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TMI Blog2022 (10) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... tire Performance Bank Guarantee given by the Appellant with direction to exclude the time from the date of issuance of Form G till the date of passing of orders and issued certain further directions. The Appellant aggrieved by the said order has come up in this Appeal. 2. Brief facts of the case necessary for deciding this Appeal are: (i) An Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code") was filed against the Corporate Debtor EMC Limited, which was admitted by order dated 12.11.2018. CA Kannan Tiruvengadam was appointed as Resolution Professional ("RP"). (ii) In pursuance of issuance of Form-G, four Expression of Interests were received. However, only two Resolution Applicants namely - the Appellant and KBC Aldini Capital Limited submitted their Resolution Plan. The Resolution Plan submitted by the Appellant was approved by the Committee of Creditors ("CoC") in its Meeting dated 01.10.2019 by 80.18% votes. The Adjudicating Authority vide order dated 21.10.2019 approved the Resolution Plan. In terms of the Resolution Plan, the Appellant was duty bound to make entire payment of INR 568 crores within a period of 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, since there is knowing and wilful contravention of the approved Resolution Plan. (ii) Additionally, the SRA and its officers responsible be proceeded against for contravention of the approved resolution plan in terms of Section 74(3) read with section 236 of the Insolvency and Bankruptcy Code, 2016. To facilitate this, a copy of this order shall be sent to the Insolvency & Bankruptcy Board of India (IBBI) and the Secretary, Ministry of Corporate Affairs, who are the agencies authorised in terms of section 236(2) ibid to initiate appropriate complaint before the Special Court as envisaged under Section 236(1) ibid. (iii) The Corporate Debtor is a viable going concern with about 400 employees and workmen. There is every chance of a successful resolution of the Corporate Debtor. Therefore, to facilitate this, the entire period consumed in the CIRP commencing from the first date of issue of Form G inviting Expressions of Interest till the date of passing of orders in this application is excluded. This will grant sufficient time for a limited reboot of the CIRP from the stage of issue of Form G. (iv) The Chairman of the Monitoring Committee shall discharge the functions of Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Authority that conduct would amount to willful contravention as contemplated under Section 74, sub-section (3) is not within the scope of jurisdiction of Adjudicating Authority. The power under Section 74, sub-section (3) is an exclusive prerogative and jurisdiction of Special Courts and could not have been exercised by Adjudicating Authority. The Adjudicating Authority by issuing a mandate for proceeding to be instituted against the Appellant and its officers for contravention of the Resolution Plan has exceeded its authority inasmuch as the Code does not confer any power upon the Adjudicating Authority to direct the Board or the Central Government to initiate proceedings under Section 74, sub-section (3). 6. Shri Abhijeet Sinha, learned Counsel for Respondent No.1 refuting the submission of learned Counsel for the Appellant contends that Respondent No.1, who is a Chairman of the Monitoring Committee had every jurisdiction to file I.A. No.2175 of 2020. It is the Chairman of the Monitoring Committee, who is entrusted under the Resolution Plan to monitor the implementation of the Plan. The submission of Counsel for the Appellant that Application filed by Respondent No.1 was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (2015) 4 SCC 136. 8. We have heard submission of learned Counsel for the parties and have perused the record. 9. The Resolution Plan submitted by the Appellant was approved by the Committee of Creditors with 80.18% vote shares on 01.10.2019. The Adjudicating Authority vide order dated 21.10.2019 approved the Resolution Plan. As per the Resolution Plan submitted by the Appellant, the Appellant was to make payment by way of upfront payment of INR 568 crores within 60 days from the Effective Date. Clause 8.3, deals with "Payment to the financial creditor who are members of the CoC". Clause 8.3 (c) (ii) is as follows: "8.3(c)(ii) The aggregate amount which is proportionately payable to each of the Financial Creditors, as mentioned above, would be paid by way of upfront payment of INR 568 crs as reduced by the priority payments due on account of CIRP Cost, payments to workmen and amount due to Operational Creditors out of the proposed amount on an interest free basis within 60 days from the Effective Date." 10. Apart from above upfront payment, the Plan contained provisions regarding outstanding un-invoked Bank Guarantee issued to various entities towards diverse obligations amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e again appointed as Resolution Professional for the said purpose; (ix) The period to complete the corporate insolvency resolution process be extended by 180 days from the date of the order to be passed herein; (x) Appropriate directions be passed with regard to keeping the corporate debtor as going concern. (xi) ALTERNATIVE TO PRAYERS (vii), (viii) and (ix) above, orders of liquidation be passed in respect of the corporate debtor in terms of Section 33 and 34 of the Insolvency and Bankruptcy Code, 2016; (xii) Ad interim orders in terms of prayers above; (xiii) Pass any other order or orders which this Hon'ble Tribunal may deem fit in the facts and circumstances of the case in the interest of equity, justice and good conscience." 11. Even during the pendency of the Application before the Adjudicating Authority, various affidavits were filed by the Appellant stating that entire upfront payment shall be made by 30.06.2021 and thereafter another date given as 31.10.2021, which affidavits proved to be a false representation on behalf of the Appellant. The sequence of events indicate that the Appellant failed to implement the Resolution Plan. One of the pleas, which was taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gulation 36-B of the CIRP Regulations was amended by Notification dated 24.01.2019 inserting Regulation (4-A), which is to the following effect: "36-B[(4A) The request for resolution plans shall require the resolution applicant, in case its resolution plan is approved under sub-section (4) of section 30, to provide a performance security within the time specified therein and such performance security shall stand forfeited if the resolution applicant of such plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule. Explanation I.