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TMI Blog2023 (12) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... npaid. There are no hesitation to hold that the Appellant s legal rights have been affected and hence, falls within the ambit of the definition of `person injured or damaged in a legal sense . Therefore, it is observed that the Appellants Appeal is maintainable, specifically having regard to the fact that the Second Appellant M/s. KRS Erectors has purchased the First Appellant Company as a `Going Concern on an `as is where is basis and is a `person aggrieved as its `pecuniary interest is directly affected. Appellants are aggrieved parties as the title of the CCPS still stands in their name and not hearing the Appellants and giving such directions would construe violation of Principles of Natural Justice. Needless to add, the Second Appellant/M/s. KRS Erectors Private Limited, which is the Company having acquired the First Appellant Company as a `going concern is an aggrieved party and it has the locus to file this Appeal. It is the main case of the Respondent that the subject 42,00,00,000 CCPS falls outside the scope of the approved Acquisition Plan. It is the case of the Appellants that Clause 5.10 of the Acquisition Plan makes it clear that unearned receivables perta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the chequered history and the fact that the Impugned Order did not reflect the factual matrix, is not appreciated. Though initially, it was opined that this matter be sent back to the Adjudicating Authority for hearing afresh, keeping in view that substantial time has been spent before this Tribunal in understanding the factual matrix of the matter and the matter was heard at length over a considerable period of time, and having regard to the fact that IBC is a time bound process, it is held that the Appeal itself be decided. The Impugned Order passed by the Adjudicating Authority is set aside and any actions taken by the Respondents during the pendency of the Appeal are rendered otiose - appeal allowed. - [Justice Rakesh Kumar Jain] Member (Judicial) And [Shreesha Merla] Member (Technical) For the Appellant : Mr. E. Om Prakash, Sr. Advocate for Mr. Pranav G, Mr. Mayan H Jain, Ms. Moneshaa, Ms. Niveditha Narayanan, and Mr. Sharath Chandupatla, Advocates. For the Respondent : Mr. S.R. Rajagopal, Sr. Advocate for Mr. Sagar Dhawan, Mr. Allwin Godwin, Vimal Asthana, Aishani Roy, Niranjana Pandian, Advocates for R1. Mr. Muthuchharan Sundaresh, Advocate for R5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Senior Counsels, we dispose of this IA observing that, liquidator of LITL shall assist/cooperate in the process of dematerialization and transfer of the said CCPS, in name of Respondent No. 1, for onward transfer in favour of Respondent No. 4 and all the parties to the share purchase agreement shall sincerely endeavour to implement/fulfil all the terms and conditions of the share purchase agreement dated 12.09.2023, as expeditiously as possible but not later than 60 days, from the date of this order. since the liquidation of CD being time bound process. With these observations, this IA is disposed of however without costs. IA/1009/2023 In the light of the order passed in 816/2023 no orders are required in this IA this application seeking amendments in IA 816/2023. Hence, this IA/100/2023 is disposed of accordingly. 2. For better understanding of the case, we briefly touch upon the parties arrayed in this matter. The fisrt Appellant namely Lanco Infratech Ltd. (`LITL ) was admitted into CIRP on 07.08.2017 and thereafter, was ordered into liquidation on 27.08.2018. During the course of the liquidation process, the Second Appellant, namely KRS Erectors Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conversion of the 42,00,00,000 CCPS to DEMAT Form. The Twelfth Respondent is the Registrar of Companies having jurisdiction in respect of Lanco Anpara Power Ltd. 4. Succinctly put, the First Appellant and the Second Respondent Companies entered into a Share Purchase Agreement (SPA) dated 30.03.2012 whereby, the First Appellant had agreed to sell its entire Equity and Preference Share Holding in the Sixth Respondent Company to the Second Respondent against payment of consideration. Learned Senior Counsel for the Appellant submitted that as per Section 3 of the SPA, Rs. 734.26/- Crores was to be paid as consideration by the Second Respondent immediately upon the execution of the SPA and further consideration of Rs. 485.376/- Crores was to be paid within one month after the approval by its