Execution of Lease Not a Condition Precedent for Approval

The Adjudicating Authority (AA) found that the execution of a long-term lease for Ace Complex Land was not a condition precedent for approving the Resolution Plan but only for its effective date. The AA dismissed the appeal, stating that the appellant's challenges to the approved plan were unjustified attempts to evade obligations. The appellant was ordered to pay costs of Rs. 1 lakh.

---

---

Issues Involved:
1. Jurisdiction of the Adjudicating Authority (AA) in modifying the Resolution Plan.
2. Condition precedent of execution of a long-term lease for Ace Complex Land.
3. Requirement of prior written consent from the mortgagee (Vistra).
4. Submission of Performance Bank Guarantee (PBG) and issuance of Letter of Intent (LOI).
5. Implementation of the Resolution Plan and obligations of the Appellant.
6. Involvement and rights of Vistra and Kotak Mahindra Bank.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Adjudicating Authority (AA) in modifying the Resolution Plan:
The appellant contended that the AA exceeded its jurisdiction by declaring certain conditions of the Resolution Plan as infructuous or redundant, which affected the feasibility and viability of the plan. The appellant argued that the AA could either accept or reject the Resolution Plan in whole but could not modify it. The AA's scope of inquiry under Section 31 of the Insolvency and Bankruptcy Code (I&B Code) is limited and does not extend to altering the terms of the Resolution Plan.

2. Condition precedent of execution of a long-term lease for Ace Complex Land:
The appellant argued that the execution of a long-term lease (20 years) for Ace Complex Land with acceptable terms, including the prior written consent of Vistra, was a condition precedent for the implementation of the Resolution Plan. The AA, however, concluded that this requirement was not a condition precedent for the approval of the Resolution Plan but only for its effective date. The AA's decision was based on the understanding that the necessary steps for implementation, including the execution of the lease, were to be taken after the approval of the Resolution Plan and not before.

3. Requirement of prior written consent from the mortgagee (Vistra):
The appellant emphasized that the prior written consent of Vistra, the mortgagee of Ace Complex Land, was crucial for the execution of the lease. The AA noted that the 2020 lease had been executed without obtaining Vistra's consent. However, the AA determined that the issue of the validity of the lease deed and the rights of the third party could be left open, and the implementation of the Resolution Plan could proceed. The AA directed the appellant to negotiate with Vistra to obtain their no objection.

4. Submission of Performance Bank Guarantee (PBG) and issuance of Letter of Intent (LOI):
The appellant argued that the AA erred in directing the appellant to furnish a PBG of Rs. 150 crores despite the I&B Code mandating the issuance of LOI and PBG as pre-conditions for filing an application for approval of the Resolution Plan. The AA concluded that the requirement of LOI was not a condition precedent for filing the application for approval of the Resolution Plan and was subject to the directions of the Hon'ble Supreme Court. The AA found that the appellant had breached the Resolution Plan by not submitting the balance PBG and had failed to nominate a representative to the Interim Monitoring Committee (IMC).

5. Implementation of the Resolution Plan and obligations of the Appellant:
The AA noted that the appellant, as the Successful Resolution Applicant, was bound to take necessary steps for the implementation of all provisions of the Resolution Plan. The appellant had failed to comply with the requirement of submitting the balance PBG, initiating the process for seeking approval of the Competition Commission of India (CCI), and nominating a representative to the IMC. The AA concluded that the appellant's non-compliance justified the invocation of the PBG by the Committee of Creditors (COC).

6. Involvement and rights of Vistra and Kotak Mahindra Bank:
Vistra sought impleadment as a necessary party, arguing that any modification of the impugned order concerning the subject land could affect its legal rights as a mortgagee. The AA found that Vistra was not a party to the proceedings arising out of the application for approval of the Resolution Plan and had not filed an appeal against the impugned order. The AA concluded that Vistra could not seek impleadment in the appeal proceedings. Similarly, the intervention sought by Kotak Mahindra Bank was not permitted as it was beyond the scope of examining the legality of the Resolution Plan.

Conclusion:
The AA concluded that the execution of the long-term lease for Ace Complex Land with acceptable terms was not a condition precedent for the approval of the Resolution Plan but only for its effective date. The AA found that the appellant's attempts to challenge the approved Resolution Plan were unwarranted and an effort to withdraw from its obligations. The appeal was dismissed, and costs of Rs. 1 lakh were imposed on the appellant.

---