TaxTMI 
TaxTMI 
2024 (4) TMI 1014
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....porate Debtor and has dismissed IA No.483 of 2023 filed by the Appellant - SRA seeking extension of timeline for making the payments under the approved Resolution Plan. The Appellant aggrieved by the aforesaid two orders has filed these Appeal(s). 2. Brief facts necessary to be noticed for deciding the Appeal(s) are: (i) The Appellant, who is a technocrat entrepreneur and is the promoter and founder of the Corporate Debtor - M/s Transparent Energy Systems Pvt. Ltd., submitted a Resolution Plan for revival of the Corporate Debtor. Under the Resolution Plan, the Appellant offered a settlement amount totaling to Rs.1972.02 lakhs. The Corporate Debtor is a registered MSME. (ii) The Resolution Plan submitted by the Appellant was approved by the Committee of Creditors ("CoC"), which consists of State Bank of India ("SBI") as sole CoC Member, having 100% vote share. The Resolution Plan was approved by the Adjudicating Authority vide order dated 16.04.2021. Under the Resolution Plan, total amount was to be paid in six tranches. The first three tranches were to be paid on 15.10.2021, 15.04.2022 and 15.10.2022. The Appellant paid amount of first three tranches amounting ....
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....ounsel for the Appellant submits that Appellant has now arranged fund and he shall make the payment of fourth instalments within 30 days from today in terms of the plan. List this Appeal on 11th March, 2024. In the meantime, liquidator in pursuance of the impugned order shall not proceed with the liquidation proceeding. Issue notice. Requisites along with process fee be filed within three days. Let Reply be filed by the Respondent within two weeks. Appellant may file Rejoinder within two weeks, thereafter. 4. After order dated 07.02.2024, the Appellant wrote to the SBI to permit the Appellant to make payment of fourth tranche. The Appellant in the email wrote to SBI as well as Chairman of Monitoring Committee to permit payment of fourth tranche of Rs.91.41 lakhs, which was scheduled on 15.04.2023 by utilizing the sources of fund as mentioned in the letter. A reply was sent on behalf of the SBI that amount of Performance Guarantee of INR 0.4 crores cannot be permitted to be utilized for payment of fourth tranche and further amount of Rs.23,65,865/-, which is yet to be paid to various creditors cannot be used. However, with regard to two payments, i.e. R....
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....anches. 7. Shri Harshit Khare, learned Counsel appearing for SBI refuting the submissions of learned Counsel for the Appellant submits that Appellant had not made the payment of fourth tranche which was due on 15.04.2023, hence the Bank had filed IA No.4034 of 2023 for liquidation. It is submitted that subsequent request received from the Appellant to utilize the amount lying in different accounts, which included the utilization of Performance Guarantee of Rs.40 lakhs was duly replied by the Bank. It is submitted that Appellant having not paid the amount, SBI has rightly initiated proceedings for liquidation. It is further submitted that Adjudicating Authority has rightly rejected IA No.483 of 2023 filed by the Appellant for extension of time for payment of fourth, fifth and sixth tranches. It is submitted that extension of time is nothing but modification of the Resolution Plan, which jurisdiction is not with the Adjudicating Authority. The learned Counsel for the SBI has relied on the judgment of Hon'ble Supreme Court in Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Ltd. and Anr. - (2022) 2 SCC 401, as per which the Resolution Plan cannot be permitte....
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....plan based on the sources of funding identified above. However, in the unlikely event that there is any shortfall from any of the sources, the RA would endeavour to make good such shortfall through any of the following sources within a reasonable time and as expeditiously as possible: 1. Equity infusion: The RA has already taken substantial efforts to infuse equity in the last three years through strategic investors. Once the prevailing economic situations improves, the RA would once again explore to rope in strategic investors for equity infusion in the CD, the proceeds of which would be utilized to compensate for any shortfall in the funds. 2. Funding through Debt: The RA would also favourably consider meeting any unlikely shortfall by raising fresh debt. It would need the consent of FC at relevant time to extend charge on the assets mortgaged with the FC to such future lenders. It is expected that the FC would extend reasonable cooperation in this regard. 3. Sale of factory at Shirwal: As reiterated above, the RA is confident of meeting its commitments under this Plan. It is therefore very unlikely that any of the alternate sources of funding will actu....
