TaxTMI 
TaxTMI 
2023 (12) TMI 1151
X X X X Extracts X X X X
X X X X Extracts X X X X
....l, Sr. Advocate for Mr. Nithin Chowdary Pavuluri, Mr. Arjun Suresh, Mr. Vinay Kumar Pandey, VSR Avadhani, Advocates for R6. Ms. Anuradha Bisani, For Liquidator/R7. Mr. Arun Karthik Mohan, Advocate for R10. Mr. Shankar Narayanan, Senior Advocate for PNB JUDGMENT (Virtual Mode) [Per: Shreesha Merla, Member (Technical)] 1. The present Appeal is filed against the Impugned Order dated 13.09.2023 passed by the National Company Law Tribunal, Hyderabad Bench - II / Adjudicating Authority in IA (IBC) No. 816/2023 and IA (IBC) No. 1009/2023 in CP (IB) No.519/7/HBD/2018, whereby the Adjudicating Authority has observed in the Impugned Order, dated 13.09.2023, as follows: "Ld. Senior Counsel Mr. SR Raja Gopal for Mr. Allwin Godwin, Mr. Sagar Dhawan & Mr. VVSN Raju, Adv for the Petitioners and Ld. Senior Counsel Mr. Vivek Reddy for R1 and R2 for Mr. Bheemachary, Mr. Harshavardhan Abburi for R3, present. No representation for R4. IA 816/2023 Ld. Senior Counsels have submitted that the 4th Respondent (MEIL Energy Pvt Ltd) and 1st Respondent (Ramanagaram Enterprises Private Limited/R1) have entered into share purchase agreement dated 12.09.2023 to which the IDBI Bank (Petitioner) is also ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st Appellant company as a 'Going Concern'. This Acquisition Plan was approved by the NCLT on 26.09.2022. It is submitted that being the successful bidder, the Second Appellant has reconstituted the Board of Directors with effect from 26.07.2023. 3. The First Respondent / IDBI is the Financial Creditor of both the First Appellant Company and the Second Respondent and has filed IA No. 816/2023 before the NCLT. The Second Respondent is a step/down subsidiary of the First Appellant Company and was admitted into CIRP on 09.05.2019. A Resolution Plan was jointly submitted by M/s. iLABS Hyderabad Technology Centre Pvt. Ltd. and M/s. 50 Hertz Energy Pvt. Ltd., arrayed as Respondents 3 and 4 respectively, which was approved by the Adjudicating Authority vide Order dated 26.04.2021. The Second Respondent namely M/s. Ramanagaram Enterprise Pvt. Ltd. was initially incorporated under the name M/s. Vamshi Industrial Power Ltd. and thereafter, renamed as Lanco Thermal Power Ltd. The Fifth Respondent Company is stated to be the identified bidder for 42,00,00,000 CCPS of Lanco Anpara Power Ltd. / the Sixth Respondent which forms the subject matter of the Appeal. It is submitted that the First Appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o them. 5. Learned Senior Counsel for the Appellant submitted that as per Section 3.2 (ii)(c) of the SPA, 42,00,00,000 CCPS which stood pledged to the lenders of the First Appellant were to be transferred to the Second Respondent with effect from the date of the SPA. The consent of the project lenders for the transfer of the pledged CCPS was not given and therefore by mutual consent of both the First Appellant and the Second Respondent herein, the timelines for transfer of the CCPS was extended from time to time. It is submitted by the Learned Counsel for the Appellant that the Second Respondent had only paid Rs. 734.26/- Crores out of the total consideration of Rs. 1219.636/- Crores agreed under the SPA. The transfer never took place as the consent of the lenders was not forthcoming and because the balance sale consideration was never paid. It is argued that the timeline for conversion of the CCPS to Equity Shares was also extended from time to time till 30.09.2023. It is contended that Lanco Anpara never sought extension of the timelines for conversion from CCPS to Equity Shares from either the Monitoring Committee or the Second Appellant which had acquired 100% shareholding in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Appellant herein to cooperate with respect to the transfer of the subject shares. 8. As regarding maintainability of the Appeal, raised by the Respondents, Learned Senior Counsel Mr. E. Om Prakash strenuously argued that the Appellants are necessary parties being substantially interested in the subject matter of IA No. 816/2023 and therefore, ought to have been heard, but the Adjudicating Authority, in gross violation of the Principles of Natural Justice, passed the Impugned Directions; that the subject 42,00,00,000 CCPS stand in the name of the First Appellant / Lanco Infra / LITL; that LITL was sold as a `Going Concern' to KRS Erectors; that after the 'Sale' in Liquidation, the erstwhile Liquidator becomes functus officio and the question of directing the erstwhile Liquidator for transfer of shares of LITL does not arise; the sale is pursuant to an Acquisition Plan and the erstwhile Liquidator is only to assist the Monitoring Committee constituted under the Plan; that post the Sale the Authority to represent LITL lies with the reconstituted Board of Directors; that LITL having the title of the CCPS is an 'aggrieved person' as the share certificates stand in its name; that the '....