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TMI Blog2024 (9) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... ys siphoned off by the erstwhile promoters of Bhushan Steel & Power Ltd., including but not limited to the assets of over Rs. 4000 crores attached by the Directorate of Enforcement; (ii) Grant an appropriate writ, order or direction, directing the Reserve Bank of India to issue appropriate directions to the Respondent Banks under Section 35A of the Banking Regulation Act, 1949; (iii) Pass such other or further order/s which this Hon'ble Court may deem fit and proper in the interest of justice." 2. Learned counsel for respondent No.1/Punjab National Bank ["PNB"] and respondent No.2/State Bank of India ["SBI"] are present on advance notice. Learned counsel for respondent No. 3/RBI is also present on advance notice. FACTUAL BACKGROUND : 3. Shorn of unnecessary details, the CD Bhusan Steel & Power Limited was admitted to CIRP Corporate Insolvency Resolution Process by an order dated 26.07.2017 in C.A./C.P (IB) No.202/(PB)/2017, at the behest of the PNB, by the adjudicating authority National Company Law Tribunal wherein the Resolution Professional ["RP"] admitted the claims for an amount of Rupees Forty Seven Thousand Crores (approximately) payable to the "Financial Creditors" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged during the course of arguments that the CD and the SRA were joint venture partners in a company, namely M/s. Rohne Coal Company Private Limited, holding 24.09% and 49% equity respectively. It was urged that the said aspect was neither considered by the NCLT nor by the National Company Law Appellate Tribunal ["NCLAT"], but for the wanton failure on the part of the respondents to protect the interest of the creditors of the CD. During the course of arguments, learned counsel for the petitioner invited the attention of this Court to the directions passed by the learned Adjudicating Authority while approving the "Resolution Plan", that inter alia provided as under: "128. As a sequel of the above discussion, CA No- 254(PB)/2019 is allowed and the resolution plan of JSW-H1 Resolution Plan Applicant is accepted. The objections raised by the Ex-Directors cum Promoters of the Corporate Debtor and Operational Creditors are hereby over-ruled. However, the acceptance and approval of the resolution plan shall be subject to the following: xxx xxxxxx (i) The criminal proceedings initiated against the erstwhile Members of the Board of Directors and others shall not effect the JSW-H1 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the attachment by the ED, the respondents in the present writ did not support the said order, although they were the "victim creditors" and would have been direct beneficiaries of the attachment in terms of Section 8(8) of the PMLA. 10. Learned counsel for the petitioner vehemently urged that owing to the deliberate inaction on the part of the respondents, the petitioner stands to lose more than Rs. 4.52 crores which was due to him in the year 2017. Learned counsel for the petitioner, in support of his submissions has relied on the decisions in Vadilal Chemcials Ltd. v. State of A.P. (2005) 6 SCC 292; Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund (Earlier Known as Kotak India Venture Limited) (2021) 6 SCC 436; and Manish Kumar v. UOI (2021) 5 SCC 1. 11. Learned counsel appearing for the PNB through video conferencing, challenged the maintainability of the present writ petition pointing out that the "Resolution Plan" stands approved upto the Supreme Court and the same cannot be questioned now by way of the present proceedings, particularly when personal insolvency proceedings have been initiated against the promoters/directors of the CD. It was urged that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Coal Block amongst the aforesaid three companies, including the Appellant and the Corporate Debtor herein, with their respective proportionate share of coal reserve. (ii) At the behest of the Ministry of Coal, a joint venture agreement dated 05.03.2008 was executed by and amongst the Appellant, Corporate Debtor and Jai Balaji Industries Ltd., pursuant to which RCCPL came to be incorporated. (iii) Vide the LoI and the proportionate share of coal reserve allotted to each Allocattee specified thereunder, the Appellant was entitled to 69.01% of coal reserve. Further, as per the JVA, the Appellant was entitled to subscribe to 69.01% of the share capital of RCCPL together with its affiliate company/s. Therefore, the Appellant had directly subscribed to 49% of the share capital in RCCPL and one of its affiliate, Everbest Consultancy Services Pvt. Ltd. had subscribed to the remaining 20.01% of share capital. (iv) While the Coal Block was under development, the Hon"ble Supreme Court of India vide its order dated 24.09.2014 passed in Manohar Lal Sharma v. The Principal Secretary & Others. W.P. (Criminal) 120/2012, cancelled the allocation of the coal blocks by the Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the leaned counsel for the petitioner, alluding to Section 32A of the IBC read with Section 8(8) of the PMLA is concerned, even assuming for the sake of convenience that the "operational creditors" of the CD are the "victims" of illegal actions of the erstwhile management, evidently the said provision would come into play only at a post-conviction stage. Be that as it may, it is well ordained in corporate law that once the CIRP proceedings are initiated and "Resolution Plans" are approved, the adjudication of the claim of the creditors could only be in accordance with the IBC. Needless to state that the COC, once constituted in accordance with the IBC, acts on behalf of all the creditors and the taskof the COC is to attain a balance between the twin goals of the CIRP process viz., maximization of the value of the assets of the CD and also a planned course for revival of the CD. These being the twin objectives, the decisions take by the COC, which have been approved by the NCLT are considered to be commercially viable and cannot be condemned on any counts by the petitioner. 