- For the purposes of this sub-regulation, "performance security" shall mean security of such nature, value, duration and source, as may be specified in the request for resolution plans with the approval of the committee, having regard to the nature of resolution plan and business of the corporate debtor. Explanation II. - A performance security may be specified in absolute terms such as guarantee from a bank for Rs. X for Y years or in relation to one or more variables such as the term of the resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant was never put to notice that it has to deposit the balance 75% of premium of the plot within certain period of time. In the absence of such notice, it was held that there was no breach of contract on the part of the Appellant. Paragraphs 24 and 25 of the judgment of the Hon'ble Supreme Court in this context is relevant, which are to the following effect: "24. The aforesaid judgment would apply in a situation where a promisee accedes to the request of the promisor to extend time that is fixed for his own benefit. Thus, in Keshavlal Lallubhai Patel v. Lalbhai Trikumlal Mills Ltd. [1959 SCR 213 : AIR 1958 SC 512] , this Court held: (SCR pp. 219-20 : AIR p. 515, para 8) "The true legal position in regard to the extension of time for the performance of a contract is quite clear under Section 63 of the Contract Act. Every promisee, as the section provides, may extend time for the performance of the contract. The question as to how extension of time may be agreed upon by the parties has been the subject-matter of some argument at the Bar in the present appeal. There can be no doubt, we think, that both the buyer and the seller must agree to extend time for the delivery of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the authority with which the corporate debtor is registered. (2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors 1[approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). [Explanation. - For the purpose of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum. (3) Where the resolution plan approved by the Adjudicating Authority 3[under section 31 or under sub-section (1) of section 54L, is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt as a going concern by the Chairman of the Monitoring Committee, every effort should be made to give one more chance at resolution before we order liquidation as a last resort." 21. When the Corporate Debtor was being run as a going concern by the RP and thereafter by the Chairman of the Monitoring Committee and there are 400 employees working with the Corporate Debtor, the Adjudicating Authority had not acted beyond its jurisdiction in issuing the impugned direction. Paragraphs 3.12 and 3.13 of the impugned order where it notices the case of the Appellant, is also relevant to be extracted, which is to the following effect: "3.12. So far, the Chairman has successfully managed to ensure that the Bank Guarantees to the tune of Rs.458,09,65,460/- (Rupees four hundred fifty-eight crore nine lakh sixty-five thousand four hundred sixty only) issued on behalf of the Corporate Debtor remain uninvoked. Further, the fact that the Corporate Debtor has been kept as a going concern till now reflects the revival potential of the Corporate Debtor. 3.13. Liquidation of the Corporate Debtor will not only jeopardise the employment of 400 employees associated with the Corporate Debtor but also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n paragraph 37, 38 and 39: "37. In appropriate case, on receipt of an application under subsection (3), if the Adjudicating Authority determines that the 'Corporate Debtor' has contravened the provisions of the 'Resolution Plan', it requires to pass order of liquidation as provided under sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1) as laid down under Section 30(4). 38. In the present case, it is argued that none of the persons' interests are prejudicially affected because of contravention, made any application to the Adjudicating Authority for liquidation order under sub-section (3) of Section 33, therefore, according to the counsel for the 'Committee of Creditors' and the 'Resolution Professional', no order could have been passed under Section 33(3) of the 'I&B Code'. 39. We have already observed that in case where the 'Resolution Plan' earlier approved within a reasonable period of 180 days or much before completion of 270 days, one may request the Adjudicating Authority to allow the 'Resolution Professional'/ 'Committee of Creditors' to consider the pending 'Resolution Plan (s)' or to call for fresh 'Resolution Plan'/ 'Revised Resolution Plan', in absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fessional as Chairman (b) Monitoring Committee (MC) shall supervise the Resolution Plan until payment of the up-front consideration as contemplated under the Resolution Plan and on completion of such payment and completion of Closing Day Actions the Term of the MC shall expire." 27. The Respondent, who filed the Application as a Chairman of the Monitoring Committee was fully entrusted to supervise the implementation of the Resolution Plan. When the Plan has failed to be implemented by the Resolution Applicant, it is also the duty of the Monitoring Committee to bring it to the notice of the Adjudicating Authority, relevant facts including the failure of the Plan and ask for further directions from the Adjudicating Authority with regard to the Corporate Debtor. We, thus, do not find any substance in the submission of the learned Counsel for the Appellant that Respondent No.1 has no locus to file the Application. 28. Now we come to the last submission of learned Counsel for the Appellant, i.e., directions issued with regard to under Section 74, sub-section (3). Section 74, sub-section (3) is a provision contained in Chapter-VII - "Offences and Penalties". Section 74, sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 74, sub-section (3) are neither binding nor determinative of any issue when the Special Court where a complaint is filed proceed with the trial of offence. The observations made by the Adjudicating Authority has to be read only for the purpose of sending the copy of the order to the Board for consideration for filing a complaint and order of the Adjudicating Authority cannot be treated to any direction to initiate action under Section 74, sub-section (3), which is in the domain of the Board and Central Government as per the statutory Scheme of the Code. 31. In view of the foregoing discussions, we uphold the order of the Adjudicating Authority issued under paragraph 8.1.(i), (iii) and (iv). However, directions issued in 8.1.(ii) are modified to the extent that a copy of the order passed by Adjudicating Authority shall be sent to the Insolvency and Bankruptcy Board of India and the Secretary, Ministry of Corporate Affairs to consider in terms of Section 236, sub-section (2) to initiate appropriate complaint before the Special Court as envisaged under Section 236(1). The direction cannot be read to be a direction to initiate complaint, rather it has to be treated to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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