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TMI Blog2023 (9) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... s / Wind Energy Generators monitored and held by the Holding Company RPPL to its customers. This Tribunal is of the earnest view that these Appellants fall within the ambit of the definition of Operational Creditors as defined under Section 5 (20) of the Code and therefore, these Appeals are maintainable. Whether the businesses of RPPL and RISPL are intertwined and integrated and whether the criteria required for Consolidation of these two CIRPs is met? - HELD THAT:- A perusal of the material on record shows that there is no rebuttal by RPPL regarding the issues of interlinked finances , common assets , common liabilities and common directors . This Tribunal is conscious of the fact that the Ministry of Renewable Energy has clearly specified in its Regulations that the manufacturer has to provide the O M Services as well. The Resolution Professional of RISPL has submitted that all the O M Equipment in possession of RISPL is actually owned by RPPL; that despite the O M Agreement, RPPL continues to have obligation; that RISPL has received huge sums of liquidated damages every year solely because RPPL has not refurbished the failed Wind Energy Generators on time; that RPPL has created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture and Service Private Limited (RISPL) , Regen Powertech Private Limited(RPPL) M/s. Regen Infrastructure and Services Pvt. Ltd. Versus M/s. Regen Powertech Private Ltd. Asset Reconstruction Company (India) Limited Versus Ms. Renuka Devi Rangaswamy, M/s Regen Powertech Private Limited Sulochana Cotton Spinning Mills Pvt. Ltd. Versus M/s Regen Powertech Private Ltd., M/s Regen Infrastructure and Services Pvt. Ltd Echanda Urja Private Limited Versus ReGen Powertech Private Limited, Committee of Creditors Of Regen Powertech Private Limited, ReGen Infrastructure and Services Pvt. Ltd., Committee of Creditors of ReGen Infrastructure and Services Pvt. Ltd. GAIL(India) Limited Versus Regen Powertech Private Limited (RPPL), Mr. Ebenzer Inbaraj, Regen Infrastructure and Service Private Limited (RISPL), Ms. Renuka Devi Rangaswamy [Justice M. Venugopal] Member (Judicial) And [Shreesha Merla] Member (Technical) For the Appellant : Mr. PVS Giridharan, Sr. Advocate For M/s Pooja P. & Sheik Mohammed Rafiq A.M., Advocates For the Respondents : Mr. P.H. Arvindh Pandian, Sr. Advocate For Mr. A.G. Sathyanarayana, Advocate, For R1 & R2 Mr. T.K. Bhaskar, Advocate Mr. B. Dhanaraj, Advocate, F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nerators from RPPL, which is in the business of manufacturing, supply, operation and maintenance of these Turbines. It is stated that RISPL is a wholly owned subsidiary of RPPL with the sole objective of managing the Operation and Maintenance Services of the Wind Turbines, which arrangement was entered into for ease of operation. RPPL was admitted into CIRP on 09/12/2019 and RISPL was admitted into CIRP on 19/02/2020. Subsequently, the Applicant / Appellant had filed their Claim in Form B on 20/12/2019 for an amount of Rs. 25,18,56,602/- with RPPL which was submitted in full by the Resolution Professional (hereinafter referred to as 'the RP'). It was submitted that the Applicant had agreed to take part in the various windfarm projects of RPPL by purchasing the Wind Turbine only because RISPL promised a comprehensive package of supply, erection, commissioning, operation and maintenance of the Wind Turbines for a period of 10 years. 4. It is submitted by the Learned Senior Counsel that RISPL is only an extended arm of RPPL and has no access of its own and that the facilities for Services and repairs are only availed with RPPL and RISPL makes use of the same to fulfil its obligations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 5(21) of the IBC Code, 2016 wherein, an Operational Debt is defined as a 'Claim in respect of the provision of goods or services…'. It is submitted that the definition is wide enough to include goods or services rendered by both the Operational Creditor and the Corporate Debtor and it does not stipulate anywhere that the goods or services should have been provided only by the Operational Creditor. The Learned Senior Counsel relied on the Judgment of the Hon'ble Supreme Court of India in the matter of 'Consolidated Construction Consortium Limited Vs. Hitro Energy Solutions Pvt. Ltd.', in Civil Appeal No. 2839/2020 wherein it was held that 'Debt' which arises out of advance payment made to a Corporate Debtor for supply of goods and services would be rendered as an 'Operational Debt' and thus the Claimant would be an 'Operational Creditor' under Section 5(20) of IBC Code, 2016. It is contended by the Learned Senior Counsel that the ratio of this case is applicable to the facts of the attendant matter and therefore the observation by the 'Adjudicating Authority' that the Appellant is not an 'Operational Creditor' is incorrect. 