TaxTMI 
TaxTMI 
2023 (8) TMI 131
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....ection 421 of the Companies Act, 2013 (in short "Companies Act") aggrieved by the judgment and order dated 24.2.2021 (in short "Impugned Order") of the National Company Law Tribunal, Mumbai Bench (in short "NCLT") in CA No. 03 of 2021 filed under CP No. 3638/MB/2018. 2. The Impugned Order has been passed by NCLT, Mumbai by exercising jurisdiction under sections 241-242 of the Companies Act, 2013 (in short "Companies Act") whereby a proposed settlement between the National Highways Authority of India (in short "NHAI") and Kiratpur Ner Chowk Expressway Limited (in short "KNCEL") has been approved resulting in foreclosure of the Concession Agreement regarding construction of Kiratpur - Ner Chowk section of National Highway. 3. In brief, the conspectus of the case is that a Concession Agreement was signed between the NHAI (the Concessioning Party) and KNCEL (the Concessionaire) for constructing the Kiratpur-Ner Chowk section of the National Highway in 2012 on Design, Build, Finance, Operate and Transfer (DBFOT) basis. This project was taken up by NHAI through a Special Purpose Vehicle ("SPV") KNCEL which is a subsidiary of IL&FS Transportation Network Limited ("ITNL"), which in t....
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....settlement would be an amount which is the lower amount of the (a) value of work done; or (b) 90% of the debt due, and the calculation of 'Debt Due' will be as per the definition provided in the Concession Agreement. 5. The Appellants have further stated that due to disputes that arose between the two parties, termination notices were issued by both the parties, and KNCEL terminated the Concession Agreement vide its notice dated 24.1.2019 and NHAI communicated its notice of termination on 22.10.2019. During the course of negotiations between the parties, the value of work done in the project was assessed at Rs.1027.79 crores by Independent Engineers (IE). The Appellants have further stated that the amount of "Debt Due" was assessed to be Rs. 787.11 crores by NHAI. The Appellants have added that KNCEL proposed foreclosure of Concession Agreement on payment of compensation of Rs.735.56 crores, which was recalculated by NHAI and it proposed a compensation amount of Rs.708.40 crores to KNCEL and after recoveries of Rs.35.78 crores, a net compensation amount payable to KNCEL was arrived at Rs.672.62 crores as 'full and final settlement' by NHAI. The Appellants have stated that as per....
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....e of the investment in the project by the concessionaire is not covered under the definition of "debt due", the payment made be restricted to the value of work done. 10. The Learned Counsel for Appellants has claimed that after serving the termination notice, the KNCEL vide its letter dated 26.3.2019 requested for foreclosure of the Concession Agreement and further requested NHAI to pay the settlement amount in accordance with MoRTH Guidelines after foreclosing the Concession Agreement. He has further claimed that in terms of the MoRTH Guidelines, the minimum amount payable to concessionaire is Rs.1025.56 crores and not the amount of Rs.672.62 crores which is included in the Supplementary Agreement. 11. The Learned Counsel for Appellants has clarified that the Appellants are not aggrieved by the fact the settlement has been entered into between NHAI and KNCEL, but they are dissatisfied by the wrong calculation of "Debt Due" which has resulted in a loss of the amount of recovery to the Appellants which should have been in accordance with MoRTH Guidelines dated 9.3.2019. He has submitted that, in addition, the Appellants are also aggrieved by the extinguishment of their claims.....
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..... 14. The Learned Counsel for Appellants has also claimed that no estoppel operates in filing the appeal as has been contended by the Respondent since there was no opportunity for representation on the part of the senior lenders before NCLT. Moreover, an estoppel cannot be used in the case of an ultra vires act. 15. The Learned Counsel for Appellants has cited the judgment of Hon'ble High Court of Delhi in the matter of Jetpur Somnath Tollways Limited & Ors. vs. National Highways Authority of India and 7 Ors. [MANU/DE/2171/2017] in which by judgment dated 31.7.2017, it was held that the "Debt Due" amount upon termination on account of concessionaire's default during the operation period made it incumbent on Concessioning Party NHAI to pay Jetpur Somnath Tollyways by way of termination payment, an amount equal to 90% of the "Debt Due" less insurance cover, and upon termination on account of NHAI's default, NHAI has to pay to the Concessionaire by way of termination payment, an amount equal to the "Debt Due" plus 150% of the Adjusted Equity. He has claimed that the judgment further holds that the termination payment would be in accordance with the definition in the Concession A....
