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TMI Blog2023 (10) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... R - 2 , 3 . JUDGMENT ASHOK BHUSHAN, J : 1. This Appeal by a Financial Creditor of the Corporate Debtor has been filed challenging the Order dated 27th June, 2023 passed by National Company Law Tribunal, Kolkata Bench (Court-I) Kolkata (hereafter referred to as "The Adjudicating Authority") in I.A. (IB) No. 724/KB/2022 filed by Respondent No. 1-S.S. Natural Resources Private Limited-Successful Resolution Applicant. 2. Brief facts of the case necessary to be noted for deciding the Appeal are:- i. Corporate Insolvency Resolution Process (CIRP in short) was initiated against the Corporate Debtor-Ramsarup Industries Limited by Order dated 08th January, 2018 passed by the Adjudicating Authority. ii. Committee of Creditors (CoC in short) was constituted which held various meetings in the CIRP Process of the Corporate Debtor. Resolution Plan submitted by Respondent No. 1 - S.S. Natural Resources Pvt. Ltd. came for consideration along with methodology of distribution in 24th CoC Meeting held on 06th March, 2019. iii. Resolution Plan submitted by Respondent No. 1 - SS Natural Resources Pvt. Ltd. and one Shyam SEL & Power Ltd. came for consideration in the 24th CoC Meeting held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Confirmation was also asked to issue No Dues Certificate by the Appellant upon receipt of the payment shared by email dated 27th April, 2022. There have been exchange of the email between the Appellant and the ex-Resolution Professional on 02nd July, 2022, the RP communicated to the Appellant that Resolution Professional vide email dated 15th June, 2022 communicated to the Appellant that upfront payment to the Financial Creditors was to be distributed out of amount of Rs. 342.25 Crores. The email further communicated the CoC Expenses and Future Litigation Fund as Rs. 4.01 Crores and Security Reimbursement amount as Rs. 4.74 Crores has to be deducted from Rs. 351 Crores. The Appellant raised objection to the email and has sent a detailed reply on 29th June, 2022 stating that out of Rs. 351 Crores upfront amount the Appellant are entitled to receive amount of Rs. 270.28 Crores. Appellant having 77% Security Interest of Rs. 351 Crores they are entitled to Rs. 270.28 Crores and deduction from amount of Rs. 351 Crores can not be accepted. Resolution Professional vide email dated 2nd July, 2022 sent a detailed Reply to the email of Appellant dated 29th June, 2022 contending that deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly. 32. With these direction I.A. (IB) No. 724/KB/2022 is disposed of, with the liberty to the Chairman of the monitoring agency to approach this Adjudicating Authority in case of any difficulty in implementation of the above protocol." viii. Aggrieved by the Order passed by the Adjudicating Authority dated 27th June, 2023, this Appeal has been filed by the Appellant-the Financial Creditor. ix. The Appellant has come up in the CIRP process of the Corporate Debtor on the strength of assignment dated 23rd April, 2021 from ARCIL. It was the Appellant who had filed the Application for liquidation which was dismissed on 06th April, 2022, details of subsequent events have already been noticed by us. 3. We have heard Mr. Mukul Rohatgi, Sr. Advocate and Mr. Krishnendu Datta, Sr. Advocate for the Appellant. Mr. Ramji Srinivasan, Sr. Advocate for Respondent No. 1-SRA and Mr. Abhinav Vashisth, Sr. Advocate for Respondent No. 2 and 3. 4. Learned Sr. Counsel for the Appellant challenging the Impugned Order contends that Appellant who is Security Interest Holder of 77% being entitled to amount of Rs. 270.28 Crores out of upfront amount of Rs. 351 Crores having not yet been paid t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution methodology was clearly placed before the CoC where Process Advisory of the CoC has circulated the distribution methodology under which total amount available for distribution was Rs. 342.25 Crores. It is submitted that in the 11th CoC Meeting held on 10th September, 2018 it was also resolved that payments made under the CoC Expenses debit note will be repaid along with interest from resolution proceeds after payment of all priority claims as provided under IBC thus CoC Expenses of Rs. 4.01 Crores was to be deducted from upfront amount of Rs. 351 Crores. It is submitted that Security Expenses which was incurred by ARCIL as well as WBIDC Limited has also to be deducted from the upfront payment as per Order dated 04th September, 2019 of the Adjudicating Authority. It is submitted that the deduction of CoC expenses as well as security expenses from the upfront payment of Rs. 351 Crores was as per the CoC decision and the Appellant's contention that the said deductions are impermissible cannot be accepted. It is submitted that process advisor of the CoC has circulated the Revised Distribution Methodology where deductions were very much reflected and no objection was raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Authority has directed the Appellant who was Respondent No. 1 in the Application I.A. No. 724/KB/2022 to provide No Dues Certificate and execute the assignment agreement. We have already noticed the operative directions issued by the Adjudicating Authority in Order dated 27th June, 2023 as above. There is no dispute between the parties that amount of Rs. 351 Crores was deposited in the controlled account by the SRA on 11th April, 2022 in compliance of the Order dated 06th April, 2022. The Issue between the parties is regarding distribution of the amount of Rs. 351 Crores which has been deposited by the SRA. On one hand, the Appellant is strenuously challenging the calculation as forwarded by the ex-RP to the Appellant indicating deduction of amount of Rs. 4.01 Crores towards CoC Expense and Future Litigation Fund and 4.74 Crores towards the Security Reimbursement from the upfront amount of Rs. 351 Crores. The case of the Respondent is that the above amounts have to be deducted from the upfront payment deposited by the SRA and the amount available for distribution to all the Financial Creditors comes to Rs. 342.25 Crores. 