7. The Learned Senior Counsel submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted by the Learned Senior Counsel that the Appellant who has filed the Application IA No. 694/2021 had chosen to submit the Resolution Plan for RISPL and having chosen not to file any Resolution Plan for RPPL cannot now seek a direction for consolidation of CIRP. As regarding the facts of the case, the Learned Senior Counsel submitted that RPPL is engaged in the business of manufacture and sale of wind energy generators, while post sale repairs and maintenance, these generators were handled by RPPL initially and subsequently were taken by RISPL since 2014. RISPL is a wholly owned subsidiary of RPPL. The role of RPPL stops with the sale and delivery of the wind energy generators, the role of RISPL commences thereafter. It is submitted that there is no obligation for RISPL to avail services only from RPPL and can avail the same from others if the commercial terms of RPPL are at any stage acceptable to RISPL. It is submitted that as RPPL could not discharge the financial loans, it was placed under CIRP on 09/12/2019 and RISPL, by an independent Order, was placed into CIRP on 19/02/2020. Each of the two Companies were proceeded independently as all the shareholder rights stand susp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Code and has rightly dismissed all the Applications. It is contended that as independent Resolution Plans have come for both RPPL and RISPL, it shows that both are capable of operating as standalone companies without any need for simultaneous Resolution. The Learned Senior Counsel vehemently opposed to the idea of consolidated CIRP on the ground that none of the Appellants/ Applicants (except for RP of RISPL) have locus in filing these Applications as none of them are part of the CoC of the two Companies, being mere Operational Creditors, mostly of RISPL and they are not competent to decide on how a Resolution should progress and their wisdom cannot override the wisdom of the Financial Creditors of the CoC. The issues of joint CIRP have been dealt with by the 'Adjudicating Authority' on merits and not only for reason of 'Locus'. The 'Adjudicating Authority' has rightly observed that it does not have equity jurisdiction and the argument of the Appellants that the ratio in the matter of 'Radico Khaitan Ltd. vs. BT & FC Pvt. Ltd. & 6 Ors.' is applicable to the facts of this case, cannot be accepted as in the case of 'Radico Khaitan Ltd. vs. BT & FC Pvt. Ltd. & 6 Ors.', on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entities have suffered continuous losses in production of electricity. 13. The Learned Counsel for the Appellant in this Appeal filed IA 452/2020 and IA 457/2020 seeking a direction from the Respondent to repair the generators of the Appellant and hand over the generators on or before 31/05/2021. The same is also recorded in the daily Order of the 'Adjudicating Authority' dated 27/04/2021. Thereafter, it was submitted vide Status Report filed in IA/452/2020 that the pandemic has disrupted the functioning of RPPL and therefore, it was unable to continue as a going concern and requested some amount from the Appellant i.e., Rs. 2.85,00,00,000/- to service three generators and Rs. 4,84,00,00,000/- to service the remaining four generators and an initial advance of Rs. 1,25,39,000/- was also remitted. Additionally, further amounts were also paid. It is submitted by the Learned Counsel that an Application was moved by them seeking Consolidation of CIRP of both the Respondents which was dismissed by the 'Adjudicating Authority' vide the Impugned Order. 14. The Learned Counsel for M/s TVH Energy Resources Private Limited vehemently argued that the reasoning given by the 'Adjudicating Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Authority' ought to have ordered for Consolidation on the basis of the Judgments passed in the matter of 'State Bank of India vs. Videocon Industries Ltd. & Ors.' (Supra), 'Radico Khaitan Ltd. vs. BT & FC Pvt. Ltd. & 6 Ors.' (Supra), and in the matter of 'Oase Asia Pacific Pte Limited Vs. Axis Bank and other Financial Creditors' (Supra) but instead in clear violation of judicial hierarchy, has dismissed the Applications. It is submitted that vide Award dated 02/04/2019, the Appellant was awarded a recovery of a sum of Rs. 12,10,55,648/- from RISPL, together with interest at 15 % p.a. and is thus clearly an 'Operational Creditor'. The Appellant has also made a Claim on the basis of this Award and Section 3(10) of the Code provides for a 'Decree Holder' to file a Claim and therefore, the observation of the 'Adjudicating Authority' that the Appellant is not an 'Operational Creditor' is erroneous. It is also submitted that RPPL vide its letter dated 09/07/2014 issued to the Appellant and that entities stated that RPPL is transferring the O&M Services to its wholly owned subsidiary-RISPL and therefore, post facto assignment of these services, the existing employees and management of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried out meetings and had its own Resolution Plan approved. The Tribunal castigated this conduct and while at the same time allowed RPPL to take advantage of its conduct reaching a stage where it would be impossible for coordination. The BTA dated 21/02/2019 by virtue of which, erection and commissioning business was transferred to ROMSL has been challenged as a fraudulent and a preferential Transaction before the NCLT in IA No. 1056/2020 in IBA No. 1424/2019. RISPL has got rights of Operation and Maintenance for the Wind Energy Generators by virtue of execution of the BTA dated 05/03/2014 for a consideration of Rs. 310,00,00,000/-. A common suspended Directors of RPPL, RISPL and ROMSL transferred the businesses and gross assets worth of Rs. 251,00,00,000/- through ROMSL and liabilities of RPPL were nullified in the Resolution Plan. Initiation of CIRP of RISPL is fraudulent for reason that no amount is payable to the Creditor who initiated since the amount has already gone into the account of ROMSL, pursuant to the execution to the BTA in 2019. There is no record to show whether the amounts given to RISPL for providing services to various customers in the year 2019-20, have gone. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L&T Finance Limited to RISPL amounting to Rs. 2,95,00,00,000/-, vide Sanction letter dated 25/03/2017 against the specific securities including the Pledge of share of RPPL in RISPL. The said facility is also secured by way of Corporate Guarantee dated 05/06/2017 executed by RPPL. The Appellant was clandestinely kept out of the CIRP of RPPL by not considering its Claims as a Financial Creditor. The Original Lender filed a proof of Claims before the Resolution Professional of both the Respondents being the borrower and guarantor and both the Claims were accepted by the respective Resolution Professionals. The Original Lender / Assignor of Appellant was a member of CoC in both the Corporate Debtors. The Original Lender on the advise that a Financial Creditor cannot proceed against the Corporate Guarantor and the Principal Debtor simultaneously withdrew its Claim from the CIRP of RPPL, vide email dated 02/03/2020 with liberty to file it afresh at a later stage and accordingly the CoC of RPPL was reconstituted and informed, vide email dated 11/03/2020. The Appellant challenged the rejection of its Claim before the 'Adjudicating Authority', vide M.A. No. 61 of 2021, seeking directions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished therein, which directly applies to facts of the present case. 21. The Learned Counsel appearing for the Appellant / M/s Sulochana Cotton Spinning Mills Pvt. Ltd. in Company Appeal (AT) (CH) (Ins) No. 104/2022, while reiterating the submissions made by the other Appellants submitted that the CoC of RISPL was also of the opinion that consolidation of CIRP Process of RPPL and RISPL would result in maximisation of value and preferred IA/548/CHE/2021 seeking simultaneous CIRP. It is submitted that the Appellant is the owner of fifteen Wind Mills supplied by RPPL and ever since the purchase, the O&M Services are provided by RISPL, wholly owned subsidiary of RPPL. It is also stated that the Appellant had submitted a Resolution Plan in respect of RISPL and the same is pending consideration before CoC. The Appellant became interested in submitting a consolidated Resolution Plan, combining both RPPL and RISPL preferred Applications IA/517/(CHE)/2021 and IA/518/(CHE)/2021 seeking consolidation of the CIRP Process. The Appellant herein is both a prospective Resolution Applicant as well as an Operational Creditor and is willing to submit a consolidated Resolution Plan. But for the pandem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... da Urja Private Limited, submitted that RPPL supplied the generators to them during CIRP and the Appellant is the recipient of services for both RPPL and RISPL and is an Operational Creditor. The Learned Counsel placed reliance on the Hon'ble Apex Court in the matter of 'Consolidated Construction Consortium Limited Vs. Hitro Energy Solutions Pvt. Ltd.' (Supra) wherein it was held that an Operational Creditor may have been a receiver of goods or services from the Corporate Debtor. The Appellant has a Claim as against RPPL which is pending Adjudication in MA/918/2020 since September 2020 and this Application was filed much before the issue of consolidation or Resolution Plan was even considered by the CoC of RPPL. It is also submitted that for filing an Application of Consolidation, which is an issue of law, no such requirement is contemplated under Section 60(5) of the Code. When RPPL and RISPL are one and the same as a single economic unit and the 'Adjudicating Authority' does not recognise the true intent behind the true existence of RISPL and RPPL, the Appellant and other entities would put to loss. The Appellant being a 100 MW installed capacity of wind energy is an important st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined entity and technology is only with RPPL; d) Usage of independent CIRP of RPPL and RISPL to hide the single economic unit existence; e) Combined Value and its benefits for industry and stakeholders f) Report of Retired Judge; g) Consolidation required in view of MNRE regulations as manufacturer has to provide O&M services; h) Conduct of RP of RPPL despite orders of 'Adjudicating Authority' in rushing to approve the Plan by CoC. 27. The Learned Senior Counsel appearing for GAIL (India) Limited submitted that the Appellant had entered into a Contract for supply, erection and commissioning of Wind Turbine Generators, arrangement of land for setting up of Commercial Wind Energy project and comprehensive O&M for 10 years, vide Letter of Acceptance, vide 19/09/2011, with RPPL for seventeen WEGs at Periyapatti, Tamilnadu. It is submitted that after commissioning the project on 09/07/2014, RPPL by their letter requested GAIL to transfer the Operation and Maintenance part of the Contract dated 19/09/2011 to their Wholly Owned Subsidiary, M/s. RISPL as the Operations and Maintenance business of RPPL was been transferred to the Subsidiary Company. The Operations and Maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the RP of RPPL has filed an Application for avoidance of certain payments to RISPL under Section 45 of the IBC, 2016 which could further drain the resources of RISPL and its ability to pay Claims of its Creditors, particularly Operational Creditors like the Applicant herein, who is a Public Sector Undertaking, dealing in Public Funds. It is also learnt that the RP of RISPL has filed an Application to declare certain transactions as fraudulent under Section 66 of the IBC, 2016. If the proceedings are not consolidated into a Joint Resolution Process, the Stakeholders, particularly, Operational Creditors, like the Applicant (who have little control over the Resolution Process, since the CoCs are entirely comprised of Financial Creditors), would serve grave prejudice. Thus, it would also be in public interest to have Joint Proceedings. 