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TMI Blog2021 (9) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... CIRP, from transferring any of the corporate debtor s assets to creditors. The amounts received by the corporate debtor during the currency of the CIRP are assets of the corporate debtor whose transfer to chosen creditor in priority without the process of Resolution Plan would be prohibited. Such a condition as was prescribed in the first COC meeting regarding apportioning of the accruals in the separate bank account of corporate debtor to the Bank of India would not be legal and against the provision in sub-section 3 of section 14, which allows only such transactions which may be notified by the central government, in consultation with any financial regulator, to be exempted from the rigour of moratorium. The accruals in the separate bank account in the Bank of India during the CIRP are not notified by the Central Government and hence they are the assets of the corporate debtor. In the present case, the Resolution Plan, which was approved by the Adjudicating Authority, included Bank of India s share as ₹ 9 crores only as full and final settlement with no conditions attached. Therefore ,the condition stipulated by the COC in its first meeting regarding the receipts by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectro Magnetic Private Limited vide order dated 26.10.2017 in Company Petition No. IB-334(ND)/2017. 3. The Appellant No.1 has submitted and argued that the officers of Respondent No. 4 Bank which is 90% voting rights holder in the Committee of Creditors (COC), took a decision to keep the Corporate Debtor going concern so as to save invocation of the bank guarantees in the first meeting of the COC. Accordingly, an interim finance of ₹ 15 lakhs was sought from SM. Finlease Limited, another financial creditor of the Corporate Debtor. In the same COC meeting, the respondent Bank of India (hereinafter called the Bank ) sought and it was agreed to earmark 25% of the receipts received during such operation of the Corporate Debtor during the moratorium period towards repayment of loan of the respondent Bank and kept in a separate current account. This action, according to the Appellant No. 1, is not in accordance with law as under no circumstances can any creditor divert to itself the receipts of the Corporate Debtor during the moratorium period as per the mandate of Section 14 of IBC, and claims that such a decision was taken under the influence of Respondent Bank which holds 90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant No. 1 along with the erstwhile Resolution Professional requested that the Respondent Bank be directed to give ₹ 88,16,071 to the Appellant No. 1 who is the successful Resolution Applicant. The Appellant No. 1 has also sought NOC for removal of charge from the Respondent Bank which is not being given on one pretext or the other and which is being used to armtwist the successful Resolution Applicant to pay amounts over and above what is approved in the Successful Resolution Plan. 7. Continuing his arguments, the Learned Counsel for Appellant No. 1 has urged that CIRP was initiated against the corporate debtor Applied Electro Magnetics Private Limited vide order of the Adjudicating Authority (NCLT, New Delhi) order dated 26.10.2017 and Navin Kumar Jain was appointed as the Interim Resolution Professional. Later the financial creditors including the respondent Bank (Bank of India) proposed the name of Vinay Talwar as Resolution Professional which was confirmed by the Adjudicating Authority vide order dated 29.1.2018. After issuing of Expression of Interest, a resolution plan that sought to provide ₹ 6.22 crores to the Respondent Bank was submitted by the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Professional submitted to the Adjudicating Authority, the Learned Counsel has contended that the Resolution Professional Vinay Talwar had made it clear the this amount which accrued due to the operations of the Corporate Debtor during the CIRP was kept in a separate account, but was not to be appropriated by the Respondent Bank of India. 9. The Ld. Counsel for Appellant No. 1 has shown the share of the respondent Bank of India in the approved Resolution Plan (attached on pp. 204 246 of the Appeal Paperbook, Volume II) wherein in paragraph 2.3.1.1 it is stated: - 2.3 Secured Financial Creditors: the claims of the secured financial creditors shall be satisfied in the manner set out below. 2.3.1 amount: 2.3.1.1. Bank of India amount:: the bank shall be paid an amount of INR 9,00,00,000 (Indian ₹9 crores only) towards full and final settlement of all dues, including any default interest or any other charges pertaining to the outstanding amount. 10. The Learned Counsel for Appellant No. 1 has contrasted the above provision for the Respondent Bank s share in the Resolution Plan referring to the provision in the earlier resolution plan (which was l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessful Resolution Applicant cannot play hot and cold, as earlier in his role as financial creditor in the COC he had accepted the condition enumerated in the minutes of the first COC meeting, but now as Successful Resolution Applicant he is raising the legality of such a condition. 