TaxTMI 
TaxTMI 
2019 (5) TMI 987
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.... short to be referred here-in-after as the 'Code') read with Regulation 39 (4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (for brevity the 'CIRP Regulations') to submit the resolution plan of Liberty House Group PTE Limited (for short LHG) as approved by the Committee of Creditors (CoC). This application supported by the affidavit of Resolution Professional dated 03.09.2018 was filed on 04.09.2018. 3. Subsequently, the State Bank of India, one of the Financial Creditors filed application CA No.592 of 2018 on behalf of the CoC of Castex Technologies Limited under Section 30 read with Sections 31 and 60 (5) of the Code with a prayer to permit the CoC to withdraw CA No.364 of 2018 and to exclude the time period spent, in negotiating with LHG and in litigation w.e.f. 18.05.2018 till passing of the final order in the instant application, from the corporate insolvency resolution process period. This application is supported by the affidavit of Mr.Vinod Kumar, Assistant General Manager of State Bank of India, Stressed Assets Management Branch-1, Connaught Place, New Delhi. 4. The facts of the case, briefly ....
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....HG) by the last date fixed for receiving the same, which was 10.04.2018 and the same were placed before the CoC in its meeting held on 16.04.2018. The binding financial offers were ultimately submitted only by these two resolution applicants by the end date of the deadline. 9. In the meeting of CoC held on 05.05.2018, the resolution plans submitted by these resolution applicants were still found to be deficient. In the other meeting held on 18.05.2018, the CoC found that the resolution plan provided by DVI was not commercially comparable with the higher bid of LHG and that no revised offer was provided by DVI after 03.05.2018. Even in the current state, the resolution plan presented by the LHG was found better than the resolution plan submitted by DVI. In the said meeting, the CoC classified LHG as the preferred bidder and it was granted time till 25.05.2018 for submission of the resolution plan after addressing the issues raised by the CoC. 10. On the basis of the decision taken by the CoC in its meeting held on 18.05.2018, it was resolved to seek extension of 90 days more in terms of Section 12 (2) and (3) of the Code. For the said purpose CA No.221 of 2018 was filed. It wa....
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....rofessional filed Form-H containing all the necessary particulars by diary No.4009, dated 15.10.2018. This Form was taken on record, when the matter was listed on 15.11.2018. 15. Thereafter certain developments took place before the resolution plan could be approved by the Adjudicating Authority. CA No.592 of 2018 was filed by State Bank of India, a Financial Creditor on behalf of the CoC in respect of the corporate debtor, under Section 30 read with Section 31 and 60 (5) of the Code by diary No.4789, dated 06.12.2018 supported by the affidavit of Vinod Kumar, Assistant General Manager of the Bank with the prayer for withdrawal of CA No.364 of 2018 and to exclude the time period spent in negotiating with LHG and in litigation from 18.05.2018 till passing of the final order on this application. The application has been filed in view of the decision taken by the CoC in its 18meeting held on 19.11.2018 Annexure A-1. It was resolved for invocation of Bid Bond Guarantee and to file an application before the National Company Law Tribunal for withdrawal of the application filed by the Resolution Professional for approval of the resolution plan and seeking exclusion/extension of CIRP pr....
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....f India A/c Castex Technologies Limited ("Performance Guarantee"). The Performance Guarantee shall be valid for an initial period of 9 (nine) months from the date of signing of the Letter of Intent ("Performance Guarantee Validity Period") and shall be extended / renewed by the Successful Applicant for such period until 100% (one hundred percent) of the Applicant Contribution is made by the Successful Applicant in accordance with the Plan. The Performance Guarantee shall have a claim period of 30 (thirty) days after the Performance Guarantee Validity Period. State Bank of India will hold the Performance Guarantee in trust on behalf of the Committee of Creditors. 14.2 The Committee of Creditors shall have the right to invoke the Performance Guarantee by issuance of a written demand in the prescribed format to invoke Performance Guarantee. The Performance Guarantee can be invoked at any time, if (a) any of the conditions IN under the Letter of Intent or Resolution Plan are breached; or (b) non-receipt of required approvals within the timelines specified in the Resolution Plan or if the Resolution Plan is not effective due to any approval required by the Successful Applicant ....
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....or any other Court having jurisdiction. 24. The respondent LHG has filed its combined reply to CA Nos.364 of 2018 and 592 of 2018 by diary No.130, dated 10.01.2019. It is admitted that the corporate debtor (Castex Technologies Limited) forms part of the larger Amtek Group of Companies. 25. It is alleged that the parties continued to negotiate with respect to the nature and method of an escrow account or providing a performance Bank guarantee. However, LHG received a letter dated 21.11.2018 that the State Bank of India has arbitrarily invoked the bid bond guarantee of Rs.40,00,00,000/-. The same was attacked as an illegal action as the CoC of the Resolution Professional did not make any attempt to resolve the issue with the LHG as agreed on the terms of submission of the performance guarantee as per clause 6.4 of the resolution plan. LHG challenged the arbitrary invocation of bid bond guarantee before the Hon'ble High Court of Delhi by way of CS (COMM) 1246 of 2018 and the notice of demand was stayed by the Hon'ble High Court of Delhi vide order dated 26.11.2018. 26. Reference has been made in detail to the discussion and deliberation held in respect of the resolution plan ....
