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2024 (11) TMI 410
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.......................................... 57 v. Issue No. 5: Non-fulfilment of Conditions Precedent ............................... 59 C. SUBMISSIONS ON BEHALF OF THE RESPONDENTS ................... 63 D. ISSUES FOR DETERMINATION ......................................................... 76 E. ANALYSIS ............................................................................................... 77 i. Whether the Performance Bank Guarantee (PBG) could have been adjusted against the first tranche payment which was to be made under the Resolution Plan, within 180 days from the Effective Date in contravention of the order of this Court dated 18.01.2024, the terms of the Resolution Plan and the provisions of law? ........................................ 85 a. Whether the Conditions Precedent were fulfilled by Respondent No.1/SRA and the Effective Date was fixed at 20.05.2022?.................. 85 b. Whether the NCLAT could have directed the Performance Bank Guarantee (PBG) to be adjusted against the first tranche payment which was to be made within 180 days of the Effective Date? ......................... 93 I. The adjustment of the PBG was impermissible under the ....
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....directions including a direction that the Performance Bank Guarantee of Rs. 150 Crore (hereinafter, the "PBG") could be adjusted towards the first tranche payment of Rs. 350 Crore which was to be made by Respondent No.1. A. FACTUAL MATRIX 2. The NCLT vide its order dated 20.06.2019 in C.P. 2205 (IB)/ (MB)/ 2019 admitted the application for initiation of Corporate Insolvency Resolution Process (hereinafter, the "CIRP") filed by State Bank of India (hereinafter, "SBI") in respect of Jet Airways (India) Limited (hereinafter, the "Corporate Debtor") in accordance with Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter, the "IBC, 2016"). The total admitted claim of the Financial Creditors was Rs. 7800 Crore (approx.). Pursuant to the aforesaid Order, Mr. Ashish Chhawchharia, was appointed as the Interim Resolution Professional and was appointed as the Resolution Professional (hereinafter, the "RP") as well. 3. On 02.06.2020, the RP issued the 4th Round of the Request for Resolution Plan (hereinafter, the "RFRP") as approved by the Committee of Creditors (hereinafter, "CoC") which invited submissions of Resolution Plans for the Corporate Debtor from potential Res....
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....olution Applicant. i. any of the condition under the Letter of Intent or the Successful Resolution Plan are breached; ii. if the Resolution Applicant fails to re-issue or extend the Performance Security (if provided as a PBG), in accordance with the terms of this RFRP; or iii. failure of the Successful Resolution Applicant to implement the Approved Resolution Plan to the satisfaction of the CoC, and in accordance with the terms of the Approved Resolution Plan. 3.13.8 The Performance Security shall be returned to the Successful Resolution Applicant within a period 7 (seven) Business Days (based on the request received from the Successful Resolution Applicant) upon 100% (one hundred percent) of the completion of the implementation of the Approved Resolution Plan by the Successful Resolution Applicant. 3.13.9 The Performance Security shall not be set-off against or used as part of the consideration that the Successful Resolution Applicant proposes to offer in relation to the Company, even if expressly indicated as such by the Successful Resolution Applicant in the Successful Resolution Plan." (emphasis supplied) 4. On 21.09.2020....
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....g the discount rate specified in the Evaluation Matrix) in Yr. 3, 4, 5 Upside on BKC Savings on Airport * 7.5% equity in JPPL * Upside on Aircrafts + ATR Inventory + Spares + BKC Property (if given) * Savings on CIRP Costs * Savings on airport and parking charges * Savings on Contingency Fund * All payments are secured against tangible security * Dissenting FCs will be paid in priority as per IBC Savings on CIRP Costs Positive Cash Balance Workmen & Employees * Rs. 52 Crores 52 Cr 100% - OCs * Rs. 15,000 to each of the Operational Creditors, irrespective of their claim 10 Cr 100% - OC (Dutch Admin) 10,000 100% - Other Creditors (other than FCs and OCs) 10,000 100% - Shareholder s (promoters, Etihad and PNB) 10,000 100% - Contingency Fund 8 Cr 100% Established JPPL Offer from RA to acquire 50.01% shareholding in JPPL from Etihad. The said sum of Rs. 25 Crores will be infused by the RA in addition to the abovementioned amounts. 25 Cr - 100% TOTAL 475 Cr + 25 Cr *THIS IS A SUMM....
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....nt in the manner stated hereinabove. (g) Infusion of funds and timelines Infusion Timelines (In Days) Amount (In Rs.) Purpose/Utilization As Equity As ECB Upfront (within 180 days) 350,00,00,000 - CIRP Cost; Contingency Fund; Payment to FCs, OCs, Other Creditors, and other stakeholders; working capital for business; Misc. Admin Expenses 181-365 days 250,00,00,000 - Working capital for business; Portion of funds can be used for acquiring Etihad's stake in JPPL; making payments to creditors if RA is inclined in advancing any payment timelines Year 2 - 175, 00,00,000 Remaining payment to FCs.; Misc. expenses for general corporate and day-to-day operations, in compliance with the extant ECB Regulations. After Year 2 - 600,00,00,000 Working capital for business Sub-Total 600,00,00,000 775,00,00,000 TOTAL 1,375,00,00,000 xxx xxx xxx 6.4. Treatment of Stakeholders 6.4.1. Treatment of outstanding CIRP Costs (a) In terms of Section 30(2)(a) of the IBC, the CIRP Costs are to be paid in priority to any other creditor of the Corporate Debtor. ....
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....to the Assenting Financial Creditors. If the airport and parking charges over are over Rs. 245 Crores, then amounts over and above Rs. 245 Crores will be first paid out of Rs. 25 Crores reserved as CIRP Costs (if there are no outstanding CIRP Costs) and then out of the positive cash flows of the Corporate Debtor. Any amounts over and above such amounts will be shared between the Resolution Applicant and the Assenting Financial Creditors in equal proportion. (j) The Resolution Applicant states that if the CIRP Cost is less than the estimated amounts and the airport dues are less than Rs. 245 Crores, then the differential amounts will be paid by the Resolution Applicant to the Assenting Financial Creditors, which amounts are over and above the amounts reserved for them this Resolution Plan. However, if the CIRP Cost exceeds the current estimates, then the CIRP Costs will be paid by the Resolution Applicant as per actuals in compliance with the provisions of the IBC and commercial proposal for other creditors of the Corporate Debtor will be adjusted accordingly, subject however to a maximum of Rs. 475 Crores. It is clarified that on account of such payments from the amounts i....
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....licant undertakes that the Liquidation Value due to such Operational Creditors (Employees/ Workmen dues including dues of Authorized Representatives of Employees/ Workmen) shall be paid and shall be given priority in payment over Financial Creditors as is already reflected in the Implementation Schedule in Clause 7.7 below. The entire payment to the Employees/ Workmen dues including dues of Authorized Representatives of Employees/ Workmen is being made in priority within 175 (one hundred seventy five) days from the Effective Date. [...] (g) Other than Admitted Workmen and Employees Dues which the Resolution Applicant proposed to pay, all other potential obligations and workmen dues including any dues towards Provident Fund (Contribution of Employees / Company), Gratuity, Employees State Insurance Scheme, Professional Tax or any other taxes in nature of employment owed or payable to, (including any demand for any penalty, penal interest already accrued/ accruing or in connection with any claims) and all rights and entitlements of present or past, direct or indirect, permanent or temporary, employees and/or workmen of the Corporate Debtor, whether admitted or not, d....
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....Date Cash Payment NPV of Rs. 391 Crores (using the discount rate specified in the Evaluatio n Matrix) Mortgage over Dubai Property No. 1 valued at more than Rs. 100 Crores Rs. 600 Crores Effective Date Year 5 or on complete payment, whichever is earlier Mortgage over Dubai Property No. 2 valued at more than Rs. 100 Crores Effective Date Mortgage over Dubai Property No. 3 valued at more than Rs. 50 Crores. Effective Date Floating charge by way of hypothecation on India POS Credit Card Receivables of Year 3, Year 4, Year 5 of the Corporate Debtor of Rs. 350 Crores or the total outstanding dues of the Assenting FCs, whichever is lower. Effective Date Upside on Aircrafts Rs. 60 Crores + Three 737s; Five 777s & Three A330 BV of Rs. 1,900 Effective Date On sale of relevant upside as per terms of Series B ZCB aircraft(s) as it could be sold in Lots and in phases or on relevant redemption date, whichever is earlier. Upside on ATR I....
