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TMI Blog2020 (10) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... Judicial) Both the Applications have been taken together as they concern interwoven facts and related prayers. They shall abide by the common order passed hereunder. 2. The factual backdrop that led to the present Applications may briefly be stated. The Union of India (UoI) filed CP No. 3638 of 2018 against Infrastructure Leasing and Financial Services Ltd (IL & FS) under Sections 241 and 242 of the Companies Act, 2013 (the Act) inter alia alleging mismanagement in the Company. 3. This Tribunal by an order dated 01/10/2018 superseded the Board of Directors of IL & FS and constituted a new Board with six Directors to take over the affairs of the Company. The new Board was directed to furnish a roadmap for consideration of the Tribunal. This Tribunal by an order dated 12/10/2018 in MA No. 1173 of 2018 declined to order a moratorium in respect of IL & FS group. The UoI and IL & FS carried the matter in Appeal before the Hon'ble National Company Law Appellate Tribunal (NCLAT) respectively in Company Appeal No. 346 of 2018 and Company Appeal No. 347 of 2018. The Hon'ble NCLAT by an order dated 15/10/2018 granted interim stay against any coercive action by the creditors against IL & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal every month. That is how the resolution of IL & FS and its group entities came to be worked out. 7. CPG-BPN Services Private Limited (hereinafter referred to as CPG) is also one of the group companies wherein, IL & FS held 59.18% of the issued, subscribed and paid up equity shares. Pursuant to the Resolution Framework, IL & FS issued a notice dated 11/11/2019 inviting Expression of Interest (EoI) for sale of the shares held by it in CPG. The notice sought the EoIs latest by 5 pm IST of 22nd November 2019. 8. The Applicant in CA No. 4127 of 2019 incorporated under Companies Act, 1956 has been engaged in the business of Domestic Outsourcing Services. It has been offering professional services to various companies including those in the telecom and retail industry. Sometime in the first week of December, 2019 the Applicant came to know about the publication of EoI indicated (supra). It accordingly on 10/12/2019 sent an EoI by e-mail addressed to CPG as well as Respondent Nos. 2 & 3 (R2 & R3) who had been engaged as Financial Transaction Advisors (FTAs) to assist in the potential sale transaction. Since it did not receive any reply, it followed it up with another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exhibit B; ii. This Hon'ble Tribunal be pleased to condone the delay in submitting the EOI by the Applicant and the EOI dated December 9, 2019 submitted by the Applicant be considered on merits in the interest of the Respondent No.1, its stakeholders and the public at large; iii. This Hon'ble Tribunal be pleased to set aside the communication dated December 16, 2019 by which Respondent Nos. 2 and 3 have rejected the EOI dated December 9, 2019 submitted by the Applicant; and iv. That pending the hearing and final disposal of the present Application, the Respondents be restrained from proceeding with the proposed transaction; 10. The Respondent No. 1 in its reply submitted that asset divestment process for CPG was initiated under the Resolution Framework by a process akin to Swiss Challenge Method, since another party had already evinced interest in acquiring the shares and it submitted binding offer for the same vide its letter dated 08/08/2019. The publication of inviting EoI was made subsequent to the bidding offer. The publication was widely circulated through 'Economic Times' and 'Maharashtra Times'. It had also been uploaded on the IL & FS website. Admittedly the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id process is up to 120% (one hundred and twenty per cent) of the equity value quoted by the Initial Bidder in its bid (Right to Match); and iv. In the event that the equity value quoted by the highest bidder in the counter bid process is higher by more than 20% (twenty per cent) of the equity value quoted by the Initial Bidder in its bid, the Initial Bidder shall not have any Right to Match." 13. In order to estimate the fair value of CPG as per the Resolution Framework the Board of Directors, (as appointed by the Tribunal) appointed two valuers namely Rakesh Narula and Co. and M/s Adroit Technical Services. Upon the valuation exercise undertaken by the valuers the fair value of the Company (CPG) was assessed as Rs. 12.97 Crores. The fair value of the stake (59.18% of IL&FS) in CPG was thus determined to be Rs. 7.6 Crores. The initial bid submitted by the initial bidder was opened on 18/10/2019. It has quoted the equity value of the Applicant's shareholding at Rs. 3,25,49,000/- which was much lower than the fair value indicated above. Accordingly, the Board of Directors initiated a counter bid process which resulted in the invitation of EoI dated 11/11/2019. In response there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Limited was also dismissed by the Hon'ble Bombay High Court. The Resolution Framework provided that upon approval of sale by Hon'ble Justice Jain (on 09/05/2020 in this case) the sanction of this Tribunal would be necessary for finally approving the sale. 17. The Applicant issued letter on 19/05/2020 confirming Vision Plus as the purchaser of 59.18% stake in CPG. On 28/05/2020, Vision Plus submitted acceptance of the letter of intent and deposited Performance Guarantee (PG) amount of Rs. 50,00,000/- (Rupees Fifty Lakhs) by bank transfer to the Applicant. Subsequently Vision Plus, Applicant and CPG executed the SPA on 27/06/2020 setting out the terms on which the sale was to be concluded. As agreed between the parties the PG amount was to be applied to Resolution Process costs and remaining amount was to be retained in a designated escrow account and the balance of the consideration was to be paid by the purchaser i.e. Vision Plus Security Control Private Limited by the Closing date as specified in the SPA. 18. It is further submitted by the Applicant that Vision Plus has attributed a positive equity value for its shares in CPG and has agreed to assume all liabilities of CPG, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that after paying Resolution Process Costs, the funds comprising the Purchase Consideration which have been deposited into the relevant bank/ escrow accounts shall be maintained as fixed deposits and should not be adjusted or set off against any other dues pertaining to any bank/financial institution; G. Direct that the distribution of the Purchase Consideration or part thereof or withdrawal of any other amounts from the escrow account apart from Resolution Process Costs be subject to further orders of this Hon'ble Tribunal; H. exempt the Applicant from affixing the affidavit annexed to this application on stamp paper and notarizing the present Application; and I. For any further reliefs as this Hon'ble Tribunal deems fit and proper in the facts and circumstances." 19. Both the Applications were heard together. The Resolution of the IL & FS and its group companies was ordered by the Hon'ble NCLAT and a Resolution framework has been approved. Though the Resolution of the Company and its group entities is not strictly under the Insolvency and Bankruptcy Code, 2016 (the Code) the principle underlying the Code for Corporate Resolution of a Company is required to be kept in m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it is that the provisions of the Code would not be strictly applicable in the instant case, but the underlying object and principle thereof, in resolving a debt-ridden Corporate Debtor, cannot be lost sight of. The adherence to specific timeline for resolution is the essence, which in effect would bring about successful resolution of a beleaguered Company, like CPG or for that matter other entities in the IL & FS conglomerate. The Applicant (Sigma) in CA No. 4127 of 2019 was informed by an e-mail dated 16th December 2019 that its request for submitting EoI could not be considered. The invitation for EoI was widely publicized in two newspapers namely 'Economic Times' and 'Maharashtra Times' in circulation among other places in Mumbai and Maharashtra. The reason that the Applicant's factory is in Uttarakhand and it could not know about the advertisements cannot be accepted for the fact that the Applicant also has an office in Mumbai as can be seen in Annexure 5 appended to the reply affidavit. Besides no indulgence can be given to someone who hasn't been vigilant enough. In the meantime, the FTAs had taken further steps for acceptance of the bid. As can be known from the discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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