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.... Paragraph No. 17 of the present Application on such terms as it may deem fit to this Hon'ble Tribunal; b. Pending the hearing and disposal of the present Application, this Hon'ble Tribunal be pleased to extend the time period for payment as contemplated in Paragraph No.9 of the Order dated 16th April 2021 till hearing and final disposal of the present Application; c. That this Hon'ble Tribunal be pleased to pass such other and further directions and reliefs as this Hon'ble Tribunal may deem fit and proper to meet the ends of justice" 14. As noted above, the SBI has filed an Application being IA No.4034 of 2023 praying for liquidation on account of non-payment of the amount. The Adjudicating Authority in the impugned order has noticed the submissions of the Appellant as well as of the SBI. The submissions of SRA has been noticed by the Adjudicating Authority in paragraph-3, which is as follows: "3.1. The SRA has accordingly sought extension by 2 years and proposed a revised payment plan as follows : S. No. Amount (Rs. Lakh) Original timeline Revised timeline 1. 91.41 April 2023 April 2024 2. 274.23 Octob....
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....n nature. We are conscious of legal proposition that this Tribunal, generally, should refrain from modifying the terms of approved Resolution Plan unless the same is concurred by the CoC. In view of this, we are of considered view that this Tribunal cannot consider the request of SRA for extension of timelines in view of express prayer of the CoC to order the liquidation of the Corporate Debtor. We find force in the contention of CoC that the SRA ought to have explored the alternative source of funding to avoid missing the deadlines for payment of money. 5.2. In view of the express unwillingness of the CoC to consider the extension of timelines, we are of considered view that the Corporate Debtor ought to be liquidated." 17. The Adjudicating Authority in the impugned order has observed that Tribunal should refrain from modifying the terms of approved Resolution Plan unless the same is concurred by the CoC. The reason which was reflected in paragraph 5.1, is the reason for rejecting the extension of timeline. 18. The learned Counsel for the SBI before us has also advanced the same submission stating that SRA has no jurisdiction to pray for modification of the Plan and....
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.... Plan at the behest of the successful Resolution Applicant, once it has been submitted to the Adjudicating Authority after due compliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the statute. Since the 330 days outer limit of the CIRP under Section 12(3) of the IBC, including judicial proceedings, can be extended only in exceptional circumstances, this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time. A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is the case in the present three appeals before us. Permitting such a course of action would either result in a down-graded resolution amount of the Corporate Debtor and/or a delayed liquidation with depreciated assets which frustrates the core ....
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....pra), a one-time relief under Article 142 of the Constitution is provided with the conditions prescribed in Section K.2."" 23. Shri Saha relying on the paragraph 202 of the above judgment submits that Adjudicating Authority under the IBC cannot exercise jurisdiction, which is not provided in IBC. Hon'ble Apex Court in the said judgment has held that residual powers of the Adjudicating Authority cannot be exercised to create procedural remedies, which have substantive outcomes on the process of insolvency. The above observations have been made in a case where the question before the Hon'ble Apex Court was as to whether after submission of Resolution Plan, Resolution Applicant can withdraw the Plan. Hon'ble Apex Court held that it is only Section 12-A, which enables withdrawal from the CIRP, hence, it was held that Resolution Applicant cannot withdraw from the Plan. The Hon'ble Apex Court has also laid down in the above case that existing insolvency framework in India provides no scope for effecting further modification and withdrawals of CoC approved Resolution Plans, at the behest of the Successful Resolution Applicant. 24. The present is not a case where the Reso....
