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2020 (9) TMI 385
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....ew Delhi in partly allowing the application by ordering liquidation of the 'Corporate Debtor', viz. 'Tecpro Systems Ltd.' in the manner laid down in Chapter III of part II of 'I&B' Code, 2016 and issuing necessary directions thereto. 2. Earlier, the Adjudicating Authority, 'National Company Law Tribunal', Principal Bench, New Delhi while passing the impugned order on 16.01.2020 at paragraph 3 to 12, and at paragraph 15 and 16 had observed the following:- "3. Respondent No. 1 M/s Kridhan Infrastructure Private Limited had submitted an updated Resolution Plan in respect of Corporate Debtor, which was approved by the Committee of Creditors in their 15th CoC meeting held on 08.03.2019 with majority vote of 89.92%. Subsequently the Adjudicating Authority also approved the resolution Plan under Section 31 of the Code vide order dated 15.05.2019. 4. It has been alleged that there has been inordinate delay in implementation of the Resolution Plan, as the successful resolution applicant, M/s Kridhan Infrastructures Private Limited has miserably failed to infuse equity funds as per the terms of the Resolution Plan. Besides the successful resolution applicant has not take....
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....T pursuant to Section 34(8) of the Insolvency and Bankruptcy Code, 2016, Regulation 39D of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the fee payable to the Liquidator and support team. (Ey Restructuring LLP) shall be as approved by the erstwhile CoC as follows: Months Fees as a % of Receipts from 0-12 12-24 More than 24 Sale of Fixed Assets 1.00% of the amount realized 0.75% of the amount realized 0.50% of the amount realized Return of live BGs 0.50% of the amount returned Months Fees as a % of Receipts from 0-24 24-60 More than 60 Arbitration proceedings/claim s/projects recovery 1.25 % of the amount realized 1.00% of the amount realize d OPE, GST and other taxes as applicable, is not included in the above fee proposal and will be billed in addition to the above. Fee also does not include cost of any External Advisors such as Legal, Valuation, Bid Process Advisory, etc. basis for the provisions of the Code. Fee also....
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....payment and taking control of the management of the Corporate Debtor, which has threatened the going concern status of the corporate debtor severely. 8. In the facts the erstwhile CoC in its meeting held on 11.11.2019 has passed a resolution for liquidation of the Corporate Debtor with overwhelming majority of 99.28% voting share. 9. It is pertinent to refer here the provisions of sub- section (3) of Section 33 of the Insolvency and Bankruptcy Code, 2016 which envisages as follows: "(3) Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i),(ii)and (iii) of clause (b) of sub-section (1)." 10. Hon'ble 'NCLAT' in the case of Yavar Dhala Vs JM Financial Asset Reconstruction Company Ltd. & Ors. in Company Appeal (AT)(Ins) No. 13 of 2019 decided on 08.03.2019 has observed that on failure of the Resolution Applicant to implement the terms of the resolution plan, liquidation h....
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....ent of 'Bank Guarantees' executed by the 'Corporate Debtor'. However, the concerned Banks and the recipients of Performance Guarantees have not been made party. This prayer, therefore, cannot be considered at the back of the recipients of the bank guarantees without giving opportunity of hearing to them. The liquidator, however, is given the liberty to file proper application on the self-same issue, if so advised". and resultantly partly allowed the Company Application by ordering liquidation of the 'Corporate Debtor' viz. 'Tecpro Systems' in the manner laid down in Chapter III of part II of 'I&B' Code, 2016 by issuing necessary directions like appointing Mr. Ramachandran Subramanian as liquidator (proposed by COC) in terms of Section 34(1) of the Code. Summary of Facts 3. According to the Appellant(s) one of the 'Financial Creditors', viz. 'Edelweiss Asset Reconstruction Company Ltd.' had filed an application u/s 7 of the 'I&B' Code for the initiation of 'Corporate Insolvency Resolution Process' against 'Corporate Debtor', viz. 'Tecpro Systems Ltd.' As a matter of fact, the said application came to be admitted on 07.08.2017, imposing a moratorium u/s 14 of the 'I&B' Code ....
