TMI Blog2021 (2) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... n Plan. The challenge put up by the Appellant to the Resolution Plan with regard to provisions made for the Appellant in the Resolution Plan even if looked at from the alternative angle considering the amended provisions of Section 30 of IBC, would not survive. - Company Appeals (AT) (Ins) Nos.552 & 976 of 2019 - - - Dated:- 3-2-2021 - [ Justice A.I.S. Cheema ] Member ( Judicial ) And [ Dr. Ashok Kumar Mishra ] Member ( Technical ) For the Appellant : Mr. Abhijeet Sinha and Mr. Shambo Nandy, Advocates For the Respondent : Mr. S. Chidambaram, for RP JUDGEMENT A.I.S. Cheema, J. 1.(A) Company Appeal (AT) (Ins) No.552 of 2019 has been filed by the Appellant against common Order dated 25th April, 2019 passed by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench) in I.A. 665 of 2018 and I.A. 52 of 2019 which were filed by the Appellant in Company Petition (IB) No.24/7/HDB/2018. Both the I.A.s filed by the Appellant were dismissed. I.A. 665 of 2018 was filed by the Appellant when in seventh meeting of the COC (Committee of Creditors), the claim of Appellant Financial Creditor was reduced along with voting share. Subsequently, the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings were initiated between Appellant and Corporate Debtor. Subsequently, to resolve the disputes, it is claimed that Corporate Debtor and its group/associate Companies approached the Appellant for one-time settlement and Loan-cum-Hypothecation Agreement dated 22nd September, 2016 was entered by the Appellant with Corporate Debtor, M/s. Maave Electronics Pvt. Ltd. and M/s. Micronet Pvt. Ltd. The Agreement is referred by the Appellant at Annexure A-2 (Page 14). Appellant is referred in it as Lender/Company; Corporate Debtor as Borrower and the other two Companies by their name/s and/or as Third Part/Fourth Part. The Appellant has referred to the contents of the said Agreement and claimed that the four loan agreements were rescheduled and restructured and the total agreed dues of ₹ 35.20 Crores were settled for ₹ 23.50 Crores. It is claimed that from this amount, ₹ 10 Crores were to be repaid as per Schedule II of the Agreement and balance ₹ 13.50 Crores was to be paid by issuing and allotting 52 Lakhs equity shares of the Corporate Debtor at ₹ 26/- each equity share with a lock-in period of one year from date of issuing the same. Appellant claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced from 16.09% to 12.25%. Being aggrieved, the Appellant filed I.A. 665 of 2018 (Annexure A-12 Page 169) against such reducing of voting share. The CIRP continued and the eleventh meeting of COC took place on 6th December, 2018 (Minutes Annexure A-13 Page 175). In this meeting, the Resolution Plan was approved and the Appellant participated in the meeting and voted against the Resolution Plan. 6. Thereafter, the Appellant filed I.A. 52 of 2019 (Annexure A-14 Page 197) seeking direction to COC to include the claim of Appellant to the extent of ₹ 10.40 Crores and restore original claim to the extent of ₹ 43,68,84,792/- and to restore original voting share of the Appellant to 62.09% and to reconsider the Resolution Plan. 7. Adjudicating Authority on 08.04.2019 by Order (Annexure A-15 Page 204) in I.A. 407/2018 held that the terms/clauses of the Agreements cannot be challenged before it and that as Resolution Professional has in 7th Meeting himself reduced voting percentage of Appellant, the I.A. had become infructuous. 8. The Adjudicating Authority heard the parties and the Impugned Order dated 25.04.2019 after referring to the disputes raised recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price of ₹ 26/- per share with lock-in period of one year. According to the RP, the Appellant Lender is still holding the same shares in its Demat Account. The Resolution Professional claims that as per the Agreement, 52 Lakhs shares @ ₹ 20/- each were allotted to the Appellant on 31.03.2017 is not in dispute. (Issued and allotted on 12.5.2017 as per Demat Credit Statement Annexure R-2). According to him, they are not pledged shares but they are free shares. The shares were allotted is not in dispute. Demat Statement for the period 1st January, 2017 to 15th May, 2017 is at Pages 11 and 12 Diary No.13078. It is stated that as loan payment was defaulted, ₹ 35.02 Crores of original dues were to be restored but when 52 Lakhs shares worth ₹ 10.40 Crores had been issued, the outstanding was required to be reduced. The Resolution Professional has referred the dues of the Appellant as under, in Written Submissions Diary No.21866:- The correct dues of the Appellant (See page 2, para 2 of Counter). Sl. No. Particulars Amount In Crore 1 Total Dues to SERI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity and Application of Proceeds Terms of Disbursement 2.1.1 The parties to the instant agreement had agreed that by way of the instant agreement, the entire claim in respect of the Four Agreements being No.HL0044090 dated May 12, 2011, Agreement No. HL0046121 dated June 15, 2011, 45611 dated June 30, 2013 and No. HL0062166 dated Sept 27, 2012, would be re-scheduled and restructured in the following manner: [i] The present accumulated dues as agreed upon by and between the parties herein under