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2024 (4) TMI 120 - AT - Companies LawRecovery of premium dues, interest, default interest, penal interest, interest overdue etc. - priority of charges - waterfall mechanism - whether as per the Concession Agreement and the Escrow Agreement, payment of premium has priority over the payment of debts of the Bank? - HELD THAT - The Concessionaire has agreed that it shall pay to the Authority for each year of the Concession Period, a premium in the form of an additional concession fee. The Clauses 25.4 and 26.2 contain an agreement of Concessionaire to pay the Authority a premium in the form of an additional concession fee. The definition, thus, clearly indicate that premium is treated to be additional concession fee - on looking into Clause 31.3.1 and Clause 4.1.1, it is clear that both the provisions provide same priority and Clauses (e) Concession Fee due and payable to the Authority , (f) monthly proportionate provision of Debt Service due in an Accounting Year and (g) Premium due and payable to the Authority are the same. The bone of contention between the parties are that since Clause (e) uses word Concession Fee due and payable to the Authority , it is higher in priority from Clause (f), which deals with monthly proportionate provision of Debt Service due in an Accounting year and concession fee includes the premium, hence, the premium has to be paid priority to the payment under Clause (f). Parties having categorized premium in different Clause, which is below the monthly proportionate provisions of Debt Service due in an Accounting year, it cannot be said that the same was done without any meaning and premium payment is in lower priority to monthly proportionate provision of Debt Service due in an Accounting Year. There are substance in the submission of learned Counsel for the Applicant that with regard to withdrawal from Escrow Account, the priority as given in Clause 4.1.1 of Escrow Agreement has to be followed. It is noticed that in the present case, the resolution of Respondent No.2 as per the Resolution Framework approved by this Tribunal on 12.03.2020 is in final stages. The order dated 15.09.2021 passed by the NCLT has been brought on the record, which notices the approval by Justice D.K. Jain also. When an entity is to be resolved as per Resolution Framework, payments to all creditors/ claimants including the Lenders have to be as per the Resolution of the Entity - It is also relevant to notice that when Resolution of Respondent No.2 is at the final stages, there is no occasion for Respondent No.1 to proceed to terminate the Concession Agreement to further complicate the Resolution of an Entity. Application allowed.
Issues Involved:
1. Priority of payment of premium over debt service under the Concession Agreement and Escrow Agreement. 2. Entitlement of NHAI to terminate the Concession Agreement and appoint a third-party agency for toll collection. 3. Classification of premium payments as going concern expenses. 4. Status and impact of the Resolution Process on the Concession Agreement and toll collection. Summary: Issue 1: Priority of Payment of Premium Over Debt Service The primary question was whether the payment of premium had priority over the payment of debts to the Bank under the Concession Agreement and Escrow Agreement. The Tribunal examined various clauses, including Clauses 25.4, 26.1, 26.2, and 31.3 of the Concession Agreement, and Clause 4.1.1 of the Escrow Agreement. It concluded that although the premium is treated as part of the Concession Fee, the Concession Fee and Premium are defined separately and listed under different clauses. The Tribunal held that the premium payment is in lower priority to the monthly proportionate provision of Debt Service due in an Accounting Year, as per Clause 4.1.1 of the Escrow Agreement. Issue 2: Entitlement of NHAI to Terminate the Concession Agreement and Appoint a Third-Party Agency The Tribunal noted that NHAI had issued notices demanding payment of premium dues and threatened to terminate the Concession Agreement. However, given that the resolution of Respondent No.2 (BKEL) was in its final stages as per the Resolution Framework approved by the Tribunal on 12.03.2020, the Tribunal found no occasion for NHAI to proceed with the termination of the Concession Agreement. The Tribunal emphasized that final resolution of Respondent No.2 should be achieved at an early date. Issue 3: Classification of Premium Payments as Going Concern Expenses The Tribunal addressed whether premium payments could be classified as going concern expenses. It was argued that going concern expenses are necessary for maintaining the business operations of the Corporate Debtor, and premium payments to NHAI do not relate to the operation and maintenance of the Project. The Tribunal found merit in the argument that premium payments are not going concern expenses and that the premium can be deferred, as it had been previously deferred from 2015 to 2025. Issue 4: Status and Impact of the Resolution Process on the Concession Agreement and Toll Collection The Tribunal observed that the resolution of Respondent No.2 was in its final stages and that any termination of the Concession Agreement by NHAI would complicate the resolution process. The Tribunal directed that the priority as given in Clause 4.1.1 of the Escrow Agreement should be followed and that appropriate measures should be taken for the final resolution of Respondent No.2. Conclusion: The Tribunal allowed the Application filed by the State Bank of India in terms of prayers (a), (b), (c), and (d), directing that NHAI should not recover any amount towards premium payment and other dues except in accordance with the waterfall mechanism prescribed under Clause 4.1.1 of the Escrow Agreement. The Tribunal also restrained NHAI from taking any actions that may jeopardize the resolution of Respondent No.2, including termination of the Concession Agreement and replacement of Respondent No.2 for toll collection.
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