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tors of LITL was reconstituted with effect from 27.06.2023and now IDBI cannot object to the same as it was very much aware of the agenda of the seventh meeting and raised no objections. In fact, the erstwhile Liquidator issued an email dated 14.09.2023 to all Stakeholders stating that the Board of Directors of LITL is reconstituted. Even then no objection was raised. IDBI was aware of the reconstitution as early as 27.06.2023 and no later than 14.09.2023. It was only on 17.10.2023 after filing of the present Appeal that IDBI had filed IA No. 1722/2023 as an after-thought. The said Application was listed for the first time on 07.11.2023 and an Interim Order was passed keeping the resolutions passed in agenda item numbers 11-13, in abeyance. 10. It is vehemently contended that IDBI had raised an objection whether the newly constituted Board can maintain the present Appeal, in its Counter Statement dated 01.11.2023, which is prior to 07.11.2023, and has not been disclosed to the Adjudicating Authority that the issue regarding reconstitution of the Board was pending consideration. One of the specific reliefs in IA No. 1722/2023 was for reversal of all such actions taken by KRS Erector....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....1722/2023 in C.P. (IB) No. 111/07/ HDB/2017, since the Second Appellant have not adhered to the terms of the approved Acquisition Plan for reconstitution of the Board of Directors of LITL and therefore the authority of LITL to challenge the Order is not maintainable. It is submitted that this Appeal has been filed in disregard of the LTPL approved Resolution Plan which was approved by the Adjudicating Authority in I.A. No.839/2020 in C.P. (IB) No.519/7/HDB/2018, which is binding in terms of the Section 31 of the Code. It is contended that the `rights', `title' and `interest' of the CCPS has been transferred to Lanco Anpara and has already passed on to REPL from LITL in terms of Share Purchase Agreement. All Financial Liabilities of REPL has been settled and the First Appellant is not entitled to any amount on account of the balance consideration under the SPA. Further, it is submitted that the Adjudicating Authority vide Order dated 24.01.2023, in I.A. No.1455/2022, in C.P. (IB) No.111/07/HDB/2017 has directed that the seventh Respondent would be the Chairman of the Monitoring Committee of LITL and this Order has not been challenged. Further, vide Order dated 16.10.2023, the Adjud....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... REPL Shares constitute 28.66% Equity Shares and 54.33% Preference Shares (LAPL CCPS) held by REPL in Lanco Anpara. It is contended that the Preference Shareholding of REPL in Lanco Anpara which was in physical form still reflected in the name of LITL as a physical share were pledged in favour, and therefore held with the tenth Respondent/REC Limited had raised a roadblock for implementation of the approved Resolution Plan. During the hearing in I.A. 816/2023, the Adjudicating Authority in an attempt to amicably resolve the issues so that Clause VII of the Resolution Plan could be implemented, passed directions and the impound Order was passed between the parties to the approved Resolution Plan being Respondents 1, 2, 3, 4 & 5. As the Second Appellant/KRS Erectors Private Limited expressed an inability to authorised any action which was beyond the purview of the acquisition Plan, the Appellant approach the Adjudicating Authority for requisite directions in I.A.816/2023. The Liquidator was present for the hearing on 13.09.2023, when the Impugned Order was passed since the procedural issue of damage of the Lanco Anpara CCPS and changing the name reflected in the Physical Shares Certi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of M/s. Lanco Groups of Entities and Lanco Anpara is a subsidiary of the First Appellant/LITL that was floated to deal with the specific project in Uttar Pradesh, for which Project, M/s. REC Ltd. was a Project lender and entire Shareholding of Lanco Anpara which was held by the First Appellant/LITL was entirely held in its own name, free of encumbrances or pledged in favour of the Project lender, namely, M/s. REC limited or pledged in favour of Lenders of M/s. LITL. It is submitted that as per the terms of the Share Purchase Agreement a total sale consideration of Rs. 1219,63,60,000/- was to be paid in two tranches of Rs.734.26 Crores. and Rs.485.376 Crores. for the entire Shareholding of Lanco Anpara held by LITL. The first tranche in the transfer was to be completed by 30.03.2012 and the second tranche after LITL had obtained the consent of the Lenders from the date of execution of the SPA, the Shares were never reflected as an Asset in the Financial Statements of the First Appellant and it has been constantly recorded as an Asset of the Second Respondent in its Financial Statements. Pursuant to this SPA, the parties have also entered into the Shareholders Agreement whereby the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d during pendency of the Application, REPL agreed to pay by the terms of the Resolution Plan and an Agreement was entered into with the sixth Respondent an IDBI on 12.09.2023. On the basis of this Agreement, the Impugned Order was passed on 13.09.2023. A time period of 60 days was given to complete the transaction, which was set to expire on 12.11.2023. The transaction was completed on 12.11.2023. The entire consideration of Rs. 855 Crores. have been paid and the Shares have been transferred in the name of the sixth Respondent. 