TaxTMI 
TaxTMI 
2024 (11) TMI 410
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....ssue 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 terms of the Resolution Plan read with Regulation 36B(4A) ....
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....s. 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 Resolution Applicants. The relevant clauses of the RFRP are reproduced hereinbelo....
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....e 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, the Consortium of Murari Lal Jalan and Florian Fritsch (hereinafter, the "Respondent No.1 / SRA") submitted its Resolution Plan. It was amended ....
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....osts * 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 SUMMARY OF THE FINANCIAL PROPOSAL. PLEASE REFER TO THE DETAILED PROVISION UNDER THE RESPECTIVE HEAD. xxx xxx xxx (d) PROPOSAL FOR RESOLUTION OF OUTSTANDING AIRPORT AND PARKING DUES (RS. 240 CRORES AS OF AUGUST 31, 2020) [...] BKC Property not part of resolution - If CoC decides to retain the BKC Property as a non....
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.... 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. (b) As per the information disclosed by the Resolution Professional on August 14, 2020, the CIRP Costs includes: i. Operating and Process Costs (Rs. 27.16 Crores, as of August 31, 2020) which includes fees, charges, salaries of Asset Protection Team (APT) of the Corporate Debtor and other costs incurred by the Resolution Professional in running the operations of the Corporate Debtor as a going concern; ii. I....
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....olution 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 infused by the Resolution Applicant in the Corporate Debtor, the pay-outs towards other claimants as currently stated will be reduced proportionately to account for such additional CIRP Costs, subject to a minimum payment of liquidation value to the Operational Creditors and Dissenting Financial Creditors of the Corporate Debtor and subject to a maximum of Rs. 475 Crores. (k) The outstanding CIRP Costs shall be paid by the Resolution Applicant out of funds infused by the Reso....
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.... [...] (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, due or contingent, asserted or unasserted, crystalized or uncrystallized, known or unknown, secured or unsecured, disputed or undisputed, present or future, whether or not set out in the balance sheet of the Corporate Debtor or the profit and loss account statements of the Corporate Debtor or the List of Creditors, claim submitted or not submitted, claim admitted or not admitted, in relation to any period prior to the ICD will be written off in full and shall be deemed to be permanently extinguished and waived off subject to Clause 9.9 of this....
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....or 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 Inventor y Rs. 15 Crores + upside as per terms of Series C ZCB Entire ATR Inventory BV of Rs. 134 Cr Effective Date On sale of ATR Inventory on relevant redemption date, whichever is earlier. Upside on Spares Rs. 50 Crores + upside as per terms of Series D ZCB Aircraft Spares BV of Rs. 600 Cr Effective Date On sale of Spares on relevant redemptio n date, whichever is earlier. (a) COMMITTED CASH PAYMENTS (i) The Resolution Applicant will pay the Assenting Financial Creditors a total sum of Rs. 185 Crores on 180th day from the Effective Date. If the BKC Property is not provided to the Resolution Applicant as per the proposal stated in Clause 6.3.1(d), then the Resolution Applicant will pay the Assenting Financial Credi....
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....ld 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 Resolution Applicant shall not be conditional upon satisfaction of any conditions, other than approval of the NCLT. 7.6. Conditions to the Implementation of the Resolution Plan 7.6.1. Conditions Precedent - The obligation of the Resolution Applicant to re-commence operations as an aviation company, being the business proposed to be acquired is subject to the fulfilment of the following conditions after the Approval Date ("Conditions Precedent"): (a) Validation of AOP of the Corporate Debtor by DGCA & MoCA - The AOP of the Corporate Debtor shall have been validated by the DGCA, the MoCA and any other relevant Government Authority and grant of all other mandatory approvals to the Corporate Debtor to enable it to recommence flying operations (including commercial/ cargo operations) and related on-ground services. (b) Submissio....
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....filment 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, deeds, or things. On such withdrawal, the members of the Resolution Applicant in the Monitoring Committee shall resign, and the remaining members of the Monitoring Committee shall assume absolute control of the Corporate Debtor. 7.7. Implementation Schedule - 7.7.1. The Resolution Applicant shall take the following steps in the order of sequence (except otherwise mentioned in any step for any part of the step) as an integral part of the Resolution Plan. It is provided that the procedure, timelines and the sequence of steps listed below are only indicative and that they may be re-arranged/ changed as may be required or directed based on discussions with the necessary Governmental Authorities/ stock exchange (on account of past non-compliances of the Corporate Debtor or otherwise) or for the purposes of advancing any payments to the stakeholders, and at all times in compliance with A....
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....h 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 guarantee provided by the Resolution Applicant can be invoked in accordance with the terms of the RFRP." 5. The RP preferred an application under Section 30(6) read with Section 31 of the IBC, 2016 before the NCLT seeking approval of the Resolution Plan submitted by Respondent No.1 and vide order dated 22.06.2021, the NCLT approved the Resolution Plan. In view of the uncertainty regarding the achievement of the "Effective Date" under Clauses 7.6.2 and 7.6.4 of the Resolution Plan, it was clarified that the same would be fixed on the 90th day from the Plan Approval Order dated 22.06.202. Respondent No.1 was also given liberty to approach the NCLT for appropriate orders with respect to an extension of the timeline, subject to a maximum of another 180 days, in case they fail to fulfill all the Conditions Precedent within 90 days. The relevant observations are reproduced hereinbelow: "33. During the hearing, the uncertainty of the time frame for implementation of the Resolution Plan was discussed. It is s....
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....e 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 the Conditions Precedent required under Clause 7.6.1 of the Resolution Plan had been met and that the Effective Date in accordance with Clause 7.6.2 had been achieved. As a consequence, Respondent No.1 had 180 days from 20.05.2022 i.e., until 16.11.2022 to infuse an amount of Rs. 350 Crore in the Corporate Debtor as per Clause 6.3.1(g) and the Implementation Schedule under Clause 7.7.1 of the Resolution Plan. 8. The workmen and employees of the Corporate Debtor and several Operational Creditors challenged the order of the NCLT dated 22.06.2021 by which the Resolution Plan was approved before the NCLAT. Vide order dated 21.10.2022, the NCLAT upheld the order of the NCLT dated 22.06.2021. However, it was observed that the workmen and employees are entitled to the payment of their full provident fund and gratuity which was unpaid as on the insolvency commencement date and that the balance of the above dues should be paid by the Successful Resolution Applicant i.e., Respondent No.1, in order to satisfy its statutory o....
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....ide 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 the Resolution Plan have to be taken by the SRA which needs to be overseen by the Monitoring Committee. On 17.04.2023, the Appellants filed Civil Appeal Nos. 3736-3737 of 2023 before this Court against the order of the NCLAT declining the grant of stay. 13. Since 15.05.2023 was fixed as the deadline to make the first tranche payment of Rs. 350 crore, Respondent No.1, on 11.05.2023, filed IA Nos. 2028-2029 of 2023 respectively before the NCLAT in the Company Appeal for the purpose of seeking exclusion of the period from 16.11.2022 till the time the Company Appeal is decided from the calculation of 180 days stipulated for the infusion of first tranche of funds under the Resolution Plan. Immediately thereafter, on 17.05.2023, IA Nos. 2059-2060 of 2023 in the Company Appeal were filed by Respondent No.1 seeking to restrain the Appellants from encashing or appropriating the Performance Bank Guarantee and Earnest Money deposited by Respondent No.1 in favor of the Appellants under the Resolution Plan. 14. The NCLAT vide its common ....