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.... in the positive. He has argued that the Hon'ble Appellate Tribunal permitted the New Board of IL&FS appointed by NCLT vide orders dated 3.10.2021 and 21.12.2018 to proceed with the resolution of IL&FS group entities in accordance with the procedure suggested by Union of India vide its Affidavit dated February 17, 2020. He has thus argued that in view of the validity of the Resolution Framework, once the settlement was arrived at between the NHAI and KNCEL, the extinguishment of all claims and liabilities of the stake holders and third parties would happen. He has also argued that since the order dated 12.3.2020 of NCLAT has attained finality, Hon'ble NCLT has full jurisdiction and power to grant relief in terms of the Impugned Order because it is now settled that the jurisdiction conferred upon NCLT under sections 241-242 is an equitable distribution and NCLT is empowered to pass such orders as it deems fit to be just and equitable in the facts of the given case. 18. The Learned Counsel for R-1 and R-2 has further argued that the Appellants had, without reservation, accepted the proceeds of the settlement amount received in pursuance of the resolution carried out for KNCEL. He ....
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....sure amount of Rs.672.62 crores. He has clarified that the NHAI's computation of "Debt Due" has been stipulated in para 39 of the Affidavit dated 7.2.2020 of Union of India, and this Affidavit was approved by this Tribunal vide March 12, 2020 order, and in view of the fact that the process used for computation of "Debt Due" has been earlier approved in an appeal by this Tribunal, the Appellant's grievance on the same is without merit. 21. The Learned Counsel for R-1 and R-2 has further submitted that 'Debt Due' was computed in a fair and transparent manner by an Independent Valuer appointed by NHAI as Rs. 787.11 crores, which was done with a view to arrive at an expeditious settlement. He has further submitted that MoRTH Guidelines stipulate that compensation payable in a case of "stuck project" is equal to the lower of the value of the work done or 90% of the debt due, and the settlement amount computed as Rs.708.40 crores being 90% of the 'Debt Due' was approved by the Conciliation Committee of Independent Experts-II ("CCIE-II") on 21.8.2020, which is the forum under whose aegis KNCEL and NHAI were settling their dispute amicably. He has submitted that an amount of Rs.1030 cro....
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....by the Hon'ble NCLT was not legally tenable, which was done without giving an opportunity of hearing to the Appellants who by virtue of being financial creditors of KNCEL were interested parties in the said settlement between KNCEL and NHAI. The Learned Counsel for Appellants has also raised the issue that the Respondents have not followed procedure and modality given in the the Resolution Framework as approved by this Tribunal. 25. In this connection, we note that Hon'ble NCLAT, in its order dated 15.10.2018 in CA (AT) No. 346/2018, has held the NCLT has much wider powers under sections 241-242 of the Companies Act than the powers vested under provisions of IBC and therefore, it is fully empowered to pass orders for resolution under sections 241-242 of the Companies Act. On the same premise NCLAT decided to impose a 'stay' regarding various actions which are akin to 'moratorium' under section 14 of the IBC and hear cases relating to resolution of IL&FS and its group companies. The relevant part of NCLAT's order is reproduced below:- "3. The questions that arise for consideration in these appeals are: (i) Whether the Tribunal can pass appropriate order under Se....
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....temporarily the acceleration of any term loan, corporate loan, bridge loan, commercial paper, debentures, fixed deposits and any other financial facility by the 'IL&FS' and its 348 group companies by any party or person or Bank or Company, etc. as of the date of first default. (v) Any and all banks, financial institutions from exercising the right to set off or lien against any amounts lying with any creditor against any dues whether principal or interest or otherwise against the balance lying in any bank accounts and deposits, whether current or savings or otherwise of the 'IL&FS' and its 348 group companies." 26. On the issue whether the settlement agreement between KNCEL and NHAI is in accordance with the proposed Resolution Framework for IL&FS and its group companies, we note that the procedure suggested by Union of India through its Affidavit dated 17.2.2020, which has been approved by NCLT and NCLAT dated 17.2.2020, gives various options for final resolution. These options include modalities for Group Level Resolution, Vertical Level Resolution and Asset Level Resolution. The Resolution Framework considers Asset Level Resolution as the most feasible option and inc....