9. 11th CoC meeting held on 10.09.2018 and 24th CoC me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... num; e) Payments made under the CoC Expense Debit Notes will be repaid along with interest, from resolution proceeds after payment of all priority claims: as provided under IBC. All CoC members agreed to the above and have accordingly instructed RP of the same. The RP will be acting on this issue only on express instructions of the CoC." 11. The above minutes of the CoC clearly records the consensus that process advisor's fee was to be paid from the money received from specific debit note raised for such expenses which payment shall not be part of Insolvency Resolution Process Cost. It was further resolved that payments made under the CoC Debit Note will be repaid along with interest from Resolution Proceeds after payment of all priority claims as provided under IBC. Rs. 4.01 Crores which has been earmarked for the Process Advisor's Fee thus is not part of CIRP Cost and the said payments were made out of amount provided by the Members of the CoC which has to be repaid from Resolution Proceeds along with interest at the rate of 18% per annum. The above resolution clearly indicates that the amount which is paid by Financial Creditors as members of the COC for payment of proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Committee of Creditors. The methodology of distribution is supposed to form part of the Resolution Plan filed by the RP with the Adjudicating Authority under Section 30(6) of the Code. To make it binding on persons mentioned in Section 31 of the Code, it will have to form part of the Resolution Plan approved by the Adjudicating Authority under Section 31 of the Code. The Process Advisors to the COC, EY, had emailed a modified distribution pattern based on security structure to the members on 05 March 2019. The RP invited the Process Advisors to the CoC to present the aforesaid revised methodology of distribution of resolution proceeds circulated to the members on 05 March 2019. Mr. Rohit from EY presented the calculation pertaining to the distribution pattern and briefed the CoC about the assumptions made for the mentioned calculations. He explained that the CoC and the Security Expenses (incurred prior to commencement of CIRP) are also distributed Unit wise - Lender wise. Upon the presentation made by the Process Advisors, EY, on the proposed distribution pattern, ARCIL raised a concern over the adequate examination of charge related documentation for implementation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be approved along with the distribution methodology which shall be as per the share of voting of each financial creditor. RESOLVED THAT the Resolution Plan shall be approved along with the distribution methodology which shall be as per the categorisation of Financial Creditors based on the security structure and as discussed in the 24th CoC." 14. Learned counsel for both the parties are not ad-idem as to what was decided by the CoC in its 24th CoC meeting. Learned Counsel for the Appellant submits that since the only resolution which was passed by requisite voting share was that the distribution methodology as per categorisation of financial creditors based on the security structure was passed hence all proposed distribution which was suggested by process advisor was neither voted nor approved thus only decision taken in the CoC meeting was that distribution shall be as per security structure of the Financial Creditors. Nothing more can be read in the minutes of the COC. The Learned Counsel for the Respondents on the other hand contends that the revised distribution of each financial creditor wise having been circulated by the Process Advisor which was part of the discussio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority dated 04.09.2019 by which order the Resolution Plan was approved. From the order dated 04.09.2019 it is seen that one of the financial creditors of the corporate debtor i.e. West Bengal Industrial Development Corporation Limited (WBIDCL) had filed C.A.