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....emonstrate compliance of all the applicable regulatory requirements afresh before commencement of flight operations. iii. Fee as applicable for issuance of AOC, shall be payable for such re-certification. iv. Jet Airways shall submit a firm action plan for revival of operations after the company is taken over by the SRA in accordance with the NCLT approved resolution plan. This issues with the approval of the Director General.". 17. While the Company Appeal was pending before the NCLAT, the Appellants filed an Affidavit dated 16.08.2023 (hereinafter, "Lender's Affidavit") before the NCLAT. The Lender's Affidavit provided that, if Respondent No.1, firstly, infuses Rs. 350 Crore by 31.08.2023; secondly, complies with the payment obligations to the workmen and employees, and; thirdly, scrupulously follows the other terms and conditions of the Resolution Plan - the Appellants would not contest the issues relating to the grant of exclusion/extension of time as well as the issue relating to the compliance of all Conditions Precedent by the Respondent and would withdraw the Company Appeal pending before the NCLAT along with the Civil Appeals filed before this Court. The Lender'....
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....plications, Respondent No.1 further urged that, in the event the Gratuity Application was not allowed, the Resolution Plan would not be implemented and in such eventuality, the Appellants and the Corporate Debtor may be directed to refund all the amounts infused or deposited by Respondent No.1. including the share application money and the PBG. 19. The NCLAT, vide its order dated 28.08.2023, partly allowed the Adjustment Application so far as the payment of the first tranche of Rs. 350 Crore was concerned and stated that as regards the prayer with respect to the Gratuity Application, the submissions required further consideration. The PBG of Rs. 150 was allowed to be adjusted against the first tranche payment and the remaining Rs. 200 Crore was allowed to be infused on or by 31.08.2023 and 30.09.2023 respectively. Therefore, the deadline to infuse the aforesaid amount and implement the Resolution Plan was further extended to 30.09.2023 (3rd implementation extension). Immediately thereafter, the Appellants filed Civil Appeal Nos. 6427-6428 of 2023 before this Court against the aforesaid order dated 28.08.2023 passed by the NCLAT. 20. Meanwhile, on 03.09.2023, the conditional AOC i....
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....l opportunity to comply and consistent with the above position, we issue the following directions: (i) The successful resolution applicant shall peremptorily on or before January 31, 2024, deposit an amount of Rs. 150 crores into the designated account of SBI, failing which the consequences under the resolution plan shall follow; (ii) The performance bank guarantee of Rs. 150 crores shall continue to remain in operation and effect, pending the final disposal of the appeal before the National Company Law Appellate Tribunal, and shall abide by the final outcome of the appeal and the directions that may be issued by the National Company Law Appellate Tribunal; and (iii) Whether or not the successful resolution applicant has been compliant with all the conditions of the resolution plan as well as of the conditions set out in paragraph 8 of the affidavit dated August 16, 2023 shall be decided by the National Company Law Appellate Tribunal in the pending appeal." ( emphasis supplied ) 23. Respondent No.1 failed to deposit Rs. 150 Crore in cash by 31.01.2024 as directed by this Court. Therefore, on 31.01.2024, Respondent No.1 filed Misc. Application Nos. 216-217 of 2024 in t....
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.... which date, handing over of the Corporate Debtor to the SRA by the Monitoring Committee shall be completed. 8. Towards the payment of provident fund dues, as per the order dated 21.10.2022 passed by this Tribunal in Company Appeal (AT) (Insolvency) Nos. 643 of 2021, SRA has undertaken to make payment of provident fund upfront along with payment of dues of workmen and employees as per the Resolution Plan, which payment of INR 12 Crores as undertaken, shall be made in addition to the payments as directed above." (emphasis supplied) 25. The aforesaid judgment and order of the NCLAT once again extended the time limit for implementation of the Resolution Plan and satisfaction of the first tranche payment obligation of Rs. 350 Crore to 11.04.2024 i.e., the date within which the creation of charge over the various Dubai properties was to be completed (5th implementation extension). The same charge has, admittedly, not been created as on date. 26. In light of the above, the Appellants have challenged the aforesaid impugned order of the NCLAT dated 12.03.2024 by way of the present Civil Appeals filed under Section 62 of the IBC, 2016. B. SUBMISSIONS ON BEHALF OF THE APPELLANTS ....
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....he first tranche payment 28. As far as the first tranche payment of Rs. 350 Crore is concerned, it was submitted that a payment of only Rs. 200 Crore in cash has been made and the SRA has failed to infuse the remaining Rs. 150 Crore in cash. 29. The learned ASG submitted that Clause 6.3.1(g) relating to the "Infusion of Funds and Timelines" provides that the timeline for the infusion of the upfront first tranche payment of Rs. 350 Crore was within 180 days from the Effective Date. The clause also indicates the manner in which the first tranche would be utilized and obligates a distribution pattern towards the CIRP costs, contingent fund, payments to FCs, OCs, other creditors and other stakeholders, working capital for business and miscellaneous administrative expenses. 30. The learned ASG then elaborated on the scope of Clause 7.7 of the Resolution Plan which provides the "Implementation Schedule" and requires that the Resolution Plan be completed within 5 years from the Effective Date. According to this clause, the performance of different obligations was to be completed within the said corresponding timelines. S.No. 11 under this table specifically requires the infusion of Rs....
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.... is not in dispute that the NCLT vide its order dated 11.04.2022 extended the time for achieving the Effective Date to 25.05.2022 and Respondent No.1 claimed to have achieved the same on 20.05.2022. Consequently, all the three Dubai properties ought to have been mortgaged on or before 20.05.2022. 33. It was submitted that the Respondent SRA failed to make the first tranche payment of Rs. 350 Crore despite the fact that it ought to have been infused within 6 months from 20.05.2022. Instead, the Respondent SRA continuously contended that the order of the NCLT dated 13.01.2023 (holding that the Conditions Precedent have been fulfilled) was challenged by the Appellants before the NCLAT and that they could not therefore bring in Rs. 350 Crore since the effective date had not yet materialized. 34. It was submitted that the Appellants filed the Lender's Affidavit dated 16.08.2023 before the NCLAT and vide Para 8 of the Lender's Affidavit, the Appellants agreed not to contest the issues relating to the grant of exclusion of time (granted by the Order of the NCLT dated 13.01.2023 and the NCLAT dated 26.05.2023) and the issue relating to the compliance with the Conditions Precedent. In the....
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....s. 36. The NCLAT in its order dated 28.08.2023 fell in error in allowing the adjustment of PBG of Rs. 150 Crore as a part of the first tranche payment. This is evident from the order of this Court dated 18.01.2024, specifically under Para 21, wherein it was held that an infusion of Rs. 350 Crore would only mean an infusion by cash and the same could not be substituted for the adjustment of PBG. This Court, further, under Para 25 directed that a failure to make this payment on or before 31.01.2024 would necessitate the consequences under the Resolution Plan to follow. This Court further issued a direction that the NCLAT shall decide whether the SRA had been compliant with all the conditions contained in the Resolution Plan as well as the conditions in Clause 8 of the Affidavit dated 16.08.2023. This Court made it clear that the non-infusion of Rs. 150 Crore in cash would lead to consequences both in terms of the Affidavit and also the Resolution Plan since the condition insofar as infusion was concerned, remained the same both in the Affidavit and in the Resolution Plan. Therefore, the observation of the NCLAT in the impugned order holding that the consequences of non-deposit of Rs....
