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TMI Blog2022 (4) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... een filed by an Assignee of some of the Lenders of the Corporate Debtor challenging the Order dated 06th April, 2022 passed by the Adjudicating Authority on I.A. No. 538 of 2021 filed by the Appellant for Liquidation, I.A. No. 628 of 2021 filed by the Appellant claiming compensation/interest from the Successful Resolution Applicant (hereinafter referred to as 'SRA') due to delay in implementation of the Resolution Plan and I.A. No. 635 of 2021 filed by the SRA seeking direction for implementation of the Resolution Plan. Both the I.As filed by the Appellant have been rejected and I.A. filed by the SRA was allowed by giving 5 (five) days time to transfer sum of Rs. 322 Crores in the Account of the Corporate Debtor. The Appellant being aggrieved by the Impugned Order has come up in this Appeal. 2. We need to notice the facts and sequence of the events for deciding the issues which have been raised in this Appeal. 'Ramsarup Industries Limited'-the Corporate Debtor was admitted into 'Corporate Insolvency Resolution Process' (hereinafter referred to as 'CIRP') vide Order dated 08th January, 2018, a Resolution Plan submitted by the 'SS Natural Resources Private Limited'-Respondent No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court on 02nd July, 2021. 9th meeting of the Monitoring Committee was held on 07th July, 2021 where SRA expressed its intention to implement the Resolution Plan. In the 9th Meeting, the Appellant raised demand for compensation/interest as a pre-condition to implement the Resolution Plan. The SRA declined to make payment of compensation/interest on which the Appellant took stand before the Committee that till the Lenders are compensated for the delay, the Appellant would not be willing to implement the Resolution Plan. After the meeting dated 07th July, 2021, the SRA filed an Application before the Adjudicating Authority being I.A. No. 635 of 2021 against the Erstwhile Resolution Professional and the Appellant seeking direction to the Respondents to cooperate in the implementation of the approved Resolution Plan. I.A. No. 628 of 2021 was filed by the Appellant seeking payment of interest by SRA from the date of the approval of the Resolution Plan i.e. 04.09.2019 till the implementation of the Resolution Plan by the SRA. Replies to the Applications were filed before the Adjudicating Authority and the Adjudicating Authority after elaborately hearing the parties pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT on 04.03.2021, no steps were taken for implementation of the Resolution Plan by the SRA and SRA has put conditions for implementation of the Resolution Plan. The Appellant had immediately filed the Application for Liquidation on 08th June, 2021 as per directions issued in Paragraph 201 of the NCLAT Orders dated 04.03.2021. It is submitted that Order of the NCLAT dated 04.03.2021 was also confirmed by the Hon'ble Supreme Court vide its Order dated 04.05.2021. The Adjudicating Authority disregarding both the aforesaid Orders has rejected the Application for Liquidation filed by the Appellant. It is further submitted that for implementation of the Resolution Plan no condition could be put by the SRA and the conditions that unless the 'Vanguard's Appeal' is decided, the amount need not be paid to the Financial Creditors, is contrary to the Resolution Plan. Mr. Rohtgi submits that the plan offer of the SRA was much less than the Liquidation Value of the Assets and only on Liquidation of the Corporate Debtor maximisation of the Value shall be achieved which is the object of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'The Code'). Mr. Rohtgi submits that Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the NCLAT on 04.03.2021 by virtue of assignment taken by it on 23rd April, 2021 for an amount of Rs. 255 Crore. The firm offers of Rs. 525 Crore as contended by Learned Sr. Counsel for the Appellant is the offer at instance of Orrisa Metaliks Pvt. Ltd. who was H-2 in the CIRP whose plan could not be approved. It is submitted that the Appellant pressed for liquidation of the Corporate Debtor to serve its own interest as well as the interest of the Unsuccessful Resolution Applicant. It is submitted that total bid amount offered by the SRA was more than liquidation value and in event it is now held by the Hon'ble Supreme Court that Resolution Plan can be approved even if it is of less amount than the liquidation value. It is submitted that the stand taken by the SRA before the 07th and 08th Meeting of the Monitoring Committee that amount be not disbursed till the Appeal of the Vanguard is not decided by the Hon'ble Supreme Court was justified and reasonable. Vanguard Credit and Holdings Pvt. Ltd. claimed in its Appeal before the Hon'ble Supreme Court the land on which the Factory of the Corporate Debtor is situated. In event the Vanguard succeeds in taking away the land beneath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls, NCLAT directed the Monitoring Committee to start taking steps for implementation of the Resolution Plan in paragraph 201: "201. We further direct the Monitoring Agency to start taking steps for implementation of the Resolution Plan immediately, and in case the Successful Resolution Applicants fails to implement the approved Resolution Plan; appropriate action should be taken immediately, and without waiting further, the application should be moved before the Adjudicating Authority for liquidation of the Corporate Debtor. Registrar NCLAT is directed to send the order's copy immediately to all the concern parties through email as well as by post for compliance." 