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TMI Blog2022 (1) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Successful Resolution Applicant is completely lacking in its bona fide - There is no dispute that Appellant failed to adhere to its commitment in Resolution Plan and also failed to comply order dated 12th April, 2021 and 20th September, 2021. The extension of 30 days was sought by the Appellant by its Application dated 29th October, 2021. The Adjudicating Authority ought to have adverted to the grounds and reasons given in the Application to find out as to whether there is any ground to grant any extension of time of 30 days as prayed for. It is well settled that time line in IBC proceedings has its salutary value and Resolution Applicant has to adhere to its commitment as made in the Resolution Plan, when it is approved by the Adjudicating Authority. Whether Adjudicating Authority erred in exercising its jurisdiction in refusing to grant extension by 30 days as prayed by Resolution Applicant or not? - HELD THAT:- The judgment of the Hon ble Supreme Court in the EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est. The Resolution Plan was considered and approved by the Committee of Creditors with 99.48% votes in the 8th meeting of the CoC on 12.11.2018. The Resolution Professional filed an Application for approval of the final Resolution Plan dated 05.11.2018, which came to be approved by the Adjudicating Authority by order dated 22nd January, 2019. The State Bank of India was one of the Financial Creditor with 66.76 % majority voting share and another Financial Creditor was Axis Bank Limited having 29.23% voting share in the Committee of Creditors. (ii) As per the Resolution Plan the Financial Creditors were required to be paid a total sum of ₹ 45 crores. Following amount was proposed to each of the Financial Creditors: "Name of the Bank/ Lender Claim Admitted Amount Payable Axis bank Limited 31.07 13.16 State Bank of India 70.94 30.05 Siemens Financial Service Pvt. Ltd. 0.79 00.33 Clix Finance India (GE Capital) 1.10 00.47 India Infoline Finance Limited 2.36 01.00 Total 106.26 45.00" (iii) Out of ₹ 45 crores, upfront payment of ₹ 12 crores was to be made within 60 days from the date of the order of the NCLT. ₹ 26 crores by 31st March, 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution Plan by 31st October, 2021. The Adjudicating Authority noticed that the Appellant has not followed its commitments as directed by order dated 12th April, 2021. (ix) Another Application being I.A. no.115 of 2021 dated 29th October, 2021 was filed by the Appellant stating various difficulties due to which financial obligations could not be complied with. By the Application, the Applicant prayed for grant of 30 days' time till 30th November, 2021 to comply with order dated 20th September, 2021, so as to fulfill the financial obligations of the Applicant as per approved Resolution Plan. The said Application was opposed by the State Bank of India. (x) The Adjudicating Authority after hearing the parties held that as per order dated 12th April, 2021, the Applicant was directed to pay ₹ 20 crores out of ₹ 30 crores before 7th June, 2021, which has not been complied with. The Applicant has grossly failed in complying with the order dated 12th April, 2021. There are great lapses on the part of the Resolution Applicant and the Resolution Applicant cannot take shelter and take advantage of the COVID-19 pandemic because the default has taken place much before the occurrenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple offer' communicated its offer to advance ₹ 20 crores, but after rejection of the Application on 24th November, 2021, the Bank has not disbursed the amount and unless the Appellant is granted some time to make the deposit, the disbursal of the amount would not be made by the Kotak Mahindra Bank. The Appellant in the additional affidavit has also given details of three Bank accounts, where amount of about ₹ 10 crores are deposited, which shall be utilized in making the payment. Shri Datta submits that there is no dispute that the Appellant defaulted in complying the payment schedule as provided in the Resolution Plan. He submits that there have been several reasons as has been highlighted in I.A. No.58 of 2020 and 115 of 2020, which difficulties were genuine and it is not a case that Appellant due to any mala fide intention did not deposit the amount. The Appellant having already made payment of ₹ 15 crores to the Financial Creditors and full CIRP cost amounting to ₹ 4.25 crores and other payments have also been made, the Appellant has shown its bona fide to comply the Plan and it is earnestly prayed to this Tribunal that time of only four weeks be exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, no payment at all were made by the Resolution Applicant in compliance of the order dated 12th April, 2021. He submits that Resolution Applicant has been running the diagnostic center but has not made payment as directed by the Adjudicating Authority. It is submitted that by order dated 20th September, 2021, last opportunity was granted to the Successful Resolution Applicant to make entire payment by 31st October, 2021. The Resolution Applicant has not complied the said order also and before 31st October, 2021 has filed another Application No. 115 of 2021 seeking further time of 30 days. It is submitted that Adjudicating Authority in the impugned order rightly come to the conclusion that no case has been made out for grant of any further time. The Appellant has failed to deposit the entire amount