TaxTMI 
TaxTMI 
2021 (2) TMI 1051
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....Adv. Mr. Sanjay Bhatt, Adv. Ms. Niharika Sharma, Adv. Mr. Joydeep Mukherjee, Adv. Ms. Akansha Srivastava, Adv. 2 Mr. Rabin Majumder, AOR Mr. Arvind Kumar Gupta, Adv. Ms. Henna George, Adv. Mr. Ravindra Sadanand Chingale, AOR Mr. P. S. Sudheer, AOR Mr. D. P. Singh, Adv. Ms. Sonam Gupta, AOR Ms. Ishita Jain, Adv. Mr. Anurag Tandon, Adv. Mr. Manish Paliwal, Adv. Mr. Vikas Kumar, Adv. Mr. Raghav Tiwari, Adv. Mr. Mayank Grover, Adv. M/s Corporate Legal Partners Mr. Mayank Pandey, AOR Mr. E. C. Agrawala, AOR JUDGMENT Dr Dhananjaya Y Chandrachud, J 1 This judgment will govern two proceedings: (i) A Contempt Petition - Contempt Petition (C) No.542 of 2020 instituted by the Committee of Creditors of AMTEK Auto Limited ("corporate debtor") inter alia against Deccan Value Investors LP ("DVI"), the third Respondent in the Civil Appeal - Civil Appeal No. 6707 of 2019 for violation of an order passed by this Court on 18 June 2020- Order dated 18 June 2020 passed in I.A. No. 54321 of 2020 in Civil Appeal No. 6707 of 2019. (ii) An application for rectification- I.A. No.58156 of 2020 of the order of this Court dated 18 June 2020 instituted by DVI. Both the proceedings ....
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....out of the order of the NCLAT directing liquidation of the corporate debtor and was instituted on 26 August 2019 by the CoC. 8 This Court issued notice in the Civil Appeal on 6 September 2019 and stayed the liquidation of the corporate debtor. The second proviso to Section 12(3) of the IBC was amended with effect from 16 August 2019 by the Amending Act 26 of 2019 so as to stipulate a time limit of 330 days for the completion of the corporate insolvency resolution process from the insolvency commencement date. On 24 September 2019, this Court accordingly directed the RP to invite fresh offers within a period of 21 days, following which the CoC was directed to take a "final call in the matter" within two weeks. The decision was to be placed before this Court on 5 November 2019. The RP made a public announcement for inviting fresh resolution plans on 26 September 2019, and the last date for submission of resolution plans was 22 October 2019. The CoC on 23 October 2019 concluded that only one resolution plan was received within the stipulated timeline. DVI submitted a financial proposal on 4 November 2019. In the meantime on 6 November 2019, the CoC moved an IA - I.A. No.168814 of 2....
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....seeking approval of the resolution plan of DVI. On 8 June 2020, this Court passed an order relegating the matter to the NCLT to decide upon the approval application within a fortnight. The time spent before the NCLT and this Court was directed to be excluded for calculating the long stop date. An email was addressed to DVI on the same day by the RP to submit a performance bank guarantee for the balance of INR 150 crores by 15 June 2020. DVI filed an application - I.A. No.54321 of 2020 before this Court on 12 June 2020 seeking a modification of the order of 8 June 2020 for grant of a period of two months to it to examine and understand the impact of the onset of COVID-19 and to re-evaluate the resolution plan. Simultaneously, the RP filed an application - IA No.225 of 2020 in CP (IB) No.42/CHD/HRY/2017 before the NCLT on the same day seeking approval of the resolution plan submitted by DVI. While seeking a extension of time of two months before this Court, DVI in its IA inter alia stated that: "4. The Approval Application by the Appellant seeking approval of DVI's Resolution Plan, was listed for hearing on 08.06.2020, when the Applicant submitted that due to Covid-19 pandem....