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....lution Applicant shall provide the performance security bank guarantee ("PBG") for a total sum of Rs. 150 Crores. The PBG will be provided in two parts, with the first PBG of Rs. 47.5 Crores provided within 7 (seven) days from the date of receipt of LOI; and PBG for the remaining sum of Rs. 102.5 Crores provided on the Effective Date. 7.3. Compliance with respect of Regulation 36B (4A) The Resolution Applicant undertakes to provide the performance security bank guarantee as per the terms of the RFRP in favour of "State Bank of India" (in its capacity as an agent of the CoC (and acting on behalf of the Corporate Debtor)), within 7 (seven) days of it being declared the "Successful Resolution Applicant", or by way of a direct deposit by way of the real time gross settlement system into a bank account held by the SBI Bank, as per the terms of the RFRP. xxx xxx xxx 7.1. Term of the Resolution Plan 7.1.2. The effectiveness and implementation of the Resolution Plan by the Resolution Applicant shall be subject to the approval of the NCLT. Notwithstanding anything set out in this Resolution Plan, the implementation of this Resolution Plan by the ....
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....e understand that AGSL currently does not have any creditor) or any stakeholder of the Corporate Debtor (including existing or past employee or workmen or employees' unions of the Corporate Debtor). 7.6.2. Fulfilment of Conditions Precedent - The date of fulfilment of all the Conditions Precedent as stated in Clause 7.6.1 above shall be the effective date for the purposes of this Resolution Plan ("Effective Date"). 7.6.4. Automatic Withdrawal - The Resolution Applicant is confident of completing all the Conditions Precedent (as set out in Clause 7.6.1 above) within 90 (ninety) days from the Approval Date. In the unlikely event that all the Conditions Precedent cannot be fulfilled within 90 (ninety) days, the Resolution Applicant takes the responsibility of completing the outstanding Conditions Precedent at the earliest and seeks to extend the Conditions Precedent fulfilment period by another term of maximum 180 (one hundred and eighty) days. If all the Conditions Precedent are not fulfilled within such period (i.e. 270 (two hundred and seventy) days from the Approval Date), then this Resolution Plan shall automatically stand withdrawn without any further acts,....
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....d Employees, including Authorized Representatives of Workmen and Employees) as per Clause 6.4.2. Z + 175 18. Payment to all the Operational Creditor (other than Workmen and Employees) as per Clause 6.4.3 above. Z + 175 19. Payment to Other Creditors and Stakeholders as per Clause 6.4.5, Clause 6.4.6, 6.4.7, and 6.4.8 Z + 175 20. Payment to Dissenting Financing Creditors as per Clause 6.4.4(m)(i). Z + 176 21. 1st Tranche payment to Financial Creditors as per Clause 6.4.4. Z + 180 22. Monitoring Committee to be released and Reconstituted Board of Directors to take over the management of the Corporate Debtor. Z + 180 23. Closing Date. Z + 180 24. Redemption of Series B, Series C; and Series D ZCBs Z + 365 25. Necessary statutory approvals Y + 365 (in accordance with Sec 31(4) of the IBC) 26. Redemption of Series A ZCB Z + 730 27. Release of charge (if any) over assets of the Corporate Debtor (which have not been previously released). Z + 730 28. Redemption of NCDs and release of any charge (if any) Z + 5 Years xxx xxx xxx 9.4. Implementation - The performance guarant....
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....gard to extension of the timeline, as would be deemed proper. That would help prevent the SRA from the frustration of 'automatic withdrawal' referred to in clause 7.6.4 of the Resolution Plan." (emphasis supplied) 6. Since the initial period of 90 days for fulfilment of the Conditions Precedent expired on 22.09.2021, an extension of another 90 days was granted by the NCLT vide order dated 29.09.2021 (1st extension). The 1st extension of 90 days expired on 22.12.2021. The NCLT vide order dated 20.01.2022, again, granted an extension of another 90 days (2nd extension). The 2nd extension of 90 days expired on 22.03.2022. The maximum extension that could have been provided under Clause 7.6.4 of the Resolution Plan i.e., an additional 180 days, had now come to an end. However, vide order dated 11.04.2022, the NCLT granted exclusion of a period of 65 days from 17.01.2022 to 22.03.2022, which was spent in moving the application for grant of time. This finally extended the time for achieving the Effective Date from 22.03.2022 to 25.05.2022 (3rd extension). 7. On 20.05.2022, Respondent No.1 obtained the Air Operation Certificate (hereinafter, the "AOC") and asserted that all ....
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....r, it excluded the period from 20.05.2022 to 16.11.2022 (180 days) from the period of 180 days within which the first tranche payment had to be made, in the interests of justice and to achieve the primary objective of maximization of assets and resolution of the Corporate Debtor. As a consequence, the deadline to meet with the first tranche payment obligation of Rs. 350 Crore was extended till 15.05.2023 (hereinafter, "1st implementation extension"). The appellants challenged this common order dated 13.01.2023 passed by the NCLT before the NCLAT by way of Company Appeal (AT)(INS) Nos. 129- 130 of 2023 (hereinafter, "Company Appeal") and also sought a stay on the same. 11. On 30.01.2023, this Court dismissed Civil Appeal Nos. 465-469 of 2023 filed by Respondent No.1 and upheld the order dated 21.10.2022 passed by the NCLAT. In such circumstances, Respondent No.1 was obliged to pay the full provident fund and gratuity that the workmen and employees were entitled to within 180 days from the Effective Date. 12. The NCLAT vide its order dated 03.03.2023, declined to stay the order dated 13.01.2023 passed by the NCLT while observing that the steps regarding the implementation of th....
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....9.2023 subject to certain conditions. The relevant extracts from the letter are reproduced hereinbelow: "Sir, Reference is invited to Jet Airways Letter dated 16.05.2023 followed by email dated 12.06.2023 and discussions with Sh Ankit Jalan, representative of Jalan-Kalrock Consortium (SRA) on 14.07.2023 and 27.07.2023 regarding extension of validity of AOC. 2. In view of the fact that Jet Airways is still undergoing CIRP under IBC, 2016, NCLT and NCLAT having the jurisdiction in respect of the insolvency of the Company have granted extension(s)/exclusion(s) of time for implementation of the approved Resolution Plan upto 03.09.2023, the AOC No. 6A in respect of Jet Airways (India) Ltd. shall be considered as valid until 03.09.2023, subject to the following conditions:- i. This extension shall be applicable only for the limited purpose of completing the ongoing CIRP. ii. Jet Airways shall be required to undergo recertification in accordance with the procedure contained in CAP 3100, as applicable for issuance of AOC and demonstrate compliance of all the applicable regulatory requirements afresh before commencement of flight operations. ....
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....ng adjudication before this Hon'ble Tribunal along with Civil Appeal Nos. 4131-34 of 2023 & 3736-37 of 2023 filed before the Hon'ble Supreme Court, on the said two issues. In other words, lenders would not contest the granting of exclusions as well as on the issue regarding the compliance of Conditions Precedent, in case the aforesaid steps are taken by SRA without any further delay. Failing to comply with the conditions mentioned in Para 8(a) to (c) above, the Corporate Debtor should be directed to go into liquidation." 18. In response to the aforesaid Lender's Affidavit, Respondent No.1 on 18.08.2023 filed IA Nos. 3801 and 3802 of 2023 (hereinafter, "Adjustment application") in the Company Appeal seeking inter alia - First, a direction to the Appellants to adjust the PBG of Rs. 150 Crore towards part payment of the first tranche under the Resolution Plan; second, to allow Respondent No.1 to infuse Rs. 100 Crore as share application money on or by 31.08.2023 and; thirdly, to allow Respondent No.1 to infuse the remaining Rs. 100 Crore as share application money on or before 30.09.2023. Through these applications, Respondent No.1 further urged that, in the event the Gratu....
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.... of Rs. 150 Crore to be adjusted against the first tranche payment and allowing the remaining amount of Rs. 200 Crore to be infused by 30.09.2023. 22. All the aforementioned appeals were heard together and vide common judgment and order dated 18.01.2024, this Court held that the PBG cannot be permitted to be adjusted against the first tranche payment and therefore, directed that the amount of Rs. 150 Crore be infused in cash on or before 31.01.2024 (4th implementation extension). In the event of failure by Respondent No.1 to infuse the said amount within the said date, this Court held that the consequences under the Resolution Plan would follow. It disposed of the appeals as thus: "25. The lenders have argued in the appeals that there has been a failure on the part of the successful resolution applicant to comply with the conditions precedent. If the successful resolution applicant were to comply with the terms as envisaged in SBI's affidavit dated August 16, 2023, evidently issues pertaining to compliance with the conditions precedent were not to be pressed thereafter. In order to furnish this successful resolution applicant a final opportunity to comply and consis....
