TaxTMI 
TaxTMI 
TaxTMI 
In Taguda Pte. Limited Versus Subodh Kumar Agrawal, RP of Ushdev International Limited, Subodh Kumar Agrawal Versus Taguda Pte. Limited And State Bank of India Versus Ushdev International Limited - 2022 (10) TMI 740 - NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH, an application was filed by the State Bank of India, as a financial creditor, under Section 7 of the Code for the initiation of corporate insolvency resolution process against Ushdev International Limited, the corporate debtor. The said application was admitted by the National Company Law Tribunal (‘NCLT’ for short) on 14.05.2018. The NCLT appointed the respondent No. 2 as Interim Resolution Professional, later confirmed as Resolution Professional.
The respondent invited claims from the creditors of the Corporate Debtor. The claims were analysed and admitted the claim as per the provisions of the Code and the Regulations made thereunder. A Committee of Creditor was formed. The Resolution Professional issued Form G inviting expression of interest on 24.07.2018, the last date of which is fixed on 20.08.2018. Three resolution applicants submitted their resolution plans but the same were rejected by the Committee of Creditors.
Subsequently, the respondent No. 1 submitted its resolution plan. It submitted bank guarantee of Rs.5 crores. However the same was not approved by the Committee of Creditors. The Committee of Creditor in its meeting held on 06.02.2019 directed the Resolution Professional to file an application for the liquidation of the corporate debtor. The Resolution Professional filed an application before the NCLT for the liquidation of the Corporate Debtor on 07.02.2019. The same was dismissed by the NCLT. However, the NCLT approved the resolution plan of respondent No.1.
The financial creditors filed appeal before the NCLAT against the order of NCLT approving the resolution plan of respondent No. 1. The respondent No. 1 filed an application before NCLAT expressing its willingness to improve the resolution plan. The NCLAT directed the committee of creditors to consider the revised resolution plan of the respondent No.1.
The Committee of Creditors considered the revised plan of the respondent No. 1 and approved the same with the required majority. The respondent No. 1 provided a Performance Bank Guarantee of Rs.11.50 crores and bid bank guarantee of Rs.5 crores. The resolution professional filed an application before the NCLT for the approval of the resolution plan.
ICICI bank was the dissenting creditor and filed an application before NCLT seeking clarification on enforceability of excluded securities and treatment of its dissenting vote. On 03.02.2022 the NCLT approved the resolution plan submitted by the respondent No.1 and held that the excluded assets are not enforceable and directed the ICICI bank’s dissenting vote as ‘assent’.
After the approval of the resolution plan, the Interim Monitoring Agency (‘IMA’ for short) was constituted two members of Committee of Creditors, two members of respondent No.1 and the Resolution Professional. The Agency convened its meeting now and then. The approval of SEBI and RBI has not been obtained by the respondent No.1. The Agency directed the respondent No. 1 to expedite the necessary approvals from the Regulatory Authorities and actions.
The NCLT, on the application of the Agency extended the period for 6 months and another extension for 6 months. The members of the financial creditors directed the respondent No. 1 to get the approvals of the Regulatory Authorities within one year from the date of approval of the Resolution Plan by the NCLT. Respondent No.1 responded on 31.03.2023 stating that the Revised Resolution Plan could not be implemented until RBI approvals were obtained. On 13.04.2023, the SBI sent another letter highlighting inordinate delays in obtaining all necessary approvals within one year from the approval of Resolution Plan which was causing losses to the stakeholders. On the file of an application by the appellant the NCLT directed respondent No.1 and IMA to approach RBI and request for earlier approval by RBI. On 14.09.2023, the IMA decided to submit Form FC with disclaimers to the RBI as there were certain reporting non-compliances by the erstwhile management of the Corporate Debtor.