lenders for the transfer of the shares from the First Appellant Company to the Second Respondent or within such time as may be mutually agreed but not later than 31.12.2012. Parallel to the execution of SPA, on the same date, on 30.03.2012, the Appellant, the Second Respondent and Lanco Anpara Power Ltd., executed a Shareholders Agreement (SHA). It is submitted that the Second Appellant became ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er; b) Pass an order making a reference to the Insolvency and Bankruptcy Board of India of the defaults committed by the Respondent No 1, Respondent No 2 and Respondent No 3 and recommending the initiation of proceedings under Section 74(3) read with Section 236 of the Code, in the event of the continued failure of Respondent No 1, Respondent No 2 and Respondent No 3 to implement the Approved Resolution Plan as per the directions of this Hon'ble Tribunal in terms of prayer (a) above; c) Pass an order directing the Respondent No 1, Respondent No 2 and Respondent No 3 to make good the losses which the Applicant and other members of LITL Consortium Lenders would incur on account of the non-adherence to the terms of the Approved Resolution Place to the extent envisaged under the present application; and d) Pass any other order(s) which this Hon'ble Tribunal may deem fit in the facts and circumstances of the case in the interest of equity, justice and good conscience. 7. It is argued by the Learned Senior Counsel for the Appellant that the Adjudicating Authority without issuing Notice to the Appellant, which had undergone change in the management, pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned Order. 9. It is contended by the Learned Counsel Mr. E. Om Prakash that Clause 3.9 of the Acquisition Plan contemplates formation of the Monitoring Committee to facilitate the handover of control of LITL to KRS Erectors. In the second meeting of the Monitoring Committee held on 18.11.2022, the Monitoring Committee specifically authorised KRS Erectors to represent LITL in legal matters and also to initiate the taking over of documents and assets from the erstwhile Liquidator. In the third meeting of the Monitoring Committee held on 06.04.2023, the representatives of KRS Erectors were authorised in broad terms to represent LITL for implementation of Acquisition Plan. It is pointed out by the Learned Counsel that in the seventh meeting dated 22.06.2023, agenda item numbers 11-13 of the proposed agenda related to discussion regarding reconstitution of Board of Directors of LITL by appointing new directors, but no objection was raised by IDBI to the proposed agenda. However, the secured Financial Creditors stated that they were unable to attend the seventh meeting and hence, the same was postponed to 27.06.2023, on which date none of the secured Financial Creditors were attende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same has been handed over to KRS Erectors. REPL addressed a similar email to KRS Erectors seeking transfer of the CCPS, but did not mention the pendency of the IA No. 816/2023. IDBI has wilfully suppressed these facts before the Adjudicating Authority and did not make LITL and KRS Erectors as parties though they are materially interested and affected by the subject matter. 11. Apart from the aforenoted issues, the Learned Senior Counsel Mr. E. Om Prakash submitted that as the ownership of the shares falls within the scope of assets of LITL and any question relating to such shares should be decided in proceedings relating to the CIRP and Liquidation of LITL. By choosing to file IA No. 816/2023 in CP No.519/2018, which relates to the CIRP of REPL instead of in CP No. 111/2017, IDBI has approached the Adjudicating Authority behind the back of LITL and KRS Erectors. It is strenuously argued by the Learned Senior Counsel that the Adjudicating Authority in its order dated 12.06.2023 has specifically directed IDBI to clarify its locus to file the IA on behalf of the consortium of lenders of LITL. 12. The Learned Sr. Counsel, Mr. S.R. Rajgopal appearing for the First Respondent/IDB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been passed towards reconstitution of the Board of Directors of LITL. Despite not having the unanimous consent KRS Erectors Private Limited want ahead to constitute the Board of Directors of LITL, for which again, IDBI, filed I.A.1722/2023 in C.P. (IB) No.111/07/HDB/2017, in which Application, the Adjudicating Authority vide Interim Order dated 07.11.2023, directed that the resolutions passed in Items 11 to 14 pursuant to the Notice of the seventh