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....naction on the part of the SRA for 29 days from the date of the impugned order and on 10.04.2024 at 16:38 hours, the SRA sent an email stating that they are willing to proceed with the security creation of the Dubai properties and also informed that since its value had reduced by Rs. 14 Crore, they would bridge the gap with an additional property or a cash security. On the same date, another email was sent by the SRA at 17:18 hours stating that an account balance of Rs. 76.07 Lakh is available with the Appellants and the same may be used to execute the mortgage. The ASG submitted that the Appellants replied to the said communication on the same day at 19:18 hours stating that: (a) The assenting financial creditors on 13.10.2023 have appointed Mashreq Bank to act as the agent for creation of the mortgage in terms of the prevailing law in Dubai and the necessary amount required to be paid to them had not yet been received. (b) After the impugned order of the NCLAT came to be passed on 12.03.2024, the Appellants sent an email on 22.03.2024 regarding the cost for the creation of a mortgage over the properties located in Dubai, which had not been paid till date. (c) That, instead ....
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.....4.1(f) provides that on 31.08.2020, an approximate figure of Rs 240 Crore towards parking charges for aircrafts and airport space lease charges was arrived at through the estimate given by the RP and this was subject to a maximum of Rs. 475 Crore. Specific attention was drawn to the expression in Clause 6.3.1(d) which states that "such payments will be settled upfront in full in first 180 days from the effective date and without any conditions (including not being staggered payments spread across a period of time) so that flying can start immediately without any future disputes and concerns with such claimants for past dues". The respondents, however, have not remitted any amount towards the airport dues nor have they allowed the Resolution Plan to be implemented. As a result of the several extensions/exclusions given by the NCLT and NCLAT to the SRA, the airport dues as on date stand at a staggering figure of Rs. 1100 Crore approx., which amount, again, is to be paid by the respondents alone. 43. The ASG submitted that, when the aforesaid is the position in the Resolution Plan, the NCLAT in its impugned order dated 12.03.2024 vide Paras 53-55 respectively has chosen to restrict ....
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.... observed in unambiguous terms that "the workmen are entitled to full payment of provident fund and gratuity, hence the balance of above dues ought to be paid by the SRA to satisfy statutory obligations. Non-payment of full provident fund and gratuity shall lead to violation of Section 30(2)(e) and hence, to save the Plan the above payments have to be made". This view of the NCLAT had also been upheld by this Court vide its order dated 30.01.2023. The Resolution Plan under Clause 6.3.1(c) obligates the payment of such dues within 180 days from the Effective Date. 46. It was submitted that, the NCLAT, vide Paras 111-114 had erroneously directed the payment of an amount of Rs. 12 Crore towards the Provident Fund and has completely ignored the payment of dues pertaining to gratuity of the workmen and employees. The Appellants contend that this finding is not only an error apparent but completely inconsistent with the NCLAT's own earlier order dated 21.10.2022, which stood upheld by this Court on 31.01.2023. iv. Issue No. 4: Achievement of Effective Date 47. It was submitted that Clause 7.6.2 of the Resolution Plan provided that the date of fulfilment of all the Conditions Preceden....
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....mployees' dues of Rs. 226 Crore within the initial 180 days from the Effective Date as well as within the multiple extensions granted by the NCLT, NCLAT and this Court. The ASG submitted that multiple extensions and accommodations have already been granted to the SRA for implementation of the Resolution Plan. Therefore, it is too late in the day to claim that the non-infusion of Rs. 150 Crore to complete the first tranche payment of Rs. 350 Crore is only a breach of the Lender's Affidavit dated 16.08.223 and not the Resolution Plan. The same needs to be rejected outrightly. v. Issue No. 5: Non-fulfilment of Conditions Precedent 50. The ASG submitted that the respondents have failed to comply with 3 Conditions Precedent, specifically under Clauses 7.6.1(a), (c) and (d) of the Resolution Plan respectively. 51. It was submitted that Clause 7.6.1 (a) requires the SRA to obtain an AOC which has to be validated by the DGCA and the Ministry of Civil Aviation (hereinafter, "MoCA"). The Respondent possessed an AOC on 20.05.2023 i.e., the Effective Date as contended by the SRA. The validity of the AOC was further extended by the DGCA on 27.07.2023 up to 03.09.2023 subject to certain cond....
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....he Respondents had not paid even today), the NCLAT vide para 50 and Para 55 erroneously concluded that "the adjudicating authority has rightly observed that settling of old dues cannot be considered as non-allotment of slots" and therefore condition 7.6.1(c) stands fulfilled. This finding is contrary to the finding recorded by NCLT and the Resolution Plan and as a consequence, the Respondents could be said to have breached this condition precedent as well. 56. The ASG submitted that Clause 7.6.1(d) requires the SRA to obtain the International Traffic Rights Clearance. The NCLT, vide Para 125, had righty held that "the international traffic rights clearance is required to be obtained in compliance with the applicable laws which stipulates that minimum 20 aircrafts are required to be deployed before applying for such clearance". However, after holding so, the NCLT proceeded to conclude that this condition cannot be satisfied upfront and can be fulfilled only when the operations have recommenced successfully and that, therefore, this condition precedent stood fulfilled. In simple terms, the NCLT could be said to have modified a condition precedent to a condition subsequent and this v....
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....his submission, the counsel placed reliance on the decision of this Court in IFCI Ltd. v. Sutanu Sinha and Others reported in 2023 SCC OnLine SC 1529. 60. The counsel submitted that the directions issued by this Court vide order dated 18.01.2024 were interim and not final. The appeals which were decided by this Court arose out of an interlocutory application which was filed by the SRA seeking directions from the NCLAT on the mode of satisfying the conditions in the Lender's Affidavit dated 16.08.2023. It was submitted that the same is evident from a reading of Para 19 which reads that ".. Observations in the present judgment are confined to the arrangement which must operate during the pendency of the appeal without the court expressing a final view on merits of the appeal, which will fall for consideration before the NCLAT". Further, Para 21 of the same order stated that, "...The impugned order of the NCLAT, on the other hand, allowed the plea of the SRA for adjustment and consequential release of the PBG at the interlocutory stage. This prima facie would not be in accordance with the tenor of paragraph 8 of the affidavit...". Therefore, it was submitted that the directions issue....
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....will be adjusted against the first tranche payment. For subsequent tranches of payment, the security package does not include the PBG and instead includes other types of security. It was submitted that the Lenders are relying on the RFRP to claim that no adjustment of the PBG was possible. However, the RFRP is only a wish list of the CoC which was informed to the applicants at the time of inviting plans. Therefore, it cannot override a negotiated and approved provision of the Resolution Plan. This is precisely why the approved Resolution Plans often deviate from the RFRP. 64. The counsel submitted that according to Clause 6.4.4 of the Resolution Plan, the Balance Security is in the form of immovable properties located in Dubai and since they are located outside India, the approval of the RBI was necessary for the creation of security. The security on the Dubai properties of the SRA was to be created on the Effective Date, i.e., 20.05.2022. On 21.05.2022, a day after the Effective Date, the SBI had applied for the approval and the same was received on 22.07.2022. 65. It was submitted that, on 03.02.2023 the SRA had shared drafts of the transaction documents required for the creati....
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....tted that, the Resolution Plan provides for the adjustment of CIRP dues from the positive cash balance of the Corporate Debtor and then from the share of the Lenders. The Appellants' own case is that the Airport Dues amount to Rs. 1000 Crore approximately. Therefore, as per the Resolution Plan, Rs. 400 Crore approx. is payable towards the airport dues, first, from the positive cash balance of the Corporate Debtor and if that is insufficient, then from the Lenders' share being CIRP Dues. Finally, the remaining Rs. 600 Crore would be borne by the SRA 70. As regards the payment of Provident Fund and Gratuity to the workmen and employees, it was submitted that the NCLAT did not waive off the liability of the SRA towards the payment of PF and Gratuity. On the contrary, for the implementation of the same, the NCLAT had provided timelines for making such payments in compliance with the applicable laws. It was further submitted that in the 42nd MC meeting held on 02.04.2024, the SRA undertook to make the payment towards the dues of PF and gratuity and the Appellants are aware of the same. 71. The counsel submitted that there are concurrent findings on the fulfillment of Conditions Preced....
