TaxTMI 
TaxTMI 
2024 (12) TMI 614
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.... filed by the Respondent No.1, the Corporate Debtor/ Company and IA No.5023 of 2023 was filed by Respondent Nos.2 to 12- investors in the company. By the impugned order, both the applications were partly allowed and disposed of. Aggrieved by the order dated 20.08.2024, these Appeals have been filed. 2. Brief facts of the case necessary to be noticed for deciding these Appeals are:- 2.1. Jyoti Structure Limited an Engineering Procurement Company (EPC) was admitted to Insolvency Resolution Process by order dated 04.07.2017. In the CIRP process of the Corporate Debtor, a Resolution Plan was submitted by one Sharad Sanghi. The Resolution Plan was approved by the CoC which in turn was approved by the Adjudicating Authority vide its order dated 27.03.2019. The Resolution Plan provided for continuance/ roll-over NFB facilities by existing lenders. A Non-Fund Based (NFB) Facility Agreement was executed between Company and the Lenders on 15.09.2021. On 09.11.2021, approved Resolution Plan was implemented achieving the closing date. From 09.11.2021 to 23.11.2022, the company was engaged with NFB lenders for issuance of bank guarantee/ letter of credit under the NFB facilities. NFB lend....
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....ht of the above, the Appellant, humbly seeks to challenge the Impugned Order to the limited extent set out in paragraph 8(a)(i) and paragraph 8(a)(vii) above." 2.4. Paragraph 8(a)(i) and 8(a)(vii) as referred above of the Appeal is as follows:- "i) Schedule VI Clause F of the Resolution Plan inter alia provides for roll-over of the NFB Limits, to the extent of each Appellants' exposure, to be made available to the Borrower. This clause further provides that the issuance of the BGs / LCs (i.e. the NFB Limits) will be done based on due consideration of the project and subject to applicable laws and regulations for such issuance / utilization. vii) Such a direction to release the NFB Limits at the first instance, without due consideration of the Borrower, and for the Respondents to provide documents / information as requested by the lenders (including the Appellants), is wholly without any basis and reasons whatsoever. By passing such a direction, the L.d. Adjudicating Authority has re-negotiated and/or re-written the commercial terms that were already agreed under the Resolution Plan and NFB Agreement and has exceeded its jurisdiction by interfering in the co....
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....ution plan approved for the Corporate Debtor to the Borrower i.e. Jyoti Structures Limited; Pass such other and further reliefs as the nature and circumstances of the case may require." 3. We have heard Counsel for the Appellant as well as Counsel appearing for the Respondent No.1 and Counsel appearing for Investors. 4. Counsel for the Appellant challenging the impugned order contends that the order passed by the Adjudicating Authority is contrary to the Resolution Plan. Counsel for the Appellant referring to Clause F (I) in Section VI of the Resolution Plan submits that the clause provides that the BGs/ LCs will be released, upon a request made by the borrower after due consideration of the project by the respective issuing lender and subject to applicable laws and regulations for such issuance/ utilisation. Counsel for the Appellant refers to RBI Circular to support his submission. Counsel for Appellant refers to RBI Circular dated 01.04.2023. Clause 2.2.3 which requires safeguards to be observed by the banks. Counsel for the Appellant submits that there is no commercial basis or benefit in evaluating a project in isolation, without evaluating a borrower. Resolutio....
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....have any obligation to issue/ release/ disburse the NFB limits under the approved Resolution Plan is incorrect. The Appellants knowing all facts including the viability of the company have approved the Resolution Plan and approved the plan which provided for rolling over of the NFB facilities on basis of appraisal of the project. Counsel for the Respondents have referred to relevant clauses of Part-VI of the Resolution Plan which also contain stipulation that NFB limits are not to be unreasonably withheld. As per the provisions of the IBC, consideration of feasibility and viability of the Resolution Plan can be conducted only at the stage of approval of the Resolution Plan under Section 30(4). When the Resolution Plan has been considered and approved by the CoC after considering the feasibility and viability of the company and it was decided to roll-over the NFB limits, there is no occasion to turn round and oppose issuance of NFB facilities. The Corporate Debtor was EPC Company which after obtaining relevant contract is required to submit Performance Bank Guarantee and due to non-release of BGs/LCs, the very business of company cannot progress. Further the Resolution Plan itself c....