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....Authority pursuant to which the said 'Kridhan Projects Private Limited' shall perform and observe the terms of this 'Resolution Plan' and assume the performance obligations of the 'Resolution Applicant'. 9. It is brought to the fore that the 'Kridhan Projects Private Limited'(SPV) was duly incorporated on 27.04.2018 with an authorised and paid up share capital of 10,00,000/- however, the operations of the special purpose vehicle' were to initiate only upon approval of the 'Resolution Plan', execution of all documentation and all regulatory approvals. 10. The version of the Appellant(s) is that by virtue of the order dated 15.05.2019 passed by the Adjudicating Authority, the approval of 'Resolution Plan' would confer the change in the management and ownership of the 'Corporate Debtor' and the control of the 'Corporate Debtor' shall vest with the new Management. Further, the said order had directed the Appellant to submit a performance bank guarantee of an amount of Rs. 5/- crores within 30 days from the date of receipt of order. In due compliance of the order of the Adjudicating Authority ('NCLT'), Principal Bench, New Delhi an amount of Rs. 5/- crores was transferred by the A....
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....e is to be given to a 'Resolution' over a 'Liquidation' and further 'Liquidation' can only be seen as a last resort. 16. The Learned Counsel for the Appellant(s) cites the decision of Hon'ble Supreme Court 'Arcelor Mittal India Pvt. Ltd.' V. 'Satish Kumar Gupta & Ors.', AIR, 2018 at page 5646 wherein the scope of the words 'Adjudicating Authority' in Section 33 pertaining to approval of 'Resolution Plan' was interpreted to be wide enough to include 'National Company Law Appellate Tribunal' also and the Hon'ble Supreme Court had observed at paragraph 82 and 83 as under:- "82. One thing that must be made clear at this stage is that one Section 33 speaks of the 'Adjudicating Authority' in sub-section (1) it is referring to both the Adjudicating Authority as well as the Appellate Authority. An Adjudicating Authority may decide in favour of a 'Resolution Plan' which order may then be set aside by the Appellate Authority. This order of the Appellate Authority, setting aside the order of the Adjudicating Authority, would then be the order which rejects the 'Resolution Plan' for the purposes of Section 33. The same would apply to an ultimate order of rejection by the Supreme Co....
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....ts employees etc. set aside the impugned order dated 9th July, 2019. Both the 'Resolution Plans' be implemented in its latter and spirit. The claim of all the creditors stand settled. Control and records of both the 'Corporate Debtors' - 'M/s. Adhunik Metallics Ltd.' and 'M/s Zion Steel Ltd.' have already been handed over to the 'Successful Resolution Applicant' by 'Committee of Creditors'/'Monitoring Committee'/'Resolution Professional'. 'Committee of Creditors'/'Monitoring Committee'/'Resolution Professional' stand discharged." 18. The Learned Counsel for the Appellant(s) contends that Rule 11 of 'NCLAT' Rules specifically provides wide powers to this Tribunal to pass orders in upholding the principles laid down by the 'Hon'ble Supreme Court' in making all efforts to save the 'Corporate Debtor' from a corporate death of liquidation and in this regard refers to the decision 'Vijaykumar vs. Gopalsamy Ganesh Babu and Ors.' reported in (MANU/NL/0150/2020) whereby and whereunder this Tribunal while invoking the powers under Rule 11 had observed the following: - "7. Considering the object of IBC which is the resolution and that effort should be made to revive the 'Corporate....
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....ation. Apart from that, an 'Operational Creditor' had filed an 'Impleadment Application' in the instant Appeal and are claiming 'Resolution' over 'Liquidation' and in the best interest of all stakeholders, 'Liquidation' is to be avoided and a 'Resolution Order' is to be passed. 22. The Learned Counsel for the Appellant(s) submit that pursuant to the letter received by the erstwhile 'Resolution Professional' of the 'Corporate Debtor' (Tecpro Systems Ltd.) from one Mr. Gautam Joginderlal Suri claiming to be the authorized signatory of the 'Kridhan Infrastructure Pvt. Ltd.' (Resolution Applicant/RA) the meeting was called by the liquidator on 25.02.2020 at 'Edelweiss House, Mumbai and discussions took place in the said meeting and that the representatives of the 'Resolution Applicant' inform the erstwhile COC members that they intend to implement the 'Resolution Plan', given a chance by the erstwhile COC members and the plan was presented was under:- "i. RA will infuse equity of INR 15 crore within seven working days from the date of order passed by 'NCLAT' in the appeal filed by RA; ii. Upon infusion of this equity, RA would like to assume 100% control of the ope....
