TMI Blog2022 (1) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... 12th April, 2021 and 20th September, 2021. The extension of 30 days was sought by the Appellant by its Application dated 29th October, 2021. The Adjudicating Authority ought to have adverted to the grounds and reasons given in the Application to find out as to whether there is any ground to grant any extension of time of 30 days as prayed for. It is well settled that time line in IBC proceedings has its salutary value and Resolution Applicant has to adhere to its commitment as made in the Resolution Plan, when it is approved by the Adjudicating Authority. Whether Adjudicating Authority erred in exercising its jurisdiction in refusing to grant extension by 30 days as prayed by Resolution Applicant or not? - HELD THAT:- The judgment of the Hon ble Supreme Court in the EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED ORS. [ 2021 (9) TMI 672 - SUPREME COURT] thus, does not support the submission of learned Counsel for the State Bank of India that Adjudicating Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Committee of Creditors with 99.48% votes in the 8th meeting of the CoC on 12.11.2018. The Resolution Professional filed an Application for approval of the final Resolution Plan dated 05.11.2018, which came to be approved by the Adjudicating Authority by order dated 22nd January, 2019. The State Bank of India was one of the Financial Creditor with 66.76 % majority voting share and another Financial Creditor was Axis Bank Limited having 29.23% voting share in the Committee of Creditors. (ii) As per the Resolution Plan the Financial Creditors were required to be paid a total sum of ₹ 45 crores. Following amount was proposed to each of the Financial Creditors: Name of the Bank/ Lender Claim Admitted Amount Payable Axis bank Limited 31.07 13.16 State Bank of India 70.94 30.05 Siemens Financial Service Pvt. Ltd. 0.79 00.33 Clix Finance India (GE Capital) 1.10 00.47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly disposed of by Adjudicating Authority vide its order dated 20th September, 2021. Application was heard and order was reserved on 22.07.2021 and was pronounced by Adjudicating Authority on 20th September, 2021. The Adjudicating Authority granted one more opportunity to the Appellant to fulfill all its commitment and financial obligations as stated in the Resolution Plan by 31st October, 2021. The Adjudicating Authority noticed that the Appellant has not followed its commitments as directed by order dated 12th April, 2021. (ix) Another Application being I.A. no.115 of 2021 dated 29th October, 2021 was filed by the Appellant stating various difficulties due to which financial obligations could not be complied with. By the Application, the Applicant prayed for grant of 30 days time till 30th November, 2021 to comply with order dated 20th September, 2021, so as to fulfill the financial obligations of the Applicant as per approved Resolution Plan. The said Application was opposed by the State Bank of India. (x) The Adjudicating Authority after hearing the parties held that as per order dated 12th April, 2021, the Applicant was directed to pay ₹ 20 crores out of ₹ 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended the 30 days time, the Appellant could have been able to meet all financial obligations under the Plan. Shri Datta submits that in the additional affidavit filed, the Appellant has given details of source of fund for payment of ₹ 30 crores, which it is required to pay to the Financial Creditors. It is submitted that although the Kotak Mahindra Bank has in-principle offer communicated its offer to advance ₹ 20 crores, but after rejection of the Application on 24th November, 2021, the Bank has not disbursed the amount and unless the Appellant is granted some time to make the deposit, the disbursal of the amount would not be made by the Kotak Mahindra Bank. The Appellant in the additional affidavit has also given details of three Bank accounts, where amount of about ₹ 10 crores are deposited, which shall be utilized in making the payment. Shri Datta submits that there is no dispute that the Appellant defaulted in complying the payment schedule as provided in the Resolution Plan. He submits that there have been several reasons as has been highlighted in I.A. No.58 of 2020 and 115 of 2020, which difficulties were genuine and it is not a case that Appellant due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No.32 of 2020 filed by the Bank for liquidation is taken for consideration. Shri Saha referring to the order dated 12th April, 2021 passed by the Adjudicating Authority contends that Adjudicating Authority by its order granted time till 7th June, 2021 to the Resolution Applicant to deposit amount of ₹ 20 crores out of ₹ 30 crores to show their bona fide. However, no payment at all were made by the Resolution Applicant in compliance of the order dated 12th April, 2021. He submits that Resolution Applicant has been running the diagnostic center but has not made payment as directed by the Adjudicating Authority. It is submitted that by order dated 20th September, 2021, last opportunity was granted to the Successful Resolution Applicant to make entire payment by 31st October, 2021. The Resolution Applicant has not complied the said order also and before 31st October, 2021 has filed another Application No. 115 of 2021 seeking further time of 30 days. It is submitted that Adjudicating Authority in the impugned order rightly come to the conclusion that no case has been made out for grant of any further time. The Appellant has failed to deposit the entire amount by 31st O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties and have perused the record. 