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....ements." 8. Before we proceed to enter into respective submissions of the parties, it is relevant to notice certain clauses of the approved Resolution Plan with regard to which clauses there is no dispute between the parties. Resolution Plan itself has captured the nature of business and necessity for roll-over of the bank guarantees/letter of credit. Clause 2(b) of the plan notices as follows:- "2. Restructuring of Debt (b) Engineering Procurement & Construction ("EPC") business is dependent on banking support. In this regard, the Proposed Investors have not sought any fresh limits. The Proposed Investors would only require roll-over of bank guarantees ("BG")/letter of credit ("LC") limits to the extent of the current exposure of financial creditors as on the date on which the CoC votes on this Final Resolution Plan. This will ensure growth of revenue and margins for the Company, which are crucial for meeting debt repayment commitments. The roll-over of the BG/LC limits is only applicable to the extent of released/discharged/cancelled/returned (by the beneficiaries) BGs/LCs (and not invoked/ encashed BGs/LCs). This is further explained in paragraph F ....
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.... stipulations for the final Resolution Plan' which also contain provisions for payment to financial creditors from the equity infusion as well as arising from the business operations of the company. Section VII (I) is as follows: - "I. Those financial creditors of the Company who qualify as "dissenting financial creditors" (as defined under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process For Corporate Persons) Regulations, 2016, as amended from time to time) ("Dissenting Financial Creditors") shall be paid an amount as would have been paid to them in respect of their financial debt in case of liquidation of the Company ("Dissenting Financial Creditor Dues"). As set out in the provisions of the Insolvency and Bankruptcy Code, 2016 and the regulations framed thereunder, the Dissenting Financial Creditor Dues shall be paid from the cash flows of the Company including from the equity infusion as per the terms of this Final Resolution Plan and arising from the business operations of the Company, before any recoveries are made by the Financial Creditors who voted in favor of the Final Resolution Plan as follows:...." 12. Stipulation pertaining to r....
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....e obligation of the NFB lenders is effective from the closing date. As noted above, the closing date has been admittedly achieved in November 2021. 15. One more clause of the Resolution Plan necessary to be noticed is clause E (3) of Section VI of the Resolution Plan, which is as follows:- "3. Upon the Final Resolution Plan receiving the approval of the NCLT, in the event of any inconsistency between the terms set out in the Final Resolution Plan as approved by the NCLT and the terms set out in any agreement, documents, arrangement executed between the Company / its guarantors/ security providers/Founder Promoters/directors/employees and any of its creditors, the terms set out in the approved Final Resolution Plan shall prevail to the extent of such inconsistency." 16. Before we proceed further, we need to notice the prayers made in the application IA No.4959 of 2023 which was filed by the Company. In the application, Respondent No.1 had made following prayers:- "PRAYER In view of the above-mentioned facts and circumstances the Applicant most respectfully prays that this Hon'ble Tribunal may be pleased to: a. Direct each of the Responde....
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.... of Credit Facilities and the Bank Guarantee Facilities may be interchanged upto the extent as set out in Schedule I. ................... (iii) Any such utilisation/issuance of a Bank Guarantee or Letter of Credit will be done based on (a) due consideration of the Borrower and the project by such Lender issuing the Bank Guarantee or Letter of Credit and subject to applicable laws and regulations for such issuance / utilization, to the satisfaction of the Lender. However, the issuance of the same will not be unreasonably withheld by the relevant Lender issuing the Bank Guarantee or Letter of Credit. Also, prior to issuance / utilisation of the Bank Guarantee or Letter of Credit, the issuing Lender will be provided with all details of the project including but not limited to the client, location, and project funding while requesting for issue of rolled over Bank Guarantee or Letter of Credit, for its evaluation and (b) the funding/ financial arrangements required for undertaking and completing the project (including any fund based or non-fund based financing, or milestone based payment in terms of the relevant EPC contract for the project, as applicable), for which ....
