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TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 888
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....toring Committee was allowed forfeiting entire Performance Bank Guarantee given by the Appellant with direction to exclude the time from the date of issuance of Form G till the date of passing of orders and issued certain further directions. The Appellant aggrieved by the said order has come up in this Appeal. 2. Brief facts of the case necessary for deciding this Appeal are: (i) An Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code") was filed against the Corporate Debtor EMC Limited, which was admitted by order dated 12.11.2018. CA Kannan Tiruvengadam was appointed as Resolution Professional ("RP"). (ii) In pursuance of issuance of Form-G, four Expression of Interests were received. However, only two Resolution Applicants namely - the Appellant and KBC Aldini Capital Limited submitted their Resolution Plan. The Resolution Plan submitted by the Appellant was approved by the Committee of Creditors ("CoC") in its Meeting dated 01.10.2019 by 80.18% votes. The Adjudicating Authority vide order dated 21.10.2019 approved the Resolution Plan. In terms of the Resolution Plan, the Appellant was duty bound to ma....
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....onitoring Committee, on 13 November, 2020 shall stand forfeited in favour of the Corporate Debtor immediately, since there is knowing and wilful contravention of the approved Resolution Plan. (ii) Additionally, the SRA and its officers responsible be proceeded against for contravention of the approved resolution plan in terms of Section 74(3) read with section 236 of the Insolvency and Bankruptcy Code, 2016. To facilitate this, a copy of this order shall be sent to the Insolvency & Bankruptcy Board of India (IBBI) and the Secretary, Ministry of Corporate Affairs, who are the agencies authorised in terms of section 236(2) ibid to initiate appropriate complaint before the Special Court as envisaged under Section 236(1) ibid. (iii) The Corporate Debtor is a viable going concern with about 400 employees and workmen. There is every chance of a successful resolution of the Corporate Debtor. Therefore, to facilitate this, the entire period consumed in the CIRP commencing from the first date of issue of Form G inviting Expressions of Interest till the date of passing of orders in this application is excluded. This will grant sufficient time for a limited reboot of the CIR....
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....er Section 74, sub-section (3) of the code is beyond the power conferred upon the Adjudicating Authority. The observation of the Adjudicating Authority that conduct would amount to willful contravention as contemplated under Section 74, sub-section (3) is not within the scope of jurisdiction of Adjudicating Authority. The power under Section 74, sub-section (3) is an exclusive prerogative and jurisdiction of Special Courts and could not have been exercised by Adjudicating Authority. The Adjudicating Authority by issuing a mandate for proceeding to be instituted against the Appellant and its officers for contravention of the Resolution Plan has exceeded its authority inasmuch as the Code does not confer any power upon the Adjudicating Authority to direct the Board or the Central Government to initiate proceedings under Section 74, sub-section (3). 6. Shri Abhijeet Sinha, learned Counsel for Respondent No.1 refuting the submission of learned Counsel for the Appellant contends that Respondent No.1, who is a Chairman of the Monitoring Committee had every jurisdiction to file I.A. No.2175 of 2020. It is the Chairman of the Monitoring Committee, who is entrusted under the Resolution P....
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....Ors. decided on 16.08.2019 and the judgment of the Hon'ble Supreme Court in Kailash Nath Associates vs. Delhi Development Authority and Ant. - (2015) 4 SCC 136. 8. We have heard submission of learned Counsel for the parties and have perused the record. 9. The Resolution Plan submitted by the Appellant was approved by the Committee of Creditors with 80.18% vote shares on 01.10.2019. The Adjudicating Authority vide order dated 21.10.2019 approved the Resolution Plan. As per the Resolution Plan submitted by the Appellant, the Appellant was to make payment by way of upfront payment of INR 568 crores within 60 days from the Effective Date. Clause 8.3, deals with "Payment to the financial creditor who are members of the CoC". Clause 8.3 (c) (ii) is as follows: "8.3(c)(ii) The aggregate amount which is proportionately payable to each of the Financial Creditors, as mentioned above, would be paid by way of upfront payment of INR 568 crs as reduced by the priority payments due on account of CIRP Cost, payments to workmen and amount due to Operational Creditors out of the proposed amount on an interest free basis within 60 days from the Effective Date." 10. Apart from above ....
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.... passing of orders in this application be excluded; (viii) The corporate insolvency resolution process in respect of the corporate debtor be directed to commence afresh and the Applicant herein be once again appointed as Resolution Professional for the said purpose; (ix) The period to complete the corporate insolvency resolution process be extended by 180 days from the date of the order to be passed herein; (x) Appropriate directions be passed with regard to keeping the corporate debtor as going concern. (xi) ALTERNATIVE TO PRAYERS (vii), (viii) and (ix) above, orders of liquidation be passed in respect of the corporate debtor in terms of Section 33 and 34 of the Insolvency and Bankruptcy Code, 2016; (xii) Ad interim orders in terms of prayers above; (xiii) Pass any other order or orders which this Hon'ble Tribunal may deem fit in the facts and circumstances of the case in the interest of equity, justice and good conscience." 11. Even during the pendency of the Application before the Adjudicating Authority, various affidavits were filed by the Appellant stating that entire upfront payment shall be made by 30.06.2021 and there....
