2018 (12) TMI 1631 - Tri - Insolvency and Bankruptcy

Tribunal allows withdrawal of application, imposes cost on Liberty House, directs matter to COC

The Tribunal allowed the withdrawal of IA No. 823(PB)/2018, imposed a cost of Rs. 1,00,000 on Liberty House to be paid to the Corporate Debtor, and ... Approval of the Resolution Plan - performance of bank guarantee - HELD THAT:- The prayer made by the applicant deserves to be accepted. It has come on record that performance bank guarantee is a sine qua non as has been rightly contended by Mr. Vashisth, learned Senior counsel for the applicant-resolution professional. The 'Process Note' dated 18.05.2018 as modified on 21.06.2018, in categorical terms deals with performance bank guarantee. Within ten business days of the date of issuance of LOI, the Liberty House being successful Resolution Plan applicant was to provide performance bank guarantee of ₹ 60, 00, 00,000/- in favour of State Bank of India which was the Bank on behalf of the COC. Even the format for furnishing the performance bank guarantee has been provided in the 'Process Note' itself. Clause 1.9.3 makes it patently clear that non-submission of performance guarantee by the successful applicant as per the requirement of Clause 1.9. 1 would lead to rendering the Resolution Plan by such successful applicant as non-responsive as the resolution professional would be entitled to reject the Resolution Plan and cancel the LOI. It is pertinent to mention that after the approval of the Resolution Plan on 30.08.2018 by the COC, the LOI was issued on 30.08.2018 itself when by e-voting COC has approved the Resolution Plan. It is also pertinent to notice that the terms and conditions for submission of binding resolution proposal for company which makes it clear by Clause 1.11.2 that the Liberty House was under obligation to fulfil the terms of the 'Process Note'. In respect of M/S. Amtek Auto Ltd. and M/ s. Adhunik Metaliks Limited again Liberty House has presented its Resolution Plans. It is represented that the Resolution Plans in both the cases have been approved and in the aforesaid two cases also the Liberty House is dragging its feet. We are unable to accept the contention advanced on behalf of the Liberty House that litigation is pending, therefore, no notice of such a fact could have been taken by the COC in its meeting dated 19.11.2018 As prayed the period from 04.09.2018 till date is excluded from the CIR Process - HELD THAT:- The act of the court shall harm no man - Actus Curiae neminem gravabit and that the aforesaid maxim is firmly rooted in our jurisprudence. Therefore, the period from 04.09.2018 till today deserves to be excluded from the CIR Process period of 270 days. The period of 270 days in any case is yet to come to an end. Therefore, the resolution professional may place the matter before the COC for further decision in accordance with law. Issues Involved:1. Withdrawal of IA No. 823(PB)/20182. Requirement of Performance Bank Guarantee3. Conduct of Liberty House and its implications4. Exclusion of time period from CIR ProcessIssue-wise Detailed Analysis:1. Withdrawal of IA No. 823(PB)/2018:The application was filed by the Resolution Professional, authorized by the Committee of Creditors (COC), to withdraw IA No. 823(PB)/2018, which sought approval of the Resolution Plan submitted by Liberty House. The Liberty House, initially declared as the H-1 Bidder, later showed reluctance to proceed with its Resolution Plan, leading the COC to direct the Resolution Professional to file for withdrawal.2. Requirement of Performance Bank Guarantee:The Liberty House opposed the withdrawal application, arguing that the Resolution Plan approved by the COC did not include a clause for furnishing a performance bank guarantee. However, the Resolution Professional contended that the performance bank guarantee was a sine qua non, as stipulated in the 'Process Note' dated 18.05.2018, modified on 21.06.2018. Clause 1.9.1 required the successful applicant to furnish a performance bank guarantee of INR 60,00,00,000 within ten business days of the issuance of the Letter of Intent (LOI). Clause 1.9.3 stated that non-submission of the performance bank guarantee would render the Resolution Plan non-responsive, allowing the Resolution Professional to reject the plan and cancel the LOI.3. Conduct of Liberty House and its Implications:Despite the COC relaxing the requirement for the performance bank guarantee, the Liberty House refused to proceed with the Resolution Plan, demonstrating a lack of commitment and seriousness. This conduct was viewed unfavorably, as it disrupted the time-bound Corporate Insolvency Resolution Process (CIRP) and attracted adverse comments. The Liberty House's similar behavior in other cases, such as M/S. Amtek Auto Ltd. and M/S. Adhunik Metaliks Limited, further questioned its bona fides.4. Exclusion of Time Period from CIR Process:The application also prayed for the exclusion of the period from 04.09.2018 till the date of the order from the CIRP period of 270 days. The Tribunal referenced the Supreme Court's judgment in Arcelormittal India Private Limited v. Satish Kumar Gupta & Ors., which upheld the maxim 'Actus Curiae neminem gravabit' (the act of the court shall harm no man). Consequently, the period from 04.09.2018 till the date of the order was excluded from the CIRP period.Conclusion:The Tribunal allowed the withdrawal of IA No. 823(PB)/2018, imposed a cost of Rs. 1,00,000 on Liberty House to be paid to the Corporate Debtor, and directed the Resolution Professional to place the matter before the COC for further decision. The applications were disposed of accordingly.