by 31st October, 2021. It is submitted that Adjudicating Authority has rightly observed that the Resolution Applicant cannot take shelter and advantage of COVID-19 pandemic because the default has taken place much before the occurrence of the pandemic. It is submitted that in pursuance of the order dated 20th September, 2021, the Appellant has not filed the Weekly Progress Report as wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mier Hearing Service Inc 707, Oaks, Shores road, Leesburg, Florida-34748 USA Through Tri County Holding (P) Ltd. SF no. 6/684, 685, Sikkaram Palayam, 101 Bajaj Bhavan, Nariman Point, Mumbai 400021. .... Appellant" 12. In the Appeal, the Appellant has filed extract of Minutes of the Meeting of sole shareholder of the Tri County Holding Pvt. Ltd. dated 26th November, 2021 along with Annexure A-2. Two Minutes of the Meeting have been placed on record i.e. Minutes of Tri County Holding Pvt. Ltd. and Tri County Hearing Services at pages 36 and 37. Tri County Hearing Services has resolved that Tri County Holding (P) Ltd., authorized representative is authorized to take all necessary action to file, pursue and defend all court cases, before any Court, Tribunal, Authority etc. The Appeal has been filed by Tricounty Premier Hearing Service Inc. through Tri County Holding (P) Ltd. Tri County Holding (P) Ltd. is subsidiary of Tricounty Premier Hearing Service Inc. When Tricounty Holding (P) Ltd. is authorised to represent the Appellant, there is no invalidity in its authorizing Shri Rajesh Kumar Sinha as Authorised Representative to sign all petition papers, applications etc. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 3.00 Crore by 31st March 2020, with an interest of 8.00% p.a. on reducing balance from April 2019. Payment of amount of ₹ 4.00 Crore by 31st March, 2021, with an interest of 8.00% p.a. on reducing balance from April 2019. The source of funds to make the above payments to be Secured financial has been provided at Clause 11 of this Plan." 15. The payment of ₹ 45 Crores was to be started to be made within 60 days from the date of order of NCLT till 31st March, 2021. ₹ 12 crores was upfront. Out of ₹ 45 crores, the Resolution Applicant has paid only ₹ 12 crores + ₹ 3 crores paid in the Escrow account of State Bank of India. ₹ 30 crores is still to be paid and Appellant could not make the payment as provided in the Resolution Plan. The Application No.58 of 2020 was filed by the Applicant seeking extension of time till 31st October, 2021 for payment of entire outstanding dues. Shri Saha, learned Senior Counsel for the Respondent is correct in saying that by order dated 12th April, 2021, the Appellant was directed to make payment of ₹ 20 crores by 7th June, 2021, which payment also could not be made by the Appellant. In order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors even after SBI has filed the liquidation application. (Averred at Para 24@ Pg. 14 of Reply Affidavit dt. 23.11.2020 to MA 32); (x) The amount of ₹ 12 Crore has been paid by the RA from its personal funds as no financial institution agreed to provide loans due to incomplete handover by FCs. (Averred at Para 25 @ Pg. 15 of Reply Affidavit dt. 23.11.2020 to MA 32); (xi) The RA has been making full payment of the dues of the doctors, technicians, employees and vendors throughout the period and has been keeping the company a going concern and has paid an amount of ₹10.04 Crores (Averred at Para 28 @ Pg.16 and at Para 30 @ Pg. 17, annexed at Pg. 51 of Reply Affidavit dt. 23.11.2020 to MA 32 and Pg. 51 and 52 of Addl. Affidavit dt. 01.12.2020); (xii) Despite not being given the Complete handover of the company the RA has been investing out of its own funds to purchase new diagnostic equipment. (Averred at Para 12 @ Pg. 09 of I.A. 62/ 2021); (xiii) RA has already paid an amount of ₹ 8.04 Crores to SBI (Averred at Para 3 @ Pg.1 of the Settlement Affidavit dt. 15.03.2021). RA has duly deposited ₹3 Crore with SBI in March 2021 (Averred at Para 4 @ Pg.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as follows: 16. This Adjudicating Authority is of the view that although the Resolution Applicant has grossly failed in meeting its commitments in respect of implementation of the Resolution Plan, liquidation is the last resort when all other available options fail in the CIRP. In the interest of all the stakeholders and also the implementation of the Resolution Plan, after considering all the facts and circumstances of the case, this Adjudicating Authority allows one last opportunity to the Resolution Applicant to fulfil all its commitments and financial obligations stated in the Resolution Plan by 31.10.2021 failing which actions as may be deemed appropriate as per law, shall be taken." 17. There is no dispute that even after extension granted by Adjudicating Authority till 31.10.2021 the Appellant could not make the payment and filed another Application No.115 of 2021 for granting extension of 30 days for making payment, which came to be rejected, giving rise to this Appeal. 18. The Application No.115 of 2021 has been brought on record by State Bank of India in its counter reply. In paragraph 4, 5 and 6 of the Application, following was pleaded: "4. That it is submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned judgment is as below: 6. This Adjudicating Authority after hearing all the counsel, constraining pandemic situation in the country etc., had passed an Order on April 12, 2021 allowing time up to 07.06.2021 to the Resolution Applicant and from the total outstanding amount of ₹30.00 crore to pay ₹20.00 crore on or before 07.06.2021 to show their bona fides and also to file an affidavit stating that the plan is being complied within all other aspects. It has been noted that the Resolution Applicant has grossly failed in complying with the aforesaid Order dated April 12, 2021. There are great lapses on the part of the Resolution Plan. The Resolution Applicant cannot take shelter and take advantage of the COVID-19 pandemic situation because the default has taken place much before the occurrence of the pandemic. 