9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (11) TMI 478 - HC - Insolvency and BankruptcyNon-viability of the financial arrangement between the Corporate Creditors and the Corporate Debtor - Requirement to wait any further for the appellant No. 1/ the Company to resolve the Review process initiated by the Appellant Company seeking Review by the West Bengal Electricity Regulatory Commission (Commission), of the Tariff Order of the Commission dated the 31st of May 2021 - HELD THAT - The settlement of the tariff or, the Tariff Order, being a pre-condition towards the restructuring arrangement arrived at in the meeting dated the 17th of February, 2021, with the pronunciation of the Tariff Order by the Commission on the 31st day of May 2021, such pre-condition stood answered. It is not within the domain of R3 and R4 acting as lenders to wait any further beyond the Tariff Order pronounced by the Commission. It is evident that the restructuring exercise arrived at the said Consortium Meeting dated 17th of February, 2021 has not worked out. It is not the domain of the Writ Court to explore whether, following the collapse of the restructuring exercise, R3 and R4 could be prodded to extend further concessions in favour of the Appellant No. 1/ the Company. The issue between the parties is at a stage now when the non-viability of the financial arrangement between the Corporate Creditors and the Corporate Debtor subsumes, arguably if any, the public law element which can be attributed to either the RBI Framework of 2019 or, to the nature of the business of the Appellant No.1/ the Company, i.e. to generate an essential service such as electricity. Admittedly, having regard to the commercial arrangement arrived at between the parties at the said Consortium Meeting dated 17th February, 2021, there is no legal flaw in R3 and R4 taking the next logical step under the IBC. The Tariff Order dated 31st May, 2021 being fundamental to both the Corporate Debtor and the Corporate Creditor, its failure necessitated that the parties re-visit their positions or, at least brief each other of their respective positions, prior to embarking upon exercising their respective legal options. It would be thus open to the parties to keep the Tariff Order dated 31st May, 2021 one last time on the table and, on failure to reach a commonality of perceptions, either of the parties could then proceed with their chosen legal remedies. This Court is not at all unmindful of the primacy of the IBC proceedings. This Court is also not at all unmindful of the fact that the survival of the corporate entity, viz. the Appellant No.1/the Company, as distinguished from its Promoter Group, shall be given due and deep consideration under the IBC. At the same time this Court must record the fact that a select Audit placed before the said Consortium Meeting dated 17th February, 2021, did not suspect the Appellant No.1/the Company of any mala fide financial action. The Commission to adjudicate the Review Petition of the Appellant No.1/the Company on its own merits not later than a period of six weeks from the date of communication of this order - application disposed off.
Issues Involved:
1. Whether the Corporate Creditors (R3 and R4) are required to wait for the Review process initiated by the Appellant Company before proceeding under the Insolvency and Bankruptcy Code (IBC). 2. The propriety of the unilateral invocation of the IBC by R3 and R4. 3. The jurisdiction of the Writ Court in addressing the actions of R3 and R4. Issue-wise Detailed Analysis: 1. Requirement for Corporate Creditors to Wait for Review Process: The core issue is whether R3 and R4 must wait for the Appellant Company's Review process of the Tariff Order by the West Bengal Electricity Regulatory Commission (Commission) before proceeding under the IBC. The Appellant Company, a thermal power generator, sought a Review of the Tariff Order dated May 31, 2021, citing arithmetical omissions. The Review was filed on June 11, 2021, and is pending. The Appellant argued that R3 and R4's action under the IBC without awaiting the Review's outcome is premature and affects the restructuring process agreed upon in a Consortium Meeting on February 17, 2021. 2. Propriety of Unilateral Invocation of the IBC: The Appellant contended that R3 and R4's unilateral invocation of the IBC contravenes the restructuring proposal under the RBI Framework of 2019 and the consensus reached in the Consortium Meeting, which emphasized the importance of the Tariff Order for restructuring. The Appellant argued that the IBC proceedings initiated by R3 and R4 are abrupt and deny the Company the opportunity to resolve the tariff issues, impacting its right to do business under Article 19 of the Constitution of India. Conversely, R3 and R4 argued that the restructuring agreement is a private contract and the Tariff Order's pronouncement on May 31, 2021, fulfilled the pre-condition for restructuring. They maintained that the Appellant's non-acceptance of the Tariff Order does not bind them, and they are free to invoke the IBC to realize their debts. They cited precedents indicating that IBC proceedings are competent to address the restructuring of stressed assets. 3. Jurisdiction of the Writ Court: The Court examined whether it could intervene in the matter, given the public law element due to the nature of the Appellant's business (electricity generation) and the involvement of state entities (R3 and R4). The Court noted that the Tariff Order is fundamental to both parties and its failure necessitated revisiting their positions. The Court emphasized its duty to do complete justice and directed the Commission to adjudicate the Review Petition within six weeks. It also instructed R3 and R4 to address the Tariff Order in a second Consortium Meeting with the Appellant Company. Findings and Directions: A) The Tariff Order was a key pre-condition for restructuring. B) Both parties took steps to obtain the Tariff Order. C) The Tariff Order was crucial for the Appellant's financial viability. D) The non-viability of the Tariff Order does not prevent R3 and R4 from invoking the IBC. E) The problem of the non-viable Tariff Order is solely the Appellant's issue. F) The Review Application points to significant arithmetical omissions. G) The Commission must decide on the Review Application's merits. H) Corporate Creditors cannot wait indefinitely for the tariff adjudication process. I) The Appellant failed in key commitments, justifying R3 and R4's IBC action. J) The Writ Court can exercise jurisdiction due to the public law element. K) Equity and commercial law must balance predictability and justice. L) High Courts have the power to do complete justice. M) Parties should re-visit the Tariff Order before proceeding with legal options. N) The IBC proceedings' primacy and the Appellant's survival should be considered. Final Directions: I) The Commission to adjudicate the Review Petition within six weeks. II) R3 and R4 to address the Tariff Order in a second Consortium Meeting with the Appellant. III) The Court did not delve into the merits but acted to ensure complete justice. The judgment and order of the Single Bench dated July 2, 2021, were modified accordingly. The appeal and application were disposed of with no order as to costs.
|