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.... Sr. Lenders w.r.t. the outstanding amount of principal and interest is also required. xx xx xx xx P. Concessionaire vide letter dated January 14, 2020 submitted its consent to settle the issues/disputes on payment of Rs.672.62 crore net of recoveries amounting to Rs.35.78 crore along with request to add accrued interest on the senior debt and sub debt as part of debt due as defined in the Concession Agreement. Concessionaire vide said letter also requested to pay interest on amount arrived as above for delay in release of payment from date of termination of the Project till date of actual transfer." 29. Admittedly, the Concessionaire and Concessioning Party had signed the original Concession Agreement. Therefore, in our view they are the necessary parties to enter into a settlement agreement. We have noted earlier in this judgment that the settlement agreement has been worked out under the supervision of CCIE-II, which in para 2.1 notes the gross settlement amount of Rs.708.40 crores and the net due amount, after taking into account Rs.35.78 crores towards recoveries, is Rs. 672.42 crores. This amount is cleared by CCIE-II as being fair, reasonable and arri....
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....the project had not come into "operation period". 35. In this connection, it is also noted that there was dispute between KNCEL and NHAI as to who was responsible for the default and both the parties had given their own dates of termination through separate termination notices. In such a situation, and since both the parties were keen for foreclosure of the Concession Agreement, a settlement was worked out based on MoRTH Guidelines under the guidance of CCIE-II, and further the amount of full and final settlement was worked out again as mutually agreed between the two parties. Therefore, Termination Payment in accordance with Concession Agreement is not applicable in the present case. 36. The procedure set out in the MoRTH Guidelines stipulates that Concession Agreement may be foreclosed vide a Supplementary Agreement, mutually agreed and executed between the parties. Annexure I of these guidelines refers to 90% of 'Debt Due" amount, which is calculated in accordance with the formula which is discussed and then accepted by both the parties. Since the two original parties in the Concession Agreement were entering into a Supplementary Settlement Agreement, there does not appear....
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....mpliance with the guidelines for submitting Resolution Proposals for approval of the undersigned, it nis stated that the same are not entirely applicable in the present proposal. Nevertheless, it is pointed out that A&M, vide email dated 21st November 2020, has recommended that the settlement is in line with the Approved resolution Framework; the distribution of the KNCEL Settlement Amount to the creditors of KNCEL is in accordance with the Revised Distribution Framework, and will be subject to the orders of the Hon'ble NCLT, and that there are no complaints/representations filed by any party in relation to the Proposal." 40. Finally in para 57, approval is accorded by Hon'ble Justice D.K. Jain, which is reproduced below:- "57. I have examined the proposal, which is stated to be in syne with the Resolution Framework placed before the Hon'ble NCLT by the MCA. Further, it is also asserted that the distribution of the KNCEL Settlement Amount along with the additional amounts lying in the KNCEL Escrow account is in accordance with the Revised Distribution Framework approved by the Hon'ble NCLAT. This, coupled with the assertion in the Memorandum that the Project bei....
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....ithin a period of 60 (sixty) days from COD, the Concessionaire shall notify to the Authority, the Total Project Cost as on COD and its disaggregation between Debt Due and Equity, and only the amounts so conveyed shall form the basis of computing Termination Payment, and it is further agreed that in the event such disaggregation is not notified to the Authority, Equity shall be deemed to be the amount arrived at by subtracting Debt Due from Total Project Cost. 59. "Debt Due" has been defined to mean the aggregate of inter alia the sum expressed in Indian Rupees outstanding, on the Transfer Date, of the principal amount of the debt provided by the Senior Lenders under the Financing Agreements for financing the Total Project Cost but excluding any part of the principal that had fallen due for repayment two years prior to the Transfer Date; 60. The "Total Project Cost" has been defined to mean the lowest of: (a) the capital cost of the Project, less Equity Support as set forth in the Financial Package; (b) the actual capital cost of the Project upon completion of Four-Laning of the Project Highway less Equity Support; and (c) a sum of Rs. 82....
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....at the Net KNCEL Settlement amount was distributed to such creditors as per the revised distribution Framework pursuant to the orders of this Tribunal dated February 4, 2021 in Company Application No. 3 of 2021. Xx xx xx ORDER xx xx xx 57. In the interest of justice, accordingly, application is allowed in terms of the reliefs A to H of the Application without prejudice of course to any proceedings that any investigative or any other authorities may take against the erstwhile directors of the companies that are subject matter of this application." 45. We consider the contention of the Appellant that the principle for calculation of "Debt Due" should be the same as accepted in the judgment in Jetpur Somnath Tollways Limited & Ors.(supra). We note that this case was filed under section 9 of Arbitration and Conciliation Act, 1996, which has been mentioned in para 1 of the said judgment. Therefore, the Jetpur Somnath Tollways Limited & Ors. case relates to arbitration proceedings under the Concession Agreement. It is in this light that clause 37.3 of the Concession Agreement has been considered in para 15 of the judgment for calculation of "Debt Due" and....