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TMI Blog2023 (12) TMI 1149X X X X Extracts X X X X X X X X Extracts X X X X ..... s examined with reference to Shoora Capital and in the net worth of Resolution Applicant s, group was claimed in the Resolution Plan - it is clear that the Resolution Applicant has undertaken in the addendum to the Resolution Plan dated 18.06.2021 as well as by LoI dated 28.07.2021 that it shall not change its shareholding in directorship and constitutional pattern of the Resolution Applicant for a period of 5 years from the effective date and for changes if any. Approval of two leading Financial Creditors shall be obtained. Replies to emails received from the Resolution Applicant indicate that no approval was taken from the Financial Creditor for effecting any change in constitutional pattern of the Resolution Applicant and directorship - Adjudicating Authority after considering the submissions has rightly come to the conclusion that the breach was committed by the Resolution Applicant of the addendum dated 18.06.2021 and the conditions as included in the LoI dated 28.07.2021. Whether in the facts of the present case, CoC was precluded from taking any decision to issue fresh Form G and to withdraw the Resolution Plan which was earlier approved? - HELD THAT:- Present is a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Adjudicating Authority granting exclusion of time is consequential to the order passed in IA No.985 of 2023. The Adjudicating Authority in its impugned order has made observations in paragraph 32(ix) and (x) as extracted above that the Corporate Debtor Company is a going concern and there is buoyancy in the market for its products of non-ferrous metals. It is well settled that the object and purpose of the IBC is to revive the Corporate Debtor and when the Adjudicating Authority has taken decision to issue fresh Form G by excluded the period from 05.02.2021 till passing of the order, no exception can be taken to said direction - there are no error in the order of the Adjudicating Authority excluding the period from 05.02.2021 till passing of the order in the CIRP and issuing direction to issue fresh Form-G. Appeal dismissed. - [Justice Ashok Bhushan] Chairperson , [Barun Mitra] Member (Technical) And [Arun Baroka] Member (Technical) For the Appellant : Mr. Anand Chhiber, Ms. Nishita Khurana, Mr. Aashya Sharda, Mr. Gaurav Mitra and Mr. Lavanya Pathak, Advocates For the Respondents : Mr. Sunil Fernandes, Mr. Vaijayant Paliwal, Mr. Nikhil Mathur and Ms. Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Resolution Plan of the Appellant. On 25.10.2021, Mr. Gaurav Gupta, CEO of Shoora Capital FZE informed Resolution Professional vide email dated 25.10.2021 that there have been some changes in the directorship and constitutional pattern of Resolution Applicant. On 26.10.2022, Shoora Capital informed Resolution Professional vide email that Mr. Gaurav Gupta has ceased to be a director or stakeholder in the entities namely Shoora Minerals Pvt. Ltd. , Jubilee Metal Pvt. Ltd. and Jubilee Metal Holding Pvt. Ltd. . The Appellant- Jubilee Metals Pvt. Ltd. is a company whose 100% share are owned by Shoora Minerals Pvt. Ltd. . Shoora Minerals Pvt. Ltd. is 100% owned by Shoora Capital FZE . Shoora Capital FZE is 100% owned by Mr. Gaurav Gupta. Resolution Professional vide e-mails dated 26.10.2022 and 30.10.2022 wrote to Mr. Gaurav Gupta that there appears to be a major deviation from the terms of the approved Resolution Plan. Mr. Gaurav Gupta was requested to give details of change in the directorship/constitutional pattern of the Appellant. On 01.11.2022, Appellant responded to the emails sent by the Respondent No.1 attaching the Affidavit under Section 29A of the Code. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Professional to conduct expedited process inviting fresh resolution plans for resolution of the Corporate Debtor c. Pass an order for exclusion of time period from 05.02.2021 (the date on which first Form G inviting EOI and Resolution Plan was issued) till the date of passing of the order in the present IA by this Hon'ble Tribunal for the purpose of CIRP of the Corporate Debtor. d. Pass such other order/orders as it may deem fit and proper in the facts and circumstances of the case. 3.2. In IA No.985 of 2023, Appellant appeared and filed its reply. Appellant filed an IA No.2294 of 2023 dated 21.03.2023 praying for following reliefs:- a. Pass an order directing the Respondent to not take any coercive action against the Applicant including withdrawal of Resolution Plan; b. Pass an order setting aside or quashing the resolution passed by the Committee of Creditors in its meeting dated 21.12.2022 qua withdrawal of resolution plan pending for approval before this Hon'ble Tribunal; c. Pass an order directing the COC to consider the submissions of the Applicant before passing any resolution towards withdrawal of Resolution plan of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be