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TMI Blog2021 (2) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... harika Sharma, Adv. Mr. Joydeep Mukherjee, Adv. Ms. Akansha Srivastava, Adv. 2 Mr. Rabin Majumder, AOR Mr. Arvind Kumar Gupta, Adv. Ms. Henna George, Adv. Mr. Ravindra Sadanand Chingale, AOR Mr. P. S. Sudheer, AOR Mr. D. P. Singh, Adv. Ms. Sonam Gupta, AOR Ms. Ishita Jain, Adv. Mr. Anurag Tandon, Adv. Mr. Manish Paliwal, Adv. Mr. Vikas Kumar, Adv. Mr. Raghav Tiwari, Adv. Mr. Mayank Grover, Adv. M/s Corporate Legal Partners Mr. Mayank Pandey, AOR Mr. E. C. Agrawala, AOR JUDGMENT Dr Dhananjaya Y Chandrachud, J 1 This judgment will govern two proceedings: (i) A Contempt Petition - Contempt Petition (C) No.542 of 2020 instituted by the Committee of Creditors of AMTEK Auto Limited ("corporate debtor") inter alia against Deccan Value Investors LP ("DVI"), the third Respondent in the Civil Appeal - Civil Appeal No. 6707 of 2019 for violation of an order passed by this Court on 18 June 2020- Order dated 18 June 2020 passed in I.A. No. 54321 of 2020 in Civil Appeal No. 6707 of 2019. (ii) An application for rectification- I.A. No.58156 of 2020 of the order of this Court dated 18 June 2020 instituted by DVI. Both the proceedings are inter-related. Both have been heard together. 2 On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e debtor and was instituted on 26 August 2019 by the CoC. 8 This Court issued notice in the Civil Appeal on 6 September 2019 and stayed the liquidation of the corporate debtor. The second proviso to Section 12(3) of the IBC was amended with effect from 16 August 2019 by the Amending Act 26 of 2019 so as to stipulate a time limit of 330 days for the completion of the corporate insolvency resolution process from the insolvency commencement date. On 24 September 2019, this Court accordingly directed the RP to invite fresh offers within a period of 21 days, following which the CoC was directed to take a "final call in the matter" within two weeks. The decision was to be placed before this Court on 5 November 2019. The RP made a public announcement for inviting fresh resolution plans on 26 September 2019, and the last date for submission of resolution plans was 22 October 2019. The CoC on 23 October 2019 concluded that only one resolution plan was received within the stipulated timeline. DVI submitted a financial proposal on 4 November 2019. In the meantime on 6 November 2019, the CoC moved an IA - I.A. No.168814 of 2019 before this Court seeking an extension of four weeks to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order relegating the matter to the NCLT to decide upon the approval application within a fortnight. The time spent before the NCLT and this Court was directed to be excluded for calculating the long stop date. An email was addressed to DVI on the same day by the RP to submit a performance bank guarantee for the balance of INR 150 crores by 15 June 2020. DVI filed an application - I.A. No.54321 of 2020 before this Court on 12 June 2020 seeking a modification of the order of 8 June 2020 for grant of a period of two months to it to examine and understand the impact of the onset of COVID-19 and to re-evaluate the resolution plan. Simultaneously, the RP filed an application - IA No.225 of 2020 in CP (IB) No.42/CHD/HRY/2017 before the NCLT on the same day seeking approval of the resolution plan submitted by DVI. While seeking a extension of time of two months before this Court, DVI in its IA inter alia stated that: "4. The Approval Application by the Appellant seeking approval of DVI's Resolution Plan, was listed for hearing on 08.06.2020, when the Applicant submitted that due to Covid-19 pandemic DVI's Resolution Plan (as submitted and approved by the CoC) was unviable and not feas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly 2020 setting an outer limit of 10 July 2020. In the meantime, on 30 June 2020 DVI moved its rectification application - IA No.58156 of 2020 before this Court on the ground that: (i) No application had ever been filed by DVI seeking withdrawal of the order; and (ii) DVI had never approached this Court earlier for any relief including seeking an extension of time. 13 NCLT passed an order on 9 July 2020 approving the resolution plan submitted by DVI. Following this, on 10 July 2020, an email was addressed to DVI by the erstwhile RP to provide its nominations to the Implementation and Monitoring Committee ("IMC"). By this email, DVI was also requested to attend the first meeting of the IMC scheduled on 14 July 2020. On 14 July 2020, DVI by its email stated that formation of the IMC and the convening of meetings was premature and recorded its intent to institute an appeal against the order of the NCLT dated 9 July 2020 approving the resolution plan. On 21 July 2020, the RP addressed a communication to DVI to implement the resolution plan and submit a performance bank guarantee for the balance INR 150 crores. This was reiterated in a communication dated 23 July 2020 of the CoC t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel on behalf of the contemnor. 