TaxTMI 
TaxTMI 
2021 (2) TMI 468
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....d 242 of the Companies Act, 2013 (the Act) inter alia alleging mismanagement in the Company. 3. This Tribunal by an order dated 01/10/2018 superseded the Board of Directors of IL & FS and constituted a new Board with six Directors to take over the affairs of the Company. In addition to the six Directors appointed on 01/10/2018, this Tribunal appointed three more Directors vide order dated 03/10/2018 (pursuant to which one more director was appointed) and order dated 21/12/2018 (pursuant to which two more directors were appointed). The new Board was directed to furnish a roadmap for consideration of the Tribunal. This Tribunal by an order dated 12/10/2018 in MA No. 1173 of 2018 declined to order a moratorium in respect of IL & FS group. The UoI and IL & FS carried the matter in Appeal before the Hon'ble National Company Law Appellate Tribunal (NCLAT) respectively in Company Appeal No. 346 of 2018 and Company Appeal No. 347 of 2018. The Hon'ble NCLAT by an order dated 15/10/2018 granted interim stay against any coercive action by the creditors against IL & FS and its group entities. 4. The New Board prepared periodical progress reports in terms of the order dt. 01/10/2018 and s....
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....n the IL & FS Group which are incorporated within the territorial jurisdiction of India (Indian IL&FS Entities) and entities that are incorporated in other countries (Offshore IL&FS Entities). In compliance the UoI filed an affidavit dated February 11, 2019 placing on record before the Hon'ble NCLAT, the list of 169 Indian IL&FS Entities and 133 Offshore IL & FS Entities. Hon'ble NCLAT by order dated 11/02/2019 inter alia excluded the Offshore IL & FS Entities from the purview of the October 15 Order (15/10/2018) and directed that the resolution of the Offshore IL & FS Entities may be taken up by the New Board under the supervision of Hon'ble Justice Mr. D. K. Jain (Retd.). NCLAT also directed that the actions taken for the resolution of the Offshore IL & FS Entities be presented to this Tribunal. 8. Thus, basing on the recommendations of Hon'ble Justice Jain, the resolution was then to be placed before the NCLT (this Tribunal) for approval. The approval by this Tribunal would formalize and finalize the resolution of the individual or collective group entities. 9. By their order dated 12/03/2020 the Hon'ble Appellate Tribunal accepted 15/10/2018 as the cut-off date for distri....
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....ject related work as per the scope defined under the Concession Agreement. (vi) On 18.01.2017, ITNL appointed GHV (India) Private Limited (GHV) (Applicant in CA No. 1166 of 2020) as their subcontractor for undertaking all the civil works for the purpose of the Project and accordingly the Contract Agreement was entered into between the parties. (vii) ITNL also appointed various other subcontractors in respect of remaining works on the Project such as management of Toll Plaza, System Works, Electrical Works etc. List of all subcontractors (including GHV) engaged by ITNL with respect to the Project (FSEL subcontractors) is annexed to the Application. (viii) As FSEL was unsuccessful in procuring external financing for the Project from banks or financial institutions, "The Financial Closure" (i.e., receipt of financing from senior lenders and creation of financing arrangements) for the Project under the terms of Concession Agreement could not be achieved. Hence, ITNL continued to finance the Project through equity infusion/granting of sub-debt/granting of loans or arranging loans from group entities/third parties. (ix) As per Article 25 of the Concess....
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....S) and the new Board of Directors were appointed by NCLT and the existing board was superseded as indicated supra. (xv) On 09.03.2019, Ministry of Road Transport and Highways (MoRTH), Government of India in consultation with a High Powered Committee, issued the 'Guiding Principles for Resolution of Stuck National Highway Projects' dated 09.03.2019 and certain guidelines were issued for execution of stuck of projects. (MoRTH Guidelines) (xvi) The MoRTH guidelines contemplates the following: a. Road projects on a Build, Operate, Transfer basis, which qualifies as "stuck up" projects may be foreclosed vide a supplementary agreement as may be mutually agreed and executed between the parties; and b. The NHAI being the Concession Authority, would pay, as a full and final settlement, an amount which is the lower of the: (a) The value of work done; or (b) 90% of the "Debt Due" {if applicable to the SPV (in the present case, FSEL)}. In case the investment in the Project by the Concessionaire (of the relevant SPV) is not covered under the definition of "Debt Due", the payment may be restricted to the value of work done and assess....
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....t of payment under the MoRTH Guidelines, which will be payable to FSEL by NHAI. For the purpose of calculation of the 'Grant', NHAI had considered all the debt infused by ITNL, arranged by ITNL through third party as well as creditors for work done as 'Debt Due'. NHAI therefore during various meetings advised that compensation shall be based on 'Debt Due' and not the value of work done. This proposal was not acceptable to FSEL and FSEL continued to request NHAI to provide compensation on the basis of value of work done and as assessed by the CEG. (xxiv) The NHAI had directed FSEL to inform regarding the issues of FSEL sub-contractor/vendors or any other entity which needed to be resolved by FSEL to enable it to hand over the site free from all encumbrances absolutely unto NHAI or its nominees. (xxv) On 24.07.2019, the New Board constituted a Standing Committee for Road Projects (Standing Committee) from amongst the members of the New Board (assisted by officials of ITNL) and the Standing Committee was authorized to finalise and agree for settlement of claims with NHAI / National Highways Infrastructure Development Corporation Limited / MoRTH for incomplete road pr....
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....ject. In the meeting NHAI also informed CCIE-III about the order of Hon'ble High Court dated 19.07.2019, wherein NHAI was directed to examine the claim of GHV for INR 340.85 Crores and consider the same as and when the decision is taken by NHAI to release any funds in relation to the project. (xxxii) CCIE III in the minutes of the meeting held on 16.01.2020 recorded the offer of NHAI in respect of the foreclosure of the Concession Agreement and stipulated that: "[...] Committee observed that M/s Fagne Songadh Expressway Ltd. has given their consent vide letter dated 27th November 2019 to settle the issues/disputes on payment of Rs. 810 Cr. as settlement amount. NHAI has calculated value of work done for Rs. 888.359 Cr. Out of which Rs. 172.60 Cr has already been released by the NHAI as grant, and intimated recoveries amounting to Rs. 8.00 Cr against IE payments & maintenance. NHAI thus proposed a net settlement amount of Rs. 707. 709 Cr only. An amount of Rs. 16. 93 Cr shall be withheld on account of Royalty, from the Rs. 707. 709 Cr. [...] (4) In light of the above, the Committee felt that the concessionaire shall take all its third party vendor....
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....and iii. the amount payable to the relevant 3rd party sub-contractor pursuant to the Settlement Formula is INR 80 Crores, the payment of INR 80 Crores (to the sub-contractor) will extinguish the sub-contractor's entire claim of INR 100 Crores (against ITNL) and ITNL's claim against the project entity will reduce to INR 40 Crores. The residual settlement amounts (after discharge of sub-contractor's claim in accordance with the Settlement Formula) will be transferred to the relevant project entity, which amounts will be utilised towards discharge of obligation due to the creditors of that project entity, in accordance with the Revised Distribution Framework (as set out in Second Addendum) as approved by Hon'ble NCLAT. (xxxvi) It is to be noted that Hon'ble NCLAT vide order dated 12th March, 2020 approved the resolution process for the Applicant Group to be conducted as per the procedure suggested by the Petitioner (including those set out in the February, 2020 Affidavit) and under the supervision of Hon'ble Justice Mr. D. K. Jain (Retd.). (xxxvii) The Standing Committee in consultation with the ITNL Board, recommended the following Settlement Formu....
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.... rendered for rest of projects of ITNL as well as corporate and administrative services; (b) CMC was also instructed to review and complete the verification of all the claims filed and admitted by them for identified ITNL Sub-Contractors to the extent such claims relate to work done by the relevant ITNL Sub-Contractors with respect to FSEL project (FSEL sub-contractors) and also provide a separate report for such admitted claims; and (c) The CMC has submitted its report in relation to final claims admitted by the CMC relating to the FSEL Sub-Contractors; (xli) By the above process, the CMC determined the aggregate claims of FSEL for a sum of INR 243.32 Crores. (xlii) The CMC, as the Independent Agency, submitted its verification report dated 29.07.2020, in relation to final claims admitted by the CMC relating to FSEL. Based on the CMC Report, the Resolution Consultant Alvarez & Marsal Private Limited, has further verified the amounts to be paid to the FSEL Sub-Contractors (at an aggregate basis as well as individual sub-contractors level) from the FSEL Settlement Amount, applying the Settlement Formula as approved by the New Board and the ITNL Bo....
