TMI Blog2023 (10) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... proved along with the distribution methodology which shall be as per categorisation of Financial Creditors based on the security structure and as discussed in 24th CoC Meeting . The two discussion methodology was up for consideration that is one based on the share of voting of each financial creditor and other based on security structure of the Financial Creditor. Even on accepting the argument saying that distribution methodology which was circulated by Process Advisor to all Members of CoC which was also discussed in the meeting it having not specifically approved in the minutes resolution can be read only to mean that distribution methodology based on security structure have been approved - it is clear that CoC expenses which is figured at 4.01 Crores was to be repaid by the members of the CoC which has contributed the COC expenses along with resolution proceeds which clearly indicates that said amount has to be deducted from Rs. 351 Crores Upfront amount. The payment towards fee of Process Advisor to the CoC was to be contributed by the CoC which required to be reimbursed from the proceeds of the Resolution. The Respondents claim deduction of Rs. 4.01 Crores which is und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd execute the assignment agreement in terms of approved resolution plan and hand over title deeds of the corporate debtor within two weeks from the date of the receipt of the payment. Appeal disposed off. - [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant: Mr. Mukul Rohatgi Mr. Krishnendu Datta, Sr. Advocates, Mr. Siddhartha Datta, Mr. Kumar Anurag Singh, Mr. Deepanjan Dutta Roy, Mr. Rahul Gupta, Ms. Gayathri Balasubramanyam, Advocates. For the Respondent: Mr. Ramji Srinivasan, Sr. Advocate, Mr. Abhijeet Sinha, Mr. Shounak Mitra, Ms. Wamika Trehan, Ms. Maithili Moondra, Advocates for R-1. Mr. Abhinav Vashisht, Sr. Advocate, Ms. Priya Singh, Mr. Piyush Swami, Advocates for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the Corporate Debtor was to be transferred to the SRA. vii. Against the Order dated 06th April, 2022 passed by the Adjudicating Authority, an Appeal was filed being Company Appeal (AT) Ins. No. 396 of 2022 by the Appellant which Appeal came to be dismissed by this Tribunal vide its Order dated 19th April, 2022. Appellant aggrieved by the order dated 19th April, 2022 again filed an Appeal before the Hon ble Supreme Court being Civil Appeal No. 3633 of 2022 which also came to be dismissed on 12th May, 2022. After dismissal of the Appeal, an email dated 23rd May, 2022 was written by the Ex-Resolution Professional of the Corporate Debtor to the Appellant informing about the transfer of amount of Rs. 12,26,23,562/- in the Bank Account of the Appellant on 20th May, 2022. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n after three years. 30. The SRA has deposited the amount as given in the Resolution Plan in the controlled account and hence, he has fulfilled his part. The Respondent is therefore under due obligation to provide the NDC and execute the assignment agreements and further hand over the title deeds of the Corporate Debtor which are in the custody of the Respondent, to the SRA forthwith. The revival of the Corporate Debtor should not be hampered any further. 31. The MA shall determine and appropriate the amounts to be borne out by various parties as outlined above, preferably within two weeks from the date of issue of this order. A compliance affidavit be filed by the Chairman of the Monitoring committee within two weeks of completion of the above transactions. We order accordingly. 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 Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Fund and 4.74 Crores towards security reimbursement are being deducted which is not as per approved Resolution Plan. It is submitted that in the 24th CoC meeting held on 06th March, 2019 it was never resolved to make any deduction from the upfront amount of Rs. 351 Crores. The Appellant is entitled for 77% out of total amount of Rs. 351 Crores from which amount no deduction can be made and non-payment of entitlement to the Appellant has to be treated as non implementation of the plan. The Adjudicating Authority committed error in directing for giving No Dues Certificate whereas payment has not yet been paid to the Appellant of its entitlement. 5. Mr. Abhinav Vashisth, Learned Sr. Counsel appearing for Respondent Nos. 2 and 3 submits that in the meeting of the COC held on 06th March, 2019, distribution 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 is concerned, Respondent No. 1 has deposited the entire amount as per Order dated 06th April, 2022 of the Adjudicating Authority on 11th April, 2022 in the controlled account of the Corporate Debtor. Total amount of Rs. 351 Crores having been deposited by the SRA it has complied its part. It is submitted that the Appellant cannot be heard in saying that there is any breach on the part of the Respondent No. 1. The Respondent No. 1 has deposited the amount and majority of financial creditors have already received their share of entitlement and it is Appellant and other few who have not yet accepted the payments offered. 7. We have heard Learned Sr. Counsel for the parties and have perused the record. 8. The Order under challenge in this Appeal is Order of the Adjudicating Authority where the Adjudicating 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 depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to such CoC members on receipt of proceeds from a resolution applicant. It was also put forth by Mr Ralhan that the contributions made by members against these debit notes should also carry interest @ 18% p.a. which got a general consensus amongst the members. Hence, following understanding was concluded relating to these payments: a) The CoC has granted specific approval to RP to pay one invoice of the process advisor fees from the money available; b) All subsequent payments of CoC expenses will be done on the basis of money received from specific debit notes raised for such expenses ( CoC Expense Debit Notes ); c) Payments being made under the CoC Expense Debit Notes will not form part of insolvency resolution process cost; d) Payments made under the CoC Expense Debit Notes will bear an interest of 18% per annum; 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Item No. 7 of the minutes two resolutions were up for consideration as mentioned at A and B of item No. 7. The minutes which is filed as Annexure D to the Reply of Respondent No. 2 and 3 indicate that the predecessor in interest of the Appellant was part of the minutes and has not objected to the deduction of CoC expenses and security expenses. It is useful to extract the discussion on Item No. 7 and clarification with regard to CoC expense which is to the following effect: Pursuant to the Twenty-third meeting of the Committee of