2020 (8) TMI 384 - AT - Insolvency and Bankruptcy

Tribunal Upholds Resolution Plan, Stresses Adherence to Prevent Liquidation

The Tribunal allowed the appeal against the impugned order for exceeding jurisdiction but upheld the order directing the Appellant to implement the ... Jurisdiction to hear appeal - Judicial Indiscipline - Monitoring of execution of Resolution plan as approved - it is the plea of the Appellant that the erstwhile Bench had the requisite jurisdiction to hear and reserve the matter on the day on which it was heard - it is the contention of the Appellant, when the erstwhile Bench of ‘NCLT’, Mumbai had reserved orders, the reconstituted Bench No. II, Mumbai had acted arbitrarily and in excess of its jurisdiction had stayed the proceedings, where the orders were reserved by the co-ordinate Bench HELD THAT:- Section 419(1) of the Companies Act, 2013 speaks of constitution such number of Benches of the Tribunal, as may, by notification, be specified by the Central Government etc. As a matter of fact, ‘Constitution of Benches’ and ‘Assignment of Cases’ is left to the subjective administrative discretion of the President / Chairman of a Tribunal. Section 420(1) of the Companies Act, 2013 says that ‘the Tribunal may, after giving the parties, to any proceeding before it, a reasonable opportunity of being heard pass such orders thereon as it thinks fit’. Needless to state that the ‘Tribunal’ is to ascribe reasons for arriving at a conclusion, of course resting upon the materials on record. The Hon’ble President of ‘NCLT’, New Delhi, (in exercise of the powers conferred u/s 419 of the Companies Act, 2013) on 29.1.2020 had re-constituted the Benches at ‘NCLT’ Mumbai for the purpose of exercising and discharging the functions assigned by the statute which was in partial modification of the order dated 25.07.2020. It is to be remembered the principle of “qundo aliquid prohibetur, prohibetur et omne per quod devenitur ad illud” is that an ‘Authority is not to be permitted to evade a Law by shift or contrivance’. In as much as the impugned order which was heard by the erstwhile Bench on 30.01.2020 wherein orders were reserved, until the next date of hearing i.e. on 28.02.2020 is beyond the jurisdiction of the re-constituted Bench of ‘NCLT’ Court No. II, Mumbai, the said order with a view to prevent an aberration of justice and with a view to secure the ends of justice, is set aside by this Tribunal, of course in the interest of our institutional justice delivery system, with a benign hope and trust that such slipup will not recur again in future - Appeal allowed. Jurisdiction of Monitoring Agency - Appellant submits that the ‘Monitoring Agency’ does not have the ‘Locus-Standi’ to file MA No.249/2020 (MA No. 1) in which the impugned order was passed on 18.2.2020 - grievance of the Appellant is that the ‘Monitoring Agency’ had not even consulted with the ‘Steering Committee’ before filing MA No. 249/2020 and there was no resolution on record approving such an action - HELD THAT:- In the instant case, it cannot be brushed aside that nearly six months have gone by, from the order of approving the ‘Resolution Plan’ dated 25.11.2019 of the Appellant and the same is yet to be implemented by the Appellant till date. In the ‘Preliminary Reply Affidavit’, the Appellant / Respondent at paragraph 6 had stated that it had always shown its willingness and ability to execute the approved ‘Resolution Plan’ etc. As such, this Tribunal is of the earnest opinion that the Appellant / Respondent cannot avoid/evade/ or circumvent its ‘solemn responsibility’ to implement the ‘Resolution Plan’ unconditionally in stricto sense of the term, without any further procrastination. This Tribunal taking note of the facts and circumstances of the present case which float on the surface in a conspectus fashion and also keeping in mind that the ‘upfront payment’ was not made by the Appellant as well as the ‘Non-Convertible Debentures’ of ₹ 480/- Crores in favour of ‘Financial Creditors’ was not issued; comes to an inevitable and irresistible conclusion that the ‘Adjudicating Authority’ had rightly directed the Appellant / ‘Resolution Applicant’ to make: (a) payment of upfront amount of ₹ 420/- Crores which was already due consequent to the completion of 30 ‘Business Days’ from the date of approval of the ‘Resolution Plan’ by it; (b) the issuance of ‘Non-Convertible Debentures’ of ₹ 480/- Crores in favour of the ‘Financial Creditors’; (c) to deposit the balance performance guarantee of ₹ 48/- Crores within 90 days of the approval of the ‘Resolution Plan’ by granting a week’s time and resultantly allowed the miscellaneous application - Appeal dismissed. Issues Involved:1. Jurisdiction and Judicial Discipline2. Implementation of the Resolution Plan3. Locus Standi of the Monitoring Agency4. Timeliness and Validity of the Miscellaneous Application5. Obligations and Responsibilities of the Successful Resolution ApplicantIssue-wise Detailed Analysis:1. Jurisdiction and Judicial Discipline:The Appellant contended that the reconstituted NCLT Mumbai Bench acted arbitrarily and exceeded its jurisdiction by staying the proceedings in MA No. 249/2020, which had already been heard and reserved for orders by the erstwhile Bench. The Tribunal noted that a coordinate Bench cannot stay an order reserved by another coordinate Bench, emphasizing judicial discipline and propriety. It cited precedents from the Supreme Court, reinforcing that a Bench must follow the decision of an earlier coordinate Bench unless referred to a larger Bench.2. Implementation of the Resolution Plan:The Appellant argued that the Resolution Plan was to be implemented within 30 business days from the date of approval by the Adjudicating Authority. Despite the approval on 25.11.2019, the Appellant delayed implementation, leading to the Monitoring Agency filing MA No. 249/2020. The Tribunal found that the Appellant failed to make the upfront payment of Rs. 420 crores and issue Non-Convertible Debentures worth Rs. 480 crores as per the approved plan. The Tribunal directed the Appellant to implement the plan unconditionally and without further delay.3. Locus Standi of the Monitoring Agency:The Appellant challenged the Monitoring Agency's authority to file MA No. 249/2020, arguing it lacked approval from the Steering Committee. The Tribunal dismissed this argument, stating the Adjudicating Authority had granted liberty to file miscellaneous applications for implementing the Resolution Plan. The Monitoring Agency, along with the Resolution Professional, was deemed responsible for ensuring successful implementation.4. Timeliness and Validity of the Miscellaneous Application:The Appellant claimed MA No. 249/2020 was filed prematurely. However, the Tribunal noted that the Appellant was required to pay the upfront consideration within 30 business days from the approval date, which ended on 10.01.2020. The Monitoring Agency's application on 22.01.2020 was thus timely and valid. The Tribunal emphasized that the Appellant's reliance on the pending appeal in Company Appeal (AT)(Ins.) No. 524/2019 was misplaced.5. Obligations and Responsibilities of the Successful Resolution Applicant:The Appellant argued that cash balances and accruals should be adjusted against the upfront payment. The Tribunal rejected this, stating the Resolution Plan explicitly mentioned that cash balances up to the implementation date would accrue to the Financial Creditors. The Appellant's failure to comply with the plan's terms, including making the upfront payment and issuing Non-Convertible Debentures, was highlighted. The Tribunal underscored the importance of timely implementation to avoid liquidation and value deterioration.Conclusion:The Tribunal allowed the appeal against the impugned order dated 12.02.2020, setting it aside for being beyond jurisdiction. However, it dismissed the appeal against the order dated 18.02.2020, directing the Appellant to implement the Resolution Plan unconditionally. The Tribunal emphasized judicial discipline, the responsibilities of the Successful Resolution Applicant, and the necessity of timely implementation to uphold the integrity of the insolvency resolution process.