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....rpretation would be impermissible. Such a judicial exercise would bring in the evils which IBC sought to obviate through the back door." 12. Now we come to the submission of the Appellant questioning the forfeiture of the Performance Bank Guarantee. Regulation 36-B of the CIRP Regulations was amended by Notification dated 24.01.2019 inserting Regulation (4-A), which is to the following effect: "36-B[(4A) The request for resolution plans shall require the resolution applicant, in case its resolution plan is approved under sub-section (4) of section 30, to provide a performance security within the time specified therein and such performance security shall stand forfeited if the resolution applicant of such plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule. Explanation I.- For the purposes of this sub-regulation, "performance security" shall mean security of such nature, value, duration and source, as may be specified in the request for resolution plans with the approval of the committee, having regard to th....
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....ath case was on entirely different facts and is related to auction by the DDA. Action of the DDA in forfeiting the earnest money was held to be arbitrary due to reasons as contained in the judgment. As per the judgment of Hon'ble Supreme Court, the DDA never issued any notice and the Appellant was never put to notice that it has to deposit the balance 75% of premium of the plot within certain period of time. In the absence of such notice, it was held that there was no breach of contract on the part of the Appellant. Paragraphs 24 and 25 of the judgment of the Hon'ble Supreme Court in this context is relevant, which are to the following effect: "24. The aforesaid judgment would apply in a situation where a promisee accedes to the request of the promisor to extend time that is fixed for his own benefit. Thus, in Keshavlal Lallubhai Patel v. Lalbhai Trikumlal Mills Ltd. [1959 SCR 213 : AIR 1958 SC 512] , this Court held: (SCR pp. 219-20 : AIR p. 515, para 8) "The true legal position in regard to the extension of time for the performance of a contract is quite clear under Section 63 of the Contract Act. Every promisee, as the section provides, may extend time for the ....
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....(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. (2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors 1[approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). [Explanation. - For the purpose of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidate the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmatio....
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....e respected at all costs, and that Indian Judicial processes cannot be taken for a ride like this. The SRA seems to think that other suitors will not come in to hold the hand of the Corporate Debtor and pull it out of insolvency. Therefore, we fully intend to call the bluff of the SRA that non-extension of time will put the Corporate Debtor and its stakeholders in serious jeopardy. 7.6. Since the Corporate Debtor has been kept as a going concern by the Chairman of the Monitoring Committee, every effort should be made to give one more chance at resolution before we order liquidation as a last resort." 21. When the Corporate Debtor was being run as a going concern by the RP and thereafter by the Chairman of the Monitoring Committee and there are 400 employees working with the Corporate Debtor, the Adjudicating Authority had not acted beyond its jurisdiction in issuing the impugned direction. Paragraphs 3.12 and 3.13 of the impugned order where it notices the case of the Appellant, is also relevant to be extracted, which is to the following effect: "3.12. So far, the Chairman has successfully managed to ensure that the Bank Guarantees to the tune of Rs.458,09,65,4....
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....ction 74(3) with a prayer that the Resolution Applicant has knowingly contravened the terms of the Resolution Plan and has failed to implement the Plan. A prayer was also made to reinstate the Committee of Creditors and further to initiate proceedings under Section 74, sub-section (3). The Application filed by the Committee of Creditors was rejected, against which the Appeal was filed. In the above case, following observations were made by this Tribunal in paragraph 37, 38 and 39: "37. In appropriate case, on receipt of an application under subsection (3), if the Adjudicating Authority determines that the 'Corporate Debtor' has contravened the provisions of the 'Resolution Plan', it requires to pass order of liquidation as provided under sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1) as laid down under Section 30(4). 38. In the present case, it is argued that none of the persons' interests are prejudicially affected because of contravention, made any application to the Adjudicating Authority for liquidation order under sub-section (3) of Section 33, therefore, according to the counsel for the 'Committee of Creditors' and the 'Resolution Professio....
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.... 12.2 of the Resolution Plan is as follows: "12.2 Supervision after the Effective Date and until expiry of the Term (a) After Effective Date, a committee ("Monitoring Committee") for monitoring and supervision the implementation of the Resolution Plan shall be appointed. Resolution Applicant purpose that the Monitoring Committee would comprise as follows: i. Four member to be nominated by the Resolution Applicant; ii. Four member to be nominated by the CoC; iii. Resolution Professional as Chairman (b) Monitoring Committee (MC) shall supervise the Resolution Plan until payment of the up-front consideration as contemplated under the Resolution Plan and on completion of such payment and completion of Closing Day Actions the Term of the MC shall expire." 27. The Respondent, who filed the Application as a Chairman of the Monitoring Committee was fully entrusted to supervise the implementation of the Resolution Plan. When the Plan has failed to be implemented by the Resolution Applicant, it is also the duty of the Monitoring Committee to bring it to the notice of the Adjudicating Authority, relevant facts including the failure of t....