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TMI Blog2024 (1) TMI 1021X X X X Extracts X X X X X X X X Extracts X X X X ..... , Adv. Ms. Srishty Kaul, AOR Mr. Rajat Sinha, Adv. For Respondent(s) : Mr. Mukul Rohatgi, Sr. Adv. Mr. Krishnendu Datta, Sr. Adv. Mr. Saurabh Kripal, Sr. Adv. Ms. Pooja Mahajan, Adv. Ms. Arveena Sharma, Adv. Ms. Shruti Pandey, Adv. Mr. Aashish Vats, Adv. Mr. Rajat Sinha, Adv. Mr. Avinash B. Amarnath, AOR, Mr. Amit Sibal, Sr. Adv. Mr. Raghav Shankar, Adv. Mr. Rajendra Barot, Adv. Mr. Dhirajkumar Totala, Adv. Mr. Suharsh Sinha, Adv. Ms. Liz Mathew, AOR Mr. Nishant Upadhyay, Adv. Mr. Vinay Tripathi, Adv. Mr. Mayank Bhargava, Adv. Mr. Darpan Sachdeva, Adv. Mr. Mehul Bachhawat, Adv. Mr. Ankit Pal, Adv. Ms. Mallika Agarwal, Adv. Mr. Nisarg Bharadwaj, Adv. Mr. Sanjay Singhvi, Sr. Adv. Ms. Rohini Thyagarajan, Adv. Mr. Shakti Vardhan, Adv. Ms. Amiy Shukla, AOR, Mr. Pawanshree Agrawal, AOR Ms. Shubhangi Negi, Adv. Mr. R. Venkataramani, Attorney General for India Ms. Ekta Choudhary, AOR Mr. Divyank Dutt Dwivedi, Adv. Ms. Aditi Sharma, Adv., Mr. Tushar Mehta, Solicitor General, Mr. N. Venkataraman, A.S.G. Mr. Sanjay Kapur, AOR Mr. Devesh Dubey, Adv. Ms. Mahima Kapur, Adv. Mrs. Shubhra Kapur, Adv. Mr. Ritin Rai, Sr. Adv. Ms. Petrushka Dasgupta, Adv. Mr. Mridul Yadav, Adv. Ms. Tahira Kat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffic rights) for sectors on which Jet 2.0 proposes to recommence operations after the Effective Date. (d) International Traffic Rights Clearance The Corporate Debtor shall have received the International Traffic Rights Clearance in compliance with Applicable Laws. (e) Demerger - The Scheme filed as part of this Resolution Plan shall have been approved under Applicable Laws and the Demerged Employees shall have demerged from the Corporate Debtor to AGSL along with all their past dues, liabilities and outstanding's with effect from the Approval Date, without the requirement of any further consent or approval of any other stakeholder of AGSL (since we understand that AGSL currently does not have any creditor) or any stakeholder of the Corporate Debtor (including existing or past employee or workmen or employees' unions of the Corporate Debtor)." 3. Clause 7.6.4 contains a stipulation for "automatic withdrawal": "Automatic Withdrawal - The Resolution Applicant is confident of completing all the Conditions Precedent (as set out in Clause 7.6.1 above) within 90 (ninety) days from the Approval Date. In the unlikely event that all the Conditions Precedent cannot be fulfil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Creditors, within 180 days from the Effective Date. 6. The Successful Resolution Applicant ["SRA"] and the consortium of lenders represented by the State Bank of India ["SBI"] were not ad idem on whether the conditions precedent were fulfilled. The SRA took the position that all conditions precedent had been duly fulfilled. Consequently, on May 20 2022, the DGCA reissued an Air Operation Certificate, confirming the authorization for the Corporate Debtor to engage in commercial air operations. The SRA communicated via email to the Lenders, affirming compliance with all prerequisites and proposing that May 20 2022, should be recognized as the effective date under the Resolution Plan. However, the lenders took a position to the contrary. On 15th November 2022, the SRA filed I.A. No. 3398 of 2022 (Implementation Application) and I.A. No. 3508 of 2022 (Exclusion Application) before the NCLT seeking a determination in accord with its position. 7. By an order dated 13 January 2023, the NCLT came to the conclusion that the SRA was compliant with the conditions precedent. It allowed the Implementation Application, thereby inter alia permitting the SRA to take control and management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution Plan is titled as "Treatment of Financial Creditors" and is reproduced below, insofar as it is relevant: "Head Amount payable Security Offered Value of Security Date of Creation of Security Date of Release of Security Cash payment Up to Rs.185 crores PBG of Rs. 47.5 crores Rs. 393.5 cr (with BKC) or Rs. 147.5 Cr (without BKC) Effective Date PBG adjusted BKC Property (if given) To be released on sale of BKC Mortgage over Dubai Property No. 1 valued at more than Rs. 100 crores Year 5 or on complete payment, whichever is earlier Cash payment Rs. 195 Crores BKC Property (if given) Rs. 445 Cr (with BKC) or Rs. 200 Cr (without BKC) Effective Date To be released on sale of BKC Mortgage over Dubai Property No. 1 valued at more than Rs. 100 crores Effective Date Year 5 or on complete payment, whichever is earlier Mortgage over Dubai Property No. 2 valued at more than Rs. 100 crores Effective Date Cash payment NPV of Rs. 391 Crores (using the discount rate specified in the Evaluation Matrix) Mortgage over Dubai Property No. 1 valued at more than Rs. 100 crores Rs. 600 Crores Effective Date Year 5 or on complete pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be directed to go into liquidation." 