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....also forms part of the Resolution Plan. A Resolution Plan is placed for consideration of Committee of Creditors (CoC), which is comprised of financial creditors who in the present case are prominent banking companies of India. Before approving a Resolution Plan, the members of CoC are under bounden duty to make assessment of, inter-alia, (i) feasibility and viability of the plan, and (ii) capacity of the Resolution Applicant to implement the plan. It is pertinent to note the clause 5.3.1 of BLRC committee Report which states that "The Committee reasoned that members of the creditors committee have to be creditors both with the capability to assess viability, as well as to be willing to modify terms of existing liabilities in negotiations. Typically operational creditors are neither able to decide on matters regarding the insolvency of the entity, nor willing to take the risk of postponing payments for better future prospects for the entity. The Committee concluded that, for the process to be rapid and efficient, the Code will provide that the creditors committee should be restricted to only the financial creditors". 7.5. In case of Essar Steels vs. Satish Chandra Gupta, th....
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.... far, though this Tribunal had granted additional time to the Applicants to make payments, which had fallen due, and which stands paid after raising further money via rights issue by the Company from its Investors. The Resolution Plan, in question, is a long tenure plan contemplating payment to various stakeholders out of cash flow of the Company in each succeeding year after approval of the Plan, and such stipulation of payment to stakeholders out of cash flow was considered feasible by the Respondents while exercising their vote on the plan. Accordingly, we have no hesitation to hold that CoC was conscious of proposals in the Resolution Plan in relation to NFB limits and they voted on the Plan realising fully well that the said NFB limits are to be released, subject to project appraisal. As regards consideration of Company is concerned, we are of considered view that, after having found the Resolution Plan feasible and viable in the form it was placed before CoC and that Plan contemplated for revival of the Corporate Debtor, the Respondents cannot seek re-appraisal of the Company at the first instance as condition precedent for release of NFB facilities subject to project apprais....
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.... 12 Bajaj Elec. Ltd Tower Testing 0.55 13 Apraava Energy FGH3-Bhadla 221.05 14 Other Income 8.36 Total 1,162.42 21. We may refer to judgment of this Tribunal in Company Appeal (AT) (Insolvency) No.539 of 2022 decided on 23.05.2023- "State Bank of India vs. MBL Infrastructure Limited and Ors." which also arose out of the direction issued by the Adjudicating Authority for implementation of the Resolution Plan. This Tribunal in the above judgment has observed that when the Resolution Plan has been approved, it is obligatory on all stakeholders to act in manner so as to implement the Resolution Plan. The argument that on account of extension of three years and nine months in the implementation of the plan, the plan is no more viable and cannot be accepted was raised and rejected. In paragraph 14 of the judgment, following was observed:- "14. The object of the Code especially in a case where Resolution Plan has been approved and which approval also received the confirmation from Hon'ble Supreme Court, it is obligatory on all stake holders to initiate the implementation of the Plan, trying to find excuses ....
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....or averting frauds'. The above clause is for the purposes of averting frauds. Present is not a case that the borrower is asking for issuance of NFB facilities which will lead to perpetuating any fraud on the lenders. Present is a case where Resolution Plan has already been approved by the CoC where decision was consciously taken to roll-over NFB facilities by the existing lenders. It is also not the case that the borrower has defaulted in any of the bank guarantees or letter of credit so as to give any apprehension in the mind of the lenders that borrower will not be able to honour the service the NFB facilities. Direction issued by the Adjudicating Authority is only to the effect that the lenders shall examine the project for which bank guarantees have been asked for and the Respondent shall have right to constantly monitor the business performance of the company and shall be competent to raise flag at appropriate time in case of deviation and take corrective action at that time and company shall furnish information/ documents required by the lenders for review of financial performance of the company after its first release. We are of the view that no error has been committed by t....
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....s may jeopardize the new BGs being released." 25. Thus, the issue that non-release of NFB limits has also been flagged before the joint lenders meeting and the lenders have to think twice before not acting as per the approved Resolution Plan. Counsel for the Appellant has relied on the judgment of the Hon'ble Supreme Court in "Venkatraman Krishnamurty and Anr. vs. Lodha Crown Buildmart Pvt. Ltd.- (2024) 4 SCC 230" to support his submission that the court cannot rewrite or create a new contract between the parties and has to simply apply the terms and conditions of the agreement as agreed between the parties under the contract. The Hon'ble Supreme Court in the above judgment in paragraphs 20 and 21 observed following:- "20. The "date of offer of possession", under Clause 1.14, linked with issuance of the "Occupation Certificate" was distinct and separate from the "date of delivery of possession for fit outs" and Clause 11.3 unequivocally provided the consequences in the event of delay in that regard. The right of election given thereunder to the appellants to either continue or to terminate the agreement within ninety days from the expiry of the grace period was absolute....