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....ers as well as SRA are directed to take steps for creation of charge over the Dubai Property No. 1, Dubai Property No. 2, and Dubai Property No.3 within a period of 30 days from today. The SRA to bear all necessary expenses for creation of necessary charge. 3. The Performance Bank Guarantee of INR 150 Crores, which is lying with the Monitoring Committee/MC Lenders, shall be adjusted towards the first tranche payment of INR 350 crores as INR 200 crores have already been paid by the SRA. By adjustment of PBG as per the Resolution Plan, the first tranche of payment of INR 350 crores shall be completed. 4. Steps shall be taken for re-constitution of the shares as per the Resolution Plan forthwith. 5. Out of the first tranche payment of INR 350 crores, payments shall be made to the workmen and employees and the creditors as per the Resolution Plan, including the payment of CIRP cost as per the Resolution Plan, which payment shall be completed within 60 days from the date of this judgment. 6. The SRA shall submit an Application for re-issue of Air Operation Certificate which may be obtained within 90 days from the date of this judgment. 7. The....
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.... to Rs. 289.2 Crore (which according to the appeals filed by the workmen would be reduced to Rs. 226 Crore post the demerger of the ground handling business). An appeal against the order stood dismissed by this Court on 30.01.2023. Therefore, it is a matter of concern that the impugned order of the NCLAT limited the workmen's compensation to a mere Rs. 12 Crore which is contrary to its earlier order dated 21.10.2022 as upheld by this Court on 30.01.2023. iv. Clause 7.6.1 of the Resolution Plan deals with the five Conditions Precedent and imposes an obligation on the SRA to fulfil the same in order to recommence the operations of the Corporate Debtor as an aviation company. The SRA could be said to have breached three of these conditions i.e. Condition (a) on obtaining the AOC; Condition (c) on obtaining the Slots Allotment Approval, and; Condition (d) on obtaining the International Traffic Rights Clearance. The NCLT, vide its order dated 13.01.2023 had held that the Conditions (a) and (c) stood fulfilled and amended Condition (d) which effectively transformed it from a condition precedent to a condition subsequent. Such erroneous findings came to be wrongly affirmed by the....
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....he Resolution Plan, the SRA undertook to provide the PBG as per the RFRP and in compliance with Regulation 36B(4A) of the 2016 Regulations. Clause 9.4 of the Resolution Plan authorizes the invocation of the PBG in terms of the RFRP. 32. The learned ASG submitted that Clause 6.4.4 of the Resolution Plan on "Treatment of Financial Creditors - Summary of payments and Security package" under its tabular column evidently conveys the mandate that the SRA is under an obligation to execute a mortgage over the three Dubai properties i.e., Property No. 1 valued at Rs. 100 Crore, Property No.2 valued at Rs. 100 Crore and Property No.3 valued at Rs. 50 Crore. The table provides that the date of creation of such security would be the Effective Date. This security had to be created at the cost of the SRA. Therefore, the SRA was obliged to not only infuse an amount of Rs. 350 Crore within 180 days of the Effective Date, but also execute the mortgage of the three Dubai properties on the Effective Date. In other words, the Resolution Plan obligated the SRA to satisfy the following twin conditions for the PBG to be discharged - (a) infusing Rs. 350 Crore as the first tranche payment and (b) execu....
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....the Lender's Affidavit refers specifically to the infusion of Rs. 350 crore in cash by 31.08.2023. It was reiterated that the first tranche payment had to necessarily be made in cash since such a requirement flows from the Resolution Plan. It was not open to the SRA to contend that the Resolution Plan had a different mode of payment namely, the payment of Rs. 200 Crore in cash and Rs. 150 Crore by way of adjusting the PBG. The learned ASG contended that none of the clauses in the Resolution Plan stipulates such condition. To the contrary, under Clause 6.4.4, the PBG could be released or adjusted only upon the satisfaction of the twin requirements abovementioned. Therefore, the assumption by the Respondent that the infusion of Rs. 350 Crore emanates only out of the Lender's Affidavit dated 16.08.2023, is totally incorrect. The Lender's Affidavit has not and cannot impose any condition over and above those which are provided under the Resolution Plan. The Lender's Affidavit was filed to only set out a deadline for infusing Rs. 350 Crore by 31.08.2023, which was subsequently extended by the order dated 28.08.2023 of the NCLAT to 30.09.2023. The Lender's Affidavit only insisted on comp....
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....ssing it's final order dated 12.03.2024 ought to have insisted on the payment of Rs. 150 Crore in cash. That would have been in tune with the specific direction that was issued by this Court & the intent with which the direction was issued, and the SRA having not paid the same, had committed a breach of the Resolution Plan. The NCLAT went to the extent of swapping the conditions laid out in the Resolution Plan by directing the adjustment of the PBG first and the execution of the mortgage on the three Dubai properties later i.e., within 30 days from its order dated 12.03.2024. It was submitted that even the extension that allowed for the execution of mortgage expired on 11.04.2024 and the SRA continues to be a defaulter in this regard as well. 39. The ASG vehemently contended that, there has been a triple breach on the part of SRA - Firstly, breach of the Resolution Plan; secondly, violation of the directions issued by this Court dated 18.01.2024 and; thirdly, the failure to execute the mortgage of the three Dubai properties before 11.04.2024. 40. The ASG submitted that the impugned order of the NCLAT dated 12.03.2024 at Para 129, granted 30 days' time to the SRA for the creat....
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.... in India. The Appellants replied to the said email on 16.04.2024 and stated that the period of 30 days had already expired on 11.04.2024, the expenses for creation of charge had not been paid and that accepting the property in India which belongs to a third party would tantamount to modification of the Resolution Plan. 41. The ASG therefore submitted that the above exchanges patently bring out the SRA's non-cooperation, defiance to judicial orders and desperate attempts to suggest the creation of security of unknown third-party properties, all of which were done after the expiry of the time period of 30 days provided by the NCLAT for compliance with their order dated 12.03.2024. Consequently, even in terms of the impugned Order of the NCLAT, there has been a total breach on the part of the SRA which only indicates that they have no inclination worth the name to implement the Resolution Plan. Consequently, in terms of Clause 9.4 of the Resolution Plan and Clause 3.13.7(iii) of the RFRP respectively, the Appellants are entitled to invoke the PBG automatically without any reference to the SRA. ii. Issue No. 2: Non-payment of Airport dues 42. It was submitted that in terms of....
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....under the Resolution Plan, is accepted, then the entire amount of Rs. 475 Crore shall go towards the airport dues and as a consequence, nothing would become payable to the financial creditors, operational creditors, workmen etc. The amount of Rs. 240 Crore was a mere estimate of the dues payable in the year 2020. Due to non-payment and non-commencement of flying operations, the same amount in the year 2024 has increased multi-fold. To contend that such an increased amount does not fall under the Resolution Plan and therefore, is not payable, will cast a further burden on the CoC of the Corporate Debtor. Further, it would be unfair to accept that, for the reason of the Respondent's default in payment, the CoC would have to bear the Airport dues of Rs. 1100 Crore and none of the creditors or workmen would get anything out of this plan. This misconceived contention which intentionally makes the plan unworkable needs to be outrightly rejected. iii. Issue No. 3: Non-payment of Workmen and Employees' dues 45. The ASG submitted that the Resolution Plan originally provides for a sum of Rs. 52 Crore towards the payment of workmen's and employees' dues. However, the NCLAT vide its orde....
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.... maximum extension of 270 days that could be provided under the Resolution Plan had been reached and; Thirdly, vide order dated 11.04.2022, the NCLT further extended it to 25.05.2022 by excluding a period of 65 days spent in moving the application for grant of time. Therefore, the Effective Date was finally frozen on 25.05.2022. 48. The learned ASG submitted that the SRA, however, contended that the Effective Date had been achieved on 20.05.2022 and the same was accepted by the NCLT in its order dated 13.01.2023. Therefore, the calculation of 180 days for the infusion of the First Tranche Payment begins from 20.05.2022. The initial 180 days had expired on 16.11.2022. However, several extensions were given to the SRA for infusion of the first tranche payment - Firstly, vide order dated 13.01.2023, the NCLT extended the timeline for infusion of First Tranche Payment till 15.05.2023; Secondly, vide order dated 25.05.2023, the NCLAT further extended the timeline of 180 days till 31.08.2023; Thirdly, vide order dated 28.08.2023, the NCLAT extended the timeline of 180 days till 30.09.2023 and; Fourthly, vide Order dated 18.01.2024, this Court extended the time of 180 days for infusion....