Meeting of Monitoring Committee be kept in abeyance in the interest of smooth and proper implementation of the Acquisition Plan. 14. It is argued by the Learned Sr. Counsel, Mr. S.R. Rajagopal that I.A. 816/2023 was filed in C.P. (IB) No.519/7/HDB/2018 for implementation of the approved Resolution Plan by Respondents 3 4 with respect to REPL. Clause VII under the title `other considerations for successful implementation of the Resolution Plan of the approved Resolution Plan specifically vest certain rights with IDBI and does not envisage the role of or implicate LITL or the Second Appellant in any way. Respondents 3 4 did not implement Clause VII of the approved Resolution Plan citing procedural infirmities inter alia in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to claim any amount on account of the balance consideration under the SPA. It is also vehemently argued that the approved Acquisition Plan was approved by the Stakeholders Committee of LITL in their Commercial Wisdom, since the same would serve the best interest of all the Stakeholders of LITL as it results in a complete realisation of all the Assets of LITL. The approved Acquisition Plan only contemplates the sale of unsold Assets and assigning of actionable claim which is also mentioned in the process documents dated August, 2021. The second tranche of consideration earlier payable under the SPA considering such amounts already stand settled under the approved Resolution Plan of LTPL cannot be considered as any other unearned `revenue or `receivable due to LITL which has to be shared with the Stakeholders of LITL on a 50:50 ratio as per Clause 5.10 of the approved Acquisition Plan. It is vehemently contended that the Lanco Anpara CCPS do not form part of the approved Acquisition Plan and thus no rights of the Appellant arise from the approved Acquisition Plan. The Learned Senior Counsel Mr. S. R. Rajagopal drew our attention to the following chart for better understan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the definitive agreement would be entered into at a later point of time. Meanwhile, Appellant was sought to be sold as a concern under Liquidation and the Liquidator of the Appellant had issued a process document in August, 2021 and the Acquisition Plan was approved by the Adjudicating Authority on 26.09.2022. It is submitted that in both the Acquisition Plan as well as in the process document, the Shares of LAPL were never included as an Asset. Subsequent to the approval of the Resolution Plan, the Sixth Respondent had obtained NoC from REC Limited which was a Project lender of Lanco Anpara and Entity in whose favour pledged has been created on 29.12.2022. The sixth Respondent had therefore entered into Definitive Agreements for sale of Assets of Lanco Anpara held by IDBI in its own name on 31.03.2023. Upon entering into this Definitive Agreement of amount of ₹ 620 Crores. Out of the ₹ 855 Crores. Consideration to be paid by the sixth Respondent was estimated. The balance consideration of ₹ 235 Crores. Was not paid as Shares held in the beneficial interest of the Second Respondent was not transferred. IDBI sought assistance of REPL to implement the Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment : 19. The main issues which fall for consideration in this Appeal is whether the Appellant has locus to maintain this Appeal and whether the Adjudicating Authority was justified in giving the Impugned directions in the Order dated 13.09.2023; and whether the Order Impugned is a reasoned one and whether the Appellants ought to have been heard before passing the Impugned directions. 20. Whether the directions regarding transfer of 42,00,00,000 CCPS given by the Adjudicating Authority was justified keeping in view the factual matrix of the attendant case. 21. It is the main case of the First Respondent / IDBI that the Appellant / LITL lacks authority to file the present Appeal as the Board of Directors of LITL has been illegally reconstituted in the absence of IDBI having attended the meeting; that the Adjudicating Authority in IA No. 1722/2023 filed by IDBI in CP(IB)111/07/HDB/2017 has passed the following Order: We are therefore of the view that, pending hearing and disposal of this IA, the Resolutions passed under item No. 11 to 14 pursuant to the notice of the seventh meeting of monitoring committee can be ordered to be kept in abeyance, in the interests of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal may allow an appeal to be filed after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing the appeal but such period shall not exceