2022 (12) TMI 711 - AT - Insolvency and Bankruptcy

Cancellation of approval of Resolution Plan - Breach of conditions of the Plan - forfeiture of amount of Rs. 20 Crore deposited by the Resolution Applicant - Appellant contended that, Appellant had come to know that there have been various transactions with regard to the 05th floor which was never communicated to the Appellant by the Resolution Professional. Appellant has further come to know that there are disputes with regard to second floor of the hotel. Resolution Professional having never mentioned about the transaction regarding the second floor in Information Memorandum, no breach of the Resolution Plan can be imputed to the Resolution Applicant. HELD THAT - The Resolution Professional has brought on record the entire information memorandum running into 111 pages which contains all details regarding the assets, financial information, details of liabilities, details of certain litigation and ongoing investigations or proceedings were also mentioned in the Information Memorandum including provisional attachment order passed in the Enforcement Directorate. Information Memorandum is a comprehensive document containing all details and in view of the detailed information memorandum which is part of the record, it is not open for the Appellant to contend that certain information was not shared with the Appellant by the Resolution Professional which furnishes the basis for the Appellant not to implement the Resolution Plan. The Order passed in so far as it canceled the approval given to the Resolution Plan by Order dated 04.01.2022 as well as forfeiting Rs. 20 Crores deposited by the Resolution Applicant is affirmed. Wilful contravention of terms of the Resolution Plan - Referring Matter to IBBI for apapropriate action u/s 74(3) - direction No. III - HELD THAT - there has to be a consideration by the Adjudicating Authority as to whether facts of the particular case require any reference under Section 74(3). There is no observation in the Order that Appellant has knowingly and willfully contravened any of the terms of the Resolution Plan. Without there being any observation even in prima facie basis that the Resolution Applicant has knowingly and willfully contravened any of the terms of the Resolution Plan, reference under Section 74(3) was not called for, in the facts of the present case. The Order dated 01st November, 2021 in so far as direction No. III is concerned, is set aside

Summary

Issues Involved:
1. Cancellation of the approval of the Resolution Plan.
2. Forfeiture of Rs. 20 Crores deposited by the Successful Resolution Applicant.
3. Reference to the IBBI for action under Section 74(3) of the Insolvency and Bankruptcy Code, 2016.
4. Rejection of applications seeking directions and clarifications related to the Resolution Plan.

Detailed Analysis:

1. Cancellation of the Approval of the Resolution Plan:
The National Company Law Appellate Tribunal (NCLAT) upheld the cancellation of the Resolution Plan approved on 04.01.2020 due to the Successful Resolution Applicant's failure to implement the plan. The Appellant argued that the dispute over the ownership of the 5th floor of the hotel property, which was pending in C.A. No. 01/2018, prevented the plan's implementation. However, the tribunal found that the Resolution Plan and its Addendum-1 dated 16th March 2018 were submitted with full knowledge of the disputes and were not conditional on the resolution of C.A. No. 01/2018. The tribunal emphasized that the Appellant had undertaken to implement the plan regardless of the outcome of the pending application.

2. Forfeiture of Rs. 20 Crores Deposited by the Successful Resolution Applicant:
The NCLAT affirmed the forfeiture of Rs. 20 Crores deposited by the Appellant. The tribunal noted that the Appellant failed to pay the remaining Rs. 232 Crores within the stipulated 30 days from the approval of the plan. The tribunal found that the Appellant's conduct indicated a lack of interest and capability in implementing the plan, justifying the forfeiture of the deposit.

3. Reference to the IBBI for Action under Section 74(3) of the Insolvency and Bankruptcy Code, 2016:
The tribunal set aside the direction referring the matter to the Insolvency and Bankruptcy Board of India (IBBI) for action under Section 74(3). It held that there was no prima facie finding that the Appellant had knowingly and willfully contravened the terms of the Resolution Plan. The tribunal emphasized that such a serious reference required a specific observation of willful contravention, which was absent in this case.

4. Rejection of Applications Seeking Directions and Clarifications Related to the Resolution Plan:
The NCLAT upheld the rejection of C.A. No. 719(PB)/2020 and C.A. No. 1247(PB)/2019, which sought directions and clarifications regarding the implementation of the Resolution Plan. The tribunal found no merit in the Appellant's claims that additional directions were necessary for the plan's implementation. The tribunal reiterated that the plan was not conditional and that the Appellant was aware of all relevant disputes and issues at the time of submission.

Conclusion:
The NCLAT's judgment comprehensively addressed the issues raised by the Appellant, affirming the cancellation of the Resolution Plan and the forfeiture of the deposit while setting aside the reference to the IBBI for punitive action. The tribunal directed the National Company Law Tribunal (NCLT) to expedite the decision on C.A. No. 01/2018 and allowed the Resolution Professional to invite fresh expressions of interest post the decision. The period of the Corporate Insolvency Resolution Process (CIRP) was extended accordingly.