TaxTMI 
TaxTMI 
2023 (12) TMI 1149
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.... No. 985 of 2023 filed by the Resolution Professional for withdrawal of the application for approval of the Resolution Plan. IA No.2294 of 2023 filed by the Appellant- Successful Resolution Applicant has been dismissed and IA No.4041 of 2021 filed by the Resolution Professional seeking extension of Corporate Insolvency Resolution Process (CIRP) has been dismissed as having become infructuous. 2. Company Appeal (AT) (Insolvency) No.1550 of 2023 has been filed challenging the order passed by the Adjudicating Authority in IA No.2294 of 2023 which IA was filed by the Appellant- Successful Resolution Applicant. Company Appeal (AT) (Insolvency) No.1551 of 2023 has been filed against the impugned order dated 21.11.2023 passed in IA. No.985 of 2023 praying for withdrawal of IA No.4041 of 2021 seeking approval of the Resolution Plan. Company Appeal (AT) (Insolvency) No.1552 of 2023 has been filed by the Appellant challenging the order of the Adjudicating Authority dated 21.11.2023 in IA No.4041 of 2021. 3. Brief facts of the case necessary to be noticed for deciding these Appeals are:- 3.1. CIRP commenced against the Corporate Debtor- 'Metenere Limited' by order dated 25.09.2020. After p....
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....also requesting to provide the information regarding the shareholding structure of the Shoora Group entities and any changes carried out in respect of the same. Appellant responded to the Resolution Professional stating that the information could not be disclosed regarding change in directorship/constitutional pattern of the Successful Resolution Applicant due to the existing confidentiality clause. Appellant however, assured the Resolution Professional that it remains fully committed to the submitted resolution plan. On 25.11.2022, meeting of the CoC was convened where CoC was apprised of the development including the e-mail received from Mr. Gaurav Gupta and 'Shoora Capital FZE'. The Resolution Professional communicated by e-mail dated 27.11.2022 and 16.12.2022 informing the Appellant that the Resolution Professional will be constrained to treat the event as violation of terms of the resolution plan and LOI and will pursue all remedies available to it including forfeiture of the performance security deposit. The meeting of the CoC was convened on 21.12.2022, Successful Resolution Applicant was also informed about the scheduled meeting dated 21.12.2022. Successful Resolution Appli....
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....he respective parties. Adjudicating Authority after hearing the parties on applications IA Nos. 985 of 2023, 4041 of 2021 and 2294 of 2023, allowed the IA No.985 of 2023 permitting the Resolution Professional to withdraw the plan approval application. Adjudicating Authority also directed the Resolution Professional to invite fresh Resolution Plans by issuing fresh Form-G. Exclusion of time was also allowed from 05.02.2021 till the date of passing the order. IA No. 2294 of 2023 filed by the Appellant was rejected. In view of the order passed in IA No. 985 of 2023, IA No.4041 of 2021 was dismissed as infructuous. Aggrieved by the orders passed by the Adjudicating Authority in the aforesaid three IAs, these three Appeals have been filed as noted above. 4. We have heard Shri Gaurav Mitra, Shri Anand Chhiber and Shri Sujoy Datta, Learned Counsel for the Appellants and Shri Sunil Fernandes, Learned Counsel for the Resolution Professional and Shri Ankur Mittal, Learned Counsel for the CoC. 5. Submissions advanced by Counsel for the Appellant in these Appeals are noted together. 6. It is submitted that the Resolution Plan having been approved by the CoC is binding on the CoC and the Suc....
