TaxTMI 
TaxTMI 
2024 (6) TMI 50
X X X X Extracts X X X X
X X X X Extracts X X X X
....ational Company Law Tribunal (NCLT), Mumbai Bench in IA No.1360 of 2022 and IA No. 2989 of 2023 in CP (IB) No. 246/NCLT/MB/2017. The Appellant sought a refund of INR 10 Crores deposited with Abhyudaya Cooperative Bank, which was subsequently forfeited by the Committee of Creditors (CoC) led by the State Bank of India (SBI). Brief Background : 2. The NCLT dismissed the Appellant's application seeking the refund and allowed SBI's application to forfeit the amount. The Appellant contends that the forfeiture was unlawful and that the CoC's actions were contrary to the terms of the Resolution Plan and the applicable regulations. 3. Over the course of the CIRP, the Appellant failed to submit valid and enforceable bank guarantees as required under the Resolution Plan, leading to delays and non-compliance with the plan's implementation schedule. Consequently, the CoC, through SBI, sought directions from the NCLT to forfeit the INR 10 Crores deposited by the Appellant, which the NCLT granted. 4. Heard the counsels of both sides and also perused all the records before us. 5. The primary issues for determination in these appeals are: a. Whether the CoC's forfeiture of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Consequent Issues 12. Despite the infusion of INR 10 Crores, SBI, in a letter dated 30.08.2019, instructed Banque De Luxembourg to treat the letter as an invocation of the bank guarantee if it was not renewed. This action led to the freezing of the Appellant's funds and strained its banking relationships, further complicating the procurement of a new bank guarantee in the required format. 13. The Appellant objected to this invocation and requested SBI to withdraw the letter and release the bank guarantee. The objections were communicated via email on 31.08.2019, but the Appellant's requests were ignored. Failure to Implement the Resolution Plan Due to CoC's Demands 14. The CoC's demands for an upfront payment of INR 35 Crores, beyond the terms of the approved Resolution Plan, hindered the Appellant's ability to implement the plan. This demand was made during a meeting on 22.10.2020, further complicating the implementation process. 15. In a bonafide effort to comply, the Appellant sought the CoC's account details to deposit the remaining INR 5 Crores. However, the CoC failed to provide these details, thus obstructing the Appellant's compliance. Legal Proceeding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iance, and the funds were intended for share application, not as a performance guarantee. In light of the above arguments, the Appellant prays this Appellate Tribunal to set aside the impugned order dated 12.12.2023 passed by the NCLT, Mumbai Bench, in I.A. No. 1360 of 2022 and I.A. No. 2989 of 2023 in C.P. No. 246 of 2017. Arguments of Respondent No. 2 - State Bank of India - FC 23. The Appellant, Peter Beck und Partner Vermoegensverwaltung GMBH, is a defaulting Resolution Applicant who caused a delay of four years in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor. This delay necessitated a second round of CIRP. Failure to Submit Valid Bank Guarantees 24. The Appellant failed to submit valid and enforceable bank guarantees (BGs), in violation of its Resolution Plan. This failure has been conclusively determined by this Appellate Tribunal's judgment dated 05.01.2022 in Company Appeal (AT) (Ins) No. 161 of 2021 and Company Appeal (AT) (Ins) No. 169 of 2021, as well as the Hon'ble Supreme Court's judgment dated 28.02.2022 in Civil Appeal No. 1305-1306 of 2022. 25. Consequently, the amount of INR 10 Crore deposited by the Appellant in lie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he date on which the Resolution Applicants are allotted all Equity Shares in accordance with the Proposed Plan. Applicability of Regulation 36B(4A) 34. Regulation 36B(4A) of the CIRP Regulations, which provides for forfeiture of performance security if the resolution applicant fails to implement the approved plan, is applicable to this case. The Ld. NCLT correctly noted that the regulation is applicable, and the forfeiture is justified based on the provisions of the Resolution Plan. Contradictory Stance of Appellant 35. The Appellant is contradicting its own stance regarding the nature of the INR 10 Crore deposited with SBI, misleading this Hon'ble Tribunal by claiming it was deposited as share application money and should be repatriated under the Foreign Exchange Management Act, 1999. Failure to Comply with Bank Guarantee Requirements 36. The Appellant failed to submit the Bank Guarantee via SWIFT mode on 07.19.2019. Subsequently, the Monitoring Agency gave the Appellant multiple chances to comply, including an option to deposit INR 15 Crores, which the Appellant failed to fulfil completely. Misleading Correspondence 37. Despite claims to the contrary, Pete....