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2024 (6) TMI 50 - AT - Insolvency and BankruptcyForfeiture of amount by the Committee of Creditors (CoC) led by the State Bank of India (SBI) - restarint by the CoC from implementing its Resolution Plan or not - Appellant contends that the forfeiture was unlawful and that the CoC s actions were contrary to the terms of the Resolution Plan and the applicable regulations - Reference to IBBI. On the Forfeiture of INR 10 Crores - HELD THAT - Clause 12 of Section 5 of the Resolution Plan, particularly the belowmentioned highlighted portion, clearly brings out that the bank guarantee or equivalent performance security can be invoked and forfeited if the Resolution Applicant withdraws or fails to implement the plan without reasonable cause - In the present case, the CIRP was initiated on 11.04.2017. But the fact is that the CIRP of the Corporate Debtor was still going as on 24.01.2019 and the factum of default by the Appellant attained finality by way of the order PETER BECK AND PETER VERMOEGENSVERWALTUNG LTD. VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LTD. ANR. ETC. 2022 (2) TMI 1443 - SC ORDER of the Hon ble Supreme Court. i.e. when the aforesaid Regulation was very much in force. The Appellant s contention that this Regulation cannot be applied retrospectively, therefore, without merit, as the CIRP was ongoing when the Regulation came into effect, and the default was established while the Regulation was in force. Irrespective of the fact whether Regulation 36B(4A) was applicable or not, the forfeiture Clause 12 of Section 5 of the Resolution Plan, as noted by us earlier, clearly provides for the forfeiture in such a situation and the argument of the Appellant, therefore, cannot be accepted. The Appellant s failure to provide valid bank guarantees in the internationally acceptable SWIFT format and the inability to meet the financial commitments as stipulated in the Resolution Plan constitute a clear violation of the terms agreed upon. Despite multiple extensions and opportunities provided by the CoC, NCLT and the NCLAT, the Appellant did not fulfil its obligations. This non-compliance justifies the forfeiture of the deposited amount under the provisions of the Resolution Plan and the CIRP Regulations. On the Alleged Restraint by CoC - HELD THAT - SBI addressed a letter to Banque de Luxembourg requesting the latter to renew the bank guarantee expiring on 30.08.2019. Banque de Luxembourg issued a letter to SBI refusing to renew the bank guarantee or honour the invocation of the bank guarantee, stating that the bank guarantee cannot be considered as a valid bank guarantee but as a non-effective bank guarantee. Subsequently, the Respondent No 2 informed Appellant-Peter Beck to submit a valid and enforceable bank guarantee via SWIFT mode before 11.11.2019, the failure of which will be treated as a default. As a reply to which, Peter Beck sought return of its deposit stating that the sum of INR 10 crore was required to be returned as per applicable laws in respect of share application money, highlighting the fact that this remittance was never intended to be in lieu of the bank guarantee. To the contrary, Peter Beck had admitted in its emails dated 31.8.2019 that the amount deposited was in lieu of Bank Guarantee as evident from the Appellant s email which is on record - the Appellant is approbating and reprobating on its stance qua the nature of INR 10 Cr. deposited with SBI. On reference to IBBI - HELD THAT - The Appellant had deposited INR 10 crores in place of the guarantee. It was availing legal remedies to redress its grievances at various levels. Furthermore, their security deposit of INR is being forfeited as per the AA s orders. There are no sufficient cause for proceeding under Section 74(3) of the Code as the appellant had deposited INR 10 crores as part of the conditions of the implementation of the resolution plan and cannot be said to be wilfully not implementing the Resolution Plan. However, it is a different matter that it could not proceed further for reasons better known to them - Apart from the orders of forfeiture of INR 10 crs, there are no justification to proceed any further under Section 74(3) of the Code and make a reference to IBBI for taking action against the Appellant under this section. The forfeiture of INR 10 Crores by the CoC, led by SBI and approved by the AA, was lawful and in accordance with the Resolution Plan and the CIRP Regulations. The Appellant s failure to comply with the essential terms of the Resolution Plan, including the submission of valid bank guarantees and necessary financial commitments, warranted such forfeiture - there are no sufficient cause for initiation of proceedings in terms of Section 74(3) of the Code. Appeal dismissed.
Issues Involved:
1. Lawfulness of the CoC's forfeiture of INR 10 Crores deposited by the Appellant. 2. Whether the Appellant was restrained by the CoC from implementing its Resolution Plan. Summary: Issue 1: Lawfulness of the CoC's Forfeiture of INR 10 Crores The Appellant, Peter Beck und Partner Vermoegensverwaltung GMBH, challenged the NCLT's order allowing the forfeiture of INR 10 Crores deposited with Abhyudaya Cooperative Bank. The CoC, led by SBI, forfeited the amount due to the Appellant's failure to submit valid bank guarantees and comply with the implementation schedule of the Resolution Plan. The tribunal found that Clause 12 of Section 5 of the Resolution Plan and Regulation 36B(4A) of the CIRP Regulations justified the forfeiture. The Appellant's contention that the Regulation could not be applied retrospectively was dismissed, as the CIRP was ongoing when the Regulation came into effect. The tribunal noted that the Appellant had multiple opportunities to comply but failed to do so, thus justifying the forfeiture. Issue 2: Whether the Appellant was Restrained by the CoC from Implementing its Resolution Plan The Appellant argued that the CoC, particularly SBI, obstructed the implementation of the Resolution Plan by not providing necessary account details for additional fund deposits. However, the tribunal found that the bank details were always available to the Appellant, who managed to deposit INR 10 Crores but failed to deposit the remaining INR 5 Crores. The tribunal noted that the CoC provided ample opportunities for compliance, and the Appellant's claims of being restrained were unfounded. Findings: The tribunal concluded that the forfeiture of INR 10 Crores was lawful and in accordance with the Resolution Plan and CIRP Regulations. The Appellant's failure to submit valid bank guarantees and meet financial commitments warranted the forfeiture. The tribunal also found no sufficient cause for initiating proceedings u/s 74(3) of the IBC against the Appellant, as the forfeiture itself was deemed adequate. Order: The appeals filed by Peter Beck und Partner Vermoegensverwaltung GMBH were dismissed, affirming the NCLT's order dated 12.12.2023. However, the tribunal set aside the observations regarding the reference to IBBI for punishment u/s 74(3) of the IBC.
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