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2023 (3) TMI 72 - AT - Insolvency and BankruptcyViolation of principles of natural justice - Impleading Financial Creditors as necessary party - Resolution plan already approved - whether for obtaining the approval of the Adjudicating Authority for sale of asset as per the Revised Resolution Framework, whether the Appellant ought to have been impleaded as necessary party to the application? - HELD THAT - The Appellant being member of the Creditors Committee and having participated in the meeting held on 17.02.2021, it cannot be said that in passing resolution for approving the highest bid any principles of natural justice have been violated. The Appellant is a dissenting Financial Creditor who has only 1.89% vote share. When resolution is passed by the Creditors Committee and approval is sought from the Adjudicating Authority, as per the Revised Resolution Framework approved by this Tribunal on 12.03.2020, it is not necessary that all dissenting Financial Creditors should be impleaded to the application - Present is not a case where it can be said that any principles of natural justice have been violated since the Appellant has raised its objection in the meeting of the Creditors Committee and also voted against the resolution. The filing of the application for approval before the Adjudicating Authority was as per the steps provided in the Revised Resolution Framework - the order of the Adjudicating Authority dated 23.09.2022 cannot be set aside on the ground of violation of any principles of natural justice. The stay of an order means that the order which has been stayed would not be operative from the date of the passing of the stay order but it does not mean that the said order has been wiped out from existence. The distribution of the consideration received by the applicant (IL FS) from the transaction which have been proposed or withdrawal of any other amounts from the designated bank account shall be subject to further orders of the Adjudicating Authority. In event, order is passed by Hon ble Supreme Court in the pending Appeal, the same is also to be given effect in the proceedings before the Adjudicating Authority - Appeal dismissed.
Issues Involved:
1. Loan Sanction and Facility Agreement 2. Tribunal's Stay Order and Escrow Account Debits 3. IL&FS's Sale of TIFC Property 4. Approval of Sale by Creditors Committee and Adjudicating Authority 5. Alleged Violation of Principles of Natural Justice 6. Effect of Supreme Court's Stay Order Detailed Analysis: 1. Loan Sanction and Facility Agreement: The Housing Development Finance Corporation Ltd. (HDFC Ltd.) sanctioned a loan of Rs.400 crores to IL&FS under a lease rental discounting transaction. The repayment was to be sourced from cash flows generated from the TIFC property, which were assigned to HDFC Ltd. A Master Facility Agreement, Assignment and Administration Agreement, Escrow Account Agreement, and Power of Attorney were executed on 25.06.2018. 2. Tribunal's Stay Order and Escrow Account Debits: On 15.10.2018, the Tribunal stayed the initiation or continuation of suits or proceedings against IL&FS and its group companies, including foreclosure, recovery, or enforcement of any security interest. Post this order, IL&FS informed the Escrow Bank, requesting the reversal of debits amounting to Rs.6.24 crores. Hon'ble Justice (Retd.) D. K. Jain subsequently directed the Escrow Bank and lenders to maintain the status quo and later held that the debits violated the Tribunal's orders. 3. IL&FS's Sale of TIFC Property: IL&FS issued an advertisement on 14.10.2020 inviting expressions of interest for the sale of the TIFC property. Despite objections from HDFC Ltd., the Creditors Committee approved the highest bid of Rs.1080 crores from Project Holding Seven (DIFC) Ltd. This resolution was approved by the Board of Directors and Hon'ble Justice (Retd.) D. K. Jain, subject to the Tribunal's final decision in I.A. No. 2966 of 2020. 4. Approval of Sale by Creditors Committee and Adjudicating Authority: The Creditors Committee, with a majority vote of 73.57%, approved the sale of the TIFC property. The Adjudicating Authority later approved the proposed transaction, directing that the amounts received be paid into a designated bank account and held in trust for relevant stakeholders, with distribution subject to further orders. 5. Alleged Violation of Principles of Natural Justice: HDFC Ltd. argued that the Adjudicating Authority's order was passed without impleading them as a necessary party, violating principles of natural justice. However, the Tribunal noted that HDFC Ltd. was a member of the Creditors Committee and had participated in the meeting where the sale was discussed. Thus, it concluded that there was no violation of natural justice as HDFC Ltd. had the opportunity to raise objections and vote. 6. Effect of Supreme Court's Stay Order: The Supreme Court stayed the Tribunal's judgment dated 13.05.2022, which directed the reversal of debited amounts. The Tribunal clarified that a stay does not nullify the order but renders it inoperative temporarily. The pending adjudication before the Supreme Court does not hinder the approval of the TIFC property sale, which was conducted as per the Revised Resolution Framework approved by the Tribunal. Conclusion: The Tribunal dismissed the appeal by HDFC Ltd., upholding the Adjudicating Authority's order approving the sale of the TIFC property. It emphasized that the sale process adhered to the Revised Resolution Framework and that the principles of natural justice were not violated as HDFC Ltd. was involved in the Creditors Committee's decision-making process. The distribution of sale proceeds remains subject to further orders, ensuring compliance with any future Supreme Court rulings.
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