2022 (1) TMI 1180 - AT - Insolvency and Bankruptcy

Tribunal grants 30-day extension for payment of Rs. 30 crores to Financial Creditors. Liquidation may follow non-compliance.

Tricounty Premier Hearing Service Inc Versus State Bank of India, Axis Bank Limited, Sundaresh Bhat

The Tribunal allowed the appeal, granting a 30-day extension for the Appellant to make the payment of the balance amount of Rs. 30 crores to the Financial ... Seeking extension of four weeks’ time for making payment - Appellant failed to adhere to its commitment in Resolution Plan - HELD THAT:- There is no dispute that even after extension granted by Adjudicating Authority till 31.10.2021 the Appellant could not make the payment and filed another Application No.115 of 2021 for granting extension of 30 days for making payment, which came to be rejected, giving rise to this Appeal. The Application No.115 of 2021 has been rejected by the impugned order on 24th November, 2021. The Adjudicating Authority has referred to its order dated 12th April, 2021 and has observed that Appellant has failed to comply its order dated 12th April, 2021 and last opportunity was granted till 31.10.2021, hence, it has failed to comply the order and conduct of the Successful Resolution Applicant is completely lacking in its bona fide - There is no dispute that Appellant failed to adhere to its commitment in Resolution Plan and also failed to comply order dated 12th April, 2021 and 20th September, 2021. The extension of 30 days was sought by the Appellant by its Application dated 29th October, 2021. The Adjudicating Authority ought to have adverted to the grounds and reasons given in the Application to find out as to whether there is any ground to grant any extension of time of 30 days as prayed for. It is well settled that time line in IBC proceedings has its salutary value and Resolution Applicant has to adhere to its commitment as made in the Resolution Plan, when it is approved by the Adjudicating Authority. Whether Adjudicating Authority erred in exercising its jurisdiction in refusing to grant extension by 30 days as prayed by Resolution Applicant or not? - HELD THAT:- The judgment of the Hon’ble Supreme Court in the EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED & ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED & ORS. [2021 (9) TMI 672 - SUPREME COURT] thus, does not support the submission of learned Counsel for the State Bank of India that Adjudicating Authority has no jurisdiction to extend the time for complying the financial obligations in the Resolution Plan. The facts and materials on record as noted clearly indicate that although the Appellant had failed to make payment as per Resolution Plan, but it is not a case that efforts has not been made by the Appellant to make payment. Admittedly, payment of ₹ 15 crores out of ₹ 45 crores to the Financial Creditor has already been made apart from other payments - by granting 30 days’ time to Appellant to comply its all financial obligations in Resolution Plan and make payment of balance of ₹ 30 crores shall not cause any prejudice to Financial Creditors, who have already been denied the said payment for a long period of time. In event, the Appellant is unable to make the payment as prayed for, it shall be open to proceed with the liquidation, no option being left thereafter. The order dated 24th November, 2021 passed by the Adjudicating Authority is set aside and grant 30 days’ time to the Appellant from today to make the payment of balance amount of ₹ 30 crores to the Financial Creditors on or before 20th February, 2022, failing which, it shall be open to proceed with the liquidation of Corporate Debtor - Appeal allowed. Issues Involved:1. Extension of time for payment by the Successful Resolution Applicant.2. Compliance with the terms and conditions of the Resolution Plan.3. Objection to the maintainability of the Appeal.4. Financial commitments and payments made by the Resolution Applicant.5. Impact of COVID-19 pandemic on the compliance of the Resolution Plan.6. Jurisdiction of the Adjudicating Authority to extend time for compliance.Issue-wise Detailed Analysis:1. Extension of Time for Payment by the Successful Resolution Applicant:The Successful Resolution Applicant filed an appeal challenging the order dated 24th November 2021 by the National Company Law Tribunal (NCLT), Cuttack Bench, which rejected their application for an extension of four weeks to make the required payment. The appeal was taken up on 09.12.2021, and an additional affidavit was filed detailing the payments made and the sources of funds for future payments, including an 'in-principle offer' from Kotak Mahindra Bank for a term loan of Rs. 20 crores.2. Compliance with the Terms and Conditions of the Resolution Plan:The Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor. The Resolution Plan, approved by the Committee of Creditors (CoC) and the Adjudicating Authority, required payments totaling Rs. 45 crores to Financial Creditors. The Appellant made partial payments but failed to meet the schedule outlined in the Resolution Plan. Consequently, the State Bank of India filed for liquidation due to non-compliance with the terms of the approved Resolution Plan.3. Objection to the Maintainability of the Appeal:The State Bank of India raised objections regarding the maintainability of the appeal, questioning the authority of Rajesh Kumar Sinha to file the appeal on behalf of Tricounty Premier Hearing Service Inc. through its subsidiary Tri County Holding Pvt. Ltd. The Tribunal found that Tri County Holding Pvt. Ltd., an Indian subsidiary managing the Corporate Debtor, was authorized to represent the Appellant and had been making payments under the Resolution Plan. Therefore, the appeal was deemed maintainable.4. Financial Commitments and Payments Made by the Resolution Applicant:The Resolution Applicant made an upfront payment of Rs. 12 crores and an additional Rs. 3 crores in March 2021. Payments to unsecured Financial Creditors, Operational Creditors, employees, workmen, and statutory dues were partially made. However, the Applicant failed to comply with the payment schedule and sought extensions. The Adjudicating Authority granted extensions, but the Applicant still could not meet the deadlines, leading to the rejection of further extension requests.5. Impact of COVID-19 Pandemic on the Compliance of the Resolution Plan:The Applicant argued that the COVID-19 pandemic affected their ability to comply with the financial obligations. However, the Adjudicating Authority observed that the default occurred before the pandemic and could not be used as an excuse. Despite this, the Tribunal considered the pandemic's impact on businesses and noted the Applicant's efforts to secure funds and make payments.6. Jurisdiction of the Adjudicating Authority to Extend Time for Compliance:The Tribunal referred to the judgment in Ebix Singapore Private Limited vs. CoC Educomp, which emphasized that the Adjudicating Authority cannot create procedural remedies with substantive outcomes. However, the Tribunal distinguished this case from the present one, noting that the Applicant sought a short extension to comply with the financial obligations rather than modifying or withdrawing the Resolution Plan. The Tribunal found that granting a 30-day extension would not prejudice the Financial Creditors and allowed the appeal, setting aside the order dated 24th November 2021.Conclusion:The Tribunal allowed the appeal, granting a 30-day extension for the Appellant to make the payment of the balance amount of Rs. 30 crores to the Financial Creditors by 20th February 2022. Failure to comply would result in proceeding with the liquidation of the Corporate Debtor. No costs were awarded.