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....r reissuance of the AOC within 90 days from the date of its order and the deadline for the same had expired on 12.06.2024. It was submitted that, even today, the Respondents do not have a valid AOC and the fact that the Respondents are contending that they had not renewed the AOC solely because of the matter being under litigation, only exposes their disinterest and disinclination in taking their obligations forward. 54. It was then submitted that Clause 7.6.1(c) requires the SRA to obtain Slot Allotment Approval. The NCLT in its order dated 13.01.2023 vide para 124 had clearly rendered a finding that "there is no dispute that slots for which SRA applied were granted to them by the concerned competent authority including the slots in Delhi and Mumbai on settling the old dues and as such, it cannot be considered as non-allotment of slots, as SRA has received the slots it requested for in compliance with the plan approval order." The ASG also referred to the email dated 27.06.2022 issued by MAIL and the same reads as under: "We are happy to consider your request for slots on parking bay during the ongoing summer schedule. The same is subject to the closure of ongoing discussions p....
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....btained by one of the Resolution Applicants, who according to Clause 2.1.4 of the Resolution Plan, is the other partner to the Consortium along with Mr. Murari Lal Jalan. The ASG also placed reliance on news items which suggested that Mr. Florian Fritsch is facing money laundering proceedings in three different jurisdictions. The same had been dealt with by the NCLAT summarily in its impugned order in Para 125. However, it was wrongly concluded that this was yet another attempt by the Appellants to create roadblocks in the process of implementation of the Resolution Plan. 58. The counsel finally submitted that, since the Airport Dues and the CIRP costs have substantially increased solely on account of the delay, the Court should invoke its powers under Article 142 of the Constitution of India and direct that the Corporate Debtor be sent to liquidation. C. SUBMISSIONS ON BEHALF OF THE RESPONDENTS 59. On the other hand, Mr. Mukul Rohatgi, learned senior counsel appearing on behalf of Respondent No.1 submitted that Section 62 of the IBC, 2016 requires an appeal to the Supreme Court from an order of the NCLAT to be on a "question of law". He submitted that the present appeal o....
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....rore in the affidavit was to be interpreted and if the condition was complied with, the Appeals would stand withdrawn, if not, they would be decided on their own merits. 62. It was further submitted that the NCLAT rightly observed that, the submission of the Appellant that the Corporate Debtor should be directed to be liquidated on account of non-deposit of Rs. 150 Crore, cannot be accepted since the Supreme Court neither considered nor expressed any opinion on the question of liquidation. Liquidation was never recorded as a consequence and this is evident from liquidation not being mentioned in; (a) the arguments of the Appellants recorded by the NCLAT in its order dated 28.08.2023, (b) the judgment of the NCLAT dated 28.08.2023, (c) the arguments of the Appellants recorded by this Court in its order dated 18.01.2024 and, the findings or the directions of this Court in its order dated 18.01.2024. 63. The counsel also submitted that the adjustment of the PBG against the first tranche payment was possible under the Resolution Plan, specifically under Clause 6.4.4 which sets out the "Summary of payments and security package". It is evident through Clause 6.4.4 that a revolving ....
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....ed details of the alternate security equivalent to Rs. 250 Crore in India. However, the Appellants responded to the above vide their email dated 16.04.2024 stating that providing an alternate security would tantamount to modification of the Resolution Plan. 67. The counsel submitted that the SRA, vide email dated 16.04.2024 conveyed that they had not received any invoice from Mashreq Bank towards payment of their costs for acting as an agent for security creation and that the payment of security related costs to the extent of Rs. 76 Lakh could be done from the existing deposit with the Appellants. For the balance amounts, they requested that the invoices be shared with the SRA and that the same would be processed immediately. On 20.04.2024 and 01.05.2024 respectively, the SRA reminded the Appellants to share the invoices for the purpose of security creation. 68. On the issue of security creation, the counsel summed up submitting that the SRA had done everything within its control to enable the Appellants to create security including agreeing to bear all costs and expenses for creation and preservation of security, providing contracts for such security creation, and providing ....
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....lants, the same has not been received yet and therefore, they have not allowed the SRA to undertake such a funding. 73. The Counsel submitted that the first Condition Precedent is the Validation of AOC by DGCA and MoCA as provided under Clause 7.6.1(a). The SRA had a valid AOC until 03.09.2023 and the lapse of the AOC during the pendency of the appeals cannot mean that the Condition Precedent was not met. It was submitted that the condition was met on the date of the implementation application being filed before the NCLT and that the AOC has not been renewed only due to the fault of the Appellants. 74. It was submitted that the third Condition Precedent was the requirement of Slot Allotment Approval as provided under Clause 7.6.1(c). The counsel rejected the contention of the Appellants that the slots were not provided because the airport charges were not paid and stated that the airport charges are a part of the CIRP costs which could be met as and when the Resolution Plan was operationalized. It was further submitted that the SRA had obtained 48 slots on the Effective Date when it was supposed to secure only 46 slots. The NCLT in its order dated 21.06.2022 had also held tha....
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..... 78. The counsel further submitted that there is no specific consequence provided under the Resolution Plan for a default in the creation of security. It was reiterated that the SRA had undertaken all possible steps to further the execution of the mortgage of the Dubai properties as per the Resolution Plan and it is the Appellants who have not cooperated in this regard. 79. The counsel submitted that the Appellants have taken contradictory stances at different stages of the dispute before different forums. Before the NCLAT in its pending Company Appeal, it was contended by the Appellants that the NCLT has erroneously allowed the Resolution Plan to be implemented without the complete compliance of the Conditions Precedent by the SRA. However, before this Court, they have argued that the SRA has claimed that the Conditions Precedent were fulfilled on 20.05.2022 and has asserted that it would be the Effective Date. As a consequence, the SRA should have met with their first tranche payment obligations within 180 days from the Effective Date. 80. The counsel submitted that the consequences of non-compliance with the Conditions Precedent were that the SRA would not be able to r....
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....owards PF and Rs. 188.7 Crore towards gratuity. It was submitted that neither the NCLAT order dated 21.10.2022 nor the order of this Court dated 30.01.2023 had provided any specific timelines for fulfillment of these additional liabilities which were cast upon the SRA. This is precisely why the SRA proposed to pay Rs. 14 Crore towards PF upfront in compliance with Section 11 of the PF Act and pay the Gratuity dues of Rs. 188.2 Crore in a staggered manner. 83. The counsel finally referred to the letter dated 16.08.2024 sent by MoCA which provided Security Clearance in respect of a proposed Director of the Corporate Debtor, Mr. Swapnil Jain. The validity period of this Security Clearance was stated to be co-terminus with the validity period of the AOC which was issued by the DGCA. D. ISSUES FOR DETERMINATION 84. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the following questions of law fall for our consideration: - i. Whether the Performance Bank Guarantee (PBG) could have been adjusted against the first tranche payment which was to be made under the Resolution Plan, within 180 days from the Effective D....
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.... provision related to a second appeal and it reads as thus: "100. Second appeal - (1) Save as otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie to the High Court from every decree passed in appeal by any Court subordinate to the High Court, if the High Court is satisfied that the case involves a substantial question of law. (2) An appeal may lie under this section from an appellate decree passed ex parte. (3) In an appeal under this section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal. (4) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. (5) The appeal shall be heard on the question so formulated and the respondent shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question : Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law, not formulated by it, i....
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.... not only refers to cases where there is a total dearth of evidence, but also refers to any case, where the evidence, taken as a whole, is not reasonably capable of supporting the finding." ( emphasis supplied ) This Court recapitulated that a substantial question of law would also arise in a situation where the legal position is clear, either on account of express provisions of law or binding precedents, but the Court below has ignored or acted contrary to such legal principles while deciding the matter. In such circumstance, the decision rendered by the Court below would violate a settled position of law and therefore, constitute a substantial question law. Furthermore, it was observed therein that it is not an absolute rule that the Court in a second appeal will not interfere with findings of fact. One of the well-recognized exceptions is where the Courts below have drawn wrong inferences from proved facts, by applying the law erroneously. 88. In Maria Colaco and Another v. Alba Flora Herminda D'souza and Others reported in (2008) 5 SCC 268, it was held that in the second appeal under Section 100 CPC, the High Court should not interfere on the questions of fact. H....
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.... on the basis of findings of fact arrived at by the trial court and the first appellate court. 12. However, there cannot be any doubt whatsoever that consideration of irrelevant fact and non-consideration of relevant fact would give rise to a substantial question of law. Reversal of a finding of fact arrived at by the first appellate court ignoring vital documents may also lead to a substantial question of law. In Vidhyadhar v. Manikrao [(1999) 3 SCC 573] this Court held : (SCC p. 586, para 23) "23. The findings of fact concurrently recorded by the trial court as also by the lower appellate court could not have been legally upset by the High Court in a second appeal under Section 100 CPC unless it was shown that the findings were perverse, being based on no evidence or that on the evidence on record, no reasonable person could have come to that conclusion." (See also Iswar Bhai C. Patel v. Harihar Behera [(1999) 3 SCC 457] .) 14. We may, however, notice a few decisions in regard to the jurisdiction of the High Court under Section 100 of the Code. In Commr. of Customs (Preventive) v. Vijay Dasharath Patel [(2007) 4 SCC 118] this Court held : (SCC ....