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....btaining the International Traffic Right Clearance as stated under Clause 7.6.1(d) of the Resolution Plan. This Condition Precedent had to be satisfied in accordance with the "applicable laws". Upon applying for the Clearance, the MoCA had informed the SRA that, Clause 8(b) of the National Civil Aviation Policy, 2016 requires a minimum of 20 aircrafts to be deployed for domestic operations before applying for international clearance and that therefore, the same can be granted when 20 aircrafts of the Corporate Debtor are in operation. The Business Plan only envisages 6 aircrafts and the SRA can operationalize 20 aircrafts once the operations of the Corporate Debtor begin. This is evident from Clause 8.2.6(f) that states that the restart of international operations can be envisaged only after the completion of 12 months of operating the airline. Since this condition requires operations to re-commence before it can be satisfied, this Condition Precedent has also been complied with. 76. Mr. Gopal Sankaranarayanan, learned senior counsel also appearing for the Respondents, concurred with all the aforesaid submissions made on behalf of the SRA. In addition to bringing our attention to ....
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.... consequence of non-compliance with the Conditions Precedent would be that the Resolution Plan shall automatically stand withdrawn and upon, such withdrawal, the members of the SRA in the MC shall resign and the remaining members of the MC shall assume absolute control of the Corporate Debtor. 81. Adding to the submissions as regards the Airport Dues, it was submitted that as per the estimates made by the RP, the airport dues i.e., the parking charges and airport space lease charges were Rs. 240 Crore and this was reflected in Clause 6.4.1(f) of the Resolution Plan. It was submitted that the dues accrued during the period of CIRP i.e., till the date of approval of the Resolution Plan, is a part of the CIRP costs and such payments have to be made within 170 days from the Effective Date as per Clause 6.4.1 of the Resolution Plan. As per Clause 6.4.1(h), a sum of Rs. 25 Crore was set aside for CIRP costs. However, it must be noted that Clause 6.4.1(m) allows the SRA to utilize the funds available with the Corporate Debtor for making payments of any portion of the CIRP costs. It was submitted that the Lenders rely on Clause 6.3.1(d) to state that the airport dues have to be settled up....
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....ment of the first tranche could be said to be perverse? ii. Whether the non-implementation of the Resolution Plan by the SRA necessarily leads to the consequence of liquidation as provided under Section 33(3) of the IBC, 2016? iii. Whether the timely implementation of the Resolution Plan is also one of the objectives of the IBC, 2016? E. ANALYSIS 85. Before we proceed to advert to the rival submissions canvassed on either side and the issues outlined above, we must look into the preliminary objection raised on behalf of the SRA i.e., that the scope of an appeal under Section 62 of the IBC must be restricted to a "question of law". In this regard, reliance was placed on the decision of this Court in IFCI Ltd. v. Sutanu Sinha and Others reported in 2023 SCC OnLine SC 1529 which dealt with the issue as to whether compulsorily convertible debentures could be treated as a "debt" instead of an equity instrument, to submit that the jurisdiction under Section 62 is restricted to a question of law akin to a second appeal. The relevant observations are reproduced hereinbelow: "29. Last but not the least, we must also note that our jurisdiction comes from section 62 of the Code. The ....
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....tions made are reproduced hereinbelow: "33. The principles relating to Section 100 of the CPC relevant for this case may be summarised thus: (i) An inference of fact from the recitals or contents of a document is a question of fact. But the legal effect of the terms of a document is a question of law. Construction of a document involving the application of any principle of law, is also a question of law. Therefore, when there is misconstruction of a document or wrong application of a principle of law in construing a document, it gives rise to a question of law. (ii) The High Court should be satisfied that the case involves a substantial question of law, and not a mere question of law. A question of law having a material bearing on the decision of the case (that is, a question, answer to which affects the rights of parties to the suit) will be a substantial question of law, if it is not covered by any specific provisions of law or settled legal principle emerging from binding precedents and involves a debatable legal issue. A substantial question of law will also arise in a contrary situation, where the legal position is clear, either on account of express provisions of law ....
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....s on the part of the plaintiff that he was not in possession of the suit property. On the contrary, the learned Single Judge found in reply to Para 13 of the plaint that the defendants in their written statement admitted that the work was stopped by Defendant 1 for some time but they restarted the work again. This, according to the learned Single Judge was a proof of the fact that Defendants 1 and 2 and Defendant 3 were not sure about the possession and right of Defendants 1 and 2 over the property. In fact, what transpires from all these facts is that the trial court reached the same conclusion as the learned Single Judge in second appeal in the High Court. It is true normally that in the second appeal the High Court should not interfere on the questions of fact. But if on the scrutiny of the evidence it is found that the finding recorded by the first appellate court is totally perverse then certainly the High Court can interfere in the matter as it constitutes the question of law." ( Emphasis supplied ) 89. In Abdul Raheem v. Karnataka Electricity Board and Others reported in (2007) 14 SCC 138, the Court acknowledged that the High Court's jurisdiction in terms of Section 100....
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....nced by inconsequential matters, the High Court would be justified in considering the matter and in coming to its own independent conclusion. (See Madan Lal v. Gopi [(1980) 4 SCC 255] .) 24. The High Court shall also be entitled to opine that a substantial question of law arises for its consideration when material and relevant facts have been ignored and legal principles have not been applied in appreciating the evidence. Arriving at a decision, upon taking into consideration irrelevant factors, would also give rise to a substantial question of law. It may, however, be different that only on the same set of facts the higher court takes a different view. (See Collector of Customs v. Swastic Woollens (P) Ltd. [1988 Supp SCC 796 : 1989 SCC (Tax) 67] and Metroark Ltd. v. CCE [(2004) 12 SCC 505] .) 25. Even in a case where evidence is misread, the High Court would have power to interfere. (See W.B. Electricity Regulatory Commission v. CESC Ltd. [(2002) 8 SCC 715] and also Commr. of Customs v. Bureau Veritas [(2005) 3 SCC 265] .) 26. In Dutta Cycle Stores v. Gita Devi Sultania [(1990) 1 SCC 586] this Court held : (SCC p. 587, para 4) '4. Whether or not rent for the two months....
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....fixed at 20.05.2022? 91. Clause 7.6.1 of the Resolution Plan details five Conditions Precedent that have to be fulfilled by the SRA. They are: - (a) Validation of AOC, (b) Approval of Business Plan, (c) Slot Allotment Approval, (d) International Traffic Rights Clearance, and (e) Demerger of AGSL. Of the five Conditions Precedent that find mention under Clause 7.6.1 of the Resolution Plan, the Appellants have only disputed the fulfilment of three Conditions Precedent i.e., Validation of AOC, Slots Allotment Approval and International Traffic Rights Clearance. According to Clause 7.6.2 of the Resolution Plan, the date of fulfillment of all the Conditions Precedent as stated in Clause 7.6.1 would be the Effective Date for the purposes of the Resolution Plan. A failure to fulfil the Conditions Precedent within a maximum of 270 days from the date of approval of the Resolution Plan would lead to an automatic withdrawal of the Resolution Plan as per Clause 7.6.4. 92. On 22.06.2021, the NCLT had given its imprimatur to the Resolution Plan that was submitted by the SRA and this was the Approval Date i.e., "Y" as per the Implementation Schedule set out under Clause 7.7 of the Resolution P....
