TaxTMI 
TaxTMI 
2022 (1) TMI 713
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....o. 161 of 2021[Edelweiss Asset Reconstruction Company Ltd.(acting in its capacity as trustee of EARC SC Trust 233) vs. Peter Beck and Peter Vermoegensverwaltung Ltd. & Anr.] and Company Appeal (AT) (Ins) No. 169 of 2021 [State Bank of India vs. Peter Beck and Peter Vermoegensverwaltung Ltd. & Anr.], which were filed against Order dated 2.2.2021 (hereafter called "Impugned Order") passed by the Adjudicating Authority(National Company Law Tribunal, Mumbai Bench) in I.A No. 4003 of 2019 and in I.A No. 2220 of 2020 in CP (IB) No. 246 (MB) 2017. In CA (AT) (Ins) No. 169/2021, State Bank of India has been authorized by other financial creditors to file the appeal on their behalf. 2. By the Impugned Order, the Adjudicating Authority has given an extra period of two weeks to the Successful Resolution Applicant (Respondent No. 1) to deposit Rs. 10 crores even though the Appellant had prayed in I.A. No. 2220 of 2020 that since the Successful Resolution Applicant had failed to implement the Resolution Plan as per its provisions, therefore CIRP should be re-initiated along with reinstating the previous Resolution Professional and 90 days of extra period should be provided in CIRP to invite ....
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....guarantee or provide a new bank guarantee. On 19.7.2019, the Banque De Luxembourg issued a Bank guarantee in favour of the Appellant State Bank of India, which could not be sent to the Appellant via SWIFT due to certain constraints as claimed by Respondent No. 1. Thereafter, the financial creditors decided in meeting on 28.8.2019 that Respondent No. 1 should infuse additional amount of Rs. 5 crores by 13.8.2019 prior to the expiry of existing Bank on 13.8.2019. Respondent No. 1 sent an e-mail on 31.8.2019 stating that Rs. 10 crores has been remitted to the bank account of the Corporate Debtor maintained with Abhyudaya Cooperative Bank Limited on 23.8.2019 in lieu of the bank guarantee. On September 11, 2019, the Banque De Luxembourg issued a letter to the Appellant State Bank of India refusing to renew the Bank guarantee or honour its revocation stating that Bank guarantee cannot be considered as valid bank guarantee, but as a "not-effective" one. In September 2019, the Appellant State Bank of India sent an e-mail to the monitoring agency advising it to ensure the availability of the bank guarantee before the issuance of the shares to the Successful Resolution Applicant (Respondent....
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....9 was heard after notice to Respondent No. 1 on 2.2.2021, whereupon the Impugned Order was passed. 8. In the appeal filed by Edelweiss Asset Reconstruction Company Ltd. (CA (AT) (Ins) No. 161 of 2021), the course of events as mentioned by the Appellant SBI have been stated and it is prayed that the Impugned Order dated 2.2.2021 passed by the Adjudicating Authority be set aside and in accordance with prayer in I.A. No. CA (AT)(Ins.) 2220 of 2020, order for re-instating the Committee of Creditors and erstwhile Resolution Professional after allowing extension of 90 days in CIRP for inviting fresh EOIs has been prayed for. 9. The Impugned Order of the Adjudicating Authority dated 2.2. 2021 records as follows: "Counsel for the Resolution Applicant further submitted that the Bank guarantee has been issued for Rs. 10 crores from the Banque De Luxembourg Bank. When the CoC invoked the Bank guarantee, the issuing bank, i.e. Banque De Luxembourg Bank informed the CoC that it is a non-enforceable guarantee. Since Resolution Applicant has already deposited Rs. 10,000,000 in lieu of the Bank guarantee. The Counsel for the RA also submitted that the approval from the Regulatory Au....
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....n of debt to equity by secured lenders, issuance of RTS and CCES to secure lenders and capital reduction. Z+180 Pending 10. Purchase of equity share by Resolution Applicant and inclusion of funds towards Resolution Applicant debt Z+180 Pending 11. Conversion of CCPS held by secured lenders, FCCB holders into equity shares Z+180 Pending 12. Change in Memorandum and Articles of Association and other documentation, if required under the proposed Plan Z+180 Pending 13. Management of Company - • Formation of Board • Appointment of key managerial employees of the Company • Appointment of current and statutory auditors Z+180 Pending 11. The Learned Senior Counsel for SBI further claimed that certain payment obligations such as equity capital infusion [in accordance with section 4 clause 3(a)] of Rs. 5 crores to be done within 180 days of the zero date, payment of insolvency process cost (in accordance with section 5, clause 1.1) of Rs. 5 crores to be paid within....
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....essional to invite EOIs and complete the insolvency resolution process of the Corporate Debtor. 14. The Learned Sr. Counsel for the Appellant Edelweiss Asset Reconstruction Company Limited(in short EARC)(in Company Appeal No. 161 of 2021) has argued that Respondent No.1 has not adhered to the provisions and timelines given in the Approved Resolution Plan by not complying with the following conditions: - (i) Non-payment of CIRP costs of Rs. 5 crores within 30 days from the date of approval of the resolution plan i.e. 28.2.2018 (Appeal paper book, Company Appeal No. 161/2021, page 86). (ii) Non-payment of workers' dues of Rs. 0.16crore within 30 days from the date approval of the plan (attached at pg. 86 of Appeal paperbook, Company Appeal No. 161 of 2021). (iii) Failure to provide valid bank guarantee in terms of section 5 clause 12 (ii) of the Approved Resolution Plan as, the bank guarantee submitted on 19.7.2019 was not via SWIFT mode and therefore not enforceable. No valid bank guarantee was given for the period 1.4.2018 to 28.1.2019. (iv) Failure to deposit Rs. 5 crores towards equity capital infusion in terms of section 4 clause 3 (A) of A....