14. The Learned Counsel for Respondents has urged that the Successful Resolution Applicant is twisting facts for its own benefit, which is not in accordance with the provisions of IBC. He has cited the decision in Kalparaj Dharamshi versus Kotak Advisories Limited (2021 SCC online SC 204) wherein the Hon ble Supreme Court has held that the court ought to respect the commercial wisdom of the COC of approving the resolution plan: 150. It will therefore be clear, that this Court, in unequivocal terms, held, that the appeal is a creature of statute and that the statute has not invested jurisdiction and authority either with NCLT or NCLAT, to review the commercial decision exercised by COC of approving the resolution plan or rejecting the same. 155. This court observed, that the court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acs will be utilized for salaries of the employees and ~ ₹ 16 lacs will be utilized for raw material and remaining for essential cost of the CIRP.RP expressed that an agreement to this effect can be executed today itself and the amount be disbursed at the earliest possible. To facilitate the terms of Interim Finance wherein it was agreed in the meeting held on December 14, 2017 that, 25% of the net receipts from all the Debtors shall be earmarked for payment to the Bank of India Loan Accounts and only subsequent to which the repayments to the SM Finlease shall be made, Bank of India representatives indicated the need of opening a separate Current Account of the Corporate Debtor with the Bank of India to facilitate the above term. Mr. Jain approved the opening of the said Current Account with the Bank of India. (emphasis supplied) 18. In the first resolution plan dated 4.4.2018 (attached at pp.115-154, Appeal paperbook Vol.-I of CA No. 800/2020), the relevant para 2.3 in Schedule 8: Financial Plan shows ₹ 6.22 crores included as the share of the Respondent Bank of India. It is reproduced below: 2.3 Secured Financial Creditors: The Claims of the Secured Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 9 crores to the Respondent Bank of India as full and final payment of its total admitted claim of ₹ 41.50 crores This resolution plan was approved by the COC in its 8th meeting held on 22.12.2017. The relevant extract from the minutes of the 8th COC meeting is as hereunder: MINUTES OF THE 8TH MEETING OF THE COMMITTEE OF CREDITORS OF APPLIED ELECTRO MAGNETICS PRIVATE LIMITED (THE COMPANY ) HELD ON THURSDAY, JULY 19, 2018 AT BANK OF INDIA, ZONAL OFFICE, MEETING R4OOM, 3RD FLOOR, H-2, STAR HOUSE, MIDDLE CIRCLE, CONNAUGHT PLACE, DELHI - 110001._____________________ ITEM No.4: TO CONSIDER AND DECIDE UPON THE RESOLUTION PLAN SUBMITTED BY THE RESOLUTION APPLICANT. The Chairman informed the members that he has received an amended Resolution Plan from the Resolution Applicant today afternoon. The RA submitted physical copies of the same during the meeting. The Chairman then enquired from the BOI team as well as the Resolution Applicant w.r.t the status of their discussions and the decision taken on the Resolution Plan. The BOI team member informed the members that their Head Office has rejected the amended proposal given by the Resolution Applicant. On hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included in Schedule 8: Financial Plan of the finally Approved Resolution Plan (attached at pp. 204-246 of Appeal Paperbook, Vol - II) in para 2.3. It is as hereunder: 2.3 Secured Financial Creditors: The Claims of the Secured Financial Creditors shall be satisfied in the manner set out below: 2.3.1. Amount: 2.3.1.1. Bank of India Amount: The Bank shall be paid an amount of INR 9,00,00,000 (Indian Rupees Nine crores only) towards full and final settlement of all dues including any default interest or any other charges pertaining to the outstanding. 24. In view of this last and final version of the Resolution Plan, which included the share of Bank of India as ₹ 9 crores only, the Adjudicating Authority has observed in Paras 33 and 34 of the impugned order as follows: 33. In view of the discussion made above, we are of the considered view that the Resolution Applicant is liable to pay an amount as per the approved Resolution Plan and they can not go beyond the approved Resolution Plan. Accordingly, we hold that the resolution Applicant is liable to pay an amount as per the approved Resolution Plan and they can not go beyond the approved Resolution Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e advantage of its position in apportioning any part of the receipts to the corporate debtor to itself. 28. In the present case, the Resolution Plan, which was approved by the Adjudicating Authority, included Bank of India s share as ₹ 9 crores only as full and final settlement with no conditions attached. Therefore ,the condition stipulated by the COC in its first meeting regarding the receipts by the corporate debtor during the CIRP period and apportioning of 25% of the accruals due to the operations of corporate debtor are not part of the final resolution plan and this has no legs to stand on vis a vis the approved resolution plan and the share of Bank of India contained therein. 29. An important issue that has become evident in this case is the absence of monitoring of the implementation of the successful resolution plan. Regulation 38 sub-regulation 2 of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 is quite clear about the implementation aspect of a resolution plan. This provision reads as hereunder:- 38. Mandatory contents of the resolution plan (1A) A resolution plan shall include ..... X X X X Extracts X X X X X X X X Extracts X X X X
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