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....lied) Following the order of this Court, the RP called upon DVI to submit a performance bank guarantee for a balance of INR 150 crores which was reiterated on 6 July 2020 setting an outer limit of 10 July 2020. In the meantime, on 30 June 2020 DVI moved its rectification application - IA No.58156 of 2020 before this Court on the ground that: (i) No application had ever been filed by DVI seeking withdrawal of the order; and (ii) DVI had never approached this Court earlier for any relief including seeking an extension of time. 13 NCLT passed an order on 9 July 2020 approving the resolution plan submitted by DVI. Following this, on 10 July 2020, an email was addressed to DVI by the erstwhile RP to provide its nominations to the Implementation and Monitoring Committee ("IMC"). By this email, DVI was also requested to attend the first meeting of the IMC scheduled on 14 July 2020. On 14 July 2020, DVI by its email stated that formation of the IMC and the convening of meetings was premature and recorded its intent to institute an appeal against the order of the NCLT dated 9 July 2020 approving the resolution plan. On 21 July 2020, the RP addressed a communication t....
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....r Tushar Mehta, Solicitor General of India in support of the Contempt Petition filed by the CoC; (iii) Mr Niraj Kishan Kaul, learned Senior Counsel for the RP; and (iv) Dr Abhishek Manu Singhvi, learned Senior Counsel on behalf of the contemnor. 18 Mr Mukul Rohatgi, learned Senior Counsel appearing on behalf of DVI submitted that the order of this Court dated 18 June 2020 needs to be rectified or clarified on the ground that it proceeds on two factual misconceptions. The factual errors are stated to be that: (i) The IA that was moved by DVI was for withdrawal of the offer (resolution plan); and (ii) Various orders have been passed by this Court at the instance of DVI. 19 The submission is that the observation of the Court that "in case he [DVI] indulges in such kind of practice, it will be treated as contempt of this Court" is premised on a factual misconception. Addressing the Court on the first of the above premises, Mr Rohatgi submitted that the reliefs which were sought in the application that was filed by DVI on 12 June 2020 were in the following terms: "(a) Pass an order modifying the Order dated 08.06.2020 to grant a period of 2 (two) m....
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....ated its intent to enter the fray. From 4 November 2019 when DVI submitted its financial proposal, extensions of time were granted by this Court on 13 November 2019, 2 December 2019, 20 January 2020 and 10 February 2020. Though the extensions were sought by the CoC, there can be no manner of doubt that this was to facilitate the finalization and approval of a resolution plan and DVI was among the resolution applicants. After the CoC approved DVI's resolution plan on 11 February 2020, an IA was filed by the CoC on 13 May 2020. This Court by an order dated 8 June 2020 relegated the proceedings to the NCLT for considering the approval application. Laying stress on the IA filed by DVI on 12 June 2020, it was urged that an attempt was made by DVI to wriggle-out of its commitments under the resolution plan which has been approved by the CoC on 11 February 2020 by highlighting the impact of COVID-19 on the financial health of the corporate debtor. (ii) Despite this Court having rejected the IA on 18 June 2020 : (a) DVI failed to take steps in pursuance of the resolution plan which is approved by the NCLT on 9 July 2020 by (i) failing to submit the second tranche....
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....a decision, one way or the other on the merits of DVI's submissions, but a plea of contempt cannot be founded on the acceptance or rejection of the plea of DVI that the conditions precedent to the implementation of the resolution plan have not been fulfilled. (v) In this context, the reply filed by the contemnor to the contempt petition specifically sets out the case of DVI that the condition precedents to the implementation of the resolution plan have not been fulfilled. The following paragraphs of the reply have been emphasized: "5. It is submitted that Resolution Plan dated 17.01.2020 (r/w the addendum dated 07.02.2020) as submitted by DVI and approved by the COC contains several obligations/conditions precedents for its effective implementation and to ensure the going concern status of the Corporate Debtor. It is an admitted position that the Resolution Professional / COC inter alia failed to ensure compliance of certain conditions precedents under the Resolution Plan including failure of obtaining the prior written consent of the mortgage of the Ace Complex Land whilst executing a long term lease deed on behalf of the Corporate Debtor. By an email dated 29.01....