the 4 aforesaid agreements being ₹ 35,02,00000/- (Rupees Thirty Five Crores and Two Lacs Only). [ii] Out of the aforesaid amount of ₹ 35,02,00,000 - (Rupees Thirty Five Crores Two Lacs Only), a sum of ₹ 23.50 (Rupees Twenty Three Crore Fifty Lakh) only would be repaid alongwith interest in the following manner: [a] The parties have agreed that the Borrower will pay off ₹ 10 Crores (Rupees Ten Crores Only) alongwith interest as mentioned in Schedule I and in the manner as set out in Schedule II. This amount of 10 Crores will be considered as a facility extended to the Borrower Company. [b] It is further agreed between the parties that the Borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of non realization of a sum of ₹ 23.5 Crores together with accrued interest or any part thereof in terms of this instant agreement, all the concessions shall stand withdrawn. (e) In view of the aforesaid payment structure the claims in respect of the party of the Third Part and the party of the Fourth would also be taken as settled between the parties to this agreement. (f) All the assets (including those hypothecated by the parties of the Third and Fourth part) will be returned back to the party of the Second Part only after issuance of the shares by the party of the Second Part and after completion of all formalities since the assets are lying in the custody of several Receivers. 13. The Appellant is trying to interpret these terms of the Agreement, now to claim that the shares to be issued were in the nature of pledge. The learned Counsel for the Appellant accepted that the terms nowhere state that the shares would be held as pledge. There is no dispute that 52 Lakhs shares were issued by the Corporate Debtor to the Appellant on 12th May, 2017 (see Appeal Para 7(k)). The Application under Section 7 was filed only subsequent to such issue on 3rd Janua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to take legal action at your cost and consequence which you may please note. 15. The Appellant has treated the Agreement to have been defaulted and claims that it is entitled to recover entire dues of ₹ 39,27,81,934/-. Thus, the Appellant having got transferred 52 Lakhs shares to itself, after treating the Agreement to be in default, and after withdrawing concessions, still wants to rely on the contingent Clause. Now Appellant wants to read the same as pledge, which we do not agree. The Appellant never offered to return the shares (which it could not considering the Agreement). Counsel for Resolution Professional has argued that in law, under Section 67 of The Companies Act, 2013, also, the Corporate Debtor cannot buy back its shares. We do not find that the Resolution Professional erred in reducing the claim of the Appellant in proportion and in reducing the voting share of the Appellant. We do not find error with the Impugned Order. The learned Counsel for Appellant has referred to some Judgements on the basis that there is relationship of Pawnor and Pawnee. As we find that pledge itself is not established, we need not refer to the Judgements cited. 16. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant, the Appellant filed I.A. 52 of 2019. It is stated that CA 407 of 2018 which has been filed by the Resolution Professional was disposed of by the Adjudicating Authority vide Order dated 8th April, 2019 (Annexure A-15 Page 219). It is argued that in its Order, the Adjudicating Authority did not interfere with the impugned Clauses of the Agreement and as the RP had proceeded in the seventh meeting reducing the voting percentage of Appellant, the I.A. 407 of 2018 was treated as infructuous. The Appeal mentions that against Order dated 25th April, 2019, the Appellant has filed Company Appeal (AT) (Ins) No.552 of 2019 (referred supra). 20. Coming to the Resolution Plan approved, this Appeal claims that the Adjudicating Authority failed to consider the 2019 Amendment. The Resolution Plan submitted by Respondents 1 to 3 makes provision to pay Appellant only ₹ 8.64 Crores out of admitted amount of ₹ 32.29 Crores. It is stated that the admitted amount is challenged in Company Appeal No.552 of 2019. Appellant claims that being dissenting Financial Creditor, Appellant is entitled to at least value of secured assets which at the time of execution of Loan Agreement was & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Line SC 1478 which in Para 109 is as under:- 109. When it comes to the validity of the substitution of Section 30(2)(b) by Section 6 of the Amending Act of 2019, it is clear that the substituted Section 30(2)(b) gives operational creditors something more than was given earlier as it is the higher of the figures mentioned in sub-clauses (i) and (ii) of sub-clause (b) that is now to be paid as a minimum amount to operational creditors. The same goes for the latter part of sub-clause (b) which refers to dissentient financial creditors. Mrs. Madhavi Divan is correct in her argument that Section 30(2)(b) is in fact a beneficial provision in favour of operational creditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-causes (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable. As a matter of fact, pre-amendment, secured financial creditors may cramdown unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an original proceeding. This being so, a change in law can always be applied to an original or appellate proceeding. For this reason also, Explanation 2 is constitutionally valid, not having any retrospective operation so as to impair vested rights. 