30. The CoC of RPPL in Company Appeal (AT) (CH) (Ins) No. 328/2021 submitted that the Appellants have no locus standi to maintain the Application seeking Consolidation of Simultaneous CIRP; that in the absence of Equity Jurisdiction, the 'Adjudicating Authority' could not have ordered for Consolidation of CIRP; that the Resolution Plan in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproving a resolution plan which accords with the IBC. There is no equity-based jurisdiction with the NCLT, under the provisions of the IBC. … Hence, once the requirements of the IBC have been fulfilled, the Adjudicating Authority and the Appellate Authority are duty bound to abide by the discipline of the statutory provisions. It needs no emphasis that neither the Adjudicating Authority nor the Appellate Authority have an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework." … "In the present case, the resolution plan has been duly approved by a requisite majority of the CoC in conformity with Section30(4).Whether or not some of the financial creditors were required to be excluded from the CoC is of no consequence once the plan is approved by a 1OO% voting share of the CoC. The jurisdiction of the Adjudicating Authority was confined by the provisions of Section 31(1) to determining whether the requirements of Section 30(2) have been fulfilled in the plan as approved by the CoC. As such, once the requirements of the statute have been duly fa/filled, the decisions of the Adjudicating Authority and the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process is on. The adjudicating authority will adjudicate on fraud, particularly during the process resolving bankruptcy. Appeals/actions against the behaviour of the insolvency professional are directed to the Regulator/Adjudicator. Once again, we must clarify that our observations here are not on the merits of the issue, which has not been challenged before us, but only limited to serve as guiding principles to the benches of NCLT and NCLAT adjudicating disputes under the IBC, going forward." 33. With respect to the aspect of Commercial Wisdom of the CoC, the Learned Senior Counsel placed reliance on the Judgment of the Apex Court in 'K. Sashidhar Vs. Indian Overseas Bank' reported in [(2019) 12 SCC 150] where it was laid down that unless there is a violation of Section 30(2) of the Code, the Commercial Wisdom of the CoC is not justiciable. 34. The Learned Senior Counsel Mr. M.S. Krishnan vehemently argued that the essential prerequisite to examine the need for Consolidation is the of not possible and that directing the Consolidation would be against the Commercial Wisdom of the CoC. 35. A Common Counter was filed by the Resolution Professional of RISPL in all these Appeals. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomers in working condition. All the costs of Refurbishment were borne solely by the RPPL under the BTA dated 05/03/2014 and ADTD dated 18/03/2016 as it was RPPL who manufactured and sold the defective Generators. Matters in relation to manufacturing defects come under the purview of 'Operation and Maintenance Services' and therefore, RISPL would not be able to make payments to the same. It is also submitted that the Insurance Cover against risk of any Machinery break-down due to manufacturing defects has been taken by RPPL from FY 2013-14 to FY 2018-19 and any Claim on account of machinery breakdown was attributable to RPPL and was not the obligation of RISPL. 38. It is submitted that RPPL undertook to perform the obligation of RISPL under the O & M Agreement in the event of any failure of RISPL. Likewise, the ADTD dated 26/05/2017, between RISPL, RPPL, Mr. Madhusudan Khemka and Mr. R. Sundaresh (Promoters) and IDBI Trusteeship Services, which is the Debenture Trustee, contains the Clause on Sponsor Support Undertakings, wherein the RPPL undertook to supply spares, provided ancillary services continued to make available the technological requirements apart from bearing the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to this Resolution Professional. Further, assets connected to the O & M Agreement, especially the IPR are totally denied and the 1st Respondent was incapable of doing its core business due to many Litigations between both these Companies connected to the assets, NCLT Chennai ordered a joint Meeting of the CoCs, RPs and the customer on 19/02/2022. During the Joint CoC Meeting, the 1st Respondent's request to allow the RISPL Bidders to give bid for the RPPL was totally denied by the CoC of RPPL. Not having got any fruitful outcome from this Joint Meeting, the NCLT, Chennai ordered for Mediation by appointing a retired High Court Judge, Hon'ble Justice Mr. K. Kannan, on 05/04/2021 to submit the report on 23/04/2021. During the Mediation process, the RP of RPPL unilaterally called for the CoC Meeting and passed the separate Resolution Plan causing several damages to RISPL and its customers. A majority of the CoC instructed the RP of RISPL to file for simultaneous CIRP Petition before NCLT, Chennai and therefore, the RP of RISPL preferred an Application IA/548/CHE/2021 in IBA/1424/2019, seeking for simultaneous CIRP Proceedings of both the Corporate Debtors under a common Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this initiation of CIRP was against the BTA executed on 