17. It is strenuously argued by the Learned Sr. Counsel Mr. Ashish Agarwal that the case of the Appellants is that the SPA dated 30.03.2012 could never have been given effect to as the consent of the lenders was never obtained and the balance sale consideration of Rs. 485 Crores. has not been paid, is incorrect as the Impugned Order is the consent Order taking into consideration the SPA dated 12.09.2023 and that the Application was filed directing the REPL to comply with the terms of the Resolution Plan and therefore all necessary parties were arrayed and that the Appellant is not an aggrieved person. The balance sale considerations were never a pre-conditi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of the Interim Order is 07.11.2023 whereas the Notice of the 7th Monitoring Committee Meeting was issued on 22.06.2023 by KRS Erectors. Annexure F is the Notice of the 7th meeting which establishes that Notice with all the enclosures were sent to IDBI and the agenda items between 11-14 is with respect to reconstitution of the Board of Directors. The Learned Senior Counsel Mr. E. Om Prakash drew our attention to the said notice and the agenda items are reproduced as hereunder: From the aforenoted agenda items, it is clear that IDBI was aware of the proposed meeting but did not choose to attend or file its objections to the same and no reasons were given for not attending the meeting. There is no whisper of any denial of receipt of Notice of this meeting. It is also not denied that the erstwhile Liquidator had issued an email dated 14.09.2023 to all Stakeholders regarding the Board of Directors of LITL. We are addressing to this issue only because it was vehemently argued by the Respondents that the Appellants do not have locus to file the Appeal. 22. We are not commenting on the merits of the constitution of the Board, as IA 1722/2023 is pending, except for observing that IDBI h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....committed in relation to such an order." 24. As the Code does not specifically define as to who an `aggrieved person' is, we find it relevant to refer to the definitions/observations by the Hon'ble Supreme Court in a catena of Judgements. We find it apposite to rely on the observations made by the Hon'ble Apex Court in `Adi Pherozshah Gandhi' Vs. `H.M. Seervai, Advocate General of Maharashtra', (1970) 2 SCC 484 with respect to expression person aggrieved: "6. The expression "person aggrieved" is not new, nor has it occurred for the first time in the Advocates' Act. In fact it occurs in several Indian Acts and in British statutes for more than a hundred years. In the latter a right of appeal to a "person aggrieved" is conferred in diverse contexts. It occurs in the Ale House Act, the Bankruptcy Acts, Copyright Act, Highway Act, Licensing Acts, Milk and Dairies (Amendment) Act, Rating and Valuation Act, Summary Jurisdiction Act, Union Committee Act, Local Acts, in certiorari proceedings and the Defence of Realm Regulations to mention only a few. The list of Indian Acts is equally long. 7. As a result of the frequent use of this rather vague phrase, which practice, as Lord Parker....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Sons Ltd. [(1911) 2 KB 109 at 112-14] it was further explained that "the mere fact that an order is wrongly made does not of itself give a grievance to a person not otherwise aggrieved". (per Phillimore, J.) It was added that a person deprived of the fruits of litigation which he had instituted in the hope for them, is a "person aggrieved". Similarly, a creditor who did not wish an adjudication order to be made was held not to be a "person aggrieved" - See In Re Brown Ex. p. Debtor v. Official Receiver [(1943) Ch D 177] . The utmost that this series of cases goes is to be found in the observations of James, L.J. in Ellis Ex. p. Ellis [(1876) 2 Ch D 797] that even a person not bound by the order of adjudication must be treated as a person aggrieved if the order embarrasses him. In a latter case (In Re Woods Ex. p. Ditton [(1879) 40 LT 297 CA] ) Cotton, L.J., held that even so the person must be aggrieved by the very order and not by any of the consequences that ensue. This was clarified in R. v. London County Keepers of the Peace and Justices [(1890) 20 QBD 357 at 361] by Lord Coleridge, C.J., while dealing with the Highway Act, denying the right of appeal in these words:.........