18 Mr Mukul Rohatgi, learned Senior Counsel appearing on behalf of DVI submitted that the order of this Court dated 18 June 2020 needs to be rectified or clarified on the ground that it proceeds on two factual misconceptions. The factual errors are stated to be that: (i) The IA that was moved by DVI was for withdrawal of the offer (resolution plan); and (ii) Various orders have been passed by this Court at the instance of DVI. 19 The submission is that the observation of the Court that "in case he [DVI] indulges in such kind of practice, it will be treated as contempt of this Court" is premised on a factual misconception. Addressing the Court on the first of the above premises, Mr Rohatgi submitted that the reliefs which were sought in the application that was filed by DVI on 12 June 2020 were in the following terms: "(a) Pass an order modifying the Order dated 08.06.2020 to grant a period of 2 (two) months from the date of the Order to the Respondent No. 3/ Applicant to examine and understand the impact of the Covid-19 pandemic and the lock down to discuss the terms of the Resolution Plan with the Committee of Creditors and thereafter direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C, there can be no manner of doubt that this was to facilitate the finalization and approval of a resolution plan and DVI was among the resolution applicants. After the CoC approved DVI's resolution plan on 11 February 2020, an IA was filed by the CoC on 13 May 2020. This Court by an order dated 8 June 2020 relegated the proceedings to the NCLT for considering the approval application. Laying stress on the IA filed by DVI on 12 June 2020, it was urged that an attempt was made by DVI to wriggle-out of its commitments under the resolution plan which has been approved by the CoC on 11 February 2020 by highlighting the impact of COVID-19 on the financial health of the corporate debtor. (ii) Despite this Court having rejected the IA on 18 June 2020 : (a) DVI failed to take steps in pursuance of the resolution plan which is approved by the NCLT on 9 July 2020 by (i) failing to submit the second tranche of the performance bank guarantee of INR 150 crores; (ii) failing to provide its nomination to the IMC; (iii) refusing to attend the meetings of the IMC; (iv) setting up through its advocates the plea that a force majeure event had occurred resulting in termination of the resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the condition precedents to the implementation of the resolution plan have not been fulfilled. The following paragraphs of the reply have been emphasized: "5. It is submitted that Resolution Plan dated 17.01.2020 (r/w the addendum dated 07.02.2020) as submitted by DVI and approved by the COC contains several obligations/conditions precedents for its effective implementation and to ensure the going concern status of the Corporate Debtor. It is an admitted position that the Resolution Professional / COC inter alia failed to ensure compliance of certain conditions precedents under the Resolution Plan including failure of obtaining the prior written consent of the mortgage of the Ace Complex Land whilst executing a long term lease deed on behalf of the Corporate Debtor. By an email dated 29.01.2020, such default was brought to the due notice of the Resolution Professional by the representative of DVI. The aforesaid requirement of obtaining the prior written consent was further reiterated by DVI in the addendum dated 07.02.2020. A copy of the email dated 29.01.2020 is attached as Annexure R-1. (Pages 37-40) 6. It is a matter of record that the aforesaid issues were brought before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a form and substance acceptable to the Resolution Applicants; (ii) no right of termination according to the lessor as long as lease rentals are paid; and (iii) right of first refusal occurring to the Resolution Applicants, in case of sale of ACE Complex Land." 10. It is thus seen that it is one of the essential requirements of the Resolution Plan for the Corporate Debtor to execute a long-term lease (for 20 years or more) in respect of the Ace Complex Land with "Acceptable Terms" i.e. with the prior written consent of Vistra ITCL (India) Limited ("Vistra") viz; the mortgagee of the Ace Complex Land. 11. Significantly, the aforesaid requirement of the "Execution of a long term lease (subsisting for 20 years or more) for the ACE Complex Land with Acceptable Terms" was reiterated in the addendum to the Resolution Plan dated 07.02.2020." 