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....rate debtor were detailed in the process memorandum. 31. We have heard the learned Senior Counsel for the applicant Bank, learned senior counsel for the resolution applicant-LHG and the learned counsel for the Resolution Professional and carefully perused the records. 32. The learned senior counsel for LHG submitted that the respondent does not have any objection to the withdrawal of CA No.364 of 2018 or with regard to exclusion of certain period spent in the litigation for the purpose of calculating 270 days in the completion of the insolvency resolution process. It was contended with vehemence, however, that the resolution applicant (LHG) is not a defaulter because the Resolution Professional or the CoC have changed the terms and conditions of the LoI by demanding the performance bank guarantee instead of performance guarantee as envisaged in the LoI and the process memorandum. 33. In response thereto, the learned senior counsel for the CoC contended that there was a clear default of the terms and conditions of the resolution plan and LoI in view of non-furnishing of the performance bank guarantee. 34. It was further submitted that with regard to the fact whether the ....
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.... of escrow for Rs.500 cr, basis the escrow agreement circulated on 14 September 2018, this will take 1-2 weeks to complete 2. ARGL and Castex, further to our letter of 15 September, 2018, we should issue instructions to convert existing bid bonds to performance guarantee immediately. For the balance we request you and lenders to allow us to set up performance escrow in UK now which will take up 2 weeks, as we can not immediately bring these funds to India due to lack of respective entities and regulatory processes. We will circulate this performance escrow agreement on 25 September, 2018. We will set up the necessary entities needed for ARGL and Castex in UK and India for closing our transaction, this will take up 2-3 weeks (we will start on this step immediately), thereafter it will take us upto 2 weeks to open the respective bank accounts and 1 week from there to bring the performance escrow funds to India. Thus it will take us upto 5-6 weeks to complete this process shift the UK escrow to India. This meets the lenders requirements, just that it takes little more time, and in the interim the UK escrow is set up. 40. In the communication vide e-mail dated 15.09.2018 An....
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....018 titled as Liberty House Group PTE Ltd. Versus State Bank of India and Ors. in the matter of ARGL Ltd., another corporate debtor for which LHG also submitted the resolution plan before the Hon'ble High Court of Delhi. The Hon'ble High Court of Delhi held that it has no jurisdiction to entertain the dispute, which is subject matter of these suits and the plaints were liable to be rejected. 44. The Hon'ble High Court of Delhi also discussed the merits of the case by observing that the rejection of the plaints was subject to the right of plaintiff to prefer appeal to the Division Bench following the law of procedure requiring all the aspects to be returned, to avoid remand for hearing application for interim relief in the event of the Division Bench holding the suits to be maintainable. The Hon'ble High Court of Delhi also decided the merits of the case and held that the plaintiffs are not even entitled to a restraint against encashment / payment under the Bank Guarantee. The Hon'ble High Court also observed as under:- "42. Even otherwise, de hors the legalese, what emerges on going through all the documents is that the plaintiff, after submitting the resolution plans a....
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....hat in the event of appeals ultimately succeeding, the respondent/Resolution Professional and the respondent/Bank should be directed to appropriately restitute the appellant. The appeal is still pending. So, this aspect of the matter raised by the respondent in these applications does not require any further discussion. 48. Therefore, the prayer made by the applicant-Financial Creditor submitted by the Resolution Professional for withdrawal of CA No.364 of 2018 being basically not contested, deserves to be allowed. 49. With regard to the exclusion of certain time for counting the period of 270 days in completion of the insolvency resolution process, reference can be made to the judgment of the Hon'ble National Company Law Appellate Tribunal, in Company Appeal (AT) (Insolvency) No.185 of 2018, reported as Quinn Logistics India Pvt. Ltd. Versus Mack Soft Tech Pvt. Ltd., wherein it was held that if an application has been filed by the 'Resolution Professional' or the 'Committee of Creditors' or 'any aggrieved person' for justified reasons, it is always open to the Adjudicating Authority/Appellate Tribunal to 'exclude certain period' for the purpos....
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....Tribunal should not set at naught the time limits within which the Corporate Insolvency Resolution Process must take place. It was further observed that consequence of the chopper falling is corporate death. The only reasonable construction of the Code is the balance to be maintained between timely completion of the Corporate Insolvency Resolution Process, and the corporate debtor otherwise being put into liquidation. The Hon'ble Supreme Court further observed that it cannot forget that the corporate debtor consists of several employees and workmen, whose daily bread is dependent on the outcome of the Corporate Insolvency Resolution Process. If there is a Resolution Applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible. A reasonable and balanced construction of this statute would therefore, lead to the result that, where a Resolution Plan is upheld by the Appellate Authority, either by way of allowing or dismissing an appeal before it, the period of time taken in litigation ought to be excluded. 52. The Hon'ble Supreme Court further held in Arcelormittal India Private Limited's case (supra) ....