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....n of law would differ in each case. When material and relevant facts have been ignored and legal principles have not been applied while appreciating the evidence, a substantial question of law can be said to have arisen. Additionally, even in a case where evidence is misread, the power to interfere under Section 100 would exist. 90. In our considered view the impugned order of the NCLAT directing the SRA to adjust the PBG of Rs. 150 Crore against the first tranche payment of Rs. 350 Crore was in flagrant disregard of the order of this Court dated 18.01.2023, the terms of the Resolution Plan and established law. Such an order was perverse for having not properly considered several material and relevant facts and misreading evidence as well. Furthermore, the non-infusion and payment of funds in compliance with the applicable laws and the terms of the Resolution Plan had led to circumstances causing a failure of the Resolution Plan. We have no doubt in our mind that the NCLAT acted contrary to the settled legal principles and went to the extent of drawing wrong inferences from proved facts while deciding the matter. This itself justifies the examination of various issues in exercis....
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....ution Plan. Vide order dated 13.01.2023, the NCLT held that all the Conditions Precedent had indeed been met and that 20.05.2022 would be considered as the Effective Date for the purposes of implementation of the Resolution Plan. The findings of the NCLT in the aforesaid order are reproduced hereinbelow: "Findings: 122. [...] However, having considered the rival submissions and on perusal of record with regards to satisfactory compliance of conditions precedent (CPs) it is noted that there is no dispute so far as satisfactory compliance of CPs at serial no. (i) and (v) as per approved plan i.e.:- (i) Validation of Air Operator Certificate by Directorate General of Civil Aviation (DGCA) and Ministry of Civil Aviation (MoCA) and (v) Approval of demerger of ground handling business into all capital AGSL. In this background we have thus considered if the remaining three CPs are duly complied with by the applicant or otherwise. 123. As regards to CP No. 2 i.e. Submission and approval of business plan to DGCA and MoCA: The business plan was submitted to above Authorities to fulfil compliance of DGCA's Show Cause Notice (SCN) to CD of April 2019. SCN st....
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....um twenty aircrafts are required to be deployed before applying for such clearance. In view of this, we find that this condition cannot be satisfied upfront and needs to be satisfied in compliance with applicable laws i.e., after the SRA has twenty aircrafts in operation which can only be achieved once the operation is re-commenced successfully. Accordingly, this condition can only be fulfilled after the SRA/Applicants re-commences its business and not prior to its commencement. It goes without saying that plan approved by this Tribunal has to be implemented without any modification much less than on satisfaction of any other undertaking and thus, the effective date and completion date of condition precedent under the plan shall have to be read as 20th May, 2022. 126. In the background of above facts and for the reasons stated above we hold that in addition to CPs (I) & (V) which are admittedly complied, remaining CPs (II), (III), (IV) are also duly complied." 94. During the period when the aforesaid order of the NCLT was passed, the SRA possessed a valid AOC and therefore, there was no dispute pertaining to this Condition Precedent. With respect to the Slot Al....
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.... NCLT that it could not have obtained this clearance without commencing and amplifying the operations of the Corporate Debtor. It was observed that this Condition Precedent should not come in the way of the implementation of the Resolution Plan. As regards the AOC, it was contended by the Appellants that the same had lapsed after 03.09.2023 and no extension was granted by the DGCA thereafter. However, the NCLAT was of the view that the AOC was valid on the date when the SRA had approached the NCLT for a declaration that the Conditions Precedent were fulfilled and also when the order dated 13.01.2023 of the NCLT was passed. The expiry of the validity period of the AOC during the pendency of the Company Appeal was not considered sufficient grounds to hold that the Condition Precedent was not fulfilled. The NCLAT while reaffirming that all the Conditions Precedent were satisfactorily fulfilled observed that there was no infirmity in the order of the NCLT dated 13.01.2023. The NCLAT further directed the SRA to make an application for the re-issuance of the AOC within 90 days from the date of its order i.e., by 12.06.2024. 97. The nature of the Conditions Precedent laid out under the....
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....e to the fact that the Effective Date was frozen on 20.05.2022. Therefore, as per Clause 6.3.1(g) on the "Infusion of Funds and Timelines", and Serial No.11 under Clause 7.7, the first tranche payment of Rs. 350 Crore had to be made by the SRA, upfront, within a period of 180 days from the Effective Date i.e., 20.05.2022. As per the Resolution Plan, this 180-day timeline otherwise would have expired on 16.11.2022. Several extensions were granted to the SRA to infuse this amount, at different stages of this litigation, by the NCLT, the NCLAT and this Court as well - First, by the NCLT vide order dated 13.01.2023, by which the timeline for infusion of first tranche payment was extended till 15.05.2023; Secondly, by the NCLAT vide order dated 25.05.2023, where the timeline of 180 days was further extended up to 31.08.2023; Thirdly, again by the NCLAT vide order dated 28.08.2023, where the timeline of 180 days was extended up to 30.09.2023; and Fourthly, by this Court vide order dated 18.01.2024, whereby the time of 180 days for infusion was extended up to 31.01.2024. I. The adjustment of the PBG was impermissible under the terms of the Resolution Plan read with Regulation 36B(4A) o....
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.... satisfaction of the CoC, and in accordance with the terms of the Resolution Plan. Clause 3.13.8 provides that the PBG shall be returned to the SRA within a period of 7 days, upon 100% completion of the implementation of the Resolution Plan by the SRA. Finally, Clause 3.13.9 states in categorical terms that, the PBG shall not be set-off against or used as part of the consideration that the SRA proposes to offer in relation to the Corporate Debtor, even if expressly indicated as such by the SRA in the Resolution Plan. 101. It is of vital importance that the aforementioned clauses of the RFRP are read conjointly with Clauses 7.3 and 9.4 of the Resolution Plan. Clause 7.3 of the Resolution Plan deals with the "Compliance with respect to Regulation 36B(4A)" and states that the SRA undertakes to provide the PBG as per the terms of the RFRP in favor of the SBI within 7 days of it being declared as the SRA. Clause 9.4 of the Resolution Plan is titled "Implementation" and states that "the performance guarantee provided by the Resolution Applicant can be invoked in accordance with the terms of the RFRP". Therefore, it is as clear as a noonday that the terms of the RFRP, particularly i....
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....dvance the committed payments and achieve its goal of re-commencing the operations of Jet Airways at the earliest." However, the aforesaid Clause 6.4.12 of the Resolution Plan was deleted in its entirety and replaced with the following: "6.4.12. Request for the consideration of the CoC - As required under the RFRP, the Resolution Applicant shall provide the performance security bank guarantee ("PBG") for a total sum of Rs. 150 Crores. The PBG will be provided in two parts, with the first PBG of Rs. 47.5 Crores provided within 7 (seven) days from the date of receipt of LOI; and PBG for the remaining sum of Rs. 102.5 Crores provided on the Effective Date." A reading of the amended Clause 6.4.12 of the Resolution Plan indicates that the parties had mutually agreed to do away with the phrase "which will bring financial flexibility for the Resolution Applicant and help the Resolution Applicant advance the committed payments and achieve its goal of recommencing the operations of Jet Airways at the earliest". What can be plainly deduced from such a deletion is that the PBG cannot be used by the SRA to advance any payments that are required to be paid under the scheme of the....
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....to the Resolution Plan through Clauses 7.3 and 9.4 respectively of the Resolution Plan. 106. The NCLAT in one of its orders i.e., the order dated 26.05.2023, had restrained the Appellants from invoking the PBG without the leave of the NCLT. While saying so, the following observations were made; 19. When the Resolution Plan of the Corporate Debtor has received approval up to Hon'ble Supreme Court and the Monitoring Committee is constituted under the Plan to oversee implementation, the Monitoring Committee has to act as a facilitator for implementation of the Resolution Plan instead of finding fault and taking steps, which does not facilitate the implementation, rather delay the implementation. There is no doubt that Performance Bank Guarantee can be invoked by the MC Lenders, but the said invocation can only take place when SRA has failed to implement the Plan. Present is a case where directions have been issued to both MC Lenders and SRA to implement the Plan and the event of failure of the Plan has not yet arrived. When the Adjudicating Authority has directed on 13.01.2023 to take steps towards the implementation of the Plan and which order was not been stayed by this ....
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....ls to implement Performance Security it shall stand forfeited. Present is a case, where Performance Security has already been provided in compliance of sub- Regulation 4A and present is not a case that any power to forfeit the Performance Bank Guarantee to be exercised under sub-Regulation (4A). On Explanation I, attention of the Court was drawn by Learned Counsel for SRA, which indicates that the performance security which is contemplated, can be of such nature, value, duration and source as may be specified. Thus, Performance Security can be of a particular duration and when the Resolution Plan provides release of security at the time of first tranche of payment of Rs. 350 Crores, no exception can be taken to adjustment of the Performance Bank Guarantee. The request of SRA to adjust Performance Bank Guarantee of Rs. 150 Crores is thus according to Clause 6.4.4 of the Resolution Plan on which no exception can be taken. 27. Submission was made by Learned Sr. Counsel for the Appellant that performance Bank Guarantee has to be maintained till the completion of the plan. The summary of payment and security package as contained in the table indicate that there are large number....
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....RFRP, the Resolution Plan (under Clauses 7.3 and 9.4) and Regulation 36B(4A) was that the PBG had to be kept alive till the completion of implementation of the Resolution Plan by the SRA and that it cannot be set-off against any payment obligation, then how do we reconcile such an intention with the expression "PBG adjusted" mentioned under Clause 6.4.4 of the Resolution Plan? As mentioned above, Clauses 7.3 and 9.4 respectively of the Resolution Plan incorporated the terms of the RFRP into the Resolution Plan. Clause 3.13.9 of the RFRP states that the PBG shall not be set off against any payment or consideration which is to be made by the SRA, even if expressly provided so under the Resolution Plan. Clause 6.4.4 is quite ambiguous in its construction regarding the question whether the PBG can be specifically adjusted against the first tranche payment. Although in the Summary of Payments and Security Package, under the column titled "Date of release of security", the expression "PBG adjusted" exists, yet Clause 6.4.4(a)(i) which furnishes some additional clarity on the Summary of Payments and Security Package provides no mention of the PBG under the heading "Date of release of Secu....
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....equirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors,[including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan." ( emphasis supplied ) 115. This Court in Ebix Singapore Private Limited v. Committee Of Creditors of Educomp Solutions Limited and Another reported in (2022) 2 SCC 401 was faced with the issue whether withdrawals or modifications by successful resolution applicants were permissible under the IBC, 2016 i.e., whether a resolution applicant is entitled to withdraw or modify its Resolution Plan, once it has been submitted by the Resolution Professional to the Adjudicating Authority and before it is approved by such authority under Section 31(1) of the IBC, 2016. It was unequivocally held that, based on the plain terms of the IBC, 2016, the Adjudicating Authority lacks the power to allow the....
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....cating authority. Even the CoC is not permitted to approve multiple resolution plans or solicit EoIs after submission of a resolution plan to the adjudicating authority, which would possibly be in contemplation if the resolution applicant was permitted to withdraw from, or modify, the plan after acceptance by the CoC. Regulation 36- B(4-A) requires the furnishing of a performance security which will be forfeited if a resolution applicant fails to implement the plan. This is collected before the adjudicating authority approves the plan. Notably, the Regulations also direct forfeiture of the performance security in case the resolution applicant "contributes to the failure of implementation", which could potentially include any attempts at withdrawal of the plan. xxx xxx xxx 172. Based on the plain terms of the statute, the adjudicating authority lacks the authority to allow the withdrawal or modification of the resolution plan by a successful resolution applicant or to give effect to any such clauses in the resolution plan. Unlike Section 18(3)(b) of the erstwhile SICA which vested the Board for Industrial and Financial Reconstruction with the power to make modifica....
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....fter obtaining the financial information of the corporate debtor through the informational utilities and perusing the IM, is assumed to have analysed the risks in the business of the corporate debtor and submitted a considered proposal. A submitted resolution plan is binding and irrevocable as between the CoC and the successful resolution applicant in terms of the provisions of IBC and the CIRP Regulations. In the case of Kundan Care, since both, the resolution applicant and the CoC, have requested for modification of the resolution plan because of the uncertainty over the PPA, cleared by the ruling of this Court in Gujarat Urja [Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, (2021) 7 SCC 209 : (2021) 4 SCC (Civ) 1] , a one-time relief under Article 142 of the Constitution is provided with the conditions prescribed in Section K.2." ( emphasis supplied ) 116. In light of the aforesaid, it is clear that the existing insolvency framework does not provide any scope for effecting further modifications or withdrawals of the Resolution Plan approved by the CoC, at the behest of the successful resolution applicant, once the plan has been submitted to the adjudicating authority. T....
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....lved, including the SRA. This is evident from the arguments put forth by the SRA, before the NCLAT and before this Court respectively, which dealt with the issue of whether the adjustment of the PBG was possible under the terms of the Lender's Affidavit. The following were the submissions made by the SRA in the order dated 28.08.2023 as recorded by the NCLAT: "20. Learned Sr. Counsel for the SRA has submitted that approved Resolution Plan provides adjustment of Performance Bank Guarantee towards first tranche of payment whereas Learned Counsel for the Appellants has referred to certain clauses of RFRP and also provisions of Regulation 36B (4A) to support his submission that performance bank guarantee cannot be permitted to be invoked towards payment of first tranche." ( emphasis supplied ) 119. The submissions made by the SRA as recorded in the order of this Court dated 18.01.2024 are as follows: "18. The submission which has been urged on behalf of the lenders has been opposed on behalf of the SRA by Mr. Krishnendu Datta, senior counsel, On behalf of the SRA< it has been submitted that: (i) The Resolution Plan specifically contemplates the ad....
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....edent and grant of extensions/exclusions along with offering to withdraw the Company Appeal and the Appeals pending before this Court. 122. The order of this Court dated 18.01.2023 must be seen & understood in the aforesaid background. While the appeal before us had resulted from several interim orders of the NCLAT, the question before us was whether the adjustment of the PBG of Rs. 150 Crore was permissible under the Lender's Affidavit as well as the terms of the Resolution Plan, being one and the same. We interpreted the term "infuse" as mentioned in the affidavit and under the Resolution Plan, and arrived at the conclusion that it demonstrably meant "payment in cash". Therefore, the directions that were issued by this Court, especially the direction that - "the SRA shall peremptorily on or before 31 January 2024, deposit an amount of Rs. 150 crores into the designated account of SBI, failing which the consequences under the Resolution Plan shall follow", must have been necessarily seen in the context of the Resolution Plan as well. The phrase "failing which the consequences under the Resolution Plan shall follow" was a mandatory direction that should have been taken into acco....
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....In the foregoing paragraphs, we have reached the conclusion that the SRA failed to implement the Resolution Plan by not infusing the first tranche payment of Rs. 350 Crore in cash, as required by Clause 6.3.1(g) and the Implementation Schedule under Clause 7.7 of the Resolution Plan. It is now to be seen if this has resulted in the contravention of other terms of the Resolution Plan as well. a. Whether Respondent No.1/SRA had failed to implement the Resolution Plan on non-payment of the Airport Dues as per the terms of the Resolution Plan? 126. With respect to the Airport dues, the impugned order of the NCLAT had taken into consideration Clauses 6.4.1(e), 6.4.1(h) and 6.4.1(m) respectively. Specifically dealing with Clause 6.4.1(h), it said that this provision dealt with the treatment of outstanding CIRP costs which included parking charge i.e., Airport Charges. While considering so, the following observations were made: "54. The provisions of Resolution Plan as noted above clearly indicates that CIRP costs includes Airport Charges. SRA is also entitled to use funds available with the Corporate Debtor as on effective date to meet any portion of CIRP costs. The submis....
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....e, the clause does not expressly exclude Airport Charges from the ambit of CIRP costs entirely but only states that the amount available in the bank account of the Corporate Debtor would be insufficient to cover the parking charges, rental charges etc which also form a part of the CIRP costs. Since such a bank balance would not cover the parking charge, rental charges, employee dues, taxes etc, the Resolution Plan had set apart a separate sum of Rs. 25 Crore for the payment of any such CIRP costs which might have accrued till the Approval Date. Further, the other expenses including parking charges, rental charges etc. which have been incurred post the Approval Date but within the Effective Date i.e., the period during which the Conditions Precedent would be fulfilled, would also be incurred out of the positive bank balance of the Corporate Debtor. This is what Clause 6.4.1(h) provides for. To hold that Clause 6.4.1(h) excludes airport dues from the scope of CIRP costs altogether would also question the placement of clauses such as Clauses 6.4.1(f) (which provides for an estimate of Rs. 240 Crore towards parking charges) under the larger umbrella of Clause 6.4.1 which deals with the....
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....e BKC Property is merely a proposal and not a condition to the implementation of this Resolution Plan and the CoC has the discretion to accept/reject such a proposal. If the above-mentioned proposal is acceptable to the CoC, then it is acceptable to the Resolution Applicant in the manner stated hereinabove". ( emphasis Supplied ) The contention of the SRA is that the aforesaid qualification applies equally to the part of Clause 6.3.1(d) under the heading "BKC Property not part of resolution" and that the entire Clause 6.3.1(d) would remain a proposal and not a binding condition on the SRA. Irrespective of a determination on the same, even as per Clause 6.4.1, the payment towards CIRP costs including Airport Charges had to be made in full, in priority, within 180 days from the Effective Date. This is evident from - (a) Clause 6.4.1(a) which states that the CIRP Costs are to be paid in priority to any other creditor of the Corporate Debtor in terms of Section 30(2)(a) of the IBC, 2016; (b) Clause 6.4.1(k) which states that the outstanding CIRP costs shall be paid by the Resolution Applicant out of the funds infused by the Resolution Applicant in the Corporate Debtor and a....
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.... 134. The order dated 21.10.2022 of the NCLAT dealt with the entitlements of the workmen and employees to several payments and made the following observations: 71. In view of the aforesaid discussion, we arrive at following conclusions: (i) The workmen and employees are entitled for payment of full amount of provident fund and gratuity till the date of commencement of the insolvency which amount is to be paid by the Successful Resolution Applicant consequent to approval of the Resolution Plan in addition to the 24 months workmen dues as the workmen is entitled to under Section 53(1)(b) of the Code. It is made clear that in addition to part amount of provident fund and gratuity as proposed in Resolution Plan to workmen, Successful Resolution Applicant is obliged to make payment of balance unpaid amount of provident fund and gratuity to workmen and employees. 72. Our answer to Question II and III is as follows: (i) The workmen and employees are entitled to receive the amount of provident fund and gratuity in full since they are not part of the liquidation estate under Section 36(4)(b)(iii). (ii) The workmen are entitled to receive their....
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....nt of those employees and workmen, who were demerged into AGSL shall not be there, since demerger has not been treated as termination of their services. (c) The employees are also entitled for the payment of their full provident fund, unpaid up to the date of insolvency commencement date. It is made clear that full payment of provident fund would be of that unpaid part of provident fund, which has not been deposited by the Corporate Debtor in the EPFO. (d) Employees shall also be entitled for the gratuity, which fell due up to insolvency commencement date. (e) The rest of the prayers of the workmen and employees are denied. (f) The Chairman of the Monitoring Committee, erstwhile Resolution Professional is directed to compute the payments to be made to workmen and employees within one month from today and communicate the same to the Successful Resolution Applicant to take steps for payment. ( emphasis supplied ) 135. Thus, it was held in clear terms that the workmen and employees are entitled to full payment of Provident Fund and Gratuity. The non-payment of these amounts shall lead to a violation of Section 30(2)(e) of the IBC, 2016 w....
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....ratuity and Provident Fund Claims is not allowed, then the Resolution Plan cannot be implemented under Section 30(2)(e) and as a consequence, the Lenders be directed to refund all amounts invested or infused into the Corporate Debtor by the SRA. 138. The NCLAT in its impugned order has taken note of its own order dated 21.10.2022 but has, however, only allowed the upfront payment of the Provident Fund dues of Rs. 12 Crore to the workmen and employees along with the payments that they are entitled to under the Resolution Plan. There is no specific direction as regard the payment obligations related to Gratuity nor any decision rendered on the two aforesaid IAs filed by the SRA in the Company Appeal. The NCLAT committed a serious error in failing to consider these IAs filed by the SRA and has given the impression that the SRA is liable to pay only the Provident Fund dues upfront. 139. According to the SRA, the dues relating to the Provident Fund would be paid upfront in compliance with Section 11 of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952. However, the Gratuity Dues could be paid in tranches since neither the order dated 21.10.2022 of the NCLAT nor ....
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....ted 18.01.2024 can be read to mean that non-compliance of the direction to deposit INR 150 crores by the SRA by 31.01.2024 should lead to liquidation of the Corporate Debtor. The submission of the Appellant that non-deposit of INR 150 crores leads to failure of Resolution Plan, cannot be accepted. As observed above, consequence of non-deposit of INR 150 crores is that these Appeals have to be heard on merits and the question, which has arisen in the Appeal has to be decided regarding compliance of conditions precedent by the SRA by 20.05.2022. Further submission of the Appellant that this Tribunal may exercise jurisdiction under Section 33, sub-section (3) in directing liquidation of the Corporate Debtor due to noncompliance of deposit on INR 150 crores also cannot be accepted. For passing an order under Section 33, subsection (3), there has to be adjudication that Resolution Plan approved by the Adjudicating Authority has been contravened by the Successful Resolution Applicant. We do not accept the submission of the Appellant that by nondeposit of INR 150 crores by 31.01.2024, the SRA has contravened the Resolution Plan and order be passed under Section 33, sub-section (3....
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....idation of the Corporate Debtor. The consequence of non-implementation of the Resolution Plan by the SRA must necessarily be liquidation of the Corporate Debtor in accordance with Section 33(3) of the IBC, 2016. Section 33(3) of the IBC, 2016 reads as thus: "(3) Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1)." ( emphasis supplied ) 144. The non-deposit of Rs. 150 Crore had in fact lead to a failure of the Resolution Plan on several counts as elaborated herein. In addition to the breach of Clauses 6.3.1(g), 6.4.4 and S. No. 11 of the Implementation Schedule under Clause 7.7, the non-infusion of the first tranche payment in accordance with the terms of the Resolution Plan has also led to an infraction as regards Clause 6.4.1 on the payment of CIRP costs and Clause 6.4.2 on the payment of workmen/employees' dues. Further, the payme....
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....part of the resolution applicant to implement the resolution plan and it was ordered that the liquidation proceedings against the corporate debtor be revived. The relevant observations are reproduced hereinbelow: "11. The appellant has been unable to raise the funds. The fact of the matter, as it emerges from Mr Viswanathan's submissions, is that the appellant will be unable to raise funds from the term lenders who are insisting that the status of the Company should change from a company under liquidation to an active status. The order of liquidation has not been set aside. Ultimately, what the request of the appellant reduces itself to, is that it would raise funds on a mortgage of the assets of the Company and unless the Company is brought out of liquidation, it would not be in a position to raise the funds. This is unacceptable. At this stage, the order of liquidation has only been stayed, but a final view was, thus, to be taken by this Court. Sufficient opportunities were granted to the appellant earlier during the pendency of the proceedings both before the NCLT and NCLAT. The orders of the NCLT and Nclat make it abundantly clear that despite the grant of sufficie....
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....f the Resolution Plan, it is no longer viable for the SRA to submit that the Resolution Plan shall automatically stand withdrawn according to Clause 7.6.4 of the Resolution Plan and upon, such withdrawal, the members of the SRA in the MC shall resign, the remaining members of the MC shall assume absolute control of the Corporate Debtor and all the amounts infused by the SRA would be refunded. This is especially so, since the Conditions Precedent were declared to be fulfilled and the Effective Date was achieved on 20.05.2022. The consequence of the failure to implement the Resolution Plan in terms of Clause 9.4 of the Resolution Plan and Clause 3.13.7(iii) of the RFRP is that the Appellants are entitled to invoke the PBG automatically without any reference to the SRA. Therefore, it is directed that the PBG may be invoked by the Appellants in accordance with the terms of the Resolution Plan. iii. Whether the timely implementation of the Resolution Plan is also one of the objectives of the IBC, 2016? 150. The Preamble to the Insolvency and Bankruptcy Code, 2016 reads as thus: "An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution ....
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....liquidation value might also reduce significantly since the company's assets might suffer a high economic rate of depreciation. 152. We hasten to add that any delay in arriving at the conclusion that the company is to be liquidated is also detrimental to a Company, especially when the Company has long awaited timely and positive action from the successful resolution applicant as regards the implementation of the approved resolution plan. Therefore, although liquidation should be the last resort, yet one should also ensure that further delay in arriving at this decision does not have the effect of hampering the realizations that can be made through liquidation. 153. The decision in Innoventive Industries Limited v. ICICI Bank and Another reported in (2018) 1 SCC 407 held that the Maharashtra Relief Undertakings (Special Provisions) Act, 1959 was repugnant to the IBC, 2016 and elaborated on the scheme of the IBC, 2016 by placing reliance on the 2015 Report as aforementioned. The relevant observations are reproduced hereinbelow: "13. One of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of spe....
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....y in the Liquidation process. A primary and predominant consideration behind minimizing delay is to ensure that the assets of the Corporate Debtor do not get frittered away or depreciated due to the time lag caused either during the CIRP or during the liquidation process overseen by the Liquidator. Such a time bound action is also equally important and imperative while the Resolution Plan is being implemented by the successful resolution applicant. Unnecessary delay caused in implementation of the Resolution Plan would also lead to similar consequences of the assets of the corporate debtor diminishing in value. Therefore, there is no doubt that the timely implementation of the Resolution Plan is also one of the underlying objectives of the IBC, 2016 155. It is in the above context that the Rules regarding the power of the NCLT and NCLAT to extend time, have to be discussed. Rule 15 of the NCLT Rules, 2016 reads as thus: "15. Power to extend time.- The Tribunal may extend the time appointed by these rules or fixed by any order, for doing any act or taking any proceeding, upon such terms, if any, as the justice of the case may require, and any enlargement may be ordered, ....
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.... should, in exercise of our plenary jurisdiction under Article 142 of the Constitution, direct that the corporate debtor be taken in liquidation. 160. This Court in Ebix (supra) had opined that the exercise of powers, even under Article 142, must be broadly compliant with the insolvency framework and its underlying objective. It was highlighted therein that the Court must remain cautious in granting reliefs that may run counter to the timeliness and predictability that is central to the IBC, 2016. The relevant observations made are reproduced hereinbelow: "101. Any claim seeking an exercise of the adjudicating authority's residuary powers under Section 60(5)(c) IBC, NCLT's inherent powers under Rule 11 of the NCLT Rules, 2016 or even the powers of this Court under Article 142 of the Constitution must be closely scrutinised for broader compliance with the insolvency framework and its underlying objective. The adjudicating mechanisms which have been specifically created by the statute, have a narrowly defined role in the process and must be circumspect in granting reliefs that may run counter to the timeliness and predictability that is central to IBC. Any judicia....
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....Any judicial creation of a procedural or substantive remedy that is not envisaged by the statute would not only violate the principle of separation of powers, but also run the risk of altering the delicate coordination that is designed by the IBC framework and have grave implications on the outcome of the CIRP, the economy of the country and the lives of the workers and other allied parties who are statutorily bound by the impact of a resolution or liquidation of a Corporate Debtor." ( emphasis supplied ) 162. However, the aforementioned decision should in no manner be read so as to restrict the exercise of plenary powers under Article 142 of the Constitution even while in deviating from the statutory procedure and framework of the IBC, 2016 or the rules and regulations thereunder, if such deviation is very much necessary. This Court in Glas Trust (supra) only went so far as to say that, where there is a prescribed procedure in place for a particular purpose, then that particular thing must be done only in the manner prescribed. It no way lays a dictum that even where cogent reasons exist warranting such deviation, the court would be powerless to exercise such inherent ....
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....y to exercise our plenary powers under Article 142 and direct the Corporate Debtor into liquidation in the manner as laid down in the IBC, 2016. Granting this relief to the Appellants would not run counter to the timelines and predictability that is central to IBC. On the contrary, it would be in furtherance of it. Ensuring that liquidation commences as soon as possible would also be in the best interests of the Corporate Debtor and the creditors including the workmen/employees who are yet to receive their rightful dues. To be precise, it would not be necessary for the parties to again approach the Adjudicating Authority for a determination under Section 33(3) of the IBC, 2016 on the ground that the provisions of the approved Resolution Plan have been contravened. F. SHORTCOMINGS AND SUGGESTIONS TO THE IBC, 2016. 166. This litigation is an eye opener for one and all and therefore, before we close this matter, we deem it absolutely necessary to bring to light certain deficiencies in the IBC, 2016 which require immediate attention. We would also like to definitely say something as regards the functioning of the NCLTs and NCLAT. 167. Given the importance of the IBC, 2016 for ....
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....adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viabilit....
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....red, at the earliest. (h) participate actively, constructively and effectively in deliberations and decision making of the CoC. Co-operation, supervision and timeliness (i) supervise and facilitate the Insolvency Professional in discharging his duties under the Code. (j) facilitate expeditious appointment of various professionals within the timelines prescribed under the Code and regulations. (k) endeavour to resolve any inter-se disputes between the members, particularly in relation to claims, preferably, through dialogue, or other non-adversarial means, with a view to avoid litigation to the extent possible. Confidentiality (l) ensure at all times complete adherence to the undertaking regarding confidentiality of information. Costs (m) take necessary measures to ensure that the insolvency resolution process cost is reasonable. (n) expeditiously decide on all the expenses to be incurred by the Insolvency Professional including the going concern expenses of the corporate debtor and his fee. (o) prudently fix the fee payable to the liquidator while deciding to liquidate the corporate d....
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....plore the possibilities of better enforcement of the standards and practices enumerated in the guidelines through an independent mechanism under the auspices of an oversight committee instead of making them self-regulatory. This will enable the guidelines to achieve some level of practical and operational relevance and also prevent any significant lapse in decision making on the part of the CoC. 173. This litigation is an eye-opener also as regards the manner in which the implementation of plans are handled by the Successful Resolution Applicant and the lenders involved in the process. Once a resolution plan is approved under the IBC, 2016 the Successful Resolution Applicant undertakes a profound responsibility to implement the plan in both letter and spirit. This obligation is not merely an empty formality but an enduring commitment to restore the corporate debtor to viability and ensure a meaningful turnaround. The role of Successful Resolution Applicant is thus far more than a transactional duty towards the creditors or stakeholders; it embodies a pivotal responsibility to the distressed entity itself, which must be approached with utmost dedication and an earnest sense of du....
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.... requires active support that aligns with the ultimate goal of the IBC, 2016 - to provide a fair and equitable resolution that maximizes asset value while enabling the debtor's recovery. 175. Therefore, the lenders must balance their financial interests with the broader objective of rehabilitation. They should not take an obstructive approach or seek to leverage the resolution process solely for individual benefit, as such actions would risk destabilizing the corporate debtor's recovery trajectory. Instead, they must be prepared to collaborate fully, sharing the responsibility to make the resolution process work in practice. Through a spirit of cooperation and shared purpose, the Successful Resolution Applicant and lenders together can ensure that the corporate debtor is given the best chance for revival and sustained growth, reflecting the Code's intent to rescue viable companies and protect broader economic interests. 176. The IBC, 2016 is silent as regards the phase of implementation of the Resolution Plan by the Successful Resolution Applicant. This is mostly due to the fact that each Resolution Plan might be unique and customized to the specific needs of the Corporate De....
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....esolution plan must be impermeable to any shortcuts that prevent its implementation, including timely implementation, by the successful resolution applicant. A consideration of these provisions reinforces the idea that timely implementation and strict adherence to the terms of the resolution plan is crucial. 178. Furthermore, Section 74(3) of the IBC, 2016 provides for the punishment for contravention of the resolution plan and reads as follows: "(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." ( Emphasis supplied ) 179. The Code comes down heavily on any knowing and willful contravention of the terms of the resolution plan, committed by any person, on whom the approved resolution plan has been made binding un....
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....lan. The CoC must be empowered to constitute the Monitoring Committee which may, by default, include the Resolution Professional and also include other nominees from the CoC and the resolution applicant respectively. Such a Monitoring Committee would be entrusted with the powers of monitoring and supervising the resolution plan till the expiry of the term of the resolution plan. The Committee shall also be required to ensure all statutory compliances during the implementation of the plan along with updating the Adjudicating Authorities, Financial and other Creditors about the status of implementation of the resolution plan, on a quarterly basis. 182. Moving on to certain efficiency issues within the NCLTs and NCLAT, it has been noticed over a period of time that there is a serious lack of timely admission and disposal of the applications filed as regards the initiation of CIRP, approval of the resolution plan and liquidation. This only adds to the uncertainty of the process and prolongs the dispute thereby jeopardizing the interest of all the stakeholders involved. Adjudication in a time-bound manner would help prevent any further deterioration of the value of the corporate enti....
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....nfrastructure to support their functioning. These vacancies heavily impact the insolvency reform initiative undertaken by the government since they lead to operational inefficiencies. A shortfall of members and the lack of requisite strength has led to Tribunals only sitting for a few days of the week or a few hours in a day. Even in Tribunals where there is no vacancy, the absence of requisite infrastructure has forced the benches to share courtrooms or halls on a rotation basis. As a consequence, the strict timelines provided in Section 12 of the IBC, 2016 are not complied with. Filling such vacancies with experts having adequate domain knowledge in the field must be prioritized along with addressing the infrastructure needs of the Tribunals to prevent any adverse effect on the resolution process. There must be strict mandates regarding the functioning of the Tribunals within its normal working hours. The appointment of new members must be done in a manner such that it coincides with the date of retirement of the sitting members in a seamless manner to avoid such operational inefficiencies. Persons with high ideals & impeccable integrity should be appointed as Members in the NCLT....