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....ble Terms" has been defined in the Resolution Plan as under: "Shall mean terms relating to the lease of ACE Complex Land and shall be suitable protective terms acceptable to the Resolution Applicants including (i) confirmation of the validity and subsistence of the lease arrangement by way of prior written consent of Vistra ITCL Limited acting as the security trustee on behalf of KKR India Financial Services Limited and L&T Finance Limited in a form and substance acceptable to the Resolution Applicants; (ii) no right of termination according to the lessor as long as lease rentals are paid; and (iii) right of first refusal occurring to the Resolution Applicants, in case of sale of ACE Complex Land." 10. It is thus seen that it is one of the essential requirements of the Resolution Plan for the Corporate Debtor to execute a long-term lease (for 20 years or more) in respect of the Ace Complex Land with "Acceptable Terms" i.e. with the prior written consent of Vistra ITCL (India) Limited ("Vistra") viz; the mortgagee of the Ace Complex Land. 11. Significantly, the aforesaid requirement of the "Execution of a long term lease (subsisting for 20 years or more) f....
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....e of 15 days. In the IA filed by DVI purportedly for 'clarification and modification', it was submitted that "due to Covid-19 pandemic DVI's resolution plan (as submitted and approved by the CoC) was unviable and not feasible in the present circumstances". DVI submitted that when the proceedings came up on 8 June 2020 it had urged that its resolution plan was required to be relegated to the adjudicating authority to assess the impact of the pandemic on the economy, the auto industry and the financial health of the corporate debtor and to enable the parties to renegotiate the terms of the resolution plan. In other words, DVI sought to submit that the purpose of relegating the issue of approval of the resolution plan was to enable a re-negotiation to take place before the resolution plans which have been approved by the CoC could be the subject matter of an approval of the adjudicating authority. Now, this submission of DVI cannot be accepted for two reasons: firstly, it is a settled principle of law that the record of the Court speaks for itself and the terms of a judicial order reflect what has been decided. The order of this Court dated 8 June 2020 indicates that since the fresh r....
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....t the resolution plan meets those requirements, the adjudicating authority "shall by order approve the resolution plan". Before passing an order of approval the adjudicating authority has to satisfy itself that the resolution plan has provisions for its effective implementation. In the backdrop of the above provisions, the order of this Court dated 8 June 2020 required the adjudicating authority to perform the functions which are entrusted to it under Section 31 of the IBC. To suggest that the purpose of the order dated 8 June 2020 was to enable DVI to re-negotiate the resolution plan after assessing the impact of the pandemic is thus fundamentally flawed. It is flawed because this assertion is contrary to the plain terms of the record. It is flawed also because the submission is contrary to the nature of the function which is expected to be exercised by the adjudicating authority by the plain terms engrafted into the provisions of Section 31. When DVI moved its application on 12 June 2020, it asserted that the timeline of 15 days has "resulted in practical difficulties for parties to enter into any meaningful discussions and negotiations". To assert that there was any scope for ne....
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.... must be understood in the context of the IA which was moved by DVI. When the three judge Bench in its order dated 18 June 2020 observed that the "application made by the applicant for withdrawal of the offer is hereby rejected" it must be understood in the context of the plea which was setup by DVI. There can be no mistaking the fact that DVI, despite having submitted a resolution plan which had undergone discussion and revision before the CoC before being approved in the meeting of the CoC of 11 February 2020, was seeking to renege its applications to fulfill the resolution plan. The plea for being allowed to re-examine the impact of the pandemic and to re-negotiate the terms of the resolution plan makes it abundantly clear that DVI was not willing to fulfill the terms of the obligations which it had agreed. This is evident from the fact also that though DVI was obliged to furnish the second tranche of its performance bank guarantee of INR 150 crores, it was not ready to do so. On the contrary, apprehending a threat of the invocation of the first tranche of the bank guarantee of INR 150 crores, DVI pleaded special equities and sought a direction allowing it to keep the bank guara....