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....d in Regulation 36B (4A) of the IBBI (CIRP) Regulations, 2016. It is contended that the performance guarantee can be forfeited only when Successful Resolution Applicant fails to implement the Resolution Plan after its approval by the Adjudicating Authority. It is submitted that the Appellant with its new investors is fully eligible and competent to implement the Resolution Plan. 7. Learned Counsel for the Resolution Professional refuting the submission of the Appellant contends that at the time of submission of the Resolution Plan, ownership structure of the Appellant company was that 'Shoora Capital FZE' was 100% owned by Mr. Gaurav Gupta and 'Shoora Minerals Pvt. Ltd. was 100% owned by Shoora Capital FZE and Appellant was 100% owned by 'Shoora Minerals Pvt. Ltd.'. It is submitted that considering the eligibility and the capability of the Appellant Company to make good its commitments under the Resolution Plan and that of Mr. Gaurav Gupta's Resolution Plan was approved. It is submitted that by addendum to the Resolution Plan dated 18.06.2021 a specific undertaking was taken from Mr. Gaurav Gupta to provide an undertaking that 'Shoora Capital will not dilute its investment in all ....
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.... of the conditions under the LoI or the Resolution Plan are breached by the Appellant. 8. Learned Counsel for the CoC supported the submissions of the Resolution Professional. It is submitted that the change of Successful Resolution Applicant shareholding amounts to breach of the terms of the Resolution Plan. The Adjudicating Authority has returned a finding that the Appellant did not seek consent from top two Financial Creditors prior to changing the shareholding structure of Successful Resolution Applicant as contemplated in the plan. There is a clear breach of addendum dated 18.02.2021 as well as letter of intent. Appellant himself is to be blamed for breaching the undertaking given by the Appellant before the CoC. There being breach by the Appellant, CoC was fully justified in taking a decision to withdraw the application filed for approval of the Resolution Plan. Valuable time having been lost in the process, Adjudicating Authority has rightly directed for issue of fresh Form G and granted exclusion of the period. It is submitted that the present is a case where Successful Resolution Applicant has virtually sold the Resolution Plan to a third party, contrary to the undertakin....
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....rals Private Limited (Holding Company of Jubilee Metal (P) Ltd.) Shoora Minerals Private Limited, promoted by Mr. Gaurav Gupta, was established on August 6, 2020 in New Delhi. It is 100% owned subsidiary of M/s Shoora Capital FZE Ajman, UAE * It is engaged in the trading of metals and alloys. * The Company has emerged as an international metals aggregator and commodity trader, specializing in trading of recyclable metals, alloys, engineering products, minerals & ores. * With associate entity in Hong Kong & a trading desk in UAE; Shoora Minerals Private Limited also has strategic global hubs located across Africa, UAE, Europe, Canada and South Korea, which are supported by an extended network of operations covering more than 8 countries. M/s Shoora Capital FZE Ajman. UAE (Holding Company of Shoora Minerals Private Limited) * The Company is promoted by Mr. Gaurav Gupta, it is 100% owned by Mr. Gaurav Gupta. * Shoora Capital Group commenced its operations as a trading unit engaged in bulk trading of non-ferrous metals and its products (company procures materials at competitive prices from scrap collector and buying houses and supplies to its customers). * Globa....
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....ing was given that 'Shoora Capital FZE' will not dilute its investment in Companies i.e. 'Shoora Minerals Pvt. Ltd.' and 'Jubilee Metal Holding Pvt. Ltd.' (Appellant herein). Addendum reads as follows:- "In terms of the email communications received by us on 18.06.2021, following changes may be treated as an addendum to the Resolution Plan already submitted. 1. Since Shoora Capital FZE, Azman, UAE is the ultimate parent company whose net worth has been considered at Eol stage and also currently under Resolution Plan, reliance is placed on net worth of Shoora Capital FZE for source of funds to be infused by RA, an undertaking is required from Mr. Gaurav Gupta that Shoora Capital FZE will not dilute its investment in all the subsequent chain entities including the SPV Jublice Metal Holding Pvt Ltd until the implementation (5 years from effective date) of the plan in full (without the consent of Top 2 Financial creditors) Reply: We undertake that Shoora Capital FZE will not dilute its investment in the companies viz. Shora Minerals (P) Ltd. (CIN: U28110DL2019PTC347808) and Jubilee Metal (P) Ltd. (CIN: U51909DL2020PTC370271) until the implementation of the resolution plan i.....
