TaxTMI 
TaxTMI 
2025 (5) TMI 268
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.... 2192-2193 of 2020 have been filed by Mr. Sanjay Singal & Another, the erstwhile promoters of CD challenging the impugned Judgment and Order in Company Appeal (AT) (Insolvency) No. 1034 of 2019 and the Company Appeal (AT) (Insolvency) No. 957 of 2019. (iii) Civil Appeal No. 3784 of 2020 has been filed by the Government of Odisha & Others challenging the impugned Judgment and Order in Company Appeal (AT) (Insolvency) No. 1461 of 2019. (iv) Civil Appeal No. 2225 of 2020 has been filed by the Jaldhi Overseas Pte. Limited, an Operational Creditor of CD challenging the impugned Judgment and Order in Company Appeal (AT) (Insolvency) No. 1055 of 2019. (v) Civil Appeal No. 3020 of 2020 has been filed by M/s. Medi Carrier Private Limited, an operational creditor of CD challenging the impugned Judgment and Order in Company Appeal (AT) Insolvency No. 1074 of 2020. (vi) Civil Appeal No. 668 of 2021 has been filed by the State of Odisha (was not party before the NCLAT) challenging the impugned Judgment and Order in Company Appeal (AT) (Insolvency) No. 1035 of 2019. (vii) Civil Appeal No. 6390 of 2021 has been filed by CJ Darcl Logistics Limited, an o....
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....ired certain affidavits/ undertakings from the Prospective Resolution Applicants, particularly in terms of Section 29A. (viii) After multiple rounds of negotiations and deliberations, all the three Prospective Resolution Applicants had submitted their improved/ revised Resolution Plans within the deadline stipulated by the NCLAT vide order dated 06.08.2018. (ix) In the 18th Meeting held on 14.08.2018 the plans submitted by the Liberty House, the Tata Steel and the JSW were evaluated by the CoC, as per the evaluation matrix formulated by it, and the JSW was found to have scored the highest in terms of the said evaluation matrix. However, the CoC did not declare H-1 and H-2. (x) It appears that pursuant to the further negotiations between the Core Committee comprising of small group of lenders, JSW submitted the Consolidated Resolution Plan on 03.10.2018. The said Consolidated Plan was circulated by the Resolution Professional to the members of CoC on 05.10.2018 and uploaded in the Virtual Data room. (xi) Thereafter, the Resolution Professional having received a requisition from some of the Banks, he called for a meeting of CoC on 10.10.2018 for co....
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....ectors, and approved the Resolution Plan of JSW, subject to the condition nos. (a) to (k) contained in Para-128 of the said Judgment. The said Para-128 is reproduced as under: "128. As a sequel of the above discussion, CA No. 254(PB)/2019 is allowed and the resolution plan of JSW-H1 Resolution Plan Applicant is accepted. The objections raised by the Ex- Directors cum Promoters of the Corporate Debtor and Operational Creditors are hereby over-ruled. However, the acceptance and approval of the resolution plan shall be subject to the following; a) The amount due to the operational creditors under the resolution plan must be paid in accordance with the amended Section 30 (2) of the Code as the amendment expressly provides that it would be applicable to all applications pending for approval of the resolution plan like the one in hand. b) C.A. No. 327(PB)/2019 with a prayer for placing the settlement proposal dated 20.02.2019 before the CoC is hereby rejected. c) CA No. 286(PB)/2019 filed by the erstwhile directors Mr. Sanjay Singhal and Mrs. Aarti Singhal seeking copies of the resolution plan is dismissed with a cost of Rs. 1 /- lac to be paid persona....
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....n Process in accordance with the judgment of the Hon'ble NCLAT rendered in the case of Standard Chartered Bank v. Satish Kumar Gupta, R.P. of Essar Steel Ltd. & Ors., Company Appeal (AT) (Ins.) No. 242 of 2019 decided on 04.07.2019 and the action to be taken by the RP is evident from the reading of para 211 of the said judgment . k) The cases in which the Adjudicating Authority or the Appellate Authority could not decide the claim on merit, all such Applicants may raise the issue before an appropriate forum in terms of Section 60(6) of the Code. The other 'Financial Creditors/Operational Creditors' would not be entitled any remedy under Section 60 (6) of the Code." (xx) The Successful Resolution Applicant-JSW, challenged some of the conditions mentioned in said order passed by NCLT approving its Resolution Plan, by filing the Appeal being Company Appeal No. 957 of 2019, under Section 61 of IBC. (xxi) After the approval of the plan by the NCLT as aforesaid, the Directorate of Enforcement of Central Government (ED), passed an order (PAO) on 10.10.2019 provisionally attaching the assets of the CD-BPSL under Section 5 of the Prevention of Money La....
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....ent mechanism in the Resolution Plan. G-Various reliefs sought from the statutory authorities under the Income Tax Act, 1961, Ministry of Corporate Affairs, Department of Registration and Stamps, Reserve Bank of India and others are also disposed of. We do not feel persuaded to accept the prayer made in the resolution plan yet the resolution plan applicant may file appropriate applications before the competent authorities which would be considered in accordance with law because it would not be competent for the Adjudicating Authority- NCLT to enter into any such area for granting relaxation, concession or waiver which is wholly within the domain of competent authorities. 1. All penalties, interest, delayed payment charges, any other liabilities for any non-compliance with statutory obligations including taxes, including delays in filing returns or payment of tax dues, against the Company shall stand settled in accordance with the provisions of this plan as approved by NCLT. I The criminal proceedings initiated against the erstwhile Members of the Board of Directors and others shall not affect the JSW-Hl Resolution Plan Applicant or the implementation of the resolution plan....
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....ly takes over the business of the 'Corporate Debtor', as held by the Hon'ble Supreme Court. 3. Being aggrieved by the said impugned Judgment and Order of NCLAT, these appeals have been filed by the Appellants as stated hereinabove. 4. This Court while admitting the Civil Appeal No. 1808/2020 filed by Kalyani Transco, and other appeals filed by the other parties, had vide order dated 06.03.2020, recorded the statement of learned Senior Advocate Dr. A.M. Singhvi appearing for the CoC as under: - "UPON hearing the counsel the court made the following ORDER The appeals are admitted. Dr. A.M. Singhvi, learned senior counsel appearing for the Committee of Creditors states that in case he receives money, he will return the said amount within two months, if the appeal succeeds. List all the matters together on 15.04.2020." 5. It appears that JSW, which was Respondent No. 2 in the SLP (C) No. 29327-29328 of 2019 filed by the CoC, filed an Application being I.A. No. 47947/2020 on 20.03.2020 seeking clarification of the order dated 06.03.2020 to the extent that JSW was not obligated to implement the Resolution Plan during pe....
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....nancial Creditors, in an escrow account. (c) This letter has been accepted by CoC with 97.25% of the lenders (by value) confirming their acceptance (and no dissent), and the Resolution Plan is currently proposed to be implemented in accordance with the same. (d) It is submitted that the said deposit of the Upfront Payment Amount in the escrow account by JS Wand implementation of the Resolution Plan is in consonance of this Hon'ble Court order dated March 06, 2020, and would, in any manner, be subject to the order of this Hon'ble Court inasmuch as: (i) In the event of any order of the Hon'ble Supreme Court allowing the appeals filed against the Hon'ble Appellate Tribunal judgment dated February 17, 2020 leading to setting aside of the approved Resolution Plan for any reason whatsoever, or denying the benefit under section 32A of the Code to the Corporate Debtor/ Resolution Applicant which would result in ED's claim against Corporate Debtor not being set aside or which would result in the attachment of the assets of the Corporate Debtor by the ED continuing, the Upfront Payment Amount shall be refunded by the CoC to the Resolution Applicant ....
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.... of the Resolution Plan in this respect were intended to operate for only a limited period of 30 days from the approval of the Resolution Plan by the relevant Tribunal after which the Resolution Applicant was supposed to take-over the Corporate Debtor. The continuance of this ad-hoc mechanism of interim management for more than an entire year, while being in accordance with the Resolution Plan, is not in the interest of all stakeholders given the size and business of the Corporate Debtor. It is submitted therefore that it is in the interest of all stakeholders that the Resolution Plan is implemented in full at the earliest. 10. The Petitioner craves leave of this Hon'ble Court to refer to and rely on the averments, contents and documents annexed to the said SLP and the subsequent filings by the Petitioner thereunder as an integral part and parcel of the present application and the contents are not being repeated herein for the sake of brevity." 7. The Civil Appeal Nos. 14503-14504 of 2024 arising out of SLP (C) Nos. 29327-29328 of 2019 filed by the Committee of Creditors against ED and Civil Appeal No. 3362 of 2020 filed by the ED against the JSW and Others, came to....
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....d with Rule 3A of the Prevention of Money Laundering(Restoration of Property) Rules, 2016 (hereinafter referred to as the said Rules) to submit that the NCLT had approved the Resolution Plan vide the order dated 05.09.2019 which was under challenge before the NCLAT in the Appeals filed by various parties, and in the meantime the competent authority of the PMLA vide the order dated 10.10.2019 had provisionally attached the properties of the Corporate Debtor. He further submitted that Section 32A came to be inserted in the IBC with effect from 28.12.2019, which did not have the retrospective effect, and hence, in view of the peculiar facts and circumstances of the case and without prejudice to the rights and contentions of the E.D. with regard to the investigation of the case registered against the accused-Promoters of the Corporate Debtor-Bhushan Power and Steel Ltd. and Others, the successful Resolution Applicant be permitted to take control of the attached properties treating the same as the restitution under Section 8(8) of the PMLA read with Rule 3A of the said Rules. 5. The learned senior counsel Mr. Abhishek Manu Singhvi appearing for the CoC and learned senior advoca....
