2019 (5) TMI 1838 - Tri - Insolvency and Bankruptcy

Approval of Resolution Plan - termination of agreements - HELD THAT - The resolution applicant in its resolution plan, cannot seek to terminate agreements that have created legal rights in third parties without adhering to the due process of law by which those agreements could have been terminated in case there was no CIRP in place. Such termination of legally binding agreements would violate the law under which such contracts are governed and thus in violation of section 30(2)(e). The termination in the present situation is based on the allegations of the terms of the Contract being onerous and against the interest of the Company. There is an application filed by Resolution Professional under section 45 of the I B Code for setting aside of the transaction above between the Corporate Debtor and the Veritas being undervalued which is pending final adjudication before this Tribunal. Therefore, the validity of the said transactions is yet to be decided by this Tribunal, and until then these transactions shall not be treated as undervalued transactions. The renegotiations are welcomed, and this Tribunal could not have demanded anything more than an amicable settlement of the dispute within the parties themselves out of these proceedings. However, this Tribunal is not inclined to give any exemptions or unilateral termination of legally binding contracts creating rights of third parties and existing before the initiation of the CIRP. Further, the Veritas does not have any right as sub-concessionaire or sub-lessee to get a copy of the resolution plan so the copy of the resolution plan cannot be given to the Veritas as sought in its application. This Bench is of the view that the Resolution Applicant has all the rights to either continue or terminate the existing agreements of the Company but only as per due process under applicable laws and this bench would not grant any exemption from liability under any Law. This Adjudicating Authority cannot sit in a judicial enquiry into the commercial wisdom of the CoC in dissenting to the resolution plan of the unsuccessful resolution applicant, i.e. APSEZ and that too with a whopping percentage of 99.38%. Instead, when the CoC has approved the resolution plan of the JNPT with a majority of 99.38%, then enquiry into the approved resolution plan is only possible on limited grounds referred to in Section 30(2) read with Section 31(1) of the I B Code - application dismissed.

Summary

Issues Involved:
1. Approval of the resolution plan under Section 31 of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Claims and objections raised by Veritas (India) Limited and its affiliates.
3. Objections raised by Adani Ports and Special Economic Zone Ltd. (APSEZ).

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan:
The resolution plan was filed under Section 31 of the IBC, 2016, seeking approval for the Corporate Debtor, Dighi Port Limited. The plan was submitted by Jawaharlal Nehru Port Trust (JNPT) and was approved by the Committee of Creditors (CoC) with a 99.38% majority. The plan included provisions for the payment of insolvency resolution process costs, debts of operational creditors, and management of the Corporate Debtor's affairs. The plan proposed the reconstitution of the Corporate Debtor's Board and the appointment of a monitoring committee. The Tribunal observed that the resolution plan of JNPT was more than 85% of the average liquidation value and higher than the average fair value determined by the registered valuers.

2. Claims and Objections by Veritas:
Veritas (India) Limited and its affiliates filed MA 1147/2019, seeking to intervene in the proceedings and reject or modify the resolution plan to protect their rights as sub-lessees and sub-concessionaires. Veritas argued that their agreements with the Corporate Debtor were bona fide and should not be unilaterally terminated without due process. The Tribunal noted that the resolution plan proposed the termination of Veritas agreements due to their onerous terms. However, the Tribunal held that the resolution applicant could not unilaterally terminate legally binding agreements without following due process. The Tribunal directed that any termination must adhere to applicable laws, and Veritas was not entitled to a copy of the resolution plan. Consequently, MA 1147/2019 was rejected.

3. Objections by Adani Ports and Special Economic Zone Ltd. (APSEZ):
APSEZ filed MA 761/2019, challenging the CIRP process and the approval of JNPT's resolution plan. APSEZ raised several points, including the alleged unfair exclusion from the process, non-compliance with the Swiss Challenge process, and non-submission of a performance guarantee by JNPT. The Tribunal noted that the CoC had the discretion to adopt or withdraw the Swiss Challenge process and that APSEZ had been given sufficient opportunities to present and improve its resolution plan. The Tribunal also observed that JNPT, as a government entity, had a sovereign guarantee, which was considered sufficient in lieu of a performance guarantee. The Tribunal emphasized that it could not interfere with the commercial wisdom of the CoC, which had approved JNPT's plan with a 99.38% majority. Consequently, MA 761/2019 was rejected.

Reliefs and Concessions Sought by JNPT:
JNPT sought various reliefs and concessions, including waivers of stamp duty, taxes, and compliance with certain laws. The Tribunal did not grant these reliefs but allowed JNPT to apply to relevant regulatory authorities for exemptions as per law. The Tribunal emphasized that any resolution applicant must take over the Corporate Debtor with all its assets and liabilities and comply with all applicable laws.

Conclusion:
The Tribunal approved the resolution plan submitted by JNPT with modifications, emphasizing that any termination of agreements must follow due process. The moratorium under Section 14 ceased, and the resolution professional was directed to forward all records to the Insolvency and Bankruptcy Board of India (IBBI). The resolution applicant was required to file an affidavit accepting the conditional approval of the resolution plan. The matter was listed for further proceedings on 27.05.2019.