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....ated 20.01.2022 in Company Appeal (AT) (Ins.) No. 1038 of 2021, 'Tricounty Premier Hearing Service Inc vs. State Bank of India & others', which was filed against the order in which the application of the Successful Resolution Applicant for extension of time for making deposit was rejected by the Adjudicating Authority which came to be questioned before this Appellate Tribunal. One of the arguments raised before this Tribunal was that in view of the judgment of Hon'ble Supreme Court in 'Ebix Singapore Private Limited vs. CoC Educomp', the Adjudicating Authority cannot even extend the time for making payment. This Tribunal in Para 22, 23 and 24 laid down following: "22. We may also refer to the judgment of the Hon'ble Supreme Court in Ebix Singapore Private Limited (supra) relied by learned Senior Counsel for the State Bank of India in support of his submission. In Ebix Singapore Private Limited (supra), following conclusion has been recorded by the Hon'ble Supreme Court in paragraphs 202, 203 and 204 : "202 The residual powers of the Adjudicating Authority under the IBC cannot be exercised to create procedural remedies which have substantive outcomes on the process....
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....an impermissible understanding of equity is imported through the route of residual powers or the terms of the Resolution Plan are interpreted in a manner that enables the appellants' desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor. Pertinently, this direction has been otherwise provided in Section 33(1)(b) of the IBC when an Adjudicating Authority rejects a Resolution Plan under Section 31. In this context, we hold that the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as betw....
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....for complying the financial obligations in the Resolution Plan." 26. This Tribunal rejected the submission that the Adjudicating Authority has no jurisdiction to extend the time for complying the financial obligations in the Resolution Plan. This Tribunal ultimately after considering all facts and circumstances allowed the Appeal and granted 30 days' time to the Appellant to make the payment of the balance amount." 20. We, thus, are satisfied that Adjudicating Authority has jurisdiction to grant extension of timeline in making the payment in a Resolution Plan and the view of the Adjudicating Authority that granting of extension of the timeline is modification of the terms of the Resolution Plan is not a correct view. Further, for extension of timeline it is not necessary that CoC should express its concurrence, only then the Adjudicating Authority can exercise its jurisdiction. The jurisdiction is there with the Adjudicating Authority in appropriate case. Granting extension of time in payment as per Resolution Plan for implementation of the Resolution Plan, appropriate jurisdiction is always vested with the Adjudicating Authority to pass appropriate order. We have alrea....
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....elines. It is therefore high time for the members of the monitoring committee, other the CD, to review their decision to oppose the IA No.483 of 2023 from the RA before the Hon'ble NCLT for a reasonable and justified extension of timelines. As a matter of abundant clarifications, this letter is made in good faith and without any prejudice to or without waiver any of the rights of the Resolution Applicant or the Corporate Debtor. Thanking you With Best regards SD/- Ashok Atre (Promoter and Successful Resolution Applicant - Transparent Energy Systems Pvt. Ltd.) Copy to- 1. State Bank of India, (Member of Monitoring Committee_ SAMB II Branch, Mumbai, Represented by Mr. Hirankumar Chavah (Chief Manager) 2. Transparent Energy Systems Pvt. Ltd., Pune (Member of Monitoring Committee) Represented by Mr. Ajit Apte (Executive Director) Mr. Chintamani Vaidya (Director) Mr. Haridas Wadghule (Executive Director)" 21. In the rejoinder affidavit filed by the Appellant, several subsequent correspondences between the parties have been brought on record including offer let....