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....nd kept in an account marked under lien shall stand forfeited and no further opportunity shall be granted to the 'Resolution Applicant'. Financial Creditors can approach the Adjudicating Authority to take further steps in this matter; e. Till balance INR 415 crores is paid to the Financial Creditors, the Resolution Applicant must strictly follow the cash sweep mechanism stipulated in Section 5.3 of the approved plan; f. INR 5 crores performance security as per order dated 16.01.2020 of NCLT already was utilized by the liquidator for the payment of unpaid CIRP /MC period costs (incurred prior to liquidation commencement date) which shall be recouped from the upfront funds infused (Rs. 15 crores + Rs. 50 crore) and held in fixed deposit as per order of NCLT; g. All other terms of the approved Resolution Plan remain unchanged and the Resolution Applicant shall strictly adhere to and complied with all other terms and conditions of the approved Resolution Plan." 24. The Learned Counsel for the Appellant(s) submits that the representatives of the 'Resolution Applicant' had confirmed the erstwhile 'Committee of Creditors' that there were no changes to the sha....
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....arraying the erstwhile 'Resolution Professional' as a Respondent and that Mr. Ramachandran Subramanian, liquidator appointed by the Adjudicating Authority as per order dated 16.01.2020 has not been arrayed as a party to the present appeal. 28. The Learned Counsel for the 1st Respondent / Erstwhile 'Resolution Professional' submits that the modified 'Resolution Plan' was approved by the Adjudicating Authority on 15.05.2019 and the impugned order of liquidation was passed on 16.01.2020 but in the intervening period, the Appellant had miserably failed to comply with the approved 'Resolution Plan' by failing to infuse Rs. 15 crores of upfront equity within a week and a payment of Rs. 50 crores within three months thereafter. 29. The Learned Counsel for the 1st Respondent points out that numerous extensions to infuse capital were given and the last one was given on 19.10.2019, when a 5th extension seeking time till 15.11.2019 was sought by the Appellant and further the 1st Appellant or its Representative did not attend the 'Committee of Creditors' meetings or the 'Monitoring Committee's meeting' after 04.10.2019. 30. The Learned Counsel for the 1st Respondent contends that even....
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....btor' u/s 33(3) r/w Section 60(5) was moved before the Adjudicating Authority, after resolution was passed by the erstwhile 'Committee of Creditors' with an overwhelming majority of 99.28% voting share in the meeting that took place on 11.11.2019. 34. The Learned Counsel for the 1st Respondent adverts to the Reply Affidavit of the 1st Respondent (filed on 06.03.2020) wherein at paragraph 9 it is observed as under:- "9. In the affidavit filed by the Appellant a letter (which is annexed as Annexure A/3) of the additional affidavit) provided by Candid Wealth Management Pvt. Ltd.('Guarantor') committing to infuse equity of Rs. 15 crores along with its associates, towards the source of equity infusion of Rs. 15 crores has been submitted by the Appellant. However, the following points are noteworthy to point out:- * The Guarantor has reported turnover of Rs. 3,38,000/- and a net loss of Rs. 5,455/- for the year ended 31st March, 2019. * The financial status of the guarantor for the last 5 years is as follows:- For the YE Particulars (inINR) 31-Mar-19 31-Mar-18 31-Mar-17 31-Mar-16 31-Mar-15 Total Revenue 5,83,753 4,61,3....
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....tly under 'compulsory winding up' by the 'Singapore Authorities', which is equivalent of creditors induce liquidation in our country. Moreover, the 'Accounts' with the 'Union Bank of India' reportedly continued to be 'Non-performing Asset' which disqualify them to act as 'Resolution Applicant' and these facts having deliberately suppressed before this Tribunal, by the Appellant(s). 38. The Learned Counsel for the Liquidator contends that the eligibility of the 1st Appellant / 'Resolution Applicant' is to be tested as per Section 29A of the Code and further that, the act of financial default of subsidiary companies to the lenders disqualifies the 'Resolution Applicant' u/s 29A of the 'I&B' Code. That apart, it is the crystalline stand of the Appellant that decision of the lenders to liquidate the Company after the failure of the Appellant(s) to implement the 'Resolution Plan' despite several opportunities provided to them is an irreversible one. Moreover, the claim of Edelweiss Asset Reconstruction Pvt. Ltd. (one of the lenders) that the Appellant is financially viable is a malafide one and conveniently ignores the huge default of the subsidiaries of the Appellant. 39. The Lea....