11. We may first consider the submissions of Shri Joy Saha, learned Senior Counsel for Respondent No.1 raising objection to very maintainability of the Appeal filed by Rajesh Kumar Sinha, claiming to be Authorised Signatory of Tricounty Premier Hearing Service Inc. The Memo of Appeal described the Appellants in following manner: Tricounty Premier Hearing Service Inc 707, Oaks, Shores road, Leesburg, Florida-34748 USA Through Tri County Holding (P) Ltd. SF no. 6/684, 685, Sikkaram Palayam, 101 Bajaj Bhavan, Nariman Point, Mumbai 400021. .... Appellant 12. In the Appeal, the Appellant has filed extract of Minutes of the Meeting of sole shareholder of the Tri County Holding Pvt. Ltd. dated 26th November, 2021 along with Annexure A-2. Two Minutes of the Meeting have been placed on record i.e. Minutes of Tri County Holding Pvt. Ltd. and Tri County Hearing Services at pages 36 and 37. Tri County Hearing Services has resolved that Tri County Holding (P) Ltd., authorized representative is authorized to take all necessary action to file, pursue and defend all court cases, before any Court, Tribunal, Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of ₹ 45 crores was proposed in following manner: b) On the basis of the proposed fund infusion by the Resolution Applicant the total restructured debt of ₹ 45.00 crore is proposed to be repaid as under: Upfront payment of ₹ 12.00 Crores within 60 Days from the date of order of NCLT. Payment of amount of ₹ 26.00 Crore by 31st March, 2019, without any interest. Payment of amount of ₹ 3.00 Crore by 31st March 2020, with an interest of 8.00% p.a. on reducing balance from April 2019. Payment of amount of ₹ 4.00 Crore by 31st March, 2021, with an interest of 8.00% p.a. on reducing balance from April 2019. The source of funds to make the above payments to be Secured financial has been provided at Clause 11 of this Plan. 15. The payment of ₹ 45 Crores was to be started to be made within 60 days from the date of order of NCLT till 31st March, 2021. ₹ 12 crores was upfront. Out of ₹ 45 crores, the Resolution Applicant has paid only ₹ 12 crores + ₹ 3 crores paid in the Escrow account of State Bank of India. ₹ 30 crores is still to be paid and Appellant could not make the payment as pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 9 @ Pg. 6, annexed at Pg.26 @ pg. 29 of Reply Affidavit dt. 23.11.2020 to MA 32: averred at Para 5.8 @ Pg.10 of CA 58); (viii) RA has been making continuous payments and has paid the entire CIRP Costs in full and has also paid the entire dues of workmen and employee of the Corporate Debtor. (Averred at Para 19 @ Pg. 11 of Reply Affidavit dt. 23.11.2020 to MA 32); (ix) RA has shown their bona fide intention by appropriating ₹ 12 Crore to the creditors even after SBI has filed the liquidation application. (Averred at Para 24@ Pg. 14 of Reply Affidavit dt. 23.11.2020 to MA 32); (x) The amount of ₹ 12 Crore has been paid by the RA from its personal funds as no financial institution agreed to provide loans due to incomplete handover by FCs. (Averred at Para 25 @ Pg. 15 of Reply Affidavit dt. 23.11.2020 to MA 32); (xi) The RA has been making full payment of the dues of the doctors, technicians, employees and vendors throughout the period and has been keeping the company a going concern and has paid an amount of ₹10.04 Crores (Averred at Para 28 @ Pg.16 and at Para 30 @ Pg. 17, annexed at Pg. 51 of Reply Affidavit dt. 23.11.2020 to MA 32 and Pg. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of their issuance. Interest on the said debentures shall accrue @ 8% on simple basis and shall be paid at the time of their redemption. The RA shall also give security of this amount which shall be to the satisfaction of the lenders. 16. After noticing all the relevant facts of the parties, the Adjudicating Authority in para 16 of the order dated 20th September, 2021, allowed one last opportunity to the Resolution Applicant to fulfill all its commitment by 31st October, 2021. Para 16 of the order is as follows: 16. This Adjudicating Authority is of the view that although the Resolution Applicant has grossly failed in meeting its commitments in respect of implementation of the Resolution Plan, liquidation is the last resort when all other available options fail in the CIRP. In the interest of all the stakeholders and also the implementation of the Resolution Plan, after considering all the facts and circumstances of the case, this Adjudicating Authority allows one last opportunity to the Resolution Applicant to fulfil all its commitments and financial obligations stated in the Resolution Plan by 31.10.2021 failing which actions as may be deemed appropriate as per law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he flight tickets dated 16.11.2021 is annexed herewith as ANNEXURE E. 18. The Application No.115 of 2021 has been rejected by the impugned order on 24th November, 2021. The Adjudicating Authority