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....ppeals filed at the instance of the Appellants who are the Ex-Promoters, Operational Creditors and the Government Authorities under Section 62 of IBC. According to them, an Appeal under Section 62 could be filed only by a "person aggrieved" against an order passed by the NCLAT, and that too on a question of law arising out of such order. They further submitted that the Ex-Promoters have raised the issues in their Appeals with regard to implementation of the Resolution Plan which issues were not raised even before the NCLAT, and even otherwise the said issues are beyond the scope of Section 62. According to them, in any case the SRA-JSW has already implemented the Resolution Plan successfully by making payments to the Financial Creditors on 26.03.2021 and by making payments to the Operational Creditors in March 2022. They also submitted that the Appellant Kalyani Transco and other Operational Creditors could no longer be said to be the "person aggrieved," once they have now accepted their payments under the said Resolution Plan. As regards the Appeals filed by the Appellant State of Odisha, it was sought to be submitted by them that the State of Odisha did not file its claim with re....
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....the use of the phrase "any person aggrieved" indicates that there is no rigid locus requirement to institute an Appeal challenging the order of NCLT before the NCLAT, or an order of NCLAT before this Court. Any person who is aggrieved by the order may institute an Appeal. Once the Corporate Insolvency Resolution Process is initiated, the proceedings are no longer restricted to any individual Applicant Creditor or to the Corporate Debtor, but rather they become collective proceedings in rem, where all the creditors and the Ex- Directors would be necessary stakeholders. Therefore, the Appellants who are the operational creditors, and the erstwhile Promoters, being important stakeholders, and whose Company Appeals have been dismissed by the NCLAT vide the impugned judgment, would certainly be the persons aggrieved entitled to file Appeals before this Court under Section 62 of the IBC. Moreover, they have also raised number of questions of law in the instant appeals, which although will be considered in the later part of this judgment, nonetheless, they being the persons aggrieved, the Appeals at their instance are certainly maintainable. 11. This is also most appropriate juncture t....
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....ed by the adjudicating authority (NCLT)", which we will assume may also pertain to recording of the fact that the proposed resolution plan has been rejected or not approved by a vote of not less than 75% of voting share of the financial creditors. Indubitably, the remedy of appeal including the width of jurisdiction of the appellate authority and the grounds of appeal, is a creature of statute. The provisions investing jurisdiction and authority in NCLT or NCLAT as noticed earlier, have not made the commercial decision exercised by CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order "approving a resolution plan" under Section 31. First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers "by the resolution professional" during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolu....
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....none of the grounds stated in sub- section (3) existed. Interestingly, the NCLAT vide the impugned judgment dated 17.02.2020, not only entertained but also allowed the said Appeal of JSW which was not legally maintainable, modified the conditions which were not suitable to JSW, and dismissed all the other Appeals filed by the Operational Creditors, the Ex- Promoters and the State of Odisha. 16. Further, it is also pertinent to note that the NCLAT also gave certain directions in Para 147 of the impugned judgment, with regard to an issue, which was neither the subject matter before the NCLT in the Application filed by the Resolution Professional seeking approval of the plan, nor the subject matter of the Company Appeal filed by the JSW before the NCLAT. The said Para 147 of the judgment of NCLAT reads as under: "147. Whether 'Bhushan Power & Steel Limited'- ('Corporate Debtor') has 25.6% shareholding in 'Nova Iron Steel' is a question of fact. However, if there is any such share of 'Bhushan Power & Steel Limited'- ('Corporate Debtor') in 'Nova Iron Steel', after approval of the plan and on acquisition of 'Bhushan Power &....
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....y the JSW, BPSL and Jai Balaji on 05.03.2008 pursuant to an order of Government of India, in the matter of joint allocation of Rohne Coking Coal block. These facts suppressed by JSW in its Resolution Plan, had surfaced during the course of the investigation in the PMLA proceedings initiated against the Corporate Debtor and others. Based on the said material, an issue was raised before the NCLAT whether JSW was a 'related party' to BPSL, and therefore, ineligible under Section 29A. However, the NCLAT in its impugned judgment had sought to justify the suppression of facts made by JSW. Since, the issue of 'Related Party' was not pressed into service by the learned advocates appearing for the Appellants, during the course of hearing of these Appeals, we are not stretching the issue of "related party" any further. (IV) MANDATORY REQUIREMENT UNDER SECTION 29A. 19. However, we certainly deem it appropriate to highlight the statutory requirement of proper disclosure to be made by the Resolution Applicant with regard to its eligibility under Section 29A of the IBC. As per Section 29A, a person shall not be eligible to submit a Resolution Plan, if such person or any other person acting....
