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TMI Blog2019 (4) TMI 1790X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Applicant: Arun Kathpalia, Sr. Advocate, Nakul Sachdeva, Ambika Singh, Manmeet Singh, Advocates Counsel for Resolution Professional: Vaibhav Mahajan, Ravneet Singh, Advocates Counsel for Punjab National Bank: Hashmi Nabi, Advocate ORDER 1. The present application has been filed by the Resolution Applicant (RA) i.e. JSW Steel Ltd. seeking clarifications on certain observations and directions made by this Tribunal in its order dated 19.12.2018 vide which the Tribunal approved the resolution plan submitted by the RA for resolution of the Corporate Debtor ( CD ) i.e. Vardhman Industries Ltd. 2. The observations and directions with regard to which the RA is seeking clarifications/modifications are as follows: 7, The existing board of directors shall be reconstituted with the existing directors deemed to have resigned on the Effective Date. All powers given to the erstwhile management and promoter group will be withdrawn and the memorandum and articles of association of the CD will stand substituted. 8. On and from this Tribunal 's approval date and until the Effective Date, CD will continue be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in invocation of the personal guarantee of the guarantors of CD issued in favour of the lenders. This view is also supported by the recent decision as passed by the Hon'ble Supreme Court in State Bank of India vs. Ramakrishnan Anr., Civil Appeal No. 3595 of 2018 dated 14.08.2018. 27. This Bench records its satisfaction for granting approval to the resolution plan subject to the following conditions: i. In relation to Cl. IX (1) at page 18 dealing with right to receivables, it is directed that any amounts recovered by the CD would be, before being put to any other use, would be used to pay the balance amount to financial creditors and operational creditors of the CD which has been accepted as haircut to the total amount due to them, under this resolution plan. ii. In relation to Cl. IX (2) at page 18 dealing with carry forward losses, it is directed that the relief asked for will be allowed subject to the approval of the Income Tax Department of the same. iii. In relation to Cl. IX (4) at page 18 dealing with proposal relating to subsidiaries, associate companies and joint ventures of the CD and in relation to Cl. 1.7(ii) of Schedule 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentence ...approval of the resolution plan by this Tribunal will not diminish or enhance the liability of the CD in terms of the agreement/consent as entered into between the CD and PNB of paragraph 23. The RA states that the said observation may create confusion in future as no guarantee was given by the CD to PNB or OBC. Further, both PNB and the RA in their pleadings had agreed to only the continuance of mortgage and nothing further. Thus, the RA has requested the Tribunal to clarify in relation to paragraph 3 that only the mortgage continues in the favour of PNB and OBC and no other liability of any nature whatsoever, whether under contract or otherwise shall subsist on the CD, provided however that any right of reimbursement, subrogation or indemnity which the CD may have against M/s. Vallabh Steels Pvt. Ltd. in relation to such enforcement of mortgage shall not be affected. 6. During the course of submissions, the Learned Counsel represented in relation to paragraph 23 that confusion had arisen in relation to the guarantee offered and it was clarified by the Learned Counsel that even though a mortgage has been created in favour of PNB and OCB but no guarantee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in the invocation of the personal guarantees and that it deals only with invocation of the guarantees and nothing more. Further, paragraph 26 read with the resolution plan, especially Cl. 1.3(viii) of Schedule 4, approved by the same order leaves no doubt that no right of subrogation etc survives against the CD. Thus, this modification/clarification is rejected for being redundant and repetitive. Paragraph 27(i) 9. The RA states that the condition in paragraph 27 is not the result of any objections raised by any stakeholder nor does it form a part of the reliefs asked for the by the RA in its resolution plan. The condition materially alters and modifies the resolution plan wherein the amounts payable to financial creditors and operational creditors have been clearly specified. The RA's business plan as described in Schedule 5 clearly notes in cl. I(iii) that the business plan is based on the assumption that as of the NCLT Approval Date the Company will have positive net working capital. A requirement to pay the receivables to the financial creditors or operational creditors materially affects the business plan and could make the resolution plan not v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the jurisdictional principal commissioner or commissioner Of income tax. Thus, the RA requests the Tribunal to clarify that no permission from the Income Tax Department is required and that since no representation has been made by the Income Tax Department the opportunity as provided under Section 79 of the Income Tax Act 1961 was not availed. 12.Considering the proviso to Section 79 of the Income Tax Act, 1961 which states that Section 79 shall not apply to a company where shareholding takes place in a previous year pursuant to a resolution plan approved under the Code, after affording a reasonable opportunity of being heard to the jurisdictional principal commissioner or commissioner, this Tribunal has decided that an opportunity should be given to the Income Tax Department presently by asking the RA to take the approval of the Department for this relief because the Department was not given an opportunity of being heard during the earlier proceedings in terms Of the proviso to Section 79. Thus, this prayer of the RA is rejected. Paragraph 27(iii) 13. The RA states that since the Tribunal has expressly approved Cl. IX(4) of the resolution plan for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will directly or indirectly fall on the shoulders of the RA, thus ensuring that the RA does not get any unjust benefits. 16. The RA further states that reference to Cl. 1.7 of Schedule 4 at page 29 of the resolution plan appears to have been referred to inadvertently as it does not pertain solely to subsidiaries and associates. Cl. 1.7(ii) of Schedule 4 reflects fundamental attributes of the resolution plan that all claims of any person who has a claim against the CD shall stand extinguished, unless the same has been provided for elsewhere in the resolution plan. Hence, the RA requests that the Tribunal clarify that the reference to Cl. 1.7(ii) in paragraph 27(iii) of the order dated 19.12.2018 be deleted. 17.1n light of the submission by the RA that Cl. 1.7 of Schedule 4 is a fundamental and protective clause applicable to persons not dealt with elsewhere in the resolution plan and in light of the observations made in the above paragraphs, the only modification directed in relation to paragraph 27(iii) is that the words and in relation to Cl. I. 7(ii) of Schedule 4 at page 29 shall stand deleted from paragraph 27(iii). Paragraph 27(iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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