23. Learned Counsel for the Respondents argued that Section 30(2)(b) was amended w. e. f. 16th August, 2019 while in the present matter, the Resolution Plan was approved by COC on 06.12.2018 and Adjudicating Authority on 25th April, 2019 and at that time, the protection under Section 30(2) was only with regard to Operational Creditors. It is argued by Counsel for Resolution Professional that the value of the shares was correctly reduced and the listed company cannot buy back its own shares under Section 67 of the Companies Act, 2013. It is argued that the benefit of the Amendment in Section 30(2) of IBC cannot be extended to the Appellant as the Explanation 2 which gives retrospective benefit would not help the Appellant as on 16th August, 2019, the present Appeal had not been filed and the same was filed only on 13th September, 2019. 24. Section 30 Sub-Section (1) and (2) after amendment as per Act 26 of 2019 was enforced w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. [Explanation. -For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013(18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.] Relevant part of Amended Sub-Section 4 of Section 30 reads as under:- (4) The Committee of Creditors may approve a resolution plan by a vote of not less than [sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, [the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al that the Resolution Plan approved makes provision to pay the Appellant only ₹ 8.64 Crores out of admitted amount of ₹ 32.29 Crores (Which admitted amount of Appellant is under challenge in Company Appeal (AT) (Ins) No.552 of 2019.) Appellant has further claimed that as dissenting Financial Creditor, it is entitled to at least the value of its security interest which at the time of execution of Loan Agreement was ₹ 35,02,00,000/-. Appellant claims the average liquidation value of securities held by Appellant would be ₹ 12.95 Crores. 4) Resolution Professional in Company Appeal (AT) (Ins) No.552 of 2019 in Counter has claimed that after deducting value of 52 Lakhs shares issued, the claim of Appellant was admitted for dues of ₹ 32.29 Crores. 5) Appellant has relied on Amendment Act 26 of 2019 and Judgement in the matter of Committee of Creditors of Essar Steel India Limited versus Satish Kumar Gupta Ors. (2019 SCC OnLine SC 1478) para - 109. 6) We have already heard the parties in Company Appeal (AT) (Ins) No.552 of 2019 and this Appeal and are yet to decide the issues raised in both Appeals. We have noticed that Resolution Professi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist this Tribunal. The Resolution Professional is not a litigant but a responsible officer under the provisions of IBC. Resolution Professional needs to specifically comply with directions given and put on record facts and calculations, not merely relying on unamended Section 30 (2) (b), but also, in the alternative, on the basis of Amended Section 30 (2) (b) (ii) as amended by Amendment Act 26 of 2019. 4. The Resolution Professional is directed to file further affidavit to strictly comply our directions dated 04th January, 2021. The same may be filed within a week serving copies of the same to the parties including Respondent Nos. 1 2. List the Appeal for further hearing as Part-Heard on 28th January, 2021. On the said date, the Resolution Professional should also remain available in Virtual Mode. 28. Consequently, the Resolution Professional appeared in Virtual Mode before us on 28th January, 2021 after filing the second Affidavit/further Affidavit dated 21st January, 2021 vide Diary No.24977. We had then directed that we will hear the parties with regard to these two Affidavits filed. Accordingly, the parties were heard on 1st February, 2021. 29. It wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing decisions: a. DBS Bank Ltd., Singapore vs. Mrs. Sailendra Ajmera another in Company Appeal (AT) Insolvency No.788 of 2019 (Para 10). b. Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta Ors. Civil Appeal No.8766-67 of 2019 (Para 18). c. The relevant pages of case laws are attached as Annexure 3 to this Affidavit for ready reference. 30. The learned Counsel for the Appellant submitted that Judgement in the matter of DBS Bank was not with regard to challenge of Resolution Plan but the distribution. It is argued that the Resolution Professional has accepted that average value of the secured asset is ₹ 12.86 Crores. It is stated that Resolution Professional has relied on arguments in the matter of Essar Steel . Counsel for Appellant submitted that para 109 in the matter of Essar Steel is the relevant paragraph for consideration. 31. We have gone through the material placed before us and keep in view provisions of amended Section 30(1)(2)(ii) and read the same with Section 53(1) of IBC with paragraphs 2 and 3 of the Affidavit filed by the Resolution Professional is material. The Resolution Professional has accep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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