17. At this juncture, it would be pertinent to reproduced Section 31(1) of the IBC, which reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract" governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the adjudicating authority. Even at that stage, its binding effects are produced by IBC framework. The BLRC Report mentions that "[w]hen 75% of the creditors agree on a revival plan, this plan would be binding on all the remaining creditors". The BLRC Report also mentions that, "the RP submits a binding agreement to the adjudicator before the default maximum date" [Id, p. 92.] . We have further discussed the statutory scheme of IBC in Sections I and J of this judgment to establish that a resolution plan is binding inter se the CoC and the successful resolution applicant. Thus, the ability of the resolution plan to bind those who have not consented to it, by way of a statutory procedure, indicates that it is not a typical contract. *** 117. ... The terms of the resolution plan contain a commercial bargain between the CoC and resolution applicant. There is also an intention to create legal relations with binding effect. However, it is the structure of IBC which confers legal force on the CoC-approved resolution plan. The validity of the resolution plan is not premised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the corporate debtor's liability has ceased under this sub-section. (2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not-- (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. Explanation.--For the purposes of this sub-section, it is hereby clarified that,-- (i) an action against the property of the corporate debtor in relation to an offence shall include the attachm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ydra head popping up which would throw into uncertainty, the amounts payable by a prospective "Resolution Applicant", which would be counterproductive to taking over the business of the CD. The same proposition of law was later reiterated in the case of P. Mohanraj v. Shah Brothers Ispat PrivateLimited (2021) 6 SCC 258 wherein it was held as under: "41. Section 32-A cannot possibly be said to throw any light on the true interpretation of Section 14(1)(a) as the reason for introducing Section 32-A had nothing whatsoever to do with any moratorium provision. At the heart of the section is the extinguishment of criminal liability of the corporate debtor, from the date the resolution plan has been approved by the adjudicating authority, so that the new management may make a clean break with the past and start on a clean slate. A moratorium provision, on the other hand, does not extinguish any liability, civil or criminal, but only casts a shadow on proceedings already initiated and on proceedings to be initiated, which shadow is lifted when the moratorium period comes to an end. Also, Section 32-A(1) operates only after the moratorium comes to an end. At the heart of Section 32-A is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other criminal act or omission against JSW Steel Limited or its management. No investigation by the Serious Fraud Investigation Office ["SFIO"], which is under the control of the Ministry of Corporate Affairs was pending against the said company and incidentally, the NCLAT in its aforesaid order had referred to the affidavit dated 10.10.2019, to the effect that even before the passing of the ordinance by the Union of India, the affidavit had categorically stated as under: "5) It is submitted that if any Corporate Debtor is undergoing investigation by the Central Bureau of Investigation ("CBI"), Serious Fraud Investigation Office ("SFIO") and/ or the Directorate of Enforcement ("ED"), such investigations are separate and independent of the Corporate Insolvency Resolution Process ("CIR Process") under the IBC and both can run simultaneously and independent of each other. It is further submitted that the erstwhile management of a company would be held responsible for the crimes, if any, committed under their regime and the new management taking over the company after going through the IBC process cannot be held responsible for the acts of omission and commission of the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by creditors and acquired by a bona fide third party Resolution Applicant through the statutory process supervised and approved by the Adjudicating Authority under the IBC. In so far as a Resolution Applicant is concerned, they would not be in wrongful enjoyment of any proceeds of crime after acquisition of the Corporate Debtor and its assets, as a Resolution Applicant would be a bona fide assets acquired through a legal process. Therefore, upon an acquisition under a CIR Process by a Resolution Applicant, the Corporate Debtor and its assets are not derived or obtained through proceeds of crime under the Prevention of Money Laundering Act, 2002 ("PMLA") and need not be subject to attachment by the ED after approval of Resolution Plan by the Adjudicating Authorities." (Emphasis supplied) 23. In view of the above, there is no escape from the conclusion that once the "Resolution Plan" was approved, the assets of the CD in the hand of the "Resolution Applicant" stood shielded from the criminal prosecution and attachment. Section 32A of the IBC is merely clarificatory in nature. Although, it was sought to be urged that a contrary stand has been taken by two different agencies of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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