On 08.12.2023, this Tribunal passed an Implementation Order directing Respondent No.1 to implement the Plan within 2 months, holding that compliance obligation rests with Respondent No.1 and the IMA shall cooperate. The implementation order was challenged by the respondent No. 1 before NCLAT. In the meantime, the respondent No.1 sent an email to the Applicant on 19.12.2023 regarding certain undertakings and clarifications sought by its financier, ANZA Capital Investment L.L.C. The same was considered by the IMA in its meeting held on 11.01.2024. SBI and other lenders clarified that no such undertaking could be given. The respondent No. 1 assured that it would pay the entire amount in single payment. Further the respondent No. 1 sought extension of implementation of the resolution plan.
The bank and other lenders in Joint Lenders Forum unanimously held that the respondent No. 1 was in breach of the implementation plan. Therefore, it was decided to adjust the Performance Bank credit of Rs.11.50 crores and Bid guarantee of Rs. 5 crores. The said decision was informed to the respondent No.1 through email. In case of non-implementation of the resolution plan the respondent, no.1 was informed that the bank guarantee amount would be adjusted. The delay in payments of funds under the Revised Resolution Plan is an opportunity loss for the stakeholders of the Corporate Debtor. This also results in interest loss of approximately Rs.36.70 lakhs per week to the financial creditors. Hence, it has been decided that the Corporate Debtor be liquidated at the earliest to prevent further deterioration of the assets and losses to the stakeholders. In view of the above the appellant and other lenders was of the opinion that there is no justification for Respondent No.1 to control day-to-day affairs. Given the confidence of the erstwhile CoC in Respondent No.2, it is just and proper that the Resolution Professional be entrusted with interim management.
The NCLT observed that despite approval of the Revised Resolution Plan by this Tribunal on 03.02.2022, as modified by the NCLAT, the same has remained unimplemented for over three years due to the SRA’s failure to obtain necessary regulatory approvals and funds from the foreign investor. Respondent No.1 has failed to obtain mandatory statutory approvals within the stipulated time in contravention of Section 31(4) of the Code and Clause 3.1 of the RFRP. Despite multiple extensions and directions of this Tribunal, the Resolution Applicant has been seeking repeated adjournments citing pending RBI approvals and financing arrangements, leading to breach of Plan obligations. Accordingly, the lenders invoked the Bid Bond Guarantee of Rs.5 crores and the Performance Bank Guarantee of Rs.11.50 crores submitted by the Successful Resolution Applicant.
The NCLT further observed that IMA directed the respondent No. 1 to expedite submissions to RBI so as to obtain pending RBI approvals; deciding to submit Form FC with disclaimers to RBI as there were certain reporting non-compliances by the erstwhile management of the Corporate Debtor; authorizing the Corporate Debtor’s representative to the sign the Form FC on behalf of the Corporate Debtor and submit the same to the RBI and appointing a FEMA Expert etc., besides carrying out and ensuring various statutory and regulatory compliances, engaging or continuing services of legal professionals/ erstwhile RP/ Company Secretary/Tax Auditor etc. However, it is found that despite persistent efforts by the IMA in this regard, the SRA failed to obtain necessary RBI and other regulatory approvals.
The NCLAT also upheld the order of the NCLT for implementation of the resolution plan. The appeal filed by the respondent No.1 was dismissed by NCLAT and directed the NCLT to decide the application for the liquidation of the corporate debtor. The NCLT held that the issue of non-implementation of the Resolution Plan having now attained finality, we have no hesitation in holding that the initiation of Liquidation Process of the Corporate Debtor is the only recourse left open at this stage. The NCLT gave directions for the liquidation of the corporate debtor. The NCLT appointed the Resolution Professional as liquidator. On the appointment of the Liquidator, all powers of the board of directors, key managerial personnel etc. including administrative control of the Corporate Debtor hitherto handed over to representative of Respondent No.1/SRA shall cease to have effect and shall be vested in the Liquidator. The NCLT directed the Liquidator to proceed with the process of liquidation in the manner as laid down in Chapter III of Part II of the Code.