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2019 (5) TMI 987 - Tri - Insolvency and BankruptcySubmission of resolution plan as approved by the Committee of Creditors (CoC) - prayer in this application is for withdrawal of CA No.364 of 2018 in the light of the fact that Liberty House Group PTE (LHG) has been unable to comply with even the basic requirement of furnishing the Performance Guarantee, which was required to be given by the resolution applicant on approval of the resolution plan by the CoC - to exclude the time period spent, in negotiating with LHG and in litigation w.e.f. 18.05.2018 till passing of the final order HELD THAT - There is a clear default by the LHG in not complying with the essential terms and conditions of the LoI and the process memorandum. The terms of the process memorandum as well as the LoI duly signed by the LHG would show that furnishing of the performance guarantee was the essential term. Copy of the LoI is at Annexure-7 filed with CA No.364/2018, as per which the LHG was bound to furnish within 10 business days from the date of issuance of LoI a performance guarantee as defined and in the manner as given in clause 14 of the process memorandum and that clause has already been referred while narrating the facts of the case. There is no indication in these communications that LHG does not understand the import of the word performance guarantee or the process memorandum to be a bank guarantee. The very use of the word performance guarantee implies that it is to be in the form of bank guarantee as it is preceded by the word performance. It cannot be accepted that for the total amount to be made available by LHG for the resolution plan of ₹2505 crore, the guarantee can be furnished by way of simple contract of guarantee and not the bank guarantee of ₹ 100 crores for the purpose of meeting out the requirement of performance guarantee. The prayer made by the applicant-Financial Creditor submitted by the Resolution Professional for withdrawal of CA No.364 of 2018 being basically not contested, deserves to be allowed. Exclusion of the time period spent, in negotiating with LHG and in litigation w.e.f. 18.05.2018 till passing of the final order - HELD THAT - The proposition which emerges therefore is that certain period can be excluded from the total period of 270 days permissible under Section 12 of the Code. It is alleged in the application filed by State Bank of India on behalf of a Financial Creditor in CA No.592 of 2018 that the period from the date of the acceptance of LHG as the preference bidder i.e. 18.05.2018 upto the disposal of the instant application may be excluded. The original period of 270 days expired on 13.09.2018 and therefore, there still remains sufficient time for the Resolution Professional and the CoC to take further decisions in order to ensure that the CIR Process becomes ultimately successful. Therefore, we hold that the period from 18.05.2018 till receipt of the copy of this order should be excluded by for counting the period of 270 days in completion of the insolvency resolution process. Application allowed.
Issues Involved:
1. Approval of the resolution plan by Liberty House Group (LHG) 2. Withdrawal of the application for approval of the resolution plan 3. Exclusion of time period from the Corporate Insolvency Resolution Process (CIRP) 4. Compliance with the Performance Guarantee requirement 5. Imposition of costs on LHG for non-compliance Detailed Analysis: 1. Approval of the Resolution Plan by Liberty House Group (LHG): The resolution professional filed CA No.364/2018 under Section 30(6) read with Sections 31 and 60(5) of the Insolvency and Bankruptcy Code, 2016, to submit the resolution plan of LHG as approved by the Committee of Creditors (CoC). The plan was supported by an affidavit dated 03.09.2018. The CoC had approved the resolution plan with 98.80% votes in favor, and a Letter of Intent (LOI) was issued to LHG on 30.08.2018, requiring the submission of a Performance Guarantee within ten business days. 2. Withdrawal of the Application for Approval of the Resolution Plan: State Bank of India, a financial creditor, filed CA No.592/2018 on behalf of the CoC, seeking permission to withdraw CA No.364/2018 due to LHG's failure to comply with the requirement of furnishing a Performance Guarantee. The application also sought exclusion of the time period spent in negotiating with LHG and in litigation from the CIRP period. The CoC had resolved to invoke the Bid Bond Guarantee and file an application for withdrawal of the resolution plan approval. 3. Exclusion of Time Period from the CIRP: The Tribunal considered the exclusion of certain periods for counting the total period of 270 days for the completion of the insolvency resolution process. It referred to the judgment of the Hon'ble National Company Law Appellate Tribunal in Quinn Logistics India Pvt. Ltd. vs. Mack Soft Tech Pvt. Ltd., which allows exclusion of certain periods in unforeseen circumstances. The Tribunal decided to exclude the period from 18.05.2018 to the date of receipt of the certified copy of the order for counting the 270 days. 4. Compliance with the Performance Guarantee Requirement: LHG failed to submit the Performance Guarantee of ?100 crores as required by the LOI and the process memorandum. Despite reminders and negotiations, LHG proposed converting an existing bid bond guarantee into a performance guarantee and creating an overseas escrow account for the remaining amount, which was not acceptable to the CoC. The Tribunal concluded that LHG defaulted in complying with the essential terms of the LOI and the process memorandum. 5. Imposition of Costs on LHG for Non-Compliance: The Tribunal imposed exemplary costs of ?10 lacs on LHG for making a mockery of the CIRP system and failing to comply with the essential terms of the resolution plan and LOI. The costs were to be deposited with the Prime Minister Relief Fund within one month from the date of receipt of the order. The financial creditors were given liberty to file proceedings for claiming damages and/or costs before the appropriate forum. Conclusion: The Tribunal allowed the withdrawal of CA No.364/2018 and excluded the period from 18.05.2018 to the date of receipt of the certified copy of the order for counting the 270 days of the insolvency resolution process. It also directed the CoC to issue specific notice inviting Expression of Interest to Deccan Value Investors (DVI) and imposed costs on LHG for non-compliance. The order was communicated to the parties and the Insolvency and Bankruptcy Board of India.
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