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....of Part B of the Approved Resolution Plan Section 30(2)(b) of the Code The Resolution Plan provides for the repayment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under Section 53. Clause 1.4, 1.5, 1.6 and 1.7 of Part B of the Approved Resolution Plan Section 30(2)(c) of the Code The Resolution Plan provides for the management of the affairs of the Corporate Debtor after approval of the resolution plan; Clause 1.13(iii) of Part B read with Clause 2(a) of Part A of the Approved Resolution Plan Section 30(2) (d) of the Code The Resolution Plan provides for the implementation and supervision of the resolution plan; Clause 4 of Part A read with Schedule 2 of the Approved Resolution Plan Section 30(2) (e) of the Code The Resolution Plan does not contravene any of the provisions of the law for the time being in force; Clause 1.13(vi) of Part B of the Approved Resolution Plan Regulation 38(1A) of the CIR Regulations The Resolution Plan shall include a statement as to how it h....
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....t is pertinent to note that in the 14th Meeting of the CoC, it was specifically brought to the notice of the CoC by the legal counsel of the Resolution Professional that the Resolution Plan of the JSW was subject to the compliance of Section 29A. However, in the later meetings there was no clarity made as to whether the JSW had subsequently complied with the said requirement or not. Even if it is believed that JSW had filed an affidavit with regard to its eligibility to submit the Resolution Plan, there is nothing on record to show as to whether such affidavit was verified by the Resolution Professional as he was obliged to do so in terms of Form No. H to the Schedule annexed to the CIRP Regulations, 2016. 23. Since, the eligibility/ineligibility of the Resolution Applicant to submit the Resolution Plan goes to the root of the matter, it was incumbent on the part of the Resolution Professional to verify and certify that the contents of the mandatory affidavit, filed by the Resolution Applicant-JSW in respect of Section 29A were in order. The same having not been stated in the Application filed by the Resolution Applicant before the NCLT, it has raised serious doubt in the mind o....
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....led by the Committee of Creditors, challenging the PAO dated 10.10.2019 passed by the ED and the Order dated 14.10.2019 passed by the NCLAT in Company Appeal No.957 of 2019, and the Civil Appeal No.3362 of 2020 filed by the ED against the JSW & Others challenging the impugned Judgment dated 17.02.2020 passed by the NCLAT in Company Appeal No. 957 of 2019, came to be disposed of by this Court vide the Order dated 11.12.2024. While passing the said order, it was clarified by this Court that the said order was passed in the peculiar facts and circumstances of the case, more particularly, the fact that the order of provisional attachment was passed by the ED after the Adjudicating Authority i.e. NCLT had approved the RP submitted by the SRA. It was also clarified and that the Court had not expressed any opinion on the interpretation of Section 32A (2) of IBC or on the powers of the ED to attach the property of the Corporate Debtor which was undergoing CIRP, or on any other legal issues involved in the other connected Appeals (i.e. the present Civil Appeals) pending before this Court. 27. In this regard, it is pertinent to note that the NCLT and NCLAT are constituted under Section 40....
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....oval of Resolution Plan of JSW by the NCLT on 05.09.2019, subject to the conditions mentioned therein, the PAO came to be passed by the ED on 10.10.2019 under Section 5 of the PMLA. The said PAO was challenged by SRA-JSW directly in the Company Appeal being No. 957 of 2019 filed by it before the NCLAT, and the NCLAT vide the ex parte order dated 14.10.2019 had stayed the PAO. It is pertinent to note that the said PAO dated 10.10.2019 was also the subject matter of challenge before this Court in the SLPs filed by the CoC and the same was stayed by this Court vide the Order dated 18.12.2019 in the said SLPs. Despite such position, the NCLAT while passing the impugned Judgment and Order dated 17.02.2020 recorded its findings on Section 32A of IBC to the effect that the assets of the Corporate Debtor of which JSW was a Successful Resolution Applicant, were immuned from attachment by Directorate of Enforcement. Such an Order of NCLAT is clearly in teeth of the law laid down by this Court in Embassy Property Developments (supra). The PMLA being a Public Law, the NCLAT did not have any power or jurisdiction to review the decision of the Statutory Authority under the PMLA. In our opinion, ....
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.... Plan contravened the settled legal position, while treating the secured statutory dues of the Operational Creditors as unsecured dues, which is also in contravention of the law laid down by this Court in the State Tax Officer vs. Rainbow Papers Limited.((2023) 9 SCC 545) (vi) However, on a demurrer, the Resolution Plan if it is sustained by this Court, the issue of Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) is required to be decided in favour of the Appellants and other stakeholders, and against JSW. (vii) Retention of EBITDA by SRA, despite not contributing in any manner to the operations of the Corporate Debtor from 26.7.2017 till the interim payment to the Financial Creditors on 26.03.2021, and also despite the delay in making payment to the other creditors of the Corporate Debtor, would be contrary to the scheme of the IBC. (viii) Granting of EBITDA to the creditors, would reduce the liability of the appellants who are the personal guarantors. (ix) There was no scope for negotiation between the CoC and the SRA-JSW after the approval of the Resolution Plan, in view of the law laid down by this Court in Ebix Singapor....