granted as such the approved Resolution Plan is binding on the CoC and the Successful Resolution Applicant. There is no breach of the Resolution Plan by the Appellant and the CoC arbitrarily conducted itself in resolving to withdraw the Resolution Plan and to issue fresh Form G. Change of shareholding pattern of the Successful Resolution Applicant was due to prior infusion of funds by Mr. Sandeep Parwal in the Resolution Plan and such infusion of funds was always contemplated in the Source of Fund clause of the approved Resolution Plan. Mr. Sandeep Parwal has given a letter of comfort to Successful Resolution Applicant and he was connected with the Resolution Plan due to the said reason. Net worth certificate of Mr. Sandeep Parwal who has now taken 100% shareholding of the Appellant has also been submitted to fulfil the eligibility. Restriction placed upon the Successful Resolution Applicant that it shall not dilute its shareholding was not absolute. Adjudicating Authority cannot interfere with the commercial wisdom of the CoC in approving the Resolution Plan. Resolution Plan itself contemplated that the source of funds to be infused by the Successful Resolution Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deviation from the terms of the Resolution Plan by change in the directorship and constitutional pattern of the Appellant. The meeting of the CoC was convened on 25.11.2022 and thereafter on 21.12.2022, CoC after taking note of breach and violation of the addendum of the Resolution Plan and breach of conditions of LoI resolved to issue fresh Form G and forfeit the performance guarantee given by the Appellant as per clause 13.2 of the RFRP. The submission of the Appellant that the plan once approved is irrevocable cannot be applicable in the facts of the present case when the Appellant completely altered its shareholding structure in contravention of material provisions of the Resolution Plan, addendum and LoI. Appellant being the Successful Resolution Applicant cannot be allowed to object the decision of the CoC which was taken on account of the extraordinary situation created by the Appellant himself. Appellant has not obtained consent of two Financial Creditors for carrying out any change in the shareholding and directorship. It is submitted that the Adjudicating Authority gave ample opportunities to the Appellant during pendency of the proceeding before the Adjudicating Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials on record, following are questions which arise for consideration in these Appeals are:- (i) Whether after approval of the Resolution Plan by the CoC, the Appellant- Successful Resolution Applicant has committed breach of addendum dated 18.06.2021 and the conditions of LoI? (ii) Whether in the facts of the present case, CoC was precluded from taking any decision to issue fresh Form G and to withdraw the Resolution Plan which was earlier approved? (iii) Whether the decision of the CoC dated 21.12.2022 forfeiting the performance guarantee of Rs.20 Crores given by the Appellant is not in accordance with law? (iv) Whether the Adjudicating Authority was not entitled to grant exclusion of the period in the CIRP? Question No.(i) 11. At the time of submission of the Resolution Plan, ownership structure of the Appellant i.e. Successful Resolution Applicant is not in dispute. Resolution Plan contains details of Resolution Applicant also. Clause 3.1 of the Resolution Plan contains a details of the Resolution Applicant. Clauses 3.1 and 3.2 of the Resolution Plan are as follows:- 3. Resolution Applicant 3.1. Background of the Resolution Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2. Transaction structure for proposed acquisition The proposed transaction structure would be as under: The Resolution Applicant M/s Jubilee Metal (P) Ltd., has incorporated M/s Jubilee Metal Holding Private Limited a Special Purpose Vehicle (SPV for executing this transaction. M/s Jubilee Metal (P) Ltd. is a 100% owned subsidiary M/s Shoora Minerals Private Limited India which is 100% owned subsidiary of M/s Shoora Capital FZE Ajman, UAE in India. The Resolution Applicant would acquire Metenere and will hold 100% equity Name % Shareholding Jubilee Metal Holding Private Limited 100% in Metenere Jubilee Metal (P) Limited 100% in Jubilee Metal Holding Private Limited Shoora Minerals Private Limited 100% in Jubilee Metal (P) Ltd. Shoora Capital FZE Ajman, UAE 100% in Shoora Minerals Private Limited Gaurav Gupta 100% in Shoora Capital FZE Ajman, UAE Total 100% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since Shoora Capital FZE, Azman, UAE is the ultimate parent company whose net worth has been considered at Eol stage and also currently under Resolution Plan, reliance is placed on net worth of Shoora Capital FZE for source of funds to be infused by the Successful Resolution Applicant, you undertake that Shoora Capital FZE will not dilute its investment in all the subsequent chain entities (M/s Shoora Minerals Private Limited, Jubilee Metal Private Limited including the SPV Jubilee Metal Holding Private Limited) until the implementation (5 years from Effective Date (as defined in the Resolution Plan)) of the Resolution Plan in full (without the consent of Top 2 Financial creditors) Additionally, Mr. Gaurav Gupta shall not dilute his investment in Shoora Capital FZE until the implementation of Resolution Plan (5 years from Effective Date). 