has referred to its order dated 12th April, 2021 and has observed that Appellant has failed to comply its order dated 12th April, 2021 and last opportunity was granted till 31.10.2021, hence, it has failed to comply the order and conduct of the Successful Resolution Applicant is completely lacking in its bona fide. Paragraph 6 and 7 of the impugned judgment is as below: 6. This Adjudicating Authority after hearing all the counsel, constraining pandemic situation in the country etc., had passed an Order on April 12, 2021 allowing time up to 07.06.2021 to the Resolution Applicant and from the total outstanding amount of ₹30.00 crore to pay ₹20.00 crore on or before 07.06.2021 to show their bona fides and also to file an affidavit stating that the plan is being complied within all other aspects. It has been noted that the Resolution Applicant has grossly failed in complying with the aforesaid Order dated April 12, 2021. There are great lapses on the part of the Resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings has its salutary value and Resolution Applicant has to adhere to its commitment as made in the Resolution Plan, when it is approved by the Adjudicating Authority. We may also notice that in this Appeal, the Appellant has in addition to pleas taken in the Application No.115 of 2021 has brought on the record letter dated 11.11.2021 of Kotak Mahindra Bank proposing to offer term loan facility of ₹ 20 crores, which has been brought on record along with additional affidavit. Mr. Joy Saha, learned Senior Counsel appearing for the Bank has submitted that, that letter is not a formal commitment for extending any term loan by Kotak Mahindra Bank, hence, that letter means no consideration. It is submitted that, that letter is only in-principle offer . Shri Saha has referred to following statement in the letter: Kindly note that this letter is an in-principle offer and is subject to due diligence and final approval from the bank. It should not be in any manner construed as a commitment from the Bank to extend the above mentioned financial facilities. The Bank shall have the absolute right to vary/modify/withdraw/rescind/cancel the offer without any notice to the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rore (₹ 12 crore in the bank account of corporate debtor and ₹ 3 crore with SBI, Bhopal) has already been paid towards the dues of Financial Creditors and the balance outstanding details below remains payable towards the claim of respective Financial creditors: 1. State Bank of India, a sum of ₹ 19,03,81,196/- 2. Axis Bank, a sum of ₹ 9,65,10,000/- 3. Siemens Financial, a sum of ₹ 24,00,000/- 4. Clix Finance, a sum of ₹ 34,00,000/- Remaining amount of ₹ 30 crore will be paid within four weeks from the date of the order of this Hon ble Tribunal allowing the present appeal, as follows:- -A sum of ₹ 19,03,81,196/- towards the balance claim of State Bank of India shall be paid directly by Kotak Mahindra Bank. - A sum o f₹ 9,65,10,000/- towards the claim of Axis bank shall be paid out of the balance standing in the bank accounts of the Appellant/ its subsidiaries. -A sum of ₹ 24,00,000/- to Siemens Financial a sum of ₹ 34,00,000/- to Clix Finance shall be paid directly by Kotak Mahindra Bank. Unsecured FCs 44 Lacs 44 Lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the procedure detailed in Section 12A of the IBC and Regulation 30A of the CIRP Regulations and in the situations recognized in those provisions. Enabling withdrawals or modifications of the Resolution Plan at the behest of the successful Resolution Applicant, once it has been submitted to the Adjudicating Authority after due compliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the statute. Since the 330 days outer limit of the CIRP under Section 12(3) of the IBC, including judicial proceedings, can be extended only in exceptional circumstances, this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time. A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is the case in the present three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndan Care, since both, the Resolution Applicant and the CoC, have requested for modification of the Resolution Plan because of the uncertainty over the PPA, cleared by the ruling of this Court in Gujarat Urja (supra), a one-time relief under Article 142 of the Constitution is provided with the conditions prescribed in Section K.2. 23. Shri Saha relying on the paragraph 202 of the above judgment submits that Adjudicating Authority under the IBC cannot exercise jurisdiction, which is not provided in IBC. Hon ble Apex Court in the said judgment has held that residual powers of the Adjudicating Authority cannot be exercised to create procedural remedies, which have substantive outcomes on the process of insolvency. The above observations have been made in a case where the question before the Hon ble Apex Court was as to whether after submission of Resolution Plan, Resolution Applicant can withdraw the Plan. Hon ble Apex Court held that it is only Section 12-A, which enables withdrawal from the CIRP, hence, it was held that Resolution Applicant cannot withdraw from the Plan. The Hon ble Apex Court has also laid down in the above case that existing insolvency framework in India prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