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....ided under Section 61(3) of the IBC are the only grounds available to the NCLAT for setting aside the approval of the Resolution Plan, however the NCLAT has set aside the directions of NCLT qua EBITDA, which does not fall within the four corners of Section 61(3). 34. The Learned ASG, Mr. Natraj appearing for the Appellant- State of Odisha made the following submissions: - (i) The Appellant-State had filed its claim before the Resolution Professional on 07.03.2018 for a total amount of Rs. 118,85,17,796 which included the Electricity duty along with interest till insolvency commencement date, and the said claim though was recorded at Serial No. 1750 on the consolidated list of claims of Operational Creditors, there was drastic reduction in the claim amount to INR 13,75,32,894. (ii) In view of Section 18 read with the Regulations 10, 12, 13 and 14 of the CIRP Regulations, 2016, as also the legal position settled in Swiss Ribbons (P) Ltd. Vs. Union of India ((2019) 4 SCC 17), the Resolution Professional does not possess any adjudicatory powers under the IBC, and that his role as a facilitator of the CIRP is only administrative in nature. (iii) The Resolut....
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....(vii) This Court while interpreting the RFRP of SRA in the case of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta and Others ((2020) 8 SCC 531), has held that the EBITDA generated during the CIRP period would not go the creditors. (viii) There was no delay in implementing the Resolution Plan as the plan has been implemented by the Effective Date, as defined under the Resolution Plan. (ix) The Code or its Regulations do not require the implementation of Resolution Plan to be carried within the specific timeline, and the same is the subject matter of the agreed position in a Resolution Plan. In paragraph 4(iii) of Part A, the Effective Date has been defined to mean the date of implementation of the Resolution Plan, which shall not exceed 30 days from the NCLT approval date or such extended period which may be permitted by 66% majority of lenders forming part of the erstwhile CoC. (x) So far as payment to the operational creditors is concerned, the position under Regulation 38(1) has changed since the amendment w.e.f. 27.11.2019, which provided for the amount payable to an operational creditor to be paid in priority to the Financi....
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....within the ambit of Section 62 of IBC. (iii) Though CoC as a juristic body had become functus officio after approval of Resolution Plan by the NCLAT, in the facts of the case, the lenders of BPSL forming part of CoC were specifically empowered in terms of the Resolution Plan read with the impugned judgment of NCLAT to convene and take decisions that were necessary for successful implementation of the Resolution Plan. (iv) The lenders of BPSL forming part of the CoC in their commercial wisdom had taken steps to ensure implementation of Resolution Plan to the benefit of all stakeholders of the Corporate Debtor. Though there was a delay of about two years in the implementation of the Resolution Plan, the lenders of BPSL forming part of CoC have taken commercial call in prioritizing the implementation of the Resolution Plan. (v) As per the understanding of the lenders of BPSL, at the time of plan implementation, the SRA infused only Rs. 100 crores as share capital towards Equity contribution, and the delay of remaining Rs. 8,450 Crores by way of convertible debentures was due to the uncertainty created because of the attachment of assets of BPSL by the ED. Th....
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....editors in March, 2022. According to them, though JSW initially infused only Rs.100 Crores as share capital towards Equity contribution commitments, subsequently pending the present Appeals, the reconstituted Board in its meeting held on 26.03.2021 has approved the issuance of Compulsory Convertible Debentures to Piombino Steel Limited (group entity of SRA-JSW which was to be merged into BPSL) having value of Rs.8,450 Crores, and thus requirement of infusion of Rs.8,550 Crores was complied with. We are not impressed with the said submissions. 40. In this regard, the relevant Clause 2.3 with regard to Equity Commitment and Clause 3.1 with regard to the stages of implementation of the Resolution Plan are reproduced- "2.3 Equity Commitment As part of the Resolution Plan, the Resolution Applicant also proposes to infuse equity into the Company, for an amount aggregating INR 8550 Crores which shall be infused by the Resolution Applicant upfront on the Effective Date, the uses of which are stated elsewhere in the resolution plan. The aforementioned amounts are collectively referred to as "Equity Commitment". (see Section 4(v) and (vi) of Part A of this Resolution Pla....
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.... any purpose. It therefore raises serious doubts about the legality of such actions and genuineness of the so-called compliance of Resolution Plan, pending these Appeals. 42. Even it is assumed for the sake of arguments that pending the present Appeals, the terms of the Resolution Plan have been complied with, it may be noted that no party can be permitted to deliberately create a situation where the proceedings in the Court would be frustrated or the Court's decision would become irrelevant or ineffective. A situation of fait accompli cannot be permitted to be created in the Court to frustrate the proceedings, more particularly when the CIR proceedings had ex facie stood vitiated on account of non-compliance of the mandatory provisions of law and on account of the misuse of the process of law by the parties. Any action taken or any deal/any settlement entered into by and between the parties in respect of the subject matter of the proceedings, have to pass the test of judicial scrutiny and would always be subject to the final outcome and adjudication of the proceedings. 43. It has been reiterated time and again by this Court that one of the main objects for enacting the IBC i....