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.... this CP is satisfactorily complied with the issuance of AOC. 124. As regards to CP No. 3 i.e. Slots Allotment Approval: It is noted that plan approval order of this Tribunal dated 22nd June, 2021 stipulates that no historic slots will be granted to Corporate Debtor or SRA. Admittedly, there is no challenge to this order thereby accepting the fact that old slot cannot be reinstated. Accordingly, this CP needs to be read with plan approval order, where Corporate Debtor shall be provided with such slots for which it applies. 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 plan approval order. The SRA cannot get all previous slots as this condition needs to be read with plan approval order of this Tribunal. In that view of the matter, above CPs is also found to be Satisfactorily complied with. 125. As regards to CP no. 4: International Traffic Right Clearance: On perusal of the plan approval order dated 22nd June, 2021, it is....
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....ircrafts to be deployed before applying for such a clearance. However, under the approved Plan, the SRA had to re-commence with the operations with only six aircrafts. It was, therefore, held that this Condition Precedent could not have been satisfied upfront and could only be satisfied once the operations of the Corporate Debtor had commenced successfully. With such observation, this Condition Precedent was also found to be duly complied with. The NCLT noted that the plan which was approved vide the Plan approval order dated 22.06.2021 had to be implemented without any modification and thus the Effective Date i.e., the date of completion of the Conditions Precedent under the Resolution Plan should be read as 20.05.2022. 95. The Appellants filed a statutory appeal against the order of the NCLT dated 13.01.2023 before the NCLAT and also sought a stay on the same. However, the grant of stay was declined by the NCLAT on 03.03.2023. This should have closed the debate on the understanding between the parties that the Effective Date was set in stone. 96. The NCLAT also vide its impugned order held that the SRA had fulfilled all the required Conditions Precedent. On Slot Allotment Appro....
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....tension of another 180 days. It consciously removed the ambiguity that plagued Clauses 7.6.2 and 7.6.4 respectively for the precise reason & with the idea that the Effective Date should not be endlessly postponed. Agreeing to such an erroneous proposition would mean that the Effective Date would never be achieved as long as the parties are litigating before the Courts and the SRA would be absolved of taking the implementation under the Resolution Plan further. The NCLAT had declined to stay the order of the NCLT dated 13.01.2023 which held that all the Conditions Precedent were fulfilled. Further, on a perusal of the impugned order, it is evident that the NCLT and NCLAT rendered concurrent findings of fact that the SRA had fulfilled all the Conditions Precedent. In other words, it was repeatedly declared by different fora that the Effective Date was frozen on 20.05.2022 and the obligation of the SRA to implement the Resolution Plan was absolute. All steps necessary should have been undertaken by the SRA, at least post the impugned order of the NCLAT dated 12.03.2023. To contend that its hands were tied since the Conditions Precedent were still being challenged before this Court is ....
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.... be made to the Financial Creditors. Further, in the explanation given to the said table under Clause 6.4.4(a)(i), against the heading "Date of Release of Security", there is no mention of the PBG while the other two types of security find a mention. It was submitted that the only good reason for this exclusion was the understanding that the PBG was adjustable against the obligation of the SRA towards payment of the first tranche. Further, it is the case of the SRA that since a revolving security package was agreed to under Clause 6.4.4, other types of security were envisioned for the subsequent tranches of payment and therefore, no issue could have been raised in adjusting the PBG towards the first tranche. However, we find it extremely difficult to agree with the stance of the SRA for multiple reasons which are detailed below. 100. The RFRP under Clause 3.13 deals with the Performance Security to be given by the SRA. Clause 3.13.1 provides that the SRA shall furnish or cause to be furnished, an unconditional and irrevocable PBG, of an amount of Rs. 150 Crore in favor of the SBI within 7 days of being declared as the SRA. Clause 3.13.2 provides that the PBG shall be valid, till t....
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....ion made by the Resolution Professional, CoC and/or the Adjudicating Authority in respect of any matter with respect to, or arising out of, the RFRP and the Resolution Plan Submission Process shall be binding on us... xxx xxx xxx 10. We confirm that we have not taken any deviations so as to be deemed non-responsive with respect to the provisions of the RFRP, the IB Code and the CIRP Regulations." ( emphasis supplied ) A bare reading of the above also strengthens the conclusion that the SRA has to remain compliant with the terms of the RFRP, at all times, in addition to being obedient to the terms of the Resolution Plan. Therefore, to say that the RFRP was merely a wish list of the CoC which was informed to the applicants at the time of inviting plans is incorrect, to say the least. The provisions of the RFRP, especially those provisions related to the Performance Security or PBG, were binding on the SRA. 103. The learned counsel for the SRA tried to place reliance on one another Clause of the Resolution Plan i.e., Clause 6.4.12 which stated that the PBG would bring financial flexibility and help the SRA to advance certain committed payments. This according to the SRA is....
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....ub-section (4) of section 30, to provide a performance security within the time 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." ( emphasis supplied ) 105. Regulation 36B(4A) states that the performance security shall stand forfeited if the resolution applicant fails to implement or contributes to the failure of implementation o....
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....ance with objective and purpose of the IBC. We again reiterate that efforts by MC Lenders and SRA should be coordinated for revival of the Corporate Debtor, so as to start its operations at an early date, which is in the interest of all stake holders as well as in the interest of Corporate Debtor. 20. In view of the aforesaid, we direct that MC Lenders shall not invoke the Performance Bank Guarantee in the facts of the present case as on date, and for invocation, if any, MC Lenders may take leave of the Adjudicating Authority. The IA Nos.2159-2160 is disposed of accordingly. ( Emphasis supplied ) 107. A careful reading of the aforesaid order of the NCLAT reflects that the NCLAT had itself conceded to the position that the Appellants have a right to invoke the PBG in a situation where the SRA had fails to implement the Resolution Plan. This is again in line with the intention under Regulation 36B(4A). Therefore, even in light of the NCLAT's own order dated 26.05.2023, it does not follow that the PBG could have been adjusted by the SRA, mid-implementation, against its payment obligation. 108. The NCLAT in its order dated 28.08.2023 dealt with the issue of adjustment of PBG a....
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.... 36B(4A) does not state that if the Resolution Applicant, after approval, fails to implement the PBG, then it shall stand forfeited. Instead, what the Regulation actually states is that the performance security shall stand forfeited, if the resolution applicant of such a 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". It is not the failure to implement the performance security i.e., the PBG, that is dealt with in this Regulation but the consequence of the failure to implement "the Plan" by the SRA. 110. Further the order dated 28.08.2023 proceeds to interpret Explanation I to Regulation 36B(4A) and states that since according to Explanation I, the performance security can be of a particular duration, the Resolution Plan can provide for the release of security at the time of the first tranche payment of Rs. 350 Crore and no exception can be taken to the adjustment of the PBG. However, what the NCLAT failed to take notice of is that under Explanation I to Regulation 36B(4A), the performance security shall mean security of....
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....re different from the terms of the Resolution Plan. 112. It is the case of the Appellants that Serial No.11 under Clause 7.7.1 read with Clause 6.1.3(g) evidences that the SRA had to infuse Rs. 350 Crore "in cash" and it was for this reason alone that Para 8(a) of the Lender's Affidavit required the infusion of Rs. 350 Crore to be done in cash by 31.08.2023. It was submitted that such a requirement for cash payment flowed directly from the Resolution Plan under which an adjustment of the PBG was impermissible and not just out of the Lender's Affidavit dated 16.08.2023. This is because the Lender's Affidavit has not and cannot impose any condition over and above the one laid under the Resolution Plan. 113. On the other hand, the Respondents vehemently submitted that it was only the Lender's Affidavit dated 16.08.2023 which stipulated the condition that Rs. 350 Crore had to be infused in cash by 31.08.2023, while the Resolution Plan, under Clause 6.4.4 allowed for the payment of Rs. 200 Crore in cash and Rs. 150 Crore through adjusting the PBG. In other words, they argued that the conditions envisaged in the Lender's Affidavit were different from those stipulated in the Resolution....