23 During the course of the hearing, Dr Singhvi made the following oral statement namely that "the application filed by DVI before the Supreme Court was to consider finding solutions for the delay occasioned by COVID-19. Neither was force majeure pleaded nor has it been pleaded now and only an extension of time has been sought on the ground of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the corporate debtor and to enable the parties to renegotiate the terms of the resolution plan. In other words, DVI sought to submit that the purpose of relegating the issue of approval of the resolution plan was to enable a re-negotiation to take place before the resolution plans which have been approved by the CoC could be the subject matter of an approval of the adjudicating authority. Now, this submission of DVI cannot be accepted for two reasons: firstly, it is a settled principle of law that the record of the Court speaks for itself and the terms of a judicial order reflect what has been decided. The order of this Court dated 8 June 2020 indicates that since the fresh resolution plan had been passed by the CoC with the majority of 70 per cent, "the matter of IA" namely, IA 48906 of 2020 filed by the CoC was being relegated to the NCLT for passing "appropriate orders". There is absolutely no indication in the order of the Court dated 8 June 2020 that the purpose of relegating the IA to the NCLT was to facilitate a fresh evaluation being made by DVI in regard to the impact of the pandemic on the economy, the auto industry and the health of the corporate debtor. DVI, in oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 020 was to enable DVI to re-negotiate the resolution plan after assessing the impact of the pandemic is thus fundamentally flawed. It is flawed because this assertion is contrary to the plain terms of the record. It is flawed also because the submission is contrary to the nature of the function which is expected to be exercised by the adjudicating authority by the plain terms engrafted into the provisions of Section 31. When DVI moved its application on 12 June 2020, it asserted that the timeline of 15 days has "resulted in practical difficulties for parties to enter into any meaningful discussions and negotiations". To assert that there was any scope for negotiations and discussions after the approval of the resolution plan by the CoC would be plainly contrary to the terms of the IBC. DVI, in paragraph 7 of its application stated that it was seeking a clarification/modification for, inter alia, the following reasons: (i) Its management team was based out of the US and found it difficult to travel to India during the course of the pandemic; (ii) The pandemic had had a drastic impact on the business, revenue, assets and financial and operational health of the corporate debtor; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or being allowed to re-examine the impact of the pandemic and to re-negotiate the terms of the resolution plan makes it abundantly clear that DVI was not willing to fulfill the terms of the obligations which it had agreed. This is evident from the fact also that though DVI was obliged to furnish the second tranche of its performance bank guarantee of INR 150 crores, it was not ready to do so. On the contrary, apprehending a threat of the invocation of the first tranche of the bank guarantee of INR 150 crores, DVI pleaded special equities and sought a direction allowing it to keep the bank guarantee alive until the process of re-negotiation was completed in two months. This again was to overcome the consequence of the invocation of the bank guarantee arising from DVI's default. The prayer seeking a direction to allow DVI to extend the bank guarantee was artfully worded since the effect would be to restrain the invocation of the bank guarantee. One of us (Justice MR Shah) was a member of the Bench which declined to grant relief on the IA filed by DVI on 12 June 2020. But, for the purpose of the present application, this judgment is based on the record as it stands, which leaves no ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 29A of the IBC and other documents on 6 December 2019. Fresh resolution plans were submitted by four entities including DVI on 31 December 2019. 