05/03/2014 between RPPL and RISPL. It is contended that the RP of RPPL in a mala fide intention restrained ARCIL and L&T Infra Partners from taking part in the CoC of RPPL by choosing not to reply to their resubmission of Claims submitted by these Financial Creditors on 08/12/2020 and sent the Claim rejection intimation after the approval of the Resolution Plan that is on 05/04/2021. ARCIL and L&T Infra are the Financial Creditors of RISPL and as the RP of RPPL did not include them as Financial Creditors of RPPL, the Applications and Appeals filed by ARCIL and L & T Infra Partners for including them as Financial Creditors of RPPL. The Land Leasehold Rights mortgaged to these Financial Creditors by RPPL and RISPL is nullified without even including them in the CoC of RPPL. These Secured Financial Creditors were deliberately kept out of the CoC of RPPL and had these Creditors' Claims been admitted and added in the CoC of RPPL, the present situation of the assets of RISPL getting hijacked would not have taken place. The Learned Senior Counsel concluded that separate Resolution for both Companies would push RISPL into 'Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olidation would serve the interest of all the Stakeholders. Assessment : 46. At the outset, this Tribunal addresses to the finding by the 'Adjudicating Authority' that the Appellants in Company Appeal (AT) (CH) (Ins) Nos. 323/2021, 96/2022, 334/2021, 335/2021, 104/2022, 328/2021, and in 88/2022 are not 'Operational Creditors'. The Hon'ble Apex Court in the matter of 'Consolidated Construction Consortium Limited Vs. Hitro Energy Solutions Pvt. Ltd.' in Civil Appeal No. 2839 of 2020 has particularly addressed the issue as to 'Whether the appellant is an operational creditor under the IBC even though it was a 'purchaser'.' 47. Section 5 (20) of the IBC defines 'Operational Creditor' in the following terms :- "(20) "operational creditor" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;" 48. Section 5(21) defines 'Operational Debt' which is detailed as herein: (21) "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the re-payment of dues arising under any law for the time being in force and payable to the Central Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of a 'Creditor which includes the Decree Holder, as defined under Section 3(10) of the Code. It is also seen from the record that the Appellant / M/s Sulochana Cotton Spinning Mills Private Limited in Company Appeal (AT) (CH) (Ins) No. 104/2022 is not only an Operational Creditor, but also a prospective Resolution Applicant who had submitted a Resolution Plan for RISPL and has given an undertaking that its ready and willing to submit a 'Consolidated Bit' for both RPPL and RISPL. Therefore, this Tribunal is of the considered view that a blanket observation that the Appellants are not 'Operational Creditors' is incorrect. Keeping in view, the facts and circumstances of the case on hand and specifically relying on the ratio of the Hon'ble Apex Court in the matter of 'Consolidated Construction Consortium Limited Vs. Hitro Energy Solutions Pvt. Ltd.' (Supra) and also the undisputed fact that the Appellants in Company Appeal (AT) (CH) (Ins) No. 323/2021, Company Appeal (AT) (CH) (Ins) No. 96/2022, Company Appeal (AT) (CH) (Ins) No. 334/2021, Company Appeal (AT) (CH) (Ins) No. 335/2021, Company Appeal (AT) (CH) (Ins) No. 104/2022, Company Appeal (AT) (CH) (Ins) No. 328/2021, Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Equipment Company, forming part of and annexed to the accounts for the year ended 31st March 2012. 5. Related party discloser (i) Controlling Company M/s BT and FC Pvt. Ltd.) (ii) Common Directors: Mr. M.V. Murlidher and Padma Murlidher both are Directors in Respondent Nos. 1 and 2 Company. Thus, the Directors of the both Companies are Common and there is common control of companies. (Please See Company Master Data of R-1 and R-2 at Page 528 and 529 of Appeal Paper Book) (iii) Common Assets: The Respondent No. 2 Company owns a partial of land admeasuring 2 acres 36 gundas situated at No. 15, First Phase, Peenya Bengaluru and has constructed warehouse on the land. The Respondent No. 1 Company runs a bottling plant unit in the warehouse and owns the plant and machinery therein, therefore, there is inter-dependency between two Companies and the assets are common to such an extent that the Respondent No. 2 Company has provided its land and warehouse to the Respondent No. 1 Company to carry on its business activity. (iv) Common Liabilities: (a) The Respondent No. 3 has made a claim of Rs. 13,45,11,636/- against the Respondent No. 1 Company as a borrower and the Respondent No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any has a significant influence but which is not a subsidiary company of the company having such influence and includes a joint venture company. Explanation: for this purpose of this clause - (a) The expression significant influence means control of at least 20% of total voting power or control of or participation in business decisions under an agreement…… 55. In the aforenoted matters, The NCLAT, Principal Bench has given a finding that Respondents No. 1 & 2 (BT & FC Pvt. Ltd. & BDDEC Pvt. Ltd.) have fulfilled the criteria of Consolidation and that the 'Adjudicating Authority' has not appreciated the facts in the correct perspective and allowed the Consolidation of the two CIRPs. 