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....Jubilee Metal Holding Private Limited You are requested to kindly update your records accordingly. Regards" 16. On 25.10.2022, Mr. Gaurav Gupta has also sent an e-mail informing that there have been some changes in the directorship and constitutional pattern of the Resolution Applicant. E-mail of Mr. Gaurav Gupta does not give details, after receipt of the e-mail on 26.10.2022 the Resolution Professional wrote to Mr. Gaurav Gupta informing that there is major deviation from the conditions of the approved Resolution Plan. He asked to share the details of shareholding of all the change entities from the Resolution Applicant and effective date of change of shareholding structure. Mr. Gaurav Gupta did not give details despite several e-mails sent by the Resolution Professional to Mr. Gaurav Gupta. A detailed e-mail by Resolution Professional to Mr. Gaurav Gupta was sent on 03.11.2022 where Resolution Plan and addendum as well as LoI dated 28.07.2021 was referred. E-mail stated as follows:- "Therefore, against the above background, considering that both the Resolution Plan and the letter of intent issued to the Resolution Applicant clearly contemplate the continued association....
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.... to a breach of the resolution plan, as well as the letter of intent dated July 28, 2021. However, despite being sensitized of the seriousness of this situation, the undersigned received a reply from the Resolution Applicant nearly a month after the first request for further information was made by the undersigned, and the fact that such reply refuses providing such information to the undersigned under the garb of confidentiality. Against this background, in the absence of any clear information from your end suggesting otherwise and as per direction received from the CoC in the meeting dated 25 November 2022, please note that the undersigned shall be constrained to treat such event as a violation of the terms of the resolution plan and the letter of intent, and pursue all remedies available to it against the Resolution Applicant, including but not limited to the forfeiture of the performance security deposited with the undersigned. Best regards Surendra +919717390678" 18. By another e-mail dated 16.12.2022 by the Resolution Professional, Resolution Applicant was requested to participate in the meeting of the CoC in 20.12.2022, to explain such changes in directorship/c....
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....as well as by LoI dated 28.07.2021 that it shall not change its shareholding in directorship and constitutional pattern of the Resolution Applicant for a period of 5 years from the effective date and for changes if any. Approval of two leading Financial Creditors shall be obtained. Replies to emails received from the Resolution Applicant indicate that no approval was taken from the Financial Creditor for effecting any change in constitutional pattern of the Resolution Applicant and directorship. Mr. Gaurav Gupta who had 100% holding company, 'Shoora Capital' has exited by transferring its 100% shareholding in holding company and consequently the constitution of holding company and all group entities is completely changed. 21. Adjudicating Authority after considering the submissions has rightly come to the conclusion that the breach was committed by the Resolution Applicant of the addendum dated 18.06.2021 and the conditions as included in the LoI dated 28.07.2021. We, thus, affirm the finding of the Adjudicating Authority contained in paragraph 32 (ix), (x) & (xi). The findings and directions of the Adjudicating Authority contained in paragraph 32(ix), (x) & (xi) which are as foll....
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.... CoC is binding both on the Resolution Applicant as well as CoC. It is submitted that the Resolution Plan which is binding on the CoC, no decision could have been taken by the CoC to withdraw the application for approval of the Resolution Plan. 24. Before proceeding further, we need to notice the judgment of the Hon'ble Supreme Court in 'Ebix Singapore Pvt. Ltd.' (supra) which has been relied by the Appellant. 'Ebix Singapore Pvt. Ltd.' was a case where after approval of the Resolution Plan by the CoC, the Resolution Applicant filed application before the Adjudicating Authority for withdrawal of the Resolution Plan. Two applications for withdrawal of the Resolution Plan were rejected twice by the Adjudicating Authority. However, the third application which was filed by the Successful Resolution Applicant was allowed by the Adjudicating Authority which order came to be challenged before the Appellate Tribunal. 25. In the above case, the CoC has resolved not to allow the application for withdrawal. Against the order of the Adjudicating Authority allowing withdrawal of third application, Appeal was filed, which appeal was ultimately allowed on 29.07.2020 and the order of the NCLT al....