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....tcy Code (Amendment) Act, 2019." 44. It may be noted that the last two provisos that is the second and third provisos to Section 12 have been inserted by the Act 26 of 2019, which came into force with effect from 16.08.2019. Therefore, prior to 16.08.2019, there was only one proviso to Section 12. In the instant case, since the CIRP had commenced on 26.07.2017, when the Company Petition filed by the Punjab National Bank for initiating the insolvency proceedings was admitted by the NCLT, we will have to consider the position of Section 12 as it stood prior to its amendment on 16.08.2019. 45. This Court in Arcelormittal India Private Limited vs. Satish Kumar Gupta and Others ((2019) 2 SCC 1), had an occasion to deal with Section 12 as it stood prior to the said amendment, which came into force with effect from 16.08.2019. It has been held as under: - "73. The time-limit for completion of the insolvency resolution process is laid down in Section 12. A period of 180 days from the date of admission of the application is given by Section 12(1). This is extendable by a maximum period of 90 days only if the Committee of Creditors, by a vote of 66% [It is pertinent to note th....
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....ended further "but not exceeding 90 days", making it clear that a maximum of 270 days is laid down statutorily. Also, the proviso to Section 12 makes it clear that the extension "shall not be granted more than once". 46. In view of the above, it is explicitly made clear that the provision contained in Section 12(1) is mandatory in nature as the expression "shall be completed" is used. Sub-section (3) further makes it clear that the duration of 180 days may be extended further "but not exceeding 90 days", meaning thereby a maximum of 270 days' time limit is statutorily laid down. The proviso to Section 12 also further clarifies that the extension of period of CIRP under the said Section shall not be granted more than once. Therefore, there remains no shadow of doubt that prior to insertion of two provisos by way of amendment in Section 12 which came into force w.e.f 16.08.2018, the entire CIRP proceedings had to be completed within maximum period of 270 days from the date of admission of the Application to initiate such process. 47. The Company Petition filed by the Punjab National Bank was admitted by the NCLT vide the Order dated 26.07.2017 on which date Mr. Khandelwal was a....
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....g extension of time before the expiry of 180 days nor he had submitted the Resolution Plan approved by the CoC before the maximum period for completion of CIRP prescribed under Section 12, as contemplated in Regulation 39(4) of the Regulations. 50. The Resolution Professional had filed the Company Application No. 254 of 2019 on 14.02.2019 seeking approval of the NCLT under Section 31, stating inter alia that the Consolidated Resolution Plan along with the Addendum Letter was approved by the CoC in its 19th Meeting, and thereafter the members of CoC had approved the same by requisite majority, following the e- voting process. It appears that the 19th Meeting of CoC was held on 10.10.2018 and the e-voting had taken place on 15.10.2018, 5.00 p.m. and 16.10.2018, 5.00 p.m. on the Central Depository Services (India Limited). As stated in the said Application by the Resolution Professional, he had received a post facto approval from the Indian Bank for the Consolidated Resolution Plan vide its e-mail dated 16.10.2018, and he had placed the result of voting in the sealed cover before the Appellate Authority i.e. NCLAT vide the affidavit dated 21.10.2018. He thereafter filed the said Ap....
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....tted for completion of the CIRP under Section 12, have been laid down in Section 33, according to which the NCLT had to pass an order requiring the Corporate Debtor to be liquidated in the manner laid down in Chapter III of IBC. In the instant case, the Resolution Professional had utterly disregarded the mandatory timeline contained in Section 12 setting out the time limit for completion of CIRP, had not even bothered to seek any extension from the NCLT before the expiry of 180 days from the commencement of the said process nor had bothered to explain in the Application under Section 31 as to how the entire CIRP proceedings were conducted in a time bound manner and particularly within time limits prescribed under Section 12 of IBC read with Regulation 39(4) and Regulation 40A of the Regulations, 2016. Even the NCLT also while passing the order dated 05.09.2019 approving the Resolution Plan of JSW under Section 31, had failed to verify as to whether the said Application of the Resolution Professional was within the time limit prescribed under Section 12 which was mandatory in nature as held by this Court in Arcelormittal India Private Limited (supra). 55. At this juncture, it may....
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....56. Apart from the fact that the two provisos subsequently inserted in Section 12 w.e.f. 16.08.2019 were not applicable to the facts of the present case, the CIRP against BPSL having been initiated on 26.07.2017 and the Resolution Professional having filed the Application under Section 31 on 14.02.2019, even the maximum period of 330 days including the time taken in legal proceedings had expired much prior to filing of the said Application under Section 31 on 14.02.019. 57. In that view of the matter, we have no hesitation in holding that the Application submitted by the Resolution Professional seeking approval of the Resolution Plan of JSW under Section 31 being hit by Section 12 of IBC, the NCLT had committed grave error of law in approving the said plan vide its order dated 05.09.2019. 58. Even if it is assumed that the Application filed by the Resolution Professional seeking approval of the Resolution Plan of JSW under Section 31 was not hit by Section 12, and that the CIR proceedings conducted by him was within the time limit prescribed under Section 12, in view of the order dated 04.02.2019 passed by the NCLAT in the Company Appeal being No.198 of 2018 preferred by the ....