56. Further, The Principal Bench, NCLAT in the matter of 'Oase Asia Pacific Pte Limited Vs. Axis Bank and other Financial Creditors & Ors.' in Company Appeal (AT) (Ins) No. 780/2020 has reconfirmed the following parameters to be met with respect to Consolidation of CIRPs: a) Common Control b) Common Directors c) Common Assets d) Common Liabilities e) Inter-dependence f) Inter-lacing of Finance g) Pooling of Resources h) Co-existence for survival i) Intricate Link of Sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2006 04.01.2008 2 Common Control a) Has complete control over RISPL which is a wholly owned subsidiary. b) Had transferred right to use the technology required for Operation and Maintenance of the Windmill Turbines. a) RISPL is a wholly owned subsidiary of RPPL b) Common registered office with MCA c) Common email ID 3 Common Directors Only Common Suspended Directors 4 Common Suspended Directors 1. Madhusudan Khemka 2. Sundaresh Ramanathan 1. Madhusudan Khemka 2. Sundaresh Ramanathan 5 Relationship Holding Company Wholly Owned Subsidiary 6 Manufacturing Plant Tada and Nellore with 600 employees There is no manufacturing facility. It is dependent on the Holding Company for repairs and services. RISPL provides the following services- • Erection and installation; • Routine maintenance; • Maintenance of sub-stations. • Evacuation of power and acts as a support system of RPPL. It is an arm of the business of RPPL. 7 Specialised technology showing dependency on technology Has exclusive technology rights for manufacture and repair of Regen make Vensys V77-1500 KW turbine. Dependent on the Holding company for technology and repair. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,00,000/-). c) RPPL Lands, long leased to RISPL where RISPL's 5 Pooling Sub Stations are constructed, are mortgaged to RISPL's lenders, L&T and ARCIL. 12 Common Assets a) RPPL leased out certain lands to RIPSL for long lease where RISPL's 5 pooling sub stations are in operation. Copy of the lease deeds are part of the Record (Annexure A8) b) RISPL tools are used for E&C Business which are transferred to Regen O&M Services Ltd c) Many important land assets recorded in the balance sheets of RISPL are registered in the name of RPPL. 13 Common Liabilities a) Generator Repair Liability and Consequential Liquidity Liability. b) RISPL's Assets and Liabilities have been transferred to RPPL's Wholly Owned Subsidiary Company, ROMSL by way of Business Transfer. The Approved RP of RPPL extinguished ROMSL's Liabilities towards RISPL and has divested nearly Rs. 251 Crores. c) It is the case of the Appellants that due to non-filing of Audited Financial Statements of RPPL post 31/03/2017, the Books of RPPL, RISPL and their Wholly Owned Subsidiaries have not been reconciled. There is also no clarity on the amounts due to various vendors / suppliers or regarding receivables. 14 Intertwine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signment Agreement for the relationship between the Appellant / Party on one side and the Assignor / Assignee on the other side. This Assignment Agreements admittedly entered into with the Appellants further reinforces the fact that RPPL continued to be the Obligator for the O&M of the Appellants. Annexure A8 is the Copy of the extract of the amended and restated Debenture Trust Deed, dated 11/05/2017 between RISPL and RPPL and the Common Directors, Mr. Madhusudan Khemka and Mr. R. Sundaresh and IDBI Trusteeship Services Ltd., the Debenture Trustee. In this Debenture Trust Deed, RPPL has admittedly agreed to the following 17.4 Sponsor Support Undertakings The RPPL hereby agrees, covenants and undertakes the following: (i) The RPPL shall comply with all its covenants and undertakings under the Transaction Documents. (ii) RPPL shall continue to hold atleast 51% (Fifty One percent) of the shareholding of the Issuer and Control the Issuer till the Final Settlement Date. (iii) RPPL shall agree, undertake and covenant to supply spare parts and provide assistance in procurement of spare parts as required in relation to the O&M Business at arm's length basis. (iv) RPPL shall ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the above Agreement, it is clear that RPPL has agreed to supply the spare parts and provide assistance in procurement of spare parts as required in relation to the O&M business and shall continue to provide all insurance for MBD repair for the manufacturing defects of all WEC machines until the final settlement date. This covenant further fortifies the case of the Appellants that the businesses are integrated. It is also seen from the record that SBI is a common Financial Creditor of both the CoCs and that ARCIL has filed an Application, bearing No. MA 61/2021, seeking to be included in the CoC of RPPL on the ground that the Corporate Debtor had issued a Corporate Guarantee in favour of L&T Finance Limited which has assigned its debt to ARCIL which holds charge on the movable and immovable assets of both the Corporate Debtors and that had the Applications filed before the 'Adjudicating Authority' been adjudicated, the Appellant's voting share in CoC of RPPL would be around 15.04 %. It is the case of the ARCIL that the CoC of RPPL has been improperly constituted. Without going into the merits of that issue raised by ARCIL in this Appeal, we are of considered view that only the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ints of nepotism or discrimination. 3. In the absence of institutional funding available to the Companies with possible exposure of the customers to pay upfront, the cost of repairs even in a situation where there were pre-concluded contracts, the matter would require appropriate direction from the Tribunal of how the matter could be dealt with. It could be in the context of insurance policies that are available for RPPL and RISPL when the insurers could be simultaneously brought on broad to discuss with the customers and ensure release of funds through the insurance companies to the extent possible. 