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....to renege from its terms after the plan has been approved by the CoC through a voting mechanism. The fleeting mention of a "binding contract" on one occasion in the BLRC Report (which was a pre-legislative text that underwent subsequent modifications by the legislature) to indicate the binding nature of the resolution plan and the finality of negotiations once it is approved by the CoC, does not establish the legal nature of the document, especially when it is not complemented by the text and design of IBC." 26. Under the heading "J. withdrawal of the Resolution Plan by a Successful Resolution Applicant under the IBC", Hon'ble Supreme Court proceeded to discuss the entire law. In paragraphs 157, 158 and 159, following has been held:- "157. These are binding precedents. Absent a clear legislative provision, this Court will not, by a process of interpretation, confer on the adjudicating authority a power to direct an unwilling CoC to renegotiate a submitted resolution plan or agree to its withdrawal, at the behest of the resolution applicant. The adjudicating authority can only direct the CoC to reconsider certain elements of the resolution plan to ensure compliance under Section....
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.... modifications after subsequent negotiations or a withdrawal after a submission of a resolution plan to the adjudicating authority as a matter of law, it would dictate the commercial wisdom and bargaining strategies of all prospective resolution applicants who are seeking to participate in the process and the successful resolution applicants who may wish to negotiate a better deal, owing to myriad factors that are peculiar to their own case. The broader legitimacy of this course of action can be decided by the legislature alone, since any other course of action would result in a flurry of litigation which would cause the delay that IBC seeks to disavow. 159. IBC is silent on whether a successful resolution applicant can withdraw its resolution plan. However, the statutory framework laid down under IBC and the CIRP Regulations provide a step-by-step procedure which is to be followed from the initiation of CIRP to the approval by the adjudicating authority. Regulation 40-A describes a model timeline for the CIRP that accounts for every eventuality that may arise between the commencement of the CIRP and approval of the resolution plan by the adjudicating authority, including the di....
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....f the Resolution Applicant and its credibility and finances. When very basis of Resolution Applicant is knocked out and it changes its constitution substantially the CoC cannot be faulted in view of breach of the conditions by the Resolution Applicant, application for approval of the Resolution Plan be withdrawn. We, thus, conclude that the Resolution Applicant has violated the addendum of the Resolution Plan as well as undertaking as given in the LoI and the Adjudicating Authority has rightly returned the finding as noted above. Question No.(iii) 30. We have already extracted the Resolution dated 21.12.2022 in which decision reference has been made to Clause 13.2 of the RFRP for forfeiting the performance guarantee. The Appellant has brought on record the RFRP as Annexure A-4. Clause 13.2 has been referred to in the Resolution of the CoC dated 21.12.2022, which is as follows:- "13.2. State Bank of India, being the designated lender shall have the right to invoke the Performance Bank Guarantee at any time, if (a) any of the conditions under the Letter of Intent or Resolution Plan or the Definitive Agreements are breached; or (b) there is a non-receipt of Required Approvals wit....
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.... also notice Clause 24 of the RFRP, which is as follows:- "24. Non-Compliance by Successful Resolution Applicant In the event of non-compliance by the Successful Resolution Applicant for any reason whatsoever, with its obligations under this Request for Resolution Plans or the Letter of Intent or the Approved Resolution Plan, the Resolution Professional and the CoC reserve the right to pursue any of the following actions, in addition to other as may be available under the Applicable Laws: i. the CoC may revoke the Lol; ii. the CoC may reject the Resolution Plan submitted by the Successful Resolution Applicant; iii. State Bank of India Designated Lender on behalf of the CoC members, may invoke the Earnest Money or the Performance Bank Guarantee, (as applicable), provided by the Applicant; and/ or iv. the Resolution Professional and the CoC may annul the Resolution Plan Process or negotiate with the Resolution Applicant." 32. Reliance has been placed by the Appellant on Regulation 36 B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Regulation 36B (4A) on which reliance has been placed is as f....