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....out any plan or scheme of arrangement and without exhibiting the existence of fraud or material irregularity in the order of liquidation. 43. The Learned Counsel for the Liquidator refers to the judgement of Hon'ble Supreme Court in 'Arcelor Mittal India Pvt. Ltd.' V. 'Satish Kumar Gupta' (civil appeal no. 9402-9405 of 2018 decided on 01.04.2018) wherein the Hon'ble Supreme Court had exercised its powers under Article 142 of the Constitution of India and allowed the 'Resolution Applicants' time to file resolution plans afresh, but also mentioned that if none of the plans is accepted, the Company will automatically go into liquidation. 44. The Learned Counsel for the Liquidator points out that the BLRC committee in its report had noted this aspect in Chapter 5 which reads "the liquidation process is an irreversible process from within a fixed period after the liquidation order is passed. An appeal to stay the liquidation will not be considered by the Adjudicator". 45. The Learned Counsel for the Liquidator submits that Rule 11 of 'NCLAT' Rules cannot be invoked for setting aside the liquidation order when there is a specific provision under Section 61(4) of the 'I&B' Code. ....
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....ortunity to revive, in terms of the 'Resolution Plan'. 52. It is the plea of the Appellant that the liquidator was not the part of the proceedings when the 'Resolution Plan' was approved and that the liquidator is not entitled to make any averments pertaining to the activities which took place prior to the passing of the liquidation order. Also, that the liquidator was never a part of the 'Monitoring Committee' and that he has no 'locus' to challenge if another opportunity is provided to the 1st Appellant/'Resolution Applicant' to revive the 'Corporate Debtor'. A Liquidator cannot have a motive, contrary to the scheme of 'I&B' Code which is to prefer revival over corporate death or liquidation of the 'Corporate Debtor'. 53. It is the case of the Appellant(s) that there is no question of going behind the commercial wisdom of the 'Approved Resolution Plan' dissecting the present revolution plan by the liquidator or for that matter any authority. In this regard, the Learned Counsel for the Appellant(s) refers to the decision of Hon'ble Supreme Court in Committee of Creditors of 'Essar Steel Ltd.' Vs. 'Satish Kumar Gupta and Others' (reported in MANU/SC/1577/2019) while quoting '....
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....) comes out with a plea that the role of Section 29A of 'I&B' Code comes in to play only for deciding the disqualification at the time of submission of the bids and not after that. Further, the scope of Section 29A is limited to test the qualification or disqualification of a 'Resolution Applicant' at the time of submission of a bid and in the instant case all that was already done, the plan was approved and a test of Section 29A was cleared and nothing further was left to be determined. In short, the contention of the Appellant is that the issue of qualification / disqualification does not arise at this stage and cannot be legally entertained, especially not on behalf of a liquidator. 55. The Learned Counsel for the Appellant(s) advances an argument that the 'Resolution Applicant' is only holding 12% equity in 'Kridhan Infra Limited' and further that the 'Resolution Applicant' does not have any holdings in the Singapore entities as mentioned. In fact, 'Kridhan Infra Limited' is not a subsidiary of the resolution applicant. Lenders' Pleas 56. The Learned Counsel for the Lenders contends that the Members of the erstwhile COC(in exercise of the commercial wisdom) in the meet....
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....limit prescribed under the Companies Act, 2013 for completion of the process and in the absence of any enabling provision under the Code or the Regulations for such compromise/arrangement there might be anomalies / gaps in implementation of the process. 61. The Learned Counsel for the Lenders takes a stand that it is the collective decision of the stakeholders consultation committee forming part of the erstwhile committee of creditors to approve and implement the resolution plan which was not only agreed upon during the meeting of the erstwhile COC members on 25.02.2020 but also stood re-affirmed in the meeting that took place on 24.08.2020. 62. The Learned Counsel for the Lenders contends that the 'Liquidator' is not acting in the interest of resolution of the 'Corporate Debtor' and there appears to be no bonafide reason for the 'Liquidator' to take a stand against the prospect of achieving resolution of the 'Corporate Debtor', when the members of the erstwhile 'Committee of Creditors' have decided to provide the Appellant an opportunity to implement the 'Resolution Plan'. 63. Appraisal At the outset, it is pertinently pointed out by this Tribunal that the 'Corporate D....