4. The manufacturing facility in Udaipur owned by RPPL could be transferred for consideration to RISPL by way of sale or lease and the IPR issues could be resolved with appropriate legal counsel to protect their ownership with RPPL. 5. Technical advice could be solicited if the design and manufacture of the windmills are required to be re-examined to adapt German technology to Indian weather conditions to cope with recurrent problems of disrepairs in a truly short period of 2-3 years, when the life span of each windmill is trumpeted up to have a 25year life span. 21. The report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate guarantor or personal guarantor, as the case may be, of such corporate debtor] shall be filed before such National Company Law Tribunal. c. Section 60(5) : 60. Adjudicating authority for corporate persons: (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of-- (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. (6) Notwithstanding anything contained in the Limitation Act, 1963 (36 of 1963) or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include its shares in the Subsidiary Companies, so much so that a Successful Resolution Applicant would also receive the control of the Securities. Insolvency Jurisprudence is still evolving in India and there are situations where the destiny of one Company is linked with another and if such linked Companies are resolved together there may be maximisation of value of assets and the possibility of revival could be much higher. In this background, the Insolvency and Bankruptcy Board of India (hereinafter referred to as 'IBBI') constituted a Working Group on 17/01/2019 to recommend a complete framework to facilitate Insolvency Resolution in a group. The Working Group (hereinafter referred to as 'WG') gave its recommendations on 23/09/2019 for the framework of procedure of Group Companies as 'Report of the Working Group on Group Insolvency'. The recommendations of the WG include Holding, Subsidiary and Associate Companies; elements of proposed framework which include Applications to be filed against all Corporate Debtors who have defaulted and are part of the Group; a single Insolvency Professional and a single 'Adjudicating Authority'; creation of a Group Creditors' Committee and grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability for criminal wrongs, etc.), and yet they operate as a group, tapping into one another's efficiencies and strengths. Even decision-making for the group could reside across definitional outlines that legally define each entity within a group. Such distinct legal identity of group entities leads to various advantages of conducting business in the form of groups. This has prompted group structures to become a modern global reality. Insolvency laws, like general company laws, typically respect the principle of separate legal personality of the entities in a group and deal with each entity's assets and liabilities separately. Consequently, insolvency statutes in most jurisdictions treat the insolvency proceedings of each group entity separately. However, such statutory frameworks may prove to be ignorant of economic realities and practicalities. Where group entities are significantly interlinked, it may be value destructive to not recognise such interlinkages in insolvency law. For instance, where the business of different entities in a group are dependent on each other; or various group entities have many common assets; or where there are multiple common liabilities and rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules and regulations for cross-border insolvency under the Code and had submitted a report in this regard to the MCA on 15 June, 2020. The Committee appreciated the recommendations of the Working Group and greatly benefited from the elaborate discussion in its report. To fulfil its mandate, the Committee consulted several stakeholders and experts, and examined relevant legal and regulatory principles as well as global best practices. Based on this, the Committee submits this report ("Report") recommending a draft framework to facilitate insolvency resolution and liquidation of corporate debtors in a group in India, as well as recommendations of the Committee on adoption of the MLEGI. 73. A brief extract of the summary, published by the Ministry of Corporate Affairs on 18/01/2023, dealing with the issue on hand has recommended the following :- …….iii. Jurisprudence on substantive consolidation, i.e., pooling of assets and liabilities of an insolvent group, is already developing under the Code through case law. This is a remedy resorted to in exceptional circumstances and provisions governing substantive consolidation may not be provided in the Code at present. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Senior Counsel appearing for ARCIL, Mr. E. Om Prakash, has submitted that MA 61/2021 in IA 394/2021 was kept pending by the 'Adjudicating Authority' and had MA 61/2021 been decided prior to the approval of the Resolution Plan, ARCIL which is the assignee of the Debt of L&T to a tune of Rs. 300 Crores would have 15% voting rights as part of the CoC in RPPL and ARCIL is seeking Consolidation. It is seen from the record that ARCIL is wearing two hats, one as a 'borrower' and one as a 'guarantor'. We find force in the submissions of the Learned Senior Counsel, Mr. E. Om Prakash that unless there is Consolidation, the 'debt' in such a case would not be addressed properly. Needless to add, if the argument of the Learned Senior Counsel for RPPL is to be taken into consideration, then the Commercial Wisdom of RISPL which is the subsidiary Company of RPPL is also to be taken into account as the RP of RISPL has filed an Affidavit that RISPL positively seeks 'Consolidation'. 