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2020 (9) TMI 385 - AT - Insolvency and BankruptcyLiquidation of Corporate Debtor - Reduction of share capital - specific case of the Appellant(s) is that they have duly complied with the conditions to be followed by them, as per order dated 15.05.2019, but the direction in the said order of the vesting of the ownership, control and management of the affairs of the Corporate Debtor was never complied with the 1st Respondent thereby depriving the Appellant(s) from the vesting its control and management upon the Corporate Debtor for its implementation of the Resolution Plan . HELD THAT - In the instant case, the 1st Appellant / Resolution Applicant had deposited ₹ 15 crores in the Escrow account was permitted as per order of this Tribunal on 29.07.2020 and further this Tribunal had directed that the said amount so deposited in Escrow Account shall not be appropriated without prior approval of this Tribunal. Also, that the 1st Appellant / Resolution Applicant had averred in the Affidavit in compliance of order dated 18.08.2020 at paragraph 7 that it is agreeable for forfeiture of an amount of ₹ 15 crores in addition to the already forfeited amount of ₹ 5 crores, in case it fails to deposit an amount of ₹ 50 crores within the three months period, from the date of reversal of the liquidation order. A perusal of Section 29A clause of the I B Code (i) indicates that it disqualifies a person if he has been subject to any of disabilities stated in clauses (a) to (h) of Section 29A in any jurisdiction outside India. In reality, Section 29A (i) will have to be read as a disability which corresponds to Section 29A(f) in view of the antecedent conduct on the part of a person applying as a Resolution Applicant in a jurisdiction outside India - Section 29A(f) and (i) of I B Code speaks of persons prohibited by foreign securities market regulator. It is seen from Section 29A(f) of the Code that if any of the individuals mentioned therein is prohibited by SEBI from either trading in securities are accessing the securities market, again ineligibility of an individual furnishing the plan attaches. In fact, as per sub- clause (i) if a person situate abroad is subject to any disability which correspond to sub-clause (a) of the code such person also is forbidden. Therefore, if a person is prohibited by a Regulator of the Securities market in a foreign market of trading in security and accessing the security market the then disability as per sub-clause (i) of section 29A would get attracted. This Tribunal, taking note of the entire conspectus of the attendant facts and circumstances of the instant case in an encircling manner and also keeping in mind of the plea taken on behalf of the liquidator that the Resolution Applicant(s) cash flow mentioned in the failed Resolution Plan is squarely dependent upon the sale of assets and hence it is subjective in character , this Tribunal, bearing in mind that the 1st Appellant / Resolution Applicant is only said to be holding 12% equity in Kridhan Infra Limited etc. and added further in view of the specific plea taken by the Liquidator that the Resolution Applicant through its subsidiaries had defaulted to Union Bank of India, Hongkong Branch to an extent of INR 750 crores approx. and hence, ineligible u/s 29A of the I B Code - Appeal dismissed.
Issues Involved:
1. Delay in Implementation of Resolution Plan 2. Non-compliance with Approved Resolution Plan 3. Decision to Initiate Liquidation Proceedings 4. Appointment of Liquidator and Liquidation Costs 5. Opportunity for Resolution Applicant to be Heard 6. Financial Viability and Eligibility of Resolution Applicant 7. Role and Authority of Liquidator and Stakeholders 8. Use of Inherent Powers under Rule 11 of NCLAT Rules Detailed Analysis: 1. Delay in Implementation of Resolution Plan The Tribunal noted that the successful resolution applicant, Kridhan Infrastructure Private Limited, failed to infuse equity funds as per the terms of the Resolution Plan and did not take over the control of management even after eight months from the approval of the plan. The Committee of Creditors (CoC) passed a resolution for the liquidation of the Corporate Debtor due to the inordinate delay and non-compliance by the Resolution Applicant. 2. Non-compliance with Approved Resolution Plan The Tribunal observed that the Resolution Applicant had repeatedly failed to honor their commitments, including equity infusion, upfront payment, and taking control of management, which severely threatened the going concern status of the Corporate Debtor. The Tribunal cited Section 33(3) of the Insolvency and Bankruptcy Code, 2016, which mandates liquidation if the approved resolution plan is contravened. 3. Decision to Initiate Liquidation Proceedings The CoC, with an overwhelming majority of 99.28% voting share, resolved to initiate liquidation proceedings due to the non-compliance and inordinate delay by the Resolution Applicant. The Tribunal upheld this decision, emphasizing that adherence to statutory requirements is mandatory and the language of the Code is clear and explicit. 4. Appointment of Liquidator and Liquidation Costs The Tribunal appointed Mr. Ramachandran Subramanian as the liquidator, as proposed by the CoC, under Section 34(1) of the Code. The Tribunal also approved the liquidation costs and fees payable to the liquidator and support team, as detailed in the CoC's resolution. 5. Opportunity for Resolution Applicant to be Heard The Appellant contended that they were not given an opportunity to be heard and sought more time to file a detailed reply, which was not granted. However, the Tribunal found that multiple opportunities were given to the Appellant to comply with the Resolution Plan, and the liquidation order was passed only after significant delays and non-compliance. 6. Financial Viability and Eligibility of Resolution Applicant The Tribunal considered the financial viability and eligibility of the Resolution Applicant, noting that the Appellant's subsidiaries had defaulted on significant loans, making them ineligible under Section 29A of the Code. The Tribunal also noted the Appellant's poor financial performance and inability to implement the Resolution Plan. 7. Role and Authority of Liquidator and Stakeholders The Tribunal clarified that the stakeholders' consultation committee under the liquidation process does not have the power to determine decisions, and their consultations are not binding on the liquidator. The liquidator must act in the interests of the collective body of creditors. 8. Use of Inherent Powers under Rule 11 of NCLAT Rules The Tribunal emphasized that inherent powers should not be invoked when specific provisions in law exist to deal with situations. The Tribunal found no exceptional or extraordinary circumstances to invoke Rule 11 of the NCLAT Rules to set aside the liquidation order. Conclusion: The Tribunal upheld the liquidation order, finding no legal flaw or material irregularity in the Adjudicating Authority's decision. The appeal was dismissed, and the sum of ?15 crores deposited by the Appellant in the Escrow Account was ordered to be returned. The Tribunal directed the Appellant to file the certified copy of the impugned order within ten days.
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