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....the 'Committee of Creditors' Mr. Ramachandran Subramanian was appointed as 'Liquidator' as per Section 34(1) of the 'I&B' Code. Before this Tribunal, the primordial plea of the Appellant is that it was not provided with an opportunity of being heard and project its grievance before the Adjudicating Authority and since the Appellant is very much is interested to implement the 'Resolution Plan' and hence this Tribunal may allow the appeal thereby preferring the aspect of 'Resolution' and avoiding 'Liquidation'. Moreover, the Appellant agrees to implement the 'Resolution Plan' and take all steps as mentioned in the 'Resolution Plan' immediately upon the order of reversal of liquidation. Further, the Appellant agrees for the forfeiture of sum of Rs. 15 crores in addition to the already forfeited sum of Rs. 5 crores, in case the 'Resolution Applicant' fails to deposit the sum of Rs. 50 crores within the period of three months from the date of reversal of liquidation order dated 16.01.2020. Also that on behalf of the Appellant(s) it is fairly submitted that one of the lands owned by the 'Corporate Debtor' which had a market value of INR 5 crore and valued by the registered valuer @ INR 4....
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....e delay, more likely it is the 'Liquidation' will only be the sensible answer. No doubt, the 'Liquidation value' tends to go down with an efflux of time as many 'Assets' suffer from high economic depreciation value. Looking at from the point of view of creditors a good realisation can generally be secured if a company/firm is sold as a going concern. If one construes in the teeth of the object sought to be achieved by the 'I&B' Code and in the light of consequences provided by Section 33 of the Code, therefore, makes it unerringly clear that the periods mentioned in Section 12 are mandatory and cannot be extended. If time specified by statute is changed, then it will give room for wider complications/implications, in the considered opinion of this Tribunal. 70. Also, even in 'Liquidation', the realisation will be lower when there are delays and in fact, delays cause value destruction/reduction. Moreover, the failure of some business plan is an integral part of the process of 'market economy'. 71. It is to be pointed out that an administrator is in control of the affairs of the Company and is in a position to offer an independent and detached view of company affairs as per dec....
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....orate Debtor' will weaken the realisation of potential creditors. Moreover, the Company promoters' rights or wrongs remain undischarged from the liability. A person who is to proceed against the Company is suspended from exercising his rights for 'moratorium' remains in force as long as the CIRP period continues. 76. In regard to the exercise of 'inherent powers' it is to be pointed out that inherent jurisdiction must be exercised subject to the rule that if the code does contain specific provision that would meet the necessities of the case in question such provision should be followed and the inherent jurisdiction should not be invoked, as per decision 'Arumuga Chettiar' V. 'K.R.S. Sevugan Chettiar' AIR 1950 Madras page 779'. 77. It is well settled principle in Law that an 'inherent power' cannot be resorted to when there are specific provisions in Law to deal with the situations. In this connection, this Tribunal worth recalls and recollects the decision of Hon'ble Supreme Court in 'Durgesh Sharma' V. 'Jayshree' reported in Air 2009 Supreme Court at page 285 wherein it is observed and held that the inherent power cannot be exercised in contravention or in conflict or ignor....
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.... also is forbidden. Therefore, if a person is prohibited by a Regulator of the Securities market in a foreign market of trading in security and accessing the security market the then disability as per sub-clause (i) of section 29A would get attracted. 82. In so far as the 'Locus Standi' of the 'Lenders' is concerned (before this Tribunal) at this stage, there is no 'Committee of Creditors', to be significantly borne in mind. However, in view of the fact that the 1st Appellant / 'Resolution Applicant' in this appeal prays for an opportunity to be provided to him to fulfill the obligations as per the approved Resolution Plan and hence, it cannot be said in 'stricto sense' of the term that the 'Lenders' have no 'Locus' especially when the Appellants are endeavoring to project their case of opportunity being provided to them to implement the 'Resolution Plan', notwithstanding the fact that numerous opportunities were provided to them before the Adjudicating Authority. 83. In so far as the 'stakeholders' consultation committee under the Liquidation process, unlike 'Committee of Creditors' under 'Resolution process' they do not have any power to determine and even their consultatio....