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me 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 the nature of resolution plan and business of the corporate debtor. Explanation II. - A performance security may be specified in absolute terms such as guarantee from a bank for Rs. X for Y years or in relation to one or more variables such as the term of the resolution plan, amount payable to creditors under the resolution plan, etc.]" 42. It is to be noted that the CIRP Regulation 36B(4A) was notified via Notification No. IBBI/2019-20/GN/REG040, dated 24th January 2019 (w.e.f. 24.01-2019). In the present case, the CIRP was initiated on 11.04.2017. But the fact is that the CIRP of the Corporate Deb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n-adherence of the timelines in accordance with the Approved Resolution Plan is quite apparent. The failure to provide valid bank guarantee in terms of Section 5 clause 12 (ii) of the Approved Resolution Plan to the satisfaction of the monitoring agency and the Financial Creditors is also a major default. XXX 34. Therefore, in light of discussion above, in partial modification of the Impugned Order, we direct that an enforceable bank guarantee of Rs. 10 crores, as is required to be submitted under the Approved Resolution Plan, should be submitted by the Successful Resolution Applicant within 30 days of this order. The payments as are already over due in the Approved Resolution Plan should be done by the Successful Resolution Applicant within two months of this order. In case Rs. 10 crores has been deposited with the Corporate Debtor by the Successful Resolution Applicant in lieu of the bank guarantee, that amount will be either adjusted against the pending amounts to be paid by the Successful Resolution Applicant or refunded to him within a period of 30 days. ". [Emphasis supplied] 46. Instead of complying with the aforesaid NCLAT Order, the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ails and notices provided, indicates that the CoC was cooperative and provided ample opportunity for compliance. The Appellant's failure to deposit the remaining INR 5 Crores, despite being given an extended deadline, further undermines its claim of being restrained. 50. The Appellant contends that it had deposited the amount of INR 10 Cr. for share application money and accordingly it must be repatriated as per Foreign Exchange Management Act, 1999. It is to be noted that facts are different than being claimed by the Appellant. Briefly they are noted here as this was a very crucial period in this matter. The Appellant submitted periodic BGs, which were not in the internationally acceptable SWIFT format. Apparently, there was no valid Bank guarantee between 15.06.2019 and 18.07.2019, in violation of the Resolution Plan. With the latest bank guarantee set to expire on 30.08.2019, the Monitoring Agency (on behalf of the lenders) sent an email allowing a final opportunity to Appellant-Peter Beck to either provide a valid BG via SWIFT or depositing INR 15 Crore by 11 PM IST on 26.08.19 towards implementation of the Resolution Plan. However, only INR 10 crores was belatedly deposited....
X X X X Extracts X X X X
X X X X Extracts X X X X
....10 Cr. Adjudicating Authority disposed of both the applications and, inter-alia, ordered as follows: "7.8. We find from the Order dated 28.2.2022 passed by Hon'ble Supreme Court that the SRA categorically expressed its inability to comply with the Order dated 5.1.2022 passed by Hon'ble NCLAT. It is pertinent to note that the Hon'ble NCLAT had modified the Order dated 2.2.2021 passed by this Tribunal on the willingness shown by the SRA before it to implement the approved Resolution Plan. Hence, it clearly follows from this sequence of events that there had been last minute effort on the part of CoC, this Tribunal and Hon'ble NCLAT to save the approved Resolution Plan, but for the unwillingness expressed by the SRA before the Supreme Court, the approved Resolution plan failed. 7.9. It is clear from the foregoing discussion that the money deposited by the SRA was in lieu of Performance Bank Guarantee and has to be dealt accordingly. In terms of provisions contained in Regulation 36B(4A) of the CIRP Regulations and provisions contained in Resolution Plan, we feel no hesitation to hold that the money deposited by the SRA is liable to be forfeited and cannot be allowed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....spect of the consequence for contravention under this section providing for imposition of fine or punishment or both." [ Emphasis supplied ] 52. Adjudicating Authority while passing the impugned order has made observations, as highlighted above and ordered in the last para to refer the matter to IBBI for taking appropriate action against the SRA to deal with the punishment under Section 74(3) of the Code. 53. We find that reference to initiate proceedings under Section 74(3) 74. Punishment for contravention of moratorium or the resolution plan. - (1) XXX (2) XXX (3) Where the corporate debtor, any of its officers or creditors or any person on whom the approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both. of the Code was not a prayer under IA 2989 of 2023, but the impugned order while disposing of IA No 29....