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TMI Blog2022 (3) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Nitesh Jain, Mr. Vividh Tandon and Mr. Prakshal Jain, Advocates for R-3 JUDGEMENT Ashok Bhushan, J: 1. These Appeals have been filed challenging two separate Orders dated 03.02.2022 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Special Bench, Court II). The First Order dated 03.02.2022 (hereinafter referred to as "Plan Approval Order") was passed in I.A. No. 1447/MB/C-II/2021 in CP(IB) No. 1790/MB/C-II/2017 approving the Resolution Plan on the application filed by the Resolution Professional. The Second Order dated 03.02.2022 (hereinafter referred to as "Clarification Order") was passed in I.A. No. 1799/MB/C-II/2021 in CP(IB) No. 1790/MB/C-II/2017 on the Application filed by the ICICI Bank. Both the above Orders dated 03.02.2022 have been challenged in these Appeals, respectively. 2. The facts and issues raised in these Appeals being common they have been heard together and are being disposed of by this common Judgment. 3. Brief facts of the case necessary to be noted for deciding these Appeals are: Corporate Insolvency Resolution Process (CIRP in short) was initiated of the Corporate Debtor-Ushdev International Limited vide Order dated 14th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits that Resolution Applicant in the Resolution Plan never provided for extinguishment of excluded securities. Mr. P. Chidambaram. Sr. Advocate further submits that he is not in disagreement with the arguments and submissions which have been made by the Learned Counsel appearing for the Committee of Creditors (CoC in short). 7. Mr. Krishnendu Datta, Sr. Advocate appearing for the ICICI Bank who is also the Appellant in Company Appeal (AT) Ins. No. 199-200 of 2022 submits that ICICI Bank had filed an Application for clarification before the Adjudicating Authority much before the 'Resolution Plan Approval' Order was passed. The ICICI Bank wanted a clarification since it has doubts that the Resolution Plan is capable of mis-interpretation that excluded securities are extinguished. Mr. Dutta further submits that in his Application he has also prayed that in the event that Hon'ble Tribunal were to hold that conversion of Corporate Debtor's entire unpaid debt into preference shares would not impact the enforceability of the excluded securities, his dissenting vote to the final Resolution Plan dated 22nd June, 2021 shall be considered as an assenting vote. Mr. Dutta submits that the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation and the articles of association of the Company, the New Preference Shares, which shall be issued to the Financial Creditors upon conversion of the Unpaid Debt, shall not have rights to receive any dividends and/or voting rights of any nature whatsoever. The New Preference Shares shall not have any rights to appoint director on the board of the Corporate Debtor. The detailed terms of such New Preference Shares are set out in Schedule XII. Further, the rights and obligations of the New Preference Shares shall be governed by the memorandum of association and the articles of association of the Company as well as the agreements, if any, mas may be entered into by the Resolution Applicant and the Financial Creditors. Upon approval of the Resolution Plan by the Adjudicating Authority, the provisions of Section 43 and Section 47 of the Act (including the rules made thereunder) and other Applicable Laws, if any, shall not be applicable to the terms of New Preference Shares set out in Schedule XII." ...... (g) Security: All Encumbrances provided by the Promoters or any third party, other than the Excluded Securities, in favour of the Financial Creditors for securing the Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is hereby clarified that upon approval of the Resolution Plan by the Adjudicating Authority, no further consent of any creditor (Financial Creditor or otherwise) shall be required to implement the Resolution Plan." 14. Now we may notice the Judgment of the Adjudicating Authority passed on 03.02.2022 approving the Resolution Plan. The Adjudicating Authority under the heading 'Reliefs, Concessions and Dispensations' passed following Order: "With regard reliefs, concessions and waivers as sought by the Resolution Applicant, this Bench orders that the reliefs and concessions are guaranteed as per the judgment of the Hon'ble Supreme Court in Ghanshyam Mishra and Sons Vs. Edelweiss Asset Reconstruction Company Limited, where at para 95(i) it was held that once a resolution plan was approved a creditor cannot initiate proceedings for recovery of the claim which are not part of the Resolution Plan. Hence, all past liabilities arising out of any levies/tax dues to any government authority such as VAT, CST, Customs Excise Duty and employees, workmen, operational creditor, financial creditor etc., which are not part of the resolution plan and pertaining to the pre CIRP period, shall stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de." 16. The view which was taken by the Adjudicating Authority both in the Order dated 03.02.2022 approving the Resolution Plan and Clarification Order was that in view of the fact that unpaid debt shall stand converted into non-convertible redeemable preference share hence the excluded securities are no longer enforceable. The Adjudicating Authority held that excluded securities are subsumed under Clause 3.3.(iii). The Adjudicating Authority obviously referred to Paragraph 3.3. (e) (H) which provided that balance Financial Debt forming part of the Admitted Debt shall stand converted into non-convertible redeemable preference shares of the company which shall be issued to the Financial Creditors upon conversion of the unpaid debt. The above provision in the Plan for conversion into non-convertible redeemable preference shares of the balance financial debt has no bearing on specific provisions in the plan by 3.3.(iii)(g) which clearly provided that excluded securities shall not be extinguished or waived under this Resolution Plan. When the Resolution Plan itself states that excluded securities shall not be extinguished under the Resolution Plan which is the provisions in the plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication" 18. In the clarification Order dated 03.02.2022, the Adjudicating Authority in Paragraph 29 has again observed that excluded securities are subsumed under Clause 3.3(iii)(c )(h) wherein the plan proposed that any balance financial debt forming part of admitted debt shall be converted into non-convertible redeemable preference share, for the reasons which we have noticed above, the above observations in Paragraph 29 of the Clarification Order also cannot be sustained and deserves to be deleted. The observations of the Adjudicating Authority in Paragraph 29 that 'the approval of the resolution plan ipso facto discharge the enforcement of excluded securities' is not in accordance with the Resolution Plan and is hereby deleted. 19. Mr. Krishnendu Datta, Sr. Advocate for the ICICI Bank Limited has further submitted that his prayers made in the I.A. No. 1799/MB/C-II/2021 that Applicant's dissenting vote to the resolution plan dated 22nd June, 2021 shall be considered as assenting vote has not been considered. The Resolution Plan has been approved by the CoC with 91.06% of votes. With regard to the prayer made by Mr. Dutta regarding permitting his dissenting vote to the Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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