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....ue of the approval of the resolution plan, under Section 31(1) IBC. Section 31(1) ensures that the resolution plan becomes binding on all stakeholders after it is approved by the adjudicating authority. The language of Section 31(1) cannot be construed to mean that a resolution plan is indeterminate or open to withdrawal or modification until it is approved by the adjudicating authority or that it is not binding between the CoC and the successful resolution applicant. Regulation 39(4) of the CIRP Regulations mandates that the RP should endeavor to submit the plan at least fifteen days before the statutory period of the CIRP under Section 12 is due to expire along with a receipt of a PBG and a compliance certificate as Form H. It is pertinent to note that sub-section (3) to Section 12 mandates that the CIRP process, including legal proceedings, must be concluded within 330 days. This three-hundred-and-thirtyday period can be extended only in exceptional circumstances, if the process is at near conclusion and serves the object of IBC, as held by a three-Judge Bench of this Court in Essar Steel [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ....
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.... plan after it has been submitted to the adjudicating authority, it must specifically provide for a tether under IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissible and procedural directions, which may include the timelines in which they can be proposed, voting requirements and threshold for approval by the CoC (as the case may be). They must also contemplate at which stage the corporate debtor may be sent into liquidation by the adjudicating authority or otherwise, in the event of a failed negotiation for modification and/or withdrawal. These are matters for legislative policy. 223. In the present framework, even if an impermissible understanding of equity is imported through the route of residual powers or the terms of the resolution plan are interpreted in a manner that enables the appellants' desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved resolution plan at a later stage of the process would result in the adjudicating authority directing mandatory liquidation of the corporate debtor. Pertinently, this direction has been otherwise provided in Sec....
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....bsolutely no scope for modification of the terms of a Resolution Plan which has received the imprimatur of the Adjudicating Authority, be it by the Adjudicating Authority itself, the CoC or the SRA. 117. When the aforesaid is the position of law, and the NCLT had approved the present Resolution Plan vide order dated 22.06.2021, the Resolution Plan was immune to any modification or alteration whatsoever. Therefore, the Appellants could have only proposed an offer under the Lender's Affidavit dated 16.08.2024 which stood true to the terms of the Resolution Plan approved by the NCLT. They could not have created any deviations, alterations or modifications of the terms of the Resolution Plan. It is in this context that the submission of the SRA that, the Lender's Affidavit required an infusion of Rs. 350 Crore in cash, while the Resolution Plan allowed for the payment of Rs. 200 Crore in cash and Rs. 150 Crore through adjustment of the PBG, must be rejected. Both the Resolution Plan and the Lender's Affidavit dated 16.08.2024 reflected the same terms i.e., infusion "in cash" of the first tranche payment of Rs. 350 Crore. In fact, even the date within which the Lender's Affidavit requi....
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.... mentioned; (v) Moreover, in respect of the second tranche comprising of Rs. 195 crores, there was no requirement to furnish any security in the form of a PBG; (vi) The securities, in other words, were of a revolving nature, but significantly on the release of the PBG against a cash payment of Rs. 185 crores, the PBG is not required to be renewed as a fresh security for the following tranches; and ..." ( emphasis supplied ) 120. A perusal of the abovementioned would indicate that both the parties as well as the NCLAT were ad idem on the fact that the terms imposed by the Lender's Affidavit dated 16.08.2023 were in pursuance of and similar to the terms of the Resolution Plan. This is because, in order to take benefit of the offer made in the Lender's Affidavit, the SRA had repeatedly asserted that the PBG should be allowed to be adjusted under the terms of the Resolution Plan and as a consequence, such an adjustment must be allowed under the Lender's Affidavit as well. Even the NCLAT in its order dated 28.08.2023 had held that the SRA could adjust the PBG of Rs. 150 Crore to take benefit of the offer of the Lender's Affidavit by relying on Clause 6.4.4 of the Resolution P....
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....RA has been compliant with all the conditions of the Resolution Plan as well as of the conditions set out in paragraph 8 of the affidavit dated 16 August 2023 shall be decided by the NCLAT in the pending appeal. These two directions must not be seen as giving any leeway to the NCLAT to act in complete ignorance or defiance of the first direction that was issued by us. Such a selective compliance with our order dated 18.01.2024 deserves to be nipped in the bud more particularly when it was mandated that our directions be considered and complied with in its entirety. Therefore, the NCLAT, while finally deciding the pending Company Appeal on merits which led to the impugned order dated 12.03.2024 has, either by design or unknowingly, ignored the directions issued by this Court vide order dated 18.01.2024 that the remaining amount of Rs. 150 Crore had to be necessarily deposited in cash only. This has resulted in a perverse decision which stands contrary to law and to the terms of the Resolution Plan itself. 124. In view of our crystal clear order dated 18.01.2024, we are of the opinion that the PBG of Rs. 150 Crore could not have been allowed to be adjusted with the first tranche pay....
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....has rightly observed that settling old dues cannot be conceded as non-allotment of slots. We thus fully concur with the finding of the Adjudicating Authority that conditions precedent under Clause 7.6.1(c) were fulfilled." ( emphasis supplied ). 127. The case of the Appellants is that upon consideration of Clause 6.4.1(h), the NCLAT erroneously concluded that the Airport Charges would be a part of the CIRP costs. Clause 6.4.1(h) of the Resolution Plan is reproduced hereinbelow: "(h) Based on the information provided, the Resolution Applicant have assumed that the amounts standing to the credit of the bank account of the Corporate Debtor (including amounts estimated to be received subsequently) are sufficient to cover for the CIRP Costs of the Corporate Debtor (excluding parking charges, rental charges, employee dues, taxes etc). Accordingly, the Resolution Applicant has set aside a sum of Rs. 25 Crores as CIRP Costs towards payment of any such costs until the Approval Date. Any expenses incurred by the Corporate Debtor from the Approval Date until the Effective Date will be incurred out of the positive bank balance of the Corporate Debtor." (emphasis supplied) 128. A pl....
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..... It is in this regard that Clause 6.4.1(j) provides that if the CIRP costs exceed the current estimates, then they will be paid as per "actuals" in compliance with the provisions of the IBC and as a consequence, the pay-outs towards the other creditors would be reduced proportionately to account for such additional CIRP costs. This would be subject to a minimum payment of liquidation value to the Operational Creditors and Dissenting Financial Creditors of the Corporate Debtor and subject to a maximum of Rs. 475 Crore. Therefore, the Resolution Plan, too, does not contemplate the CIRP costs to be strictly subject to a maximum of Rs. 25 Crore. To accept such a contention of the Appellants would be to misinterpret the observations made in the impugned order. 131. The Appellants rely on Clause 6.3.1(d), specifically under the heading "BKC Property not part of Resolution" to assert that the Airport Dues have to be settled upfront and in full in the first 180 days from the Effective Date and that it cannot be in staggered payments spread across a period of time. However, Clause 6.3.1(d) which is titled "Proposal for Resolution of Outstanding Airport and Parking Dues (Rs. 240 Crores as ....