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....ng in force, and conforms to such other requirements as may be specified by the Board. Sub-section (3) of Section 30 states that the Resolution Professional shall present to the Committee of Creditors for its approval such Resolution Plans which confirm the conditions referred to in sub- section (2). It is therefore, incumbent on the part of Resolution Professional to examine each Resolution Plan received by him and to confirm that each plan provided for the matters stated in sub-section (2) of Section 30. He has to present to the CoC for its approval, only such Resolution Plans which confirm the conditions referred to in sub- section (2). 60. It is also required to be noted that as per sub-section (1) of Section 31, the Adjudicating Authority is empowered to approve only such Resolution Plan approved by the Committee of Creditors under sub-section (4) of Section 30, which meets the requirements as referred to in sub- section (2) of Section 30. Meaning thereby, not only that the Resolution Professional has to confirm that the Resolution Plan presented before the CoC for its approval confirmed the conditions referred to in sub-section (2) of Section 30, the Adjuciating Authority ....
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....plicant has the capability to implement the resolution plan." The said Regulation 38(1) was amended from time to time and lastly by Notification dated 27.11.2019, the relevant part thereof reads as under: - "38(1) Mandatory contents of Resolution Plan:- (1) The amount payable under a resolution plan - (a) to the operational creditors shall be paid in priority over financial creditors; and (b) to the financial creditors, who have a right to vote under sub-section (2) of Section 21 and did not vote in favour of the resolution plan, shall be paid in priority over financial creditors who voted in favour of the plan." 62. Thus, the Regulation 38, whether it stood prior to or after the amendment required that the Resolution Plan proposed by the Resolution Applicant must provide for the amount due to the Operational Creditors under the Resolution Plan by giving priority in payment over Financial Creditors. It must also provide the terms of the plan, its implementation schedule, the management and control of the business of the Corporate Debtor during its term, and adequate means for supervising its implementation. The Resolution Plan also must dem....
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....ith and the dues of Financial Creditors were given priority over the dues of the Operational Creditors. 66. Despite such gross non-compliances of the mandatory provisions of IBC and the CIRP Regulations 2016, the Resolution Professional placed the Resolution Plan of JSW before the CoC. The CoC also without verifying the mandatory requirements of Regulation 38 particularly with regard to the feasibility and viability of the plan, effective implementation of the plan and the capability of Resolution Applicant to implement the plan, permitted the Resolution Applicant to submit the Consolidated Resolution Plan with Addendum Letter, which otherwise had many loose ends. Just as the Resolution Professional had failed to examine and confirm the compliance of mandatory provisions of the Code, to secure the interests of all the stakeholders involved in the process, the CoC also did not discharge its duty to carefully examine the feasibility and viability of the plan, and the capacity and resources of the Resolution Applicant-JSW for the implementation of the plan proposed by it. 67. As transpiring from the minutes of 18th and 19th Meetings held on 14.08.2024 and 10.10.2024 respectively....
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....r the Application for approval of plan was within the prescribed time limit under Section 12 or not, whether the Resolution Plan submitted by JSW had met the requirements as referred to in sub-section (2) of Section 30 or not, and whether the Resolution Plan had the provisions for its effective implementation as required to be satisfied under proviso to sub-section (1) of Section 31, approved the said Plan of JSW. 69. It is pertinent to note that as per the Resolution Plan, the Effective date for the purpose of the approved Resolution Plan was the date not exceeding 30 days from the approval by the NCLT of the Resolution Plan approved by the CoC, or such extended period which may be permitted by 66% majority of the lenders forming part of the erstwhile CoC. The JSW had proposed in its Resolution Plan to implement its obligation under the said plan by incorporating/ identifying a 100% wholly owned subsidiary company. It had also proposed to invest in equity (to the extent of Rs.8,550 Crores) of a special purpose vehicle which had to merge with the Corporate Debtor on the appointed date upon the approval of the Resolution Plan by the NCLT (Section I of Part A of the Resolution Pla....
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....e Resolution Plan which was in fact an unconditional plan; that though there was no stay granted by this Court on the implementation of the plan, there was willful breach of plan by not implementing the same; that the pendency of Appeal or any litigation would not mean a stay on an approved and binding Resolution Plan as per Section 31; that by way of its in action, it is bleeding dry the public sector banks to whom it owes Rs.19,350 Crores; that the JSW was under an obligation under the expressed terms of the Resolution Plan to implement the same within 30 days of its approval by NCLT; that applicability of Section 32(A) to the benefit of JSW was not a pre-condition to the implementation of the Resolution Plan nor it would change the unconditional commitment of JSW to implement the plan in time bound manner; that the JSW had refuted the rightful claim of CoC of the upfront payments as committed in the Resolution Plan and also the compensation for not paying the same etc. The CoC had pointed out the defaults of JSW in not implementing the Plan and submitted that the CIRP proceedings were languishing for more than 35 months because of the non-implementation of the Resolution Plan at....