X X X X Extracts X X X X
X X X X Extracts X X X X
.... injured or damaged in a legal sense". In Black's Law Dictionary, 6th Edn. at page 65, aggrieved has been defined to mean "having suffered loss or injury; damnified; injured" and aggrieved person has been defined to mean: "One whose legal right is invaded by an act complained of, or whose pecuniary interest is directly and adversely affected by a decree or judgment. One whose right of property may be established or divested. The word 'aggrieved' refers to a substantial grievance, a denial of some personal, pecuniary or property right, or the imposition upon a party of a burden or obligation."...... (Emphasis Supplied) 26. The communication on record dated 23.08.2023 between REPL and the First Appellant prior to the date of the impugned order dated 14.09.2023, is reproduced as hereunder as it shows that the payment for the subject CCPS was a matter of dispute between the concerned parties : (Emphasis Supplied) 27. In the instant case, we are of the considered view that LITL in whose name the Shares still stood, is a `person aggrieved' as the admitted fact is that second tranche of consideration for the transfer of Shares remained unpaid. We have no hesitation to hold that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hares forming part of the shares of LTPL held in Lanco Anpara Power Limited ("LAPL") i.e., ("REPL Sale Shares" which constitute 28.66% equity shares and 54.33% Preference Share ("LAPL CCPS") held by LTPL in LAPL). 30. The SPA dated 30.03.2012, entered into between Lanco Infratech Ltd. and Vamshi Power Ltd./ REPL /R2: "SECTION 2-EFFECTIVENESS 2.1 Effectiveness of Agreement ... come into force and effect without any further act or deed of the Parties on the date of this Agreement (hereinafter, the "Effective Date"). This Agreement shall continue to remain in full force and effect until terminated by the Parties. SECTION 3-SALE AND PURCHASE OF SHARES 3.1 It is agreed between the Parties that LITL, will sell its entire shareholding in equity and preference shares of the Company and VIPL will purchase entire equity and preference shareholding of LITL, in the Company comprising of 23,40,000 Equity Shares of Rs. 10/- each and 121,72,96,000 Preference Shares of Rs. 10/- each at a consideration of Rs.10/- per equity share and Rs. 10/- per preference shares amounting to Rs.1,219,63,60,000 (Rupees One Thousand Nineteen Crores Sixty Three Lacs and Sixty Thousand only), which will be....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... LITL in dematerialised form, shall be transferred to VIPL on 31st March, 2012; (b) 39,56,00,000 Preference Shares, which are free from encumbrances and are held by LITL in physical form, shall be transferred to VIPL, such that the transfer is effective inter-se LITL and VIPL as on the Effective Date. It is agreed between the Parties that such transfer shall be presented in dematerialised form for recording in the books/register of the Company upon LITL getting dematerialisation of these shares, until which time the said shares would be held in trust by LITL for VIPL, however, in the books of the Company, the name of LITL will continue as holder of these shares. (c) 42,00,00,000 Preference Shares, which are held by LITL in physical form and on which pledge has been created by LITL in favour of the Lendes, shall be transferred to VIPL, such that the transfer is effective inter-se LITL and the VIPL as on the Effective Date. It is agreed between the Parties that such transfer shall be presented for recording in the books/registers of the Company, upon (a) LITL arranging the necessary approvals from the Lenders in whose favour such shares are pledged or Non-Disposal Undertaking is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id, LITL will have a charge on the unpaid amount till the full payment and all the benefits including but not limited to Dividends, receipts from Sale of shares, Bonus shares etc., accrued and received by VIPL on account of the above said shares and any other funding received by VIPL, should be first used to pay to LITL towards unpaid consideration. It is further agreed by both the parties that except for the above additional para, all other terms and conditions, rights and obligations of the original agreements as referred above remains unaltered with same force. 