11. Following the affidavit, which was filed by SBI, an application was moved by the SRA on 18 August 2023 seeking liberty to pay the amount of Rs 350 crores as envisaged in the affidavit of SBI in the following manner: (i) The first tranche of Rs 100 crores by 31 August 2023; (ii) The second tranche of Rs 100 crores by 30 September 2023; and (iii) The balance of Rs 150 crores by the adjustment of the Performance Bank Guarantee ["PBG"] issued by the SRA in favour of the lenders. 12. Permission to do so was granted by the NCLAT on 28 August 2023 extending time until 31 August 2023 for the payment of Rs 100 crores; till 30 September 2023 for the payment of Rs 100 crores and for the balance of Rs 150 crores by adjusting the payment against the PBG issued by the SRA. 13. The reference to the PBG was contained in the tabulated statement in clause 6.4.4 of the Resolution Plan, which is set out above. Apart from the above stipulations, it would be material to make a reference, at this stage, to certain provisions of the Request for Resolution Plans ["RFRP"]. Clause 3.13 of the RFRP provides for performance security. It stipulates th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Intent, shall lead to cancellation of Letter of Intent issued by the CoC, unless otherwise determined by the CoC at its sole discretion..." 14. Clause 3.13.7 empowers SBI as an agent of the Committee of Creditors to invoke the performance security on the occurrence of certain eventualities: "3.13.7 SBI, in its capacity as an agent of the CoC (and acting on behalf of the Company), shall have the right to invoke the Performance Security on behalf of the CoC (and upon receiving approval from the CoC), (by issuance of a written demand to the Bank to invoke the Performance Security, if provided as a PBG). The Performance Security can be invoked and appropriated at any time, upon occurrence of any of the following conditions, without any reference to the Resolution Applicant. i any of the condition under the Letter of Intent or the Successful Resolution Plan are breached; ii if the Resolution Applicant fails to re-issue or extend the Performance Security (if provided as a PBG), in accordance with the terms of this RFRP; or iii failure of the Successful Resolution Applicant to implement the Approved Resolution Plan to the satisfaction of the CoC, and in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores). In support of this submission, reliance has been placed on the summary of payments and security package forming a part of clause 6.4.4 of the Resolution Plan; (ii) The SRA was in the first tranche required to pay an amount of up to Rs 185 crores against the creation of securities, namely, (i) PBG of Rs 47.5 crores; (ii) BKC Property (if given); and (iii) Mortgage over Dubai Property No 1 valued at over Rs 100 crores. In the last column of the table, it has been stipulated that the securities would be released, as indicated; (iii) The PBG was liable to be adjusted against the cash payment of the first tranche of Rs 185 crores; (iv) No specific date for the release of the security in relation to the PBG has been mentioned; (v) Moreover, in respect of the second tranche comprising of Rs 195 crores, there was no requirement to furnish any security in the form of a PBG; (vi) The securities, in other words, were of a revolving nature, but significantly on the release of the PBG against a cash payment of Rs 185 crores, the PBG is not required to be renewed as a fresh security for the following tranches; and (vii) As regards the creation of security in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter which would have to await an adjudication by NCLAT in the pending appeal. The impugned order of the NCLAT, on the other hand, allowed the plea of the SRA for adjustment and consequential release of the PBG at the interlocutory stage. This prima facie would not be in accordance with the tenor of paragraph 8 of the affidavit which was filed by SBI in which it stated that the lenders would not contest the issues in the pending appeal conditional on compliance with the three conditions which were set out in the affidavit. Infusion of Rs 350 crores, as envisaged in the affidavit, could not have been substituted with a direction for adjustment of the PBG, at that stage. Infusion meant that the third tranche has to be paid in the same manner. Adjustment of the PBG was not permissible. 22. In the circumstances, we have come to the conclusion that NCLAT was not justified in holding, in its order dated 28 August 2023, that the last tranche of Rs 150 crores which was to be paid would be adjusted against the PBG. The SRA having deposited the first two tranches each of Rs 100 crores must comply with the remaining obligation of depositing Rs 150 crores (to make up a total payment of Rs 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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