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....on and the Resolution Applicant has the capability to implement the Resolution Plan in a time bound manner. If the Resolution Plan does not comply with such mandatory requirements and such plan is approved by the CoC, it could not be said that the CoC had exercised its commercial wisdom while approving such Resolution Plan. 74. In the instant case, though the CoC in its 18th and 19th Meetings had flagged all the issues with regard to non-compliance of various provisions of the IBC and the Regulations by JSW, surprisingly it approved Plan of JSW, without any deliberation on all the compliances. Further, in the present proceedings also after making serious allegations against JSW of misusing the process of law and not implementing the Resolution Plan in the time bound manner, accepted the amount of Rs. 19,350 Crores after about two years of the approval of Plan granted by the NCLT, without raising any objection, and supporting the stand of JSW about the implementation of Plan during the course of arguments. 75. Though the commercial wisdom of the CoC should have been given the primacy in any adjudicatory proceedings, the changing stance of CoC from time to time during the cours....
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....the Company Appeal before the NCLAT, just to delay the implementation of the Plan. 77. Even after the impugned judgment was passed by the NCLAT, allowing the said untenable Appeal of JSW and dismissing the other Appeals of the Operational Creditor and the Ex-Promoters, the Resolution Plan was not implemented by JSW under the guise of pendency of the present Appeals, though there was no stay granted by this Court against the implementation of the Resolution Plan. On the contrary a statement was made by Dr. Singhvi appearing for the CoC, as recorded in the order dated 06.03.2020, to the effect that "in case he receives money he will return the said amount within two months, if the appeal succeeds." Again, pending these Appeals, with a view to delay the implementation of the Resolution Plan, JSW filed an IA being No. 47947/2020 in SLP(C) No. 29327-29328/2019 (Civil Appeal Nos.14503-14504 of 2004), which were tagged along with the present Appeals, attempting to seek a stay on the implementation of plan under the garb of seeking clarification of the court's order dated 06.03.2020, stating inter alia that JSW was not obligated to implement the Resolution Plan during the pendency of th....
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.... implement the plan because of the pendency of these Appeals, however JSW played smart by making part payment to the Financial Creditors in March, 2021, realizing the beneficial market trend of the Steel. It also surreptitiously got the Effective date extended to 31.03.2021 from the so-called core group of CoC, which had already become functus officio and which had no authority to extend the said Effective date. The net result is that the upfront payments as agreed to be made in the Resolution Plan within thirty days of the approval of the plan by NCLT was delayed by 540 days in respect of payment to the Financial Creditors and by 900 days in respect of payment to the Operational Creditors. The Equity commitment as per clause 2.3 of the Resolution Plan with regard to the infusion of Equity into the Company for an amount aggregating INR 8,550 crores, to be infused upfront on the Effective date, was also not complied with by JSW. 80. It is very pertinent to note that the upfront payments and commitment with regard to infusion of Equity into the company was one of the main criteria on which JSW had scored the highest in the evaluation matrix determined by the CoC. Thus, after obtai....
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....ugh a purely commercial lens. Instead, it must recognise that rescuing a distressed company is a responsibility of significant social and economic value, demanding a holistic and responsible strategy. This involves a dedication to long-term outcomes, where the successful resolution applicant adopts measures that genuinely support the debtor's rehabilitation, rather than making minimal or half-hearted attempts at implementation. The courts and Tribunals have consistently underscored that the successful resolution applicant's role transcends commercial interest and embodies a commitment to the larger purpose of corporate revival. Consequently, it must make thoughtful and sustained efforts, demonstrating adaptability and resilience even when faced with obstacles or operational impediments. Simply put, the successful resolution applicant cannot step back or dismiss its obligations by attributing delays or setbacks to the conduct of other stakeholders, as this would undermine the very purpose of insolvency resolution. 174-175........................... 176. The Insolvency and Bankruptcy Code, 2016 is silent as regards the phase of implementation of the resolution plan b....
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....rs since its approval by the NCLAT, though there was no legal impediment in implementing the same. Such flagrant violation of the terms of the Resolution Plan, has frustrated the very object and purpose of the Code. It is needless to say that the Resolution Plan, after its approval by the Adjudicating Authority i.e. NCLT under Section 31, is binding not only to the Corporate Debtor, its employees, members, creditors and the Government authorities but also to all the stakeholders including the successful Resolution Applicant itself. It may be noted that any contravention of the terms of the approved Resolution Plan, by any person on whom such plan is binding under Section 31, is liable to be prosecuted and punished under sub-section (3) of Section 74 of the IBC. It is also further required to be noted that in view of Section 33, where the Adjudicating Authority, before the expiry of the insolvency resolution process period or the maximum period permitted for completion of corporate insolvency resolution process under Section 12, does not receive a Resolution Plan under Sub-section (6) of Section 30; or rejects the Resolution Plan under Section 31 for the non-compliance of the requir....