(IB) No. 921/KB/2019 praying that security expense to the tune of Rs. 1,14,25,806/- and another amount of Rs. 17,10,476/- has been incurred by the Financial Creditor which need to be included in the portion of upfront amount payable by the SRA to the Creditors. The Adjudicating Authority has issued direction as prayed for hence the Security Expense payable to WBIDCL was to be apportioned from the upfront amount of Rs. 351 Crores deposited by the SRA. It is useful to quote paragraphs 26 and 27 of the Order dated 04th September, 2019: "26. One another objector is West Bengal Industrial Development Corporation Limited(WBIDCL). It filed CA(IB) NO 921/KB/2019. The Ld. Counsel appearing for the Applicant, WBIDCL submits that it is not disputing the approval of the Resolution Plan. According to him, the Applicant submitted its claim in prescribed Form C under Regulation {A) of the 1881 (Insolvency Resolution Process for Corporate Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution revised figures which was circulated by the Process Advisor in the meeting dated 06th March, 2019 were not approved, under the Order of the Adjudicating Authority dated 04.09.2019, Security Expenses were required to be deducted from the total upfront payment of Rs. 351 Crores. 20. Now we need to notice certain clauses of the Resolution Plan on which reliance have been placed by Learned Counsel for the parties. The Revised Resolution Plan filed as Annexure A-4 to the Appeal. Paragraph 2 deals with "proposal for creditors and other payments": "2 PROPOSAL FOR CREDITORS AND OTHER PAYMENTS 2.1 The Resolutioi1 Applicants' financial proposal ("Financial Proposal") is based on the statement of assets and liabilities of the Corporate Debtor as set out in the Provisional Balance Sheet of the Corporate Debtor and as uploaded in the Data Room and the List of Creditors of the Corporate Debtor as uploaded on the Corporate Debtor's website www.ramsarup.com as of November 11, 2018 and as updated from time to time ("List of Creditors"). 2.2 As per the Information Memorandum and List of Creditors, total claim filed amounting to Rs. 6,046.77 Cr. (Rupees Six Thousand Forty Six C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id amount to the Financial Creditors. ..... iv. Payment Terms: (a) Payment to Financial Creditors: The Resolution Applicant shall deposit the Upfront Amount as outlined in the Financial Proposal in the Controlled Account within 30 (thirty) days from the Effective Date. Notwithstanding anything provided in this Resolution Plan, subject however to there being no stay against the order approving the Plan as. detailed in Annexure 2, the Upfront Amount shall be debited from the Controlled Account on the 90th day from the Effective Date in the manner provided in Annexure 2 of the Plan. Such payment shall be made after payment of CIRP Process Cost, Workmen dues, statutory liabilities and payment to Operational Creditors. (b) Source of Funds: The Resolution App1icaht has submitted a comfort letter dated October 12, 2018, wherein Resolution Applicant has stated that it shall have sufficient funds to fund the Upfront Amount payable to the Fiiiancia1 Creditors." 24. Under Resolution Plan under Clause 9(iv) Resolution Applicant was responsible to bear all costs, charges, imposts post approval of the Resolution Plan. Part 9(iv) is as follows: "iv. Notwithstanding anything contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court was dismissed on 12th May, 2022. Appellant has requested the Monitoring Committee as is apparent from the Reply filed by the Respondent No. 2 and 3 that Monitoring Committee should hold its hand from proceeding with the implementation of the plan since the Appeal has already been filed by the Appellant. Thus Appellant himself was objecting to the implementation of the plan till the Appeal was finally dismissed by the Hon'ble Supreme Court on 12th May, 2022, after the dismissal of the Appeal of the Appellant before the Hon'ble Supreme Court the Application was filed by the SRA on which order was passed which is impugned in the present Appeal. There has been correspondence between the Resolution Professional and Appellant regarding disbursement of the amount out of Rs. 351 Crores to the Appellant. Appellant vide email dated 29th June, 2022 has sent detailed objection to the proposed amount by the RP on the ground that no deductions could have been made towards CoC expenses and Security expenses which was replied by the RP by email dated 2nd July, 2022 which is part of the Appeal where all objections raised by the Appellant were explained. On 2nd July, 2022, the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court. Learned Counsel for the Appellant has also submitted that the Adjudicating Authority ought not to have directed for issuance of No Dues Certificate by the Appellant without payments received by the Appellant of his dues share under Resolution Plan. We find substance in the submission of the Appellant that Appellant can not be asked to issue No Dues Certificate without Appellant received the entitlement under Resolution Plan. We are however of the view that the Adjudicating Authority ought not to have directed the Monitoring Agency to determine and appropriate the amount. The Adjudicating Authority itself could have considered the issue since there was divergent statement raised before the Adjudicating Authority which is reflected from the pleadings in the Application which was filed by the Respondent No. 1 i.e. I.A. No. 724/KB/2022 and detailed reply filed by the Appellant. The issue as to what is the correct amount to which the Appellant is entitled under the Resolution Plan was very much disputed and raised before the Adjudicating Authority and the Adjudicating Authority ought to have proceeded to determine and ought to have directed for issuance of NDC only after dir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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