Creditors held on 02 March 2019. the Committee of Creditors had discussions to decide on the methodology of distribution of proceeds to be received under the Resolution Plan from the successful Resolution Applicant. This would be either on the basis of share of voting or security structure, amongst the members 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by 07 March 2019. (ii) The CoC and the RP team would discuss with SS Naturals on the finer points in the plan on 06 March 2019. They would request SS Naturals to submit the final plan by 07 March 2019 (iii) The voting would be on each of the options of distribution methodology along with the Resolution Plan. (iv) The voting portal would be kept open from Friday, 08 March 08 2019 from 8 p.m. to 8 p.m. on Monday, 11 March 2019. (v) Depending on the results of the voting received on 11 March 2019, in case the Resolution Plan along with the proposed distribution methodology is approved by the CoC with 66% voting share, the RP and his legal counsel would work towards filing the Resolution Plan with NCLT by 12 March 2019. In the event, that the same is not approved by the CoC; a liquidation application shall be filed. RESOLVED THAT the Resolution Plan shall 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 secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before the Member of CoC which contains the deduction of CoC expense and security expense from the upfront payment of Rs. 351 Crores and distribution to the Financial Creditors was proposed on the basis of the resolution plan however as noticed above from the 11th CoC meeting it was clear that the COC Expenses were to be contributed by the members of the CoC and which shall be repaid with 18% interest from the resolution proceeds thus it is clear that CoC expenses which is figured at 4.01 Crores was to be repaid by the members of the CoC which has contributed the COC expenses along with resolution proceeds which clearly indicates that said amount has to be deducted from Rs. 351 Crores Upfront amount. 17. With regard to security expense which has also been proposed to be deducted from Rs. 351 Crores, Learned Counsel for the Respondents have referred to the Order of the Adjudicating Authority 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the Applicant which has been admitted in the Resolution Plan to be included in the upfront payment. The Ld. Counsel, appearing for the Resolution Applicant, also showed his readiness to pay the admitted amount of security expenses incurred by the Applicant as an upfront amount. Having regard to the above we are inclined to issue directions as prayed for. The said Application can be disposed of accordingly. 18. It is relevant to notice that amount of security expense which was to paid WBIDCL was part of Rs. 4.74 Crore which was to be deducted towards security expense. Security expense have been only claimed by WBIDCL and ARCIL who had incurred expenses. Thus as per order of the Adjudicating Authority the security expenses were also to be deducted from the upfront payment of Rs. 351 Crores. 19. Thus even if we for the sake of argument accept the submission of the Appellant that distribution 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. As per the Code, the CIRP Costs are to be paid in priority over payments to be made of any other debt and the CIRP Costs shall, amongst other things, include the costs, fees and charges incurred by the Resolution Professional, in running the operations of the Corporate Debtor as a going concern. ii. Within 1 (one) day after the Effective Date, the Resolution Professional shall provide a statement, containing details of the CIRP Costs as approved by the CoC from time to time, to the Resolution Applicant, and the same Will be paid in full as per the Code and as elaborated in Annexure 2 The Resolution Applicant will infuse additional funds (if needed), by way of equity or any other appropriate means, to meet the CIRP Costs. 23. We may also notice paragraph 5(ii) under heading Debt owed to financial creditors. 5(ii) and (iv) are as follows: 5. Debt owed to Financial Creditors . ii. The maximum liability of the Resolution Applicant towards all financial creditors of the Corporate Debtor, irrespective of whether they have filed claim or not shall not exceed Rs. 351 crore (Rupees three hundred and fifty one crore) and the Resolution Applicant shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The Respondents claim deduction of Rs. 4.01 Crores which is under heading COC Expense and Future Litigation Fund which is at page 18 of the Reply of Respondent No. 2 and 3, as held above COC expenses could have been very well deducted from the upfront payment but there is no requirement of deduction of future litigation fund. No Litigation Fund was required to be created nor for that said period any amount need to be deducted from the upfront payment. Under Clause 9(iv) we have noted that all costs, imposed post approval of the plan has to be apportioned by the Resolution Applicant. We thus are of the view that out of amount of Rs. 4.01 Crores only that much amount need to be deducted, which is COC expenses i.e. which is required to be reimbursed to the CoC as per their contribution. 27. Now we need to notice submission of Learned Counsel for the Appellant that since the payment to the Appellant towards its entitlement which was Rs. 270.27 Crores having not been paid the Resolution Applicant has not implemented the plan and the Adjudicating Authority ought not to have issued direction to issue No Dues Certificate. From the facts as noticed above it is clear that the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the written submissions filed by Respondent No. 2 and 3. According to the written submissions the interest amount accrued on the said amount till 10th July, 2024 is Rs. 14,94,28,383/-. It goes without saying that Appellant is entitled for the amount of interest accumulated on the amount, when the Appellant himself has requested the RP to keep the amount and hold and keep it in the interest bearing account, we cannot accept the submission of the Appellant that Respondents have failed to implement the plan. The amount which is to be paid to the Appellant has been kept in the interest bearing account as per the request of the Appellant and Appellant is entitled to receive the amount, on that basis it cannot be held that Respondent failed to implement the plan. Mr Rohatgi has much emphasized on the fact that there has been several breaches by the Respondent No. 1 in implementing the plan which clearly indicate that present is a case of liquidation and not to implement the plan. We do not accept the above submission of Mr. Rohatgi. The liquidation application which was filed by the Appellant to liquidate the Corporate Debtor was rejected by the Adjudicating Authority on 06th April, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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