain bound by the majority decision taken as per the requisite voting share. The Impugned Order shows the reasons why without waiting for Appellant the Order was required to be passed. It was in interest of resolution of Corporate Debtor. Even now, Appellant has not made out good case that if it was heard, Impugned Order could have been different. We find principles of natural justice are satisfied. We are not convinced with the argument that amended Sub-Section (4) of Section 30 requires only Secured Financial Creditors to contribute towards interim finance and not the Unsecured Financial Creditors. No such interpretation can be drawn. We will not interfere in the collective decision of COC in this regard. 13. The dissenting Financial Creditor in COC cannot be allowed to scuttle CIRP process otherwise the provision permitting COC to take decisions with regard to subjects stated in Section 28(1) by given majority of 66% under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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