3.9. The implementation of the Acquisition Plan will be supervised by Monitoring Committee ("Monitoring Committee"). (a) Till the reconstitution of the Board of the Corporate Debtor by the Bidder, the Monitoring Committee shall: 1. Comprise of 2 nominees of the secured financial creditors of the Corporate Debtor, and 2 nominees from the Bidder, 2. Exercise powers of Board of Corporate Debtor to facilitate filing suitable forms with regulatory authorities as may be required and facilitate the reconstitution of New Board of Directors, and 3. During this period, The Monitoring Committee i. Shall not execute the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orporate Debtor and/or any amount received on account of revenue generated prior to / during CIRP and Liquidation other than more clearly specified in Annexure IIIA and Annexure IIIB of the Process Document shall be shared between the Bidder/Corporate Debtor and Stakeholders in the ratio of 50%-50% respectively i.e. in the sharing mechanism for the recoveries to be made from Assets as per the Acquisition Plan. 5.11. Any recovery pursuant to any Application filed by the Resolution Professional or the Liquidator in relation to transactions covered under Section 43, 45, 50 and 66 of the Code (as applicable), as more particularly identified in Annexure IV ("Avoidance Litigation") of the Acquisition Plan, shall pass through from the Corporate Debtor to the Stakeholders of the Corporate Debtor, and shall not be available to the Bidder. Any such amounts, if received by the Corporate Debtor or Bidder shall be kept in trust and forthwith deposited into the Designated Bank Account for distribution amongst the Stakeholders. It is clarified that the Avoidance Litigation shall be continued by Bidder or Corporate Debtor at cost of secured financial creditors of the Corporate Debtor, in accorda....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of these shares. 36. None of the above conditions were complied with. Therefore, it is not clear as to how the Respondents have arrived at the effective date, as we are of the considered view that the transfer of Shares could be made effective only from the actual date of the transfer through the Share Certificates and Share Transfer Forms. Clause 3.1(c) of the Amendment to the SPA dated 01.04.2012 provides that, until the full consideration is paid, LITL will have the charge on the unpaid account till the full amount and all the benefits, including but not limited to dividends, received from sales of Shares, bonus Shares, etc., accrued and received by VIPL/REPL on account of the abovesaid Shares and any other funding received by VIPL/REPL should be first paid to LITL towards unpaid consideration. Interestingly in the third Meeting of the Monitoring Committee held on 06.04.2023, the issue of transfer of the subject CCPS to REPL was discussed and it was unanimously agreed to seek the legal opinion but thereafter IDBI filed I.A.816/2023 without issuing Notice to the Appellants. In the approved acquisition Plan, a sharing mechanism is provided for recoveries from sale of assets and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Private Limited/Respondent No. 3 (IHTL) and 50 Hertz Energy Private Limited/Respondent No. 4. In the Resolution Plan of REPL/R-2. The relevant portion is extracted hereunder: "IHTC agrees to cause the Company to sell its entire shareholding (equity and CCPS) in Lanco Anpara Power Limited (LAPL) to successful bidder nominated by IDBI Bank Limited, who is the lead financial institution for CDR lenders of Lanco Infratech Limited for a consideration of INR 20 Crores (the sale consideration shall compound at a rate of 10% per annum from the Effective Date), at the request of Financial Creditors. However, pledge on this shareholding by project lenders of LAPL shall not be affected by this sale. This sale consideration of INR 20 Crores shall be utilized to reduce the IHTC Outstanding Amount." It is seen that in the aforenoted Resolution Plan, the equity and CCPS value has been quantified at Rs. 20 Crores, when admittedly the Shares stood in the name of LITL. There are no substantial reasons given as to how when the `title' of the subject CCPS was still with the LITL / the First Appellant without the consultation/consent of the Appellants/Monitoring Committee herein specifically the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nexures. Clause 5.10 of the Acquisition Plan speaks about the unearned `revenue'/`receivables of the Corporate Debtor and or any amount received on account of the revenue generated which would be shared between the bidder/Corporate Debtor and the Stakeholders under the ratio of 50% in the sharing mechanism for the recovery is to be made from the Asset as per the Acquisition Plan. It is the case of the Learned Sr. Counsel Mr. S.R. Rajagopal that this amount does not come under receivables, but the fact remains that when there is no specific exclusion in the Acquisition Plan, reliance is to be placed on the exact terms and conditions which clearly stipulate that any amount which should be received on account of revenue generated during CIRP/Liquidation would be shared on a 50% basis. It is seen from the record that the subject CCPS do not form part of the Assets of the `Process Document' and neither fall in the exclusions list and when the Shares are still in the name of the First Appellant Company which were required to be transferred to REPL subject to the amount received and receipt of approvals from the lenders of Lanco Anpara, we are of the view that the subject CCPS could not h....