28 On 6 January 2020, the CoC declared DVI as the highest evaluated resolution applicant. DVI submitted a revised resolution plan dated 17 January 2020, following which the voting which was scheduled by the CoC on that day was cancelled. The revised proposal of the DVI was discussed in the 29th meeting of the CoC. On the same day - 20 January 2020 -when the proceedings were listed before this Court it took note of the fact that the CoC was in the process of approving a resolution plan following which an extension of two weeks was granted. DVI submitted an addendum to the resolution plan on 7 February 2020. 29 On 10 February 2020, the CoC sought an extension of a week for the resolution plan to be voted upon by the members of the CoC. On 11 February 2020, the resolution plan of DVI was approved and an affidavit was filed by the RP before this Court on 19 February 2020 reporting the approval of DVI's resolution plan by the CoC. Appropriate directions were sought. This sequence of events leaves no manner of doubt that the extension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gated the matter to the NCLT to decide upon the approval application within a fortnight. NCLT passed an order approving the resolution plan submitted by DVI on 9 July 2020. DVI having taken recourse to its appellate remedy before the NCLAT under the provisions of Section 61 of the IBC does not constitute contempt. The plea of contempt however proceeds on the conduct of DVI. Bearing on this issue, the following circumstances have to be noted: (i) the pleas which were set up by DVI in paragraphs 9,12,13,15 and 17 of its IA filed on 12 June 2020, clearly sought to setup a foundation for force majeure. In paragraph 9, DVI pleaded that "Covid-19 pandemic has materially and adversely impacted commercial assumptions underlying the business plan and financial proposal for revival of the corporate debtor and the feasibility and viability of the resolution plan". In paragraph 12, DVI urged that the execution of a letter of intent and submission of an additional bank guarantee "would mean that the approved resolution plan is being implemented without taking into consideration the changed circumstances, and would be directly in conflict with the intent of discussing the plan after understand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve circumstances leave no manner of doubt that despite the rejection of its IA by this Court on 18 June 2020, DVI continued to persist in raising the same grounds as a justification to be relieved of the obligations imposed on it by the terms of its resolution plan. 34 Dr Abhishek Manu Singhvi, learned Senior Counsel had, in the course of his submissions which have been recorded earlier, submitted that neither was force majeure pleaded then (in the IA filed before this Court) nor thereafter. 35 Faced with the communication dated 3 September 2020 of ELP made on behalf of DVI, Dr Abhishek Singhvi submitted that the submission was not before the NCLAT. However, even this is factually incorrect. 36 Mr Niraj Kishan Kaul, learned Senior Counsel has drawn the attention of the Court to the fact that on 12 September 2020, additional affidavit was filed before the NCLAT where the plea of force majeure was raised by DVI. Besides this, DVI has, despite the approval of the resolution plan, failed to (i) submit a performance bank guarantee for the balance of INR 150 crores; (ii) make a nomination to the IMC; and (iii) failed to attend the meetings of the IMC. 37 The provisions of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble plea should not in and by itself invite the penal consequences which emanate from the exercise of the contempt jurisdiction. Likewise, the default of DVI in fulfilling the terms of the resolution plan may invite consequences as envisaged in law. On the balance, we are of the considered view that it would not be appropriate to exercise the contempt jurisdiction of this Court. During the course of the hearing, Dr Abhishek Manu Singhvi, learned Senior Counsel has relied on the affidavit filed in response to the contempt petition while seeking to urge that DVI will be within in its rights to urge whether the conditions precedent to the enforcement of the resolution plan have been fulfilled. Since DVI is in appeal before the NCLAT, we express no opinion on the merits of the submission. The NCLAT will take a view on the tenability and merits of the submission of DVI that the conditions precedent under the resolution plan have not been fulfilled after hearing the parties. This is not an issue which arises before the Court in the present proceedings either upon the application for rectification moved by DVI or the contempt petition moved by the CoC. 39 For the above reasons, our conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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