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....ed from sale of the aforesaid Property of the Company shall be utilized for payment to creditors in terms of the NCLT approved Resolution Plan 4) The details of sources of funds and payment liability anticipated by the SRA for payment of 4th and 5th Tranches (after keeping in abeyance the other funds namely (a) performance security and (b) amounts lying in unclaimed payments, already available with the Company as specified in our notice for the meeting sent on February 18, 2024), is as hereinbelow - No Particulars Amount (Rs.) 1 Balance in HDFC Bank (account under re-activation after order dated 17.10.2023 by the Hon'ble NCLT for defreezing the same). 28,50,119.00 2 Balance in current account of SBI at Lonand as on 31/1/ 2024 (all funds for resolution plan are deposited in this account) 1,32,500.00 3 Sale of Shirwal Factory 6,00,00,000.00 4 Total Amount available (1 + 2 + 3) 6,29,82,119.00 5. Less payment of 4th tranche of resolution plan (91,41,000.00) 6. Less payment of 5th tranche of resolution plan (2,74,23,000.00) 7. Net funds available after payment of 4th and 5th tranche (4 - 5 - 6) 3,64,18,....
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....bove, the SBI would be entitled for payment of interest at prime lending rate of SBI for the period beyond 16th April 2026 and this provision for payment of interest shall prevail over the remedy or recourse of seeking liquidation of the Corporate Debtor. I look forward to your early compliance and approval to sale of Shirwal factory along with the consent for extended timeline for payment of 6th tranche as elaborated hereinabove. Thanking You Yours Sincerely, Ashok Atre (Promoter and successful Resolution Applicant - Transparent Energy Systems Pvt. Ltd.) Encl. - Letter of Intent dated 25th February 2024 from M/s Tooltech Components Pvt. Ltd. for purchase of Shirwal factory of the Corporate Debtor Copy to - 1. Mr. Avil Menezes Address at - Unit No.106, Kanakia Atrium -2, Chakala, Andheri Kurla Road, Andheri East, Mumbai - 400 093 Email: [email protected] 2. Mr. Ajit Apte, Mr. Chintamani Vaidya and Mr. H.N. Wadghule (representatives of the SRA/ Appellant No.2, 3 and 4 in the captioned appeal) Email : [email protected], [email protected], [email protected]" 22. The learn....
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....27 and 128 of the judgment, following was held : 126. The implementation of Resolution Plan is a collaborative process, which require positive action from all the parties, including the MC Lenders. The implementation of the Resolution Plan not only revives the Corporate Debtor, but it brings along with revival, new employment, generation of revenues etc. By non-implementation of the Plan, direct sufferers are the workers and employees, who have not received the payments. It is true that Lenders are entitled to take steps for protection of their amount, but that is not the only object of the IBC. The Lenders to protect their own financial interest cannot ignore the primary object of revival of the Corporate Debtor and payments to other stake holders, including workmen and employees, who are entitled for their payments along with Financial Creditors. The Lenders by not taking positive steps for implementation of the Plan have not only adversely affected the interest of the SRA, but have also created circumstances, so that workmen and employees be not paid. 127. Instead of taking positive steps for implementation of the Resolution Plan, the learned Counsel for the Le....
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....have been taken on record after hearing both the parties by our order dated 05.04.2023. In the Application, the Appellant has prayed direction for sale of Factory and Machinery of the Corporate Debtor located at A-51 and 52, MIDC Industrial Area, Lonand, Dist. - Satara, Maharashtra. The learned Counsel for the Appellant submits that by sale of the aforesaid Factory, the entire payment under the Plan shall be made at one go. Clause 5.1.2.12 of the Resolution Plan as extracted above under 'Alternative sources of fund' has referred to sale of factory at Shirwal. The sale of Shirwal Factory is as per the Resolution Plan, with regard to which sale, we have already observed that the said sale can take place in accordance with the provisions of the Resolution Plan. With regard to prayers made in the IAs regarding sale of Factory & Machinery located at y located at A-51 & 52, MIDC Industrial Area, Lonand, Dist. - Satara, Maharashtra, the said sale of Factory is not contemplated in Clause 5.1.2.12 of the Resolution Plan. All assets of the Corporate Debtor being mortgaged and in charge of the SBI, it is for the SBI to consider any such prayer, for which no direction can be issued in the IA N....