76. This Tribunal is of the considered view that the financial revival of one Company / Corporate Debtor will be closely linked to the Financial Health of the other Company if there is intricate Financial relationship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o issue any Order, Process or Judgment that is necessary or appropriate to carry out the provisions', the IBC, 2016 does not confer the 'Adjudicating and Appellate Authorities' with any 'Equitable Jurisdiction'. This argument has to be seen from the perspective that USA incorporates a 'Debtor-in-possession' regime, whereas the IBC, 2016 strictly adopts the 'Creditors-in-control' regime which is well defined and distinguishable. Further in the instant case, the question which arises is with respect to 'Consolidation' where the 'Adjudicating Authority' has to examine if there are any 'Assets' and 'Liabilities' are combined. In the Indian Law, Section 60 (5) (c) of the Code empowers the Adjudicating Authority to entertain and dispose of "any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor or Corporate Person under this Code". Regulation 11 of the NCLT Regulations provides for inherent powers of the Tribunal to pass such orders as may be necessary to meet the ends of Justice. Additionally, the Jurisprudence being followed in other developed countries, viz, Germany, Canada and European Union (detaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of CIRP of group companies, in the absence of specific provisions under IBC, 2016, cannot be ordered by this Adjudicating Authority." 79. This Tribunal is of the considered view that the ratio laid down by the Hon'ble Apex Court in the matter of 'Pratap Technocrats Pvt. Ltd. and Ors. Vs. Monitoring Committee of Reliance Infratel and Ors.' reported in [(2021) SCC Online SC 569] regarding 'Equity Jurisdiction', is not relevant to the facts of the attendant case, specifically in the view of the fact that Applications were filed by the Appellants seeking simultaneous CIRP / Consolidation, which Applications require to be adjudicated based on the parameters set out in 'Radico Khaitan Ltd. vs. BT & FC Pvt. Ltd. & 6 Ors.' (Supra) and 'Oase Asia Pacific Pte Limited Vs. Axis Bank and other Financial Creditors' (Supra), wherein the criteria used for Consolidation of Videocon Industries has been reiterated and which findings have attained 'finality' and are precedents set, to be safely relied upon. We hold that Consolidation of CIRP was ordered by the Principal Bench, NCLAT in the aforenoted cases, not in exercise of its 'Equity Jurisdiction', but intending 'maximisation of value of assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to make available the technological requirements, bears the cost and responsibility of major break-downs due to manufacturing defects during the "O&M period" and other such clauses. 83. Working Group on Group Insolvency constituted, vide Order No. IBBI/CIRP/GI/2018-19/001 dated 17/01/2019 in its Report to the IBBI dated 23/09/2019 states that if there are significant operational linkages between the different group companies, then Insolvency Proceedings against separate Companies would have to take into account this interdependence between Companies both to keep these Companies running as going concerns during the CIRP and to resolve the Insolvency of these Companies in a value maximizing manner. 84. It is stated that several Applications were filed by the RP of RPPL against RISPL in relation to the assets of RISPL and its Claims and RP of RISPL had filed nine Applications against RPPL and it's Wholly Owned Subsidiary Companies and some are still pending before the 'Adjudicating Authority'. 85. The Mediator, Hon'ble Justice K. Kannan, clearly stated in his Report that Joint Sale of both the Companies is possible and this would result in the value maximisation and that if bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit; the approval by CoC of RISPL, and having regard to the Report of the Mediator, Hon'ble Justice K. Kannan, appointed by the 'Adjudicating Authority', the recommendations dated 23/09/2019 of the WG constituted by IBBI; the extract of the Executive Summary dated 18/01/2023, published by the Ministry of Corporate Affairs, this Tribunal is of the considered view that Consolidation of the CIRPs be allowed and the Impugned Order of the 'Adjudicating Authority' dated 01/11/2021 is set aside. Needless to add, it is reiterated that this Tribunal, has not made any observations on the merits of the 'Claims' or as to whether some of the Appellants are 'Financial Creditors' or comment on the eligibility of the Appellants, in Company Appeal (AT) (CH) (Ins) No. 104/2022, who had submitted that they are ready to submit a consolidated bid for both RPPL and RISPL. 89. For all the foregoing reasons, Company Appeal (AT) (CH) (Ins) No. 323/2021, Company Appeal (AT) (CH) (Ins) No. 96/2022, Company Appeal (AT) (CH) (Ins) No. 334/2021, Company Appeal (AT) (CH) (Ins) No. 335/2021, Company Appeal (AT) (CH) (Ins) No. 340/2021, Company Appeal (AT) (CH) (Ins) No. 06/2022, Company Appeal (AT) (CH) (Ins) No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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