15. The Letter of Intent was received by the Appellant and Mr. Gaurav Gupta on behalf of the Appellant accepted unconditionally the Letter of Intent. After the aforesaid, application for approval of the Resolution Plan was filed by the Resolution Professional before the Adjudicating Authority being IA No.4041 of 2021 which remained p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary remedies against you and the Shoora group entities. Accordingly, the undersigned requests you to refrain from any actions contrary to the Resolution Plan, and once again requests you to kindly provide the information sought with regard to the present shareholding structure of the Shoora group entities, and any changes carried out in respect of the same. You are also requested to keep yourself available during mid next week for meeting with undersigned and CoC members. Regards Surendra +919717390678 17. In the minutes of the CoC meeting on 25.11.2022, all developments were brought into notice of the CoC which took note of all developments. After the meeting of the CoC detailed e-mail was sent on 27.11.2022 to the Resolution Applicant informing about non-compliance with Resolution Plan and LoI. Earlier e-mail sent by the Resolution Professional reads as follows:- Sub: Non-compliance with resolution plan and letter of intent Dear Sir This is in relation to the email dated November 24, 2022 received by the undersigned from the Resolution Applicant vide which the Resolution Applicant is not able to share the details sought by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the committee of creditors of the Company on December 20, 2022, to explain such changes in directorship/constitutional pattern, to the committee of creditors of the Company. Please note that in the event that you still fail to provide requisite details and/or explanations, to the satisfaction of the undersigned and/ or the committee of creditors of the Company, that such changes in directorship/constitutional pattern do not constitute a breach of the resolution plan/letter of intent, the undersigned shall pursue all remedies available to it against you, including but not limited to the forfeiture of the performance security deposited with the undersigned. 19. The CoC held its meeting on 21.12.2022 which also noted that the Resolution Applicant has sent its regret that due to some unavoidable circumstances, he could not attend the meeting. After considering all developments and circumstances, following resolution was passed on Resolution 4(D)(1):- RESOLUTION 4(D)(1); TO FORFEIT INR 20 CRORES DEPOSITED WITH SBI BY SRA AS A PERFORMANCE GUARANTEE RESOLVED THAT pursuant to Clause 13.2 of the RFRP issued on 12 February 2021, approval of members of the Committee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and as per the new structure the SRA is not the original SRA whose plan was approved by the CoC. It is seen that the very sound assessment on which the CoC approved the Resolution Plan has been sought to be changed. The CoC find that the plan is not implementable in the manner it had approved and therefore have sought to restart the process as above. We are informed that the decision to go back on fresh Form G is best suited as the CD is viable and has better potential than liquidation. It has worth and CoC is confident of achieving a viable plan from a stable Resolution Applicant. We note the above plea made by CoC counsel in the course of the arguments. x. In view of the above, we have no other option but to allow the RP/COC to withdraw the plan and to invite fresh resolution plans of the CD. It is noteworthy that the CD Company is a going concern and there is buoyancy in the market for its products of non-ferrous metals. Thus invoking our powers under Rule 11 of the NCLT Rules, 2016 read with Section 60(5) of IBC, we permit the RP to withdraw the plan approval application. We also direct the RP to expedite the process of inviting fresh resolution plans by issuing fresh For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Resolution Plan even prior to the approval before the Adjudicating Authority is binding inter se between the CoC and the Successful Resolution Applicant. In paragraph 115 and 116, following was laid down:- 115. While the above observations were made in the context of a scheme that has been sanctioned by the court, the resolution plan even prior to the approval of the adjudicating authority is binding inter se the CoC and the successful resolution applicant. The resolution plan cannot be construed purely as a contract governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the adjudicating authority. Even at that stage, its binding effects are produced by IBC framework. The BLRC Report mentions that [w]hen 75% of the creditors agree on a revival plan, this plan would be binding on all the remaining creditors 98. The BLRC Report also mentions that, the RP submits a binding agreement to the adjudicator before the default maximum date 99. We have further discussed the statutory scheme of IBC in Sections I and J of this judgment to establish that a resolution plan is binding inter se the CoC and the successful resolution appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. P. Laxmi Devi, (2008) 4 SCC 720] , while determining the constitutionality of a statute, this Court observed that it should be wary of transgressing into the domain of the legislature, especially in matters relating to economic and regulatory legislation. This Court observed : (P. Laxmi Devi case [State of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720] , SCC p. 751, para 80) 80. As regards economic and other regulatory legislation judicial restraint must be observed by the court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialisation when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions. (emphasis supplied) 158. Judicial restraint must not only be exercised while adjudicating upon the constitutionality of the statute relating to economic policy but also in matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution applicant is indicative of IBC's proscription of any attempts at withdrawal at its behest. The rule of casus omissus is an established rule of interpretation, which provides that an omission in a statute cannot be supplied by judicial construction. 27. What has been held in paragraph 157 as above that the Adjudicating Authority is not conferred any power to direct an unwilling CoC to renegotiate a submitted Resolution Plan and agree to its withdrawal at the behest of the Resolution Applicant. 28. The discussion of the Hon ble Supreme Court from paragraphs 155 to 162 indicated the said discussions were under heading J. withdrawal of the Resolution Plan by the Successful Resolution Applicant under the IBC . Thus, Court has laid down the above proposition in reference to withdrawal of the Resolution Plan by the Successful Resolution Applicant. However, what has been held in paragraph 115, as noted above also, has to be kept in mind where Hon ble Supreme Court has laid down that the Resolution Plan even prior to the approval of the Adjudicating Authority is binding inter se between the CoC and the Successful Resolution Applicant. The law is well settled and clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make payment in accordance with the Resolution Plan; or (d) the Successful Resolution Applicant fails to renew/extend the Performance Bank Guarantee at least 15 days prior to the date of its expiry of the Performance Bank Guarantee Validity Period; or (e) the Successful Resolution Applicant is found to be ineligible to submit the Resolution Plan under Section 29A of the IBC or the Successful Resolution Applicant is found to have made a false or misleading declaration of eligibility under Section 29A of the IBC, (f) the Successful Resolution Applicant conceals any material information, makes a wrong statement, misrepresents facts or makes a misleading statement in any undertaking submitted by it or Resolution Plan or any other document provided to the Resolution Professional or Committee of Creditors or it is discovered that another information provided by the Resolution Applicant is incorrect or untrue; (g) fails to implement or contributes to the failure of implementation of their resolution plan in accordance with the terms of the plan and its implementation schedule; or (h) if the Resolution Plan is withdrawn or unilaterally modified before CoC's approval. The Performance B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 30, to provide a performance security within the time specified therein and such performance security shall stand forfeited if the resolution applicant of such plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule. Explanation I.- For the purposes of this subregulation, performance security shall mean security of such nature, value, duration and source, s be specified in the request for resolution plans with the approval of the committee, having regard to the nature of resolution plan and business of the corporate debtor. Explanation II.- A performance security may be specified in absolute terms such as guarantee from a bank for Rs. X for Y years or in relation to one or more variables such as the term of the resolution plan, amount payable to creditors under the resolution plan, etc.] 33. Regulation 36B (4A) provides that performance security shall stand forfeited if the Resolution Applicant of such plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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