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....resolution applicants had responded to the fresh invitation by the RP only one resolution plan had been submitted before the last date of submission. The CoC sought liberty to consider the additional three resolution offers, one of which was the offer by DVI. It was in this context that on 2 December 2019, this Court partly allowed the application for modification by directing that fresh offers to be invited within thirty days. It was in pursuance of the order of this Court dated 2 December 2019 that a public announcement was made by the RP on 3 December 2019. DVI submitted undertakings under Section 29A of the IBC and other documents on 6 December 2019. Fresh resolution plans were submitted by four entities including DVI on 31 December 2019. 28 On 6 January 2020, the CoC declared DVI as the highest evaluated resolution applicant. DVI submitted a revised resolution plan dated 17 January 2020, following which the voting which was scheduled by the CoC on that day was cancelled. The revised proposal of the DVI was discussed in the 29th meeting of the CoC. On the same day - 20 January 2020 -when the proceedings were listed before this Court it took note of the fact that the CoC was ....
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....cation of those principles where the fine-print of this case lies. There can be no manner of doubt that (i) the contempt jurisdiction is to be exercised with circumspection; (ii) the acceptance or rejection of a plea on merits is distinct from whether a party is in breach of the order of court; (iii) the disobedience of an order must be willful before it constitutes contempt; (iv) a willful breach must appear clear by the conduct of a party not by implication; and (v) the exercise of legal rights and remedies would not constitute contempt. 32 We must at the outset note that on 8 June 2020, this Court relegated the matter to the NCLT to decide upon the approval application within a fortnight. NCLT passed an order approving the resolution plan submitted by DVI on 9 July 2020. DVI having taken recourse to its appellate remedy before the NCLAT under the provisions of Section 61 of the IBC does not constitute contempt. The plea of contempt however proceeds on the conduct of DVI. Bearing on this issue, the following circumstances have to be noted: (i) the pleas which were set up by DVI in paragraphs 9,12,13,15 and 17 of its IA file....
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....onstitutes a 'Force Majeure Event' (as defined in the Amtek Resolution Plan) which is a self-operating clause providing for the forthwith termination business/assets/ revenues of the Corporate Debtor have remained uncontroverted by you in proceedings before the NCLT Chandigarh. In any event, withholding of the information sought vide the email dated 13 July 2020 only reinforces the fact that the event of Force Majeure has occurred resulting in the forthwith termination of the Amtek Resolution Plan." On 12 September 2020, in an additional affidavit filed before the NCLAT, DVI again sought to plead the COVID-19 pandemic as a reason for allowing it to re-negotiate the resolution plan. The above circumstances leave no manner of doubt that despite the rejection of its IA by this Court on 18 June 2020, DVI continued to persist in raising the same grounds as a justification to be relieved of the obligations imposed on it by the terms of its resolution plan. 34 Dr Abhishek Manu Singhvi, learned Senior Counsel had, in the course of his submissions which have been recorded earlier, submitted that neither was force majeure pleaded then (in the IA filed before this Court) nor thereafter.....
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.... per se be regarded as a contempt of the order of this Court dated 18 June 2020. DVI was undoubtedly placed on notice of the order that should it proceed in such terms, it would invite the invocation of the contempt jurisdiction. Having said that, it is evident that the order of this Court dated 18 June 2020 rejected the IA moved by DVI and as a necessary consequence, the basis on which the reliefs in the IA were sought. Therefore correctly, it has been now stated on behalf of the DVI that it will not set-up a plea of force majeure in view of the dismissal of its IA on 18 June 2020. However lacking in bona fides the conduct of DVI was, we must be circumspect about invoking the contempt jurisdiction as setting up an untenable plea should not in and by itself invite the penal consequences which emanate from the exercise of the contempt jurisdiction. Likewise, the default of DVI in fulfilling the terms of the resolution plan may invite consequences as envisaged in law. On the balance, we are of the considered view that it would not be appropriate to exercise the contempt jurisdiction of this Court. During the course of the hearing, Dr Abhishek Manu Singhvi, learned Senior Counse....