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2025 (9) TMI 1474
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....e terms of the IPLOI and the Request for Proposal [hereinafter referred to as "RFP"], and whether any actionable fraud or legal irregularity can be attributed to the Respondent No. 1 in relation to the filing of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, before the NCLT, Kolkata. 2. The present Appeal under Clause 10 of the Letters Patent assails the correctness of judgment dated 16.09.2019 [hereinafter referred to as "Impugned Judgment"] passed by learned Single Judge in W.P.(C) 14068/2018 whereby the learned Single Judge dismissed the writ petition filed by the Appellants challenging, inter alia, the letter dated 05.11.2018 issued by the Respondent No. 1 purportedly cancelling the IPLOI, as amended by the addendum dated 18.09.2018 [hereinafter referred to as "Amended IPLOI"], issued in favour of the Appellant No. 1; and further sought consequential reliefs, including a restraint on the invocation of an unconditional Bid Performance Guarantee [hereinafter referred to as "BPG"] or bank guarantee for Rs. 100 crores. 3. In order to comprehend the controversy involved in the present case, the relevant facts in brief are required to be noticed. ....
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....tance was communicated after seven days, which was found non-compliant under Clause 2.7.2 of the RFP. Despite being informed by the lead Lender on 27.08.2018 that the acceptance letter was non-compliant, the Appellant No. 1 failed to remedy the breach. 8. Pursuant to the RBI Circular and the non-compliance by the Appellant No. 1, the lead Lender was constrained to file an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 [hereinafter referred to as "IBC"] before the National Company Law Tribunal [hereinafter referred to as "NCLT"], Kolkata. FLSmidth Pvt. Ltd. [hereinafter referred to as "FLS"] had earlier filed an application under Section 9 of the IBC for initiation of corporate insolvency resolution process against JPL on 22.11.2017. 9. Although the application under Section 7 of the IBC was filed, it was not admitted, allowing the lead Lender to withdraw the same. Despite multiple opportunities, the Appellant No. 1 failed to comply with the terms of the RFP and IPLOI. Consequently, the lead Lender issued a termination letter dated 05.11.2018 cancelling the IPLOI and authorizing invocation of the unconditional BPG of Rs. 100 crores. 10. On 19.11.201....
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....appropriate writ/order /direction calling for the entire record from Respondent No. 1 of CP (IB) No. 1291/KB/2018 filed by Respondent No. 1 before NCLT, Kolkata." 12. Counter-affidavit(s)/Reply(ies) to the Writ Petition were filed, and after detailed consideration of facts, IPLOI/RFP provisions, communications, and the statutory framework, the learned Single Judge dismissed the writ petition by judgment dated 16.09.2019, which led to filing of the present Appeal. 13. As per the IPLOI and the Addendum, the Appellant No. 1 was required to undertake the following actions by 15.10.2018: i. Furnish firm commitment letters from an Assets Reconstruction Company or other entities acceptable to the Lenders, evidencing availability of requisite funds for the transaction; ii. Provide an additional unconditional bank guarantee of Rs. 10 crores to secure performance of obligations; iii. Execute definitive agreements formalizing the share transfer and other related obligations. 14. Despite repeated communications, reminders, and sufficient opportunities granted by the Lenders, the Appellant No. 1 failed to comply with any of the aforementioned conditions. Furt....
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.... circulars, including revocation of IPLOI and invocation of bank guarantees, were invalid. It was further submitted that the Lenders' in-house resolution process, including transfer of debt and disposal of shares, could only be undertaken under the statutory framework of the IBC or in accordance with the RBI Circular, which had been subsequently quashed. 18. It was also contended that definitive agreements could not be executed without a final LOI, and the revocation of the IPLOI prior to fulfilment of these requirements was legally impermissible. It was additionally submitted that the Appellants had made arrangements to fund the transaction and were ready to execute the remaining steps, but Respondent No. 1's unilateral actions frustrated the completion of the transaction. 19. Lastly, it was argued that some of the other Lenders were willing to extend time, yet the IPLOI was terminated and the bank guarantee invoked unilaterally, causing irreparable prejudice to the Appellants. CONTENTIONS OF THE RESPONDENTS 20. Per contra, learned senior counsel for the Respondent Nos. 1 and 2 strongly contested all contentions of the Appellants. It was submitted that the application ....
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..... 24. The Respondents emphasized that the RFP and IPLOI were contractual instruments intended to regulate the transaction. The Appellants were required to fulfil obligations under a seven-step process, which included furnishing additional bank guarantees, demonstrating funding arrangements, and executing definitive agreements. The Appellants had failed to complete the required steps, and therefore, the revocation of IPLOI and invocation of the bank guarantee were justified. Clause 11 of the IPLOI explicitly provided the lenders the right to terminate the transaction and invoke the bank guarantee in case of non-compliance, and the Addendum clarified that the bank guarantee would only be returned if the process was cancelled through no fault of the Appellants. 25. Lastly, it was submitted that invocation of the bank guarantee is independent of execution of definitive agreements, is irrevocable and unconditional, and enforceable on first demand. The Appellants had offered to pay approximately Rs.2,350 crores but failed to make the necessary arrangements, proving non-compliance with the IPLOI terms. The unanimous decision of the Evaluation Committee on 18.01.2019 further validate....
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....I Rule 4 of the CPC requires that full particulars of fraud be incorporated in the petition and proved by leading cogent evidence. While deciding a writ petition, the Court is not expected to decide disputed questions of fact. The learned Single Judge has held that the Appellants have failed to substantiate their allegations of fraud. This Court concurs with this finding and does not find any reason to interfere. 30. The argument based upon the judgment of the Supreme Court in Dharani Sugars (supra), which struck down the revised framework circular dated 12.02.2018 issued by the RBI, lacks substance because the said judgment declared the Circular to be ultra vires Section 35AA of the Banking Regulation Act, 1949, and consequently rendered all actions taken solely pursuant to the Circular, including initiation of proceedings under Section 7 of the IBC, to be non-est. In the present case, however, the revocation of the IPLOI on 05.11.2018 was not an action traceable to the Circular, but a contractual step taken by the lenders in exercise of their commercial wisdom. Therefore, the judgment in Dharani Sugars (supra) does not advance the case of the Appellants. 31. It is ....
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....k guarantees, executing definitive agreements, and consummating the transaction, were not fulfilled by the Appellants. 36. This Court further notes that it is not proved that the Respondent No. 1 kept changing the goalposts regarding tie-up of funds. The Appellants had offered to pay approximately Rs.2,350 crores. They were required to make arrangements and provide proof of steps taken in this regard but failed to do so. Mere expression of willingness to pay, without demonstrable arrangements, cannot substitute actual compliance with the terms of the IPLOI. 37. Clause 11 of the IPLOI explicitly provides that the lender reserves the right to terminate the transaction and invoke the bank guarantee in the event the Appellants are unable to comply with the stipulated conditions. The terms of the IPLOI also provide that, in case of any discrepancy between the RFP and IPLOI, the IPLOI shall prevail. The Addendum further clarifies that the bank guarantee shall be returned only if the process is cancelled by the lenders for reasons not attributable to the Appellants. In the present case, the Appellants committed default and are therefore not entitled to any refund. 38. The content....