Tribunal Rejects Extinction of Claims, Orders Supplementary Resolution Plan for Operational Creditors

The Tribunal refused to grant prayers seeking the extinguishment of claims and termination of contracts of Operational Creditors/Capex Creditors. It directed the Board of ITPCL to consider a supplementary Resolution Plan addressing these creditors' claims, requiring approval by the New Board and the Adjudicating Authority for a fair and reasonable resolution of the admitted claims.

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Issues Involved:
1. Approval of ITPCL Restructuring Plan.
2. Objections by Operational Creditors/Capex Creditors regarding extinguishment of claims.
3. SEPCO III Electric Power Construction Co. Ltd. and Shandong Tiejun Electric Power Engineering Company Limited's claims.
4. China Datang Technologies and Engineering Co. Ltd. and Datang Technologies & Engineering India Pvt Ltd.'s claims.
5. Involvement of Punjab National Bank and other lenders.
6. Legal implications of Forensic Audit and PMLA proceedings.

Detailed Analysis:

1. Approval of ITPCL Restructuring Plan:
ILFS Ltd. filed I.A. No. 59 of 2021 seeking approval for the restructuring proposal of IL&FS Tamil Nadu Power Company Ltd. (ITPCL) as per the term sheet from the Consortium of Banks, aiming to convert ITPCL from 'Amber' to 'Green'. The restructuring plan was prepared in accordance with the RBI Circular dated 07.06.2019 titled ‘Prudential Framework for Resolution of Stressed Assets'. The application detailed the financial history of ITPCL and the need for restructuring due to the lack of binding bids in a public sale process. The Tribunal had previously allowed prayers (a) and (b) of the application, approving the restructuring proposal and implementation of term sheets with various banks.

2. Objections by Operational Creditors/Capex Creditors:
The Tribunal granted time to Operational Creditors affected by prayers (c) and (d) to file objections. SEPCO III Electric Power Construction Co. Ltd., Shandong Tiejun Electric Power Engineering Company Limited, China Datang Technologies and Engineering Co. Ltd., and Datang Technologies & Engineering India Pvt Ltd. filed objections and impleadment applications. The objections centered around the extinguishment of their claims and termination of contracts as proposed in the restructuring plan. The Tribunal noted that these creditors were not initially made parties to the application, and their claims had been admitted by the Claim Management Advisor.

3. SEPCO III Electric Power Construction Co. Ltd. and Shandong Tiejun Electric Power Engineering Company Limited's claims:
SEPCO and Shandong were engaged as EPC Contractors by ITPCL and had completed their contractual obligations, with ITPCL issuing Provisional Acceptance Certificates. Despite admitted claims by the Claim Management Advisor, ILFS sought to extinguish their claims citing restructuring. The Tribunal noted that adverse findings against SEPCO and Shandong in the Forensic Audit Report and Transaction Review Report were under investigation by the Enforcement Directorate, with a Provisional Attachment Order under PMLA against shares of A S Coal. However, no assets of SEPCO or Shandong were attached, and the Freezing Order issued by the Investigating Officer was not confirmed by the Adjudicating Authority.

4. China Datang Technologies and Engineering Co. Ltd. and Datang Technologies & Engineering India Pvt Ltd.'s claims:
CDTE and DTEI, engaged for developing a wet limestone-based FGD plant, had their claims admitted by the Claim Management Advisor. They objected to the extinguishment of their claims and termination of contracts proposed in the restructuring plan. The Tribunal noted that no adverse findings were reported against CDTE and DTEI, and their admitted claims were to be dealt with appropriately in a Resolution Plan.

5. Involvement of Punjab National Bank and other lenders:
Punjab National Bank, as the lead bank for the lenders of ITPCL, supported the restructuring plan and sought impleadment. The restructuring plan, approved by the Consortium of Lenders, was found to be in accordance with the RBI Circular dated 07.06.2019, and no objections were raised against it.

6. Legal implications of Forensic Audit and PMLA proceedings:
The Forensic Audit and Transaction Review Report indicated adverse findings against SEPCO and Shandong, leading to an application under Section 66 of the I&B Code. However, the Tribunal noted that the Freezing Order under PMLA was not confirmed by the Adjudicating Authority, and the Provisional Attachment Order only attached shares of A S Coal. The Tribunal emphasized that pending proceedings under PMLA could not be a ground for withholding payments to Operational Creditors/Capex Creditors.

Conclusion:
The Tribunal refused to grant prayers (c) and (d) of I.A. No. 59 of 2021, which sought the extinguishment of claims and termination of contracts of Operational Creditors/Capex Creditors. It directed the Board of ITPCL to consider a supplementary Resolution Plan addressing the claims of these creditors, which needs approval by the New Board and the Adjudicating Authority. The Tribunal emphasized the need for a fair and reasonable resolution of the admitted claims of Operational Creditors/Capex Creditors.

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