7. Although, this Adjudicating Authority was of the view that the Resolution Applicant has grossly failed in meeting its commitments in respect of implementation of the Resolution Plan, liquidation is the last resort when all other available options fail in the CIRP. In the interest of all the stakeholder and also the implementation of Resolution Plan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted that, that letter is not a formal commitment for extending any term loan by Kotak Mahindra Bank, hence, that letter means no consideration. It is submitted that, that letter is only 'in-principle offer'. Shri Saha has referred to following statement in the letter: "Kindly note that this letter is an "in-principle offer" and is subject to due diligence and final approval from the bank. It should not be in any manner construed as a commitment from the Bank to extend the above mentioned financial facilities. The Bank shall have the absolute right to vary/modify/withdraw/rescind/cancel the offer without any notice to the Applicant and the decision of the Bank in this regards shall be final, conclusive and binding on the Applicant, both in and out of court/judicial/quasi judicial authority." 21. The offer of Kotak Mahindra Bank was immediately accepted by letter dated 11.11.2021 by the Appellant. The statement in the letter as quoted above on which reliance has been placed by Mr. Saha, is a normal format when Bank communicate its 'in-principle offer'. It is true that offer and actual disbursement are two different events, but an offer of the Bank for extending ₹ 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance standing in the bank accounts of the Appellant/ its subsidiaries. -A sum of ₹ 24,00,000/- to Siemens Financial & a sum of ₹ 34,00,000/- to Clix Finance shall be paid directly by Kotak Mahindra Bank. Unsecured FCs 44 Lacs 44 Lacs Fully paid. OCs 1.01 Crores 65 Lacs The balance is required to be paid within a period of 5 years from the date of approval of resolution plan by the Ld. Adjudicating Authority i.e. 22.01.2019. Employees Workmen Dues 1.36 Crores 1 crore To be paid within 3 years from the date of approval of resolution plan by the Ld Adjudicating Authority i.e. 22.01.2019. However, a sum of ₹ 1 crore has already been paid to the employees retained by the Corporate Debtor subsequent to approval of the plan, and the remaining amount of ₹ 36 lakhs shall be disbursed as per the timelines provided under the plan. Statutory Dues 51 Lacs 20 Lacs The balance is required to be paid within a period of 5 years from the date of approval of resolution plan by the Ld. Adjudicating Authority i.e. 22.01.2019. Payment to Existing shareholders 7 Lacs 7 Lacs Fully paid, but equity not transferred in the name of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdrawals or modifications to a Resolution Plan after it has been submitted to the Adjudicating Authority, it must specifically provide for a tether under the IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissible and procedural directions, which may include the timelines in which they can be proposed, voting requirements and threshold for approval by the CoC (as the case may be). They must also contemplate at which stage the Corporate Debtor may be sent into liquidation by the Adjudicating Authority or otherwise, in the event of a failed negotiation for modification and/or withdrawal. These are matters for legislative policy. 204 In the present framework, even if an impermissible understanding of equity is imported through the route of residual powers or the terms of the Resolution Plan are interpreted in a manner that enables the appellants' desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor. Pertinently, this dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prayer for extension of 30 days' time to comply financial commitments as per order dated 20th September, 2021 cannot be said to modification of the Plan when the Adjudicating Authority itself granted time to the Resolution Applicant to comply the financial obligations till 31st March, 2021. The issue which is sought to be raised in the Appeal that whether Adjudicating Authority erred in exercising its jurisdiction in refusing to grant extension by 30 days as prayed by Resolution Applicant or not? The judgment of the Hon'ble Supreme Court in the Ebix Singapore Private Limited (supra) thus, does not support the submission of learned Counsel for the State Bank of India that Adjudicating Authority has no jurisdiction to extend the time for complying the financial obligations in the Resolution Plan. 25. We may notice one more aspect of the matter. In order dated 20th September, 2021, the Adjudicating Authority has held that Resolution Applicant cannot take shelter and take advantage of the COVID-19 pandemic because the default has taken place much before the occurrence of the pandemic. There is no doubt that default was initially committed in payment to Financial Creditors much before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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