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....actors by NHAI subject to verification of such amounts by the Independent Agent (which is underway) and approval of Hon'ble Justice Mr. D. K. Jain (Retd.) and this Tribunal. (xlviii) In view of the above, FSEL issued a letter dated 10.08.2020 to the CCIE-III setting out: (a) The procedure followed by the Applicant and ITNL in determination of the Settlement Formula, on the basis of the February, 2020 Affidavit; (b) The list of the third party vendors in respect of FSEL and the amounts payable to them determined in accordance with the approved Settlement Formula; and (c) That the aforementioned list of FSEL Sub-Contractors includes an amount of INR 188,80,01,952 payable to GHV which due to inability of ITNL to pay dues to GHV, these operational dues for work done by GHV in respect of inter alia the Project were converted into a financial debt on 31.07.2018. (xlix) In light of the same, the CCE-III passed an order on 18.10.2020 considering the August 10 letter and directing NHAI and FSEL to approach CCIE with draft settlement agreement once an agreement has been reached between parties. (l) Pursuant thereto, the FSEL and NHAI fina....
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...., Hon'ble Justice Mr. D. K. Jain (Retd.) accorded his approval for the following, subject inter alia to the approval of this Tribunal: (a) Executing the settlement agreement between FSEL and NHAI in respect of the projects; (b) Accepting an amount of INR 707.709 Crores from NHAI with deductions detailed herein; (c) Deposit of the residual amount in the FSEL Escrow Account by NHAI. (lv) Additionally, Hon'ble Justice Mr. D. K. Jain (Retd.) also approved the distribution of the amounts to the FSEL Sub-Contractors, as determined by the CMC, except the amount of INR 188.80 Crores owed to GHV which he viewed to be in the nature of financial debt. While holding so with respect to GHV, he also clarified as follows: "It may however, be clarified that the undersigned is not doubting the stand of GHV (as accepted by the Board and the Settlement Committee for Roads, constituted by the Board) that GHV had undertaken the work sub-contracted by ITNL and the project developed by FSEL..." "The amount determined as payable to GHV by GT and approved by the Board may be paid if the said dues are directed to be treated as "operational debt" and paid....
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.... the States of Gujarat and Maharashtra shall stand extinguished and the Project be discharged from all encumbrances that FSEL Sub-Contractor may have; F. To direct that the funds comprising the FSEL Settlement Amount(which are received net of all deductions including the amounts which are to be paid by National Highway Authority of India directly to the FSEL Sub- Contractors in terms of prayer (C)above) should be deposited into an Escrow Account and be maintained as fixed deposits and should not be adjusted or set off against any other dues pertaining to any bank/financial institution; G. To direct that the distribution of the residual FSEL Settlement Amount or part thereof or withdrawal of any other amounts from the escrow account be subject to further orders of this Tribunal; H. Exempt the Applicant from affixing the affidavit annexed to this application on stamp paper and notarizing the present Application. Intervention Application by GHV (CA No. 1166 of 2020) 12. Subsequently, GHV (India) Private Limited filed CA No. 1166 of 2020 to intervene in CA No. 1156 of 2020. The Applicant-Intervenor is one of the FSEL Sub-Contractors engaged in the Proje....
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....d recovery of amounts, net balance payment of INR 340,85,00,000 (including amount of INR 62.15 Crores for KSEL project) remained due and payable by ITNL. ITNL has issued balance confirmation letter acknowledging the abovesaid due to the Applicant. (ix) In the meanwhile, Union of India filed petition under Sections 241-242 of the Companies Act, 2013 against Infrastructure Leasing and Financial Services Ltd (IL & FS) and the same is pending on the file of the NCLT, Mumbai Bench. (x) In order to resolve the Project stuck on account of financial constraints faced by IL&FS, the Government issued an Office Memorandum dated 09.03.2019 indicating the procedure to be followed in cases of "Struck Highway Projects", wherein NHAI is required to enter into settlement with concessionaires and EPC contractors so that the Project get executed by another contractor. (xi) In order to amicably settle the stalled highway projects, steps were taken by IL&FS. (xii) In these circumstances, this applicant has submitted that he is supporting the whole settlement as discussed supra and has no objection for the same. 14. The Union of India, Respondent in CA No. 1156 of ....