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....4.7.2019, 13.8.2019, 28.8.2019, 24.8.2020 and 4.9.2020 which were conveyed to Respondent No.1 by the monitoring agency EY Restructuring LLP and also by SBI vide e-mail dated 12.9.2019.He has claimed that in all, there has been a delay of more than 108 days in implementation of the Approved Resolution Plan, which is sufficient proof of the time granted to the Successful Resolution Applicant Respondent No. 1 by the financial creditors and the monitoring agency. 17. The Learned Senior Counsel for Appellant EARC has reiterated the argument of the Appellant SBI that the Impugned Order amounts to modification of the Approved Resolution Plan which is not permissible as has been laid down by the Hon'ble Supreme Court in numerous judgments. He has further claimed that since Respondent No. 1 has failed to implement the approved Resolution Plan, the Corporate Debtor should not be sent into liquidation. He has cited the judgment of Hon'ble Supreme Court in the matter of Swiss Ribbons Pvt. Ltd versus Union of India (2019 4 SCC 17) wherein it is held that the primary focus of IBC is to ensure revival and continuation of the Corporate Debtor and protecting it from its own management and from c....
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....he Corporate Debtor who had invested a sum of approximately Rs. 146.08 crores in the Corporate Debtor. He is, therefore, an unsecured lender of the Corporate Debtor and has interest in successful resolution of the Corporate Debtor. He has further claimed that after the approval of the resolution plan by the Learned Adjudicating Authority on 28.2.2018, it was challenged by the former promoters/Directors of the Corporate Debtor right upto Hon'ble Supreme Court and on 5.4.2019, after the Hon. Supreme Court dismissed the appeal preferred by the former promoters/Directors of the Corporate Debtor, Respondent No.1 started to implement the successful resolution plan in the right earnest. Furthermore, the COC allowed the implementation of the resolution plan by giving the Successful Resolution Applicant a fresh time-limit upto November 7, 2020 for its implementation. On 6 November 2020 the Successful Resolution Applicant requested the monitoring agency to provide bank account for immediate transfer of Rs. 5.00 crores towards implementation but was not provided the bank account details. He has claimed that, therefore, the Appellants are trying to mislead this Hon'ble Tribunal by stating that....
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....el of the Appellants and Respondent No. 1 respectively in both the appeals. We have also considered the pleadings and documents submitted by all the parties. 22. The issues that arise in these appeals are two-fold: (i) Whether the default of Respondent No. 1 in implementing the successful resolution plan is justified because of appeals in NCLAT and in Hon'ble Supreme Court and the delay because of the time for litigation and in making initial payments as required in the approved Resolution Plan? (ii) Whether any more time could be granted as prayed by the Appellants in both the appeals CA No. 161 of 2021 and CA No. 169 of 2021 for extension of CIRP for invitation of fresh EOIs or liquidation of the Corporate Debtor, in the event the Respondent No. 1 is found in default of implementation of the Resolution Plan? 23. The Respondent No. 1 has submitted that the resolution plan, which was approved by the Adjudicating Authority on 28.2.2018,was challenged by the former promoter/directors of the Corporate Debtor upto Hon'ble Supreme Court. He has given the following key dates pertaining to litigation at various levels in this case: S.No. Date Event 1. ....
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....piry of the bank guarantee and honor its commitment and this amount remains with the Corporate Debtor till date. 26. Thus, the issue of non-adherence of the timelines in accordance with the Approved Resolution Plan is quite apparent. The failure to provide valid bank guarantee in terms of Section 5 clause 12 (ii) of the Approved Resolution Plan to the satisfaction of the monitoring agency and the financial creditors is also a major default. 27. Both the Appellants in both appeals and Respondent No.1 have prayed for two separate lines of action. The Corporate Debtor, which has performed quite well as a going concern during the CIRP period and as stated by the Learned Counsel for Appellant in written submissions, has a surplus cash of Rs. 17.23 crores as on April 30 2021, and this fact, we feel, should be kept in mind in deciding the next course of action in the case. Since the approved Resolution Plan is under implementation since its approval on 28.2.2018, the moot point is whether the Successful Resolution Applicant is serious about implementation of the plan. 28. The Successful Resolution Applicant has claimed to be unsecured Financial Creditor of the Corporate Debtor, a....
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....Plan is adjudged as having failed. Under section 33(1) (a) and (b) the following is stipulated:- 33. Initiation of liquidation- (1) Where the Adjudicating Authority, - (a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of section 30; or (b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein, it shall - (i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate Debtor is in liquidation; and (iii) require such order to be sent to the authority with which the corporate debtor is registered." 32. It is laid down in law that liquidation shall follow when no resolution plan under sub-section 6 of section 30 is received or resolution plan is rejected under section 31 for non -compliance of the re....