8. The Adjudicating Authority in the Judgment/Order has also observed that in the Appeal there was no stay for implementation of the Resolution Plan however under the Order passed by the NCLAT a further direction was issued to the Monitoring Agency to implement the Resolution Plan immediately. Thus the actions of SRA of not implementing the plan after its approval till the NCLAT dismissed the Appeals on 04.03.2021 stood condoned and by the Order dated 04.03.2021 of NCLAT directions were issued to the Monitoring Agency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, he sought an explanation from the resolution applicant on how they plan to compensate the financial creditors. He stated that, it is of utmost importance that the lenders and the RA mutually decide on the compensation amount and in the absence of such compensation being fixed, any discussion on implementation cannot be done. He further clarified that the compensation on account of delay in implementation is a pre-condition for CFM to agree for implementation of resolution plan. He made it know that CFM ARC would not like to proceed with any discussions of implementation unless the issue of compensation was resolved first." 10. On behalf of the Appellant, it was claimed that payment of interest/compensation is pre-condition which is to be noted in following words: "Mr. Pankaj Bagla from SSN enquired from CFM, if the demand for compensation is a pre-condition to implement the Resolution Plan. Mr. Pankaj Agnihotri from CFM stated that it would be a pre-condition at CFMARC's end for implementation of the Resolution Plan. He further stated that they would also want to understand from the RA about the rate at which they would be compensated." 11. On behalf of SRA, it was st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e willing to implement the Resolution Plan and would revert on the matter of deciding the professional fees of the Chairman and the Grant thornton. At this stage, Mr. Deep from Equilex informed the members that at the 3rd MA Meeting, the members had agreed that all decisions would be taken basis the views of majority of members. Mr. Pankaj Agnihotri from CFM opposed the proposition of a voting mechanism and suggested that only the views of the lenders should be recorded and that NCLT should be the correct adjudicator to finally decide on this issue. There being a disagreement amongst the lender's representatives on timing of implementation due to demand of compensation by CMF ARC, no decision was taken by the MA members with respect to next steps and way forward on implementation of the resolution plan. The RA representative reiterated that they are prepared for unconditional and immediate implementation of the resolution plan as per the steps provided therein. The members also did not vote on this issue in the present MA Meeting. There being no other agenda, the meeting was concluded with vote of thanks." 13. The above minutes of the Meeting of the Monitoring Committee held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 351.0 Payment to Operational Creditors 3.50 Payment to Workmen 7.00 Payment towards Statutory Liabilities 3.00 Capex/Working Capital 306.00 *To be paid at actual 35. The above being the offers based on the admitted claim of the creditors, the distribution of the resolution bid amount is found not in contravention of any of the provisions of the Code or Regulations. The total bid amount come to 670.50 Crores which is higher than the Liquidation Value of Rs. 610.29 Crores. The facts in the given case being not similar to the Padmanavan Venkatesh case above referred, the principle of distribution if any in the said case cannot be applied in the case in hand." 15. Thus, Liquidation Value of the Corporate Debtor was 610.29 crores where total bid amount offered by the SRA was 670.50 Crores as having been noticed by the Adjudicating Authority while approving the Resolution Plan. 16. The Submissions of Mr. Rohtgi that there is a firm offer of Rs. 525 Crores on 100% cash basis if the Liquidation is initiated and Corporate Debtor's Assets are sold. Learned Sr. Counsel-Mr. Rohtgi during the submissions has referred to the above offer given by 'Orissa Metaliks Private Limited' w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors." 19. The Hon'ble Supreme Court in 'Babulal VrdharjiGurjar Vs. Veer GurjarAluminium Industries Pvt. Ltd. & Anr.', (2020) 15 SCC1 again held that primary focus of the Code is to ensure its revival and continuance. In paragraph 21 following has been laid down: "As regards corporate debtor, the primary focus of the Code is to ensure its revival and continuation by protecting it from its own management and, as far as feasible, to save it from liquidation. As tersely put by this Court in Swiss Ribbon, the Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors" 20. When the Application filed by the Appellant for liquidation is to be considered the law laid down by the Hon'ble Supreme Court in the above cases, has to be kept in mind. The Adjudicating Authority while analyzing the conduct of the SRA, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rompted another application from the SRA in IA No.635/KB/2021 for directions to implement the Plan. The end result was a further and unnecessary delay in implementation until the three applications could be heard and decided by this Adjudicating Authority. ......... 9.16. It is now trite law that the whole idea of the Code is to put the Corporate Debtor back on its feet for the larger benefit of all the stakeholders, not just the creditors. We must not forget that the Corporate Debtor is a fully functional enterprise and is generating value for the economy, apart from providing employment to a sizeable number of people. The present applications will have to be seen in the larger context of the objectives sought to be achieved. A bird in hand is worth two in the bush. 9.17. If there is anything that the Code emphasis, it is the oft-forgotten adage that time is money. On an overall conspectus, we would urge, hope and expect that time being wasted in this manner in unnecessary litigation should now stop. Therefore, rather than the mathematically projected liquidation value being more than the value offered by the SRA, it would be better to look at the value addition that a runni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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