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.... airport dues) under Clause 6.4.1 as well. b. Whether Respondent No.1/SRA could be said to have failed to implement the Resolution Plan on account of the non-payment of workmen and employees' dues as per the terms of the Resolution Plan and the order of the NCLT dated 21.10.2022 which was confirmed by the order dated 31.01.2023 of this Court? 133. The Resolution Plan, under Clause 6.4.2 deals with the "Treatment of Employees/Workmen dues, including dues of the Authorized Representatives of Employees/Workmen". Clause 6.4.2(a) provides for a fixed sum of Rs. 52 Crore to be paid to the workmen and employees towards settlement of all their claims. Clause 6.4.2(b) states that this payment shall be made out of the funds infused by the SRA in the Corporate Debtor, in priority to the payment to the financial creditors and as per the Implementation Schedule set out in Clause 7.7 i.e., within 175 days from the Effective Date. Clause 6.4.2(c) provides that if the Liquidation Value due to the workmen and employees is not "nil", then the SRA would pay such a Liquidation Value. If this Liquidation Value is over and above the amount proposed to be paid under the Resolution Plan, then such addi....
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....east Rs.113 crores as per Section 30(2)(b) read with Section 53(1)(b) of the Code. Shri Krishnendu Datta, learned Counsel for Successful Resolution Applicant during his submission, submitted that Successful Resolution Applicant shall be paying an amount of Rs.113 crores to the workmen as per the Resolution Plan, since it was contemplated that, if liquidation value is more than Rs.52 crores, the liquidation value shall be payable to the workmen. To clear any doubt, we deem it fit and proper to issue direction to Successful Resolution Applicant to make payment to the workmen of Rs.113 crores as per the Resolution Plan. xxx xxx xxx 134. In result, the Appeal(s) are decided in following manner: (I) The Appeal(s) of workmen and employees being Company Appeal (AT) (Insolvency) Nos. 643 of 2021, 752 of 2021, 801 of 2021, 915 of 2021, 771 of 2022 are partly allowed with following directions: (a) Successful Resolution Applicant is directed to make payment of unpaid provident fund to the workmen till date of insolvency commencement, after deducting the amount already paid towards provident fund in the Resolution Plan to the workmen. (b) The workmen are also entitled for paymen....
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....er creditors of the Corporate Debtor on a pro-rata basis subject to a maximum of Rs. 475 Crore as stated in Clause 6.4.2(e) of the Resolution Plan since that was a contemplation pertaining to the liquidation value only and not for the dues relating to Provident Fund and Gratuity. An appeal against the order dated 21.10.2022 was dismissed by this Court vide order dated 30.01.2023. Therefore, there was no scope left for the SRA to avoid payment of the Provident Fund and Gratuity dues to the workmen and employees. Such an obligation was in addition to the payment of minimum liquidation value that the workmen/employees were entitled to under the terms of the Resolution Plan. 137. The SRA had filed IA Nos. 3789-3790 of 2023 in Company Appeal on 16.06.2023 praying that the Gratuity Claims be allowed to be paid in three tranches i.e., within 3, 4 and 5 years from the Closing Date. The SRA also sought leave from the NCLAT to approach to EPFO Authorities under Section 14B to seek a reduction or waiver of the damages of Rs. 24.4 crore imposed on the Corporate Debtor and to also pursue an appeal against the order of the EPFO Authorities directing the SRA to pay the damages. Subsequently, on ....
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....her there were sufficient grounds before the NCLAT to hold that Respondent No.1/SRA had contravened the terms of the approved Resolution Plan and that the Corporate Debtor must be directed to be liquidated under Section 33(3) of the IBC, 2016? 141. The NCLAT in its impugned order held that the non-deposit of Rs. 150 Crore in cash towards the first tranche payment of Rs. 350 Crore cannot lead to the conclusion that the Resolution Plan had failed. The relevant observations are reproduced hereinbelow: "79. The submission of the Appellant that on account of nondeposit INR 150 crores as directed by the Hon'ble Supreme Court, should lead to liquidation of the Corporate Debtor, cannot be accepted. The Hon'ble Supreme Court in its judgment dated 18.01.2024 has clearly held that its order modifying the direction of the Tribunal is confined only to the permission granted to the SRA to adjust INR 150 crores PBG. Thus, modification of the order by the Hon'ble Supreme Court also has to confine to the adjustment of the PBG. It was held by the Hon'ble Supreme Court that Appellant have asked for infusion of INR 350 crores and infusion does not include adjustment of PBG. The Hon'ble Supreme Cou....
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....s only confined to the terms of the Lenders Affidavit dated 16.08.2024. Previous segments of the judgment have elaborated in sufficient detail that the Lender's Affidavit could not have provided for conditions which were incompatible with the terms of the Resolution Plan. Such an affidavit would have been in direct contravention with Section 31(1) of the IBC, 2016 which does not permit any modifications to be made in the Resolution Plan duly approved by the Adjudicating Authority. Therefore, the direction of this Court in its order dated 18.01.2024 was with respect to both the Lenders Affidavit and the underlying terms of the Resolution Plan. The same was so understood by all the parties involved. 143. The Lender's Affidavit in precise terms stated that "Failing to comply with the conditions mentioned in Para 8(a) to (c) above, the Corporate Debtor should be directed to go into liquidation". It was in this context that this Court stated 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 will follow". Therefore, it is incorrect to contend tha....
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....ultiple opportunities already granted as aforesaid. Further, if such a request for further extension is entertained, it would only serve to bring us to the position that the parties were at when the order of this Court dated 18.01.2024 was passed. 146. In Kridhan Infrastructure Private Limited v. Venkatesan Sankaranarayan and Others reported in (2021) 6 SCC 94 the appellant had failed to fulfil its obligations under the Resolution Plan, including that of equity infusion, despite numerous opportunities granted over a period of 6 months. Therefore, the CoC voted by a majority to liquidate the corporate debtor as a result of failure to implement the resolution plan. The NCLT had allowed the liquidation to proceed and the NCLAT had upheld the same. On an appeal before this Court, a statement was made by the successful resolution applicant therein that an amount of Rs. 50 Crore would be deposited on or before 10.01.2021. Bearing in mind that liquidation under the IBC is a matter of last resort, such an opportunity was granted. The time for making the said deposit was further extended until 25.02.2021. However, no payment was made. By underscoring that time is a crucial facet of the sch....
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....o infuse the first tranche payment of Rs. 350 Crore as envisaged in the Resolution Plan despite the Effective Date being fixed on 20.05.2022. As a consequence, the payment of CIRP costs, workmen and employees' dues etc. which must be made in priority over the dues of the other creditors have also not been made. More than 5 years have passed and the implementation of the Resolution Plan still seems to be a dim light at the far end of a long tunnel. Over this period of 5 years, several dues such as the Airport dues to be paid by the Corporate Debtor have increased multi-fold due to the fault of the SRA and this Court must ensure that such debts stop running at some point in time. 148. Although one of the key objectives of the IBC, 2016 is to ensure the survival of the corporate debtor as a going concern, yet the same must not come at the cost of efficiency. In scenarios such as the present, "timely liquidation" is indeed preferred over an "endless resolution process". Such a view will prevent the likelihood of adversely affecting the interests of all the creditors who have been suffering due to no fault of their own and also securing the maximization of value of the remaining assets....
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....phy and fail. The longer the delay, the more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay." ( emphasis supplied ) The Report acknowledged that time and speed are of the essence for the working of the Code. It conceded that significant decisions cannot be made for the company without full clarity as to ownership and control. Therefore, the longer it takes for installing effective leadership, the quicker will be the rate of atrophy of the company. Over a period of time, this delay in taking control of the company will lead to liquidation being the only viable answer. In this context, if there is additional delay during the process of liquidation, th....
