2021 (2) TMI 1051 - SC - Insolvency and Bankruptcy

Supreme Court dismisses Contempt Petition against Deccan Value Investors LP (DVI)

The Supreme Court dismissed the Contempt Petition against Deccan Value Investors LP (DVI) for violating a court order related to an insolvency resolution ... Contempt Jurisdiction - Approval of Resolution Plan - whether recourse to the contempt jurisdiction is valid and whether it should be exercised in the facts of this case? - HELD THAT:- Undoubtedly, the conduct of DVI has not been bona fide. The extension of time in the course of the judicial process before this Court enures to the benefit of DVI as a resolution applicant whose proposal was considered under the auspices of the directions of the Court. DVI attempted to resile from its obligations and a reading of its application which led to the passing of the order of this Court dated 18 June 2020 will leave no doubt about the fact that DVI was not just seeking an extension of time but a re-negotiation of its resolution plan after its approval by the CoC. Then again, despite the order of this Court dated 18 June 2020 rejecting the attempt of DVI, it continued to persist in raising the same pleas within and outside the proceedings before the NCLAT. The conduct of DVI is lacking in bona fides. The issue however is whether this conduct in raising the untenable plea and in failing to adhere to its obligations under the resolution plan can per se be regarded as a contempt of the order of this Court dated 18 June 2020. DVI was undoubtedly placed on notice of the order that should it proceed in such terms, it would invite the invocation of the contempt jurisdiction. Having said that, it is evident that the order of this Court dated 18 June 2020 rejected the IA moved by DVI and as a necessary consequence, the basis on which the reliefs in the IA were sought. Therefore correctly, it has been now stated on behalf of the DVI that it will not set-up a plea of force majeure in view of the dismissal of its IA on 18 June 2020. However lacking in bona fides the conduct of DVI was, we must be circumspect about invoking the contempt jurisdiction as setting up an untenable plea should not in and by itself invite the penal consequences which emanate from the exercise of the contempt jurisdiction. Likewise, the default of DVI in fulfilling the terms of the resolution plan may invite consequences as envisaged in law. On the balance, we are of the considered view that it would not be appropriate to exercise the contempt jurisdiction of this Court - Since DVI is in appeal before the NCLAT, we express no opinion on the merits of the submission. The NCLAT will take a view on the tenability and merits of the submission of DVI that the conditions precedent under the resolution plan have not been fulfilled after hearing the parties. This is not an issue which arises before the Court in the present proceedings either upon the application for rectification moved by DVI or the contempt petition moved by the CoC. There is no merit in the application for rectification moved in appeal shall stand dismissed. Issues Involved:1. Contempt Petition against Deccan Value Investors LP (DVI) for violation of a Supreme Court order.2. Application for rectification of a Supreme Court order by DVI.Issue-wise Detailed Analysis:1. Contempt Petition Against DVI:Background:The Committee of Creditors (CoC) of AMTEK Auto Limited filed a Contempt Petition against DVI for allegedly violating a Supreme Court order dated 18 June 2020. This order was related to the approval and implementation of DVI's resolution plan under the Insolvency and Bankruptcy Code (IBC).Court Proceedings and Findings:- The CoC's resolution plan was initially approved by the National Company Law Tribunal (NCLT) and later contested by DVI due to the financial impact of COVID-19.- Despite the Supreme Court's rejection of DVI's application for modification on 18 June 2020, DVI continued to delay the implementation of the resolution plan by raising the plea of force majeure and failing to submit the required performance bank guarantee.- The Supreme Court noted that DVI's conduct was contumacious as it sought to evade its obligations under the approved resolution plan.- However, the Court decided not to exercise its contempt jurisdiction, emphasizing that setting up an untenable plea should not per se invite penal consequences.- The Court directed DVI not to plead force majeure in the pending appeal before the National Company Law Appellate Tribunal (NCLAT).Conclusion:The Contempt Petition was dismissed, but DVI was explicitly barred from raising the force majeure plea in the NCLAT proceedings.2. Application for Rectification by DVI:Background:DVI filed an application for rectification of the Supreme Court's order dated 18 June 2020, claiming factual misconceptions in the order.Court Proceedings and Findings:- DVI argued that the order incorrectly suggested that it sought to withdraw its resolution plan and that it had previously sought extensions of time.- The Supreme Court analyzed the record and found that DVI's application indeed indicated an intent to renegotiate the resolution plan due to the impact of COVID-19, which contradicted its obligations under the approved plan.- The Court emphasized that the judicial order's record speaks for itself and cannot be reinterpreted to suit DVI's claims.- The application for rectification was found to be an attempt by DVI to renege on its commitments and was dismissed.Conclusion:The application for rectification was dismissed, reaffirming the Supreme Court's original order.Final Directions:1. DVI's application for rectification was dismissed.2. The Contempt Petition was dismissed, but DVI was barred from pleading force majeure in the NCLAT.3. The NCLAT was directed to dispose of DVI's appeal against the NCLT's approval of the resolution plan within one month.Summary:The Supreme Court dismissed both the Contempt Petition against DVI and DVI's application for rectification of the Court's order. DVI was prohibited from raising the force majeure plea in its appeal before the NCLAT, which was directed to expedite the hearing and disposal of the appeal.