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....time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay. xxx xxx xxx Objectives The Committee set the following as objectives desired from implementing a new Code to resolve insolvency and bankruptcy: (1) Low time to resolution. (2) Low loss in recovery. (3) Higher levels of debt financing across a wide variety of debt instruments." ( emphasis supplied ) 154. Several decisions of this Court have highlighted the importance of a speedy resolution process under the IBC, 2016 in the context of either completing the CIRP process in a time-bound manner as per Section 12 of the IBC, 2016 or ensuring that the Liquidator does not cause unnecessary delay or inefficiency in the Liquidation process. A primary and predominant consideration behind minimizing ....
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....the successful revival of the corporate debtor, multiple extensions may seriously hamper the economic feasibility of the Resolution Plan and also lead to an increase in the debts of the corporate debtor. Not to mention, during the extended period, there are several costs incurred towards maintaining the corporate debtor as well. The feasibility and practicability of the resolution plan adjudged by the "commercial wisdom" of the CoC might no longer remain in cases where incessant extensions are granted by the NCLT and NCLAT under their discretionary powers. 158. The discretion in extending the time limits fixed under the Resolution Plan must be exercised in a much more circumspect manner, especially in cases such as the present, which pertains to the aviation sector, wherein timely resolution and revival of the Corporate Debtor is all the more crucial since the sector operates in such a way that a continuous flow of cash is required to maintain the company in a position of status quo. 159. We are now left to finally consider whether in view of the gross facts on record, we should, in exercise of our plenary jurisdiction under Article 142 of the Constitution, direct that the corpor....
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....t justify why this was necessary to "prevent the abuse of the process of the Court". 71. The need to be circumspect while invoking "inherent powers", when there is an exhaustive legal framework is amplified in the context of a legislation like the IBC. In Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd. (CoC), a twojudge bench of this Court, speaking through one of us (DY Chandrachud, J), affirmed this position and observed as follows: "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 or even the powers of this Court under Article 142 of the Constitution must be closely scrutinized 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 the IBC. Any judicial creation of a procedural or substantive remedy that is not envisaged by the statute would not only violate the principle of separati....
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.... of this Court must not only be of doing substantial and complete justice but also to ensure expeditious resolution of the issues in the interests of the underlying objective of the IBC, 2016 and all the stakeholders involved. We must obviate the possibility of the Corporate Debtor being stuck, embroiled and its resolution being further delayed, especially in light of the delay that has already ensued. 165. Having due regard to the materials on record, a determination that the terms of the Resolution Plan have been contravened and that there has been a failure to implement on part of the SRA, has already been made on a consideration of the issues before us. As such, since the Resolution Plan is no longer capable of being implemented, we must ensure that at least liquidation remains as a "viable" last resort for the Corporate Debtor and its creditors. Being mindful of the underlying objective that "Time and Speed are of the essence under the Code" and to prevent the frustration of this objective, we have thought fit and necessary 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 th....
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....strict the scope of interference on the commercial wisdom of the CoC was conscious and possibly taken bearing in mind the time delays that may arise out of a subsequent adjudication of the resolution plans approved by the CoC. Therefore, the commercial wisdom of the CoC has achieved paramount status, immune from any judicial intervention, to ensure the completion of the respective processes under the IBC, 2016 within the timelines prescribed therein. 170. The position that the "commercial wisdom" of the CoC is non-justiciable and only a limited judicial review is available in this regard is well-settled through several decisions of this Court. This Court in the case of K Shashidhar v. Indian Overseas Bank and Ors. reported in (2019) 12 SCC 150, held that: "52. As aforesaid, upon receipt of a "rejected" resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the 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....
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....he Code. (c) maintain objectivity during the decision-making process. (d) foster informed decision making and share with the CoC/ Insolvency Professional any relevant information relating to transactions, guarantees, recoveries, claims, etc. relating to the corporate debtor Independence and Impartiality (e) disclose to the CoC/ Insolvency Professional the details of any existing or potential conflict of interest arising due to pecuniary, personal or professional relationship with any stakeholder, immediately on becoming aware of it. Professional Competence and Participation (f) keep themselves updated with the provisions of the Code, rules and regulations and the role and responsibilities assigned thereunder. (g) nominate representative with proper authorisation and sufficient mandate to effectively participate in meetings. The nominated representative may endeavour to obtain approval of the competent authority, if required, 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 dischargin....
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....ry. (x) ensure that all resolution plans as received by Insolvency Professional are placed before CoC. (y) suitably consider the requirement of a monitoring committee for the implementation of the resolution plan." 172. The aforesaid guidelines may go a long way in streamlining the functions of the CoC. Adding to the aforesaid guidelines, we suggest that the CoC exercise their commercial wisdom and approve/reject the Resolution Plans placed before them exhibiting fairness and with good reasons. Such a reasoned decision making on their part will only serve to further enable the other key players like the Adjudicating Authorities to understand the rationale behind their decision and to uphold the correctness of the same. Furthermore, it is also suggested that the Central Government or the IBBI explore 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 ....
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....aborative effort, the duty to implement the plan does not fall on the Successful Resolution Applicant alone; lenders and creditors are equally obligated to support the process by offering constructive and continuous cooperation. They must not impede the implementation process through unnecessary demands beyond the pale of the resolution plan or with delays in implementation plan but rather should facilitate the Successful Resolution Applicant's efforts to revive the corporate debtor. Given their vested interest in the corporate debtor's successful revival, lenders have a fundamental duty to act in good faith and with transparency, recognizing that their cooperative stance is essential for overcoming the inevitable challenges of the resolution process. The lender's role is not merely passive; it 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 so....
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....s for the implementation and supervision of the resolution plan. Regulation 38 of the 2016 Regulations provides for the mandatory contents of a Resolution Plan. Regulation 38(2) specifically states that the resolution Plan shall provide for the term of the plan and its implementation schedule, along with adequate means for supervising its implementation. Further, under Regulation 38(3), a resolution plan must demonstrate that it addresses the cause of default, is feasible and viable, has provisions for its effective implementation, has provisions for approvals required and the timelines for the same and, that the resolution applicant has the capability to implement the resolution plan. Therefore, in light of these provisions of the IBC, 2016 and the 2016 Regulations, it can be seen that the resolution 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 contr....
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....ding the next steps that are to be undertaken in the order of the Adjudicating Authority, will keep the parties more vigilant since a non-performance of the obligation may lead to a violation of the terms of the approved resolution plan and also violation of the order approving the resolution plan as well. 181. As regards the implementation of the approved resolution plan, it is suggested that the IBC, 2016 statutorily provide for the constitution of a Monitoring Committee once the plan has been approved for a smooth handover of the Corporate Debtor to the successful resolution applicant. Presently, such a provision is absent in the Code and it is the Adjudicating Authority that orders for the constitution of a Monitoring Committee to ensure smooth implementation of the Plan. 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 require....
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....notice, that any act of contravention of this Court's order and the larger rubric of judicial propriety will not be tolerated. The NCLT(s) and the NCLAT must seriously rethink their approach towards admission and disposal of insolvency matters, they should not act as a mere rubberstamping authority and must take their roles seriously in ensuring time-bound hearings and resolutions. Proper and effective hearings both virtually and in-court must be given to insolvency matters of public importance, and the NCLT(s) and NCLAT(s) must earnestly work towards ensuring that the IBC, 2016 achieves its avowed object. 184. One another serious issue pertaining to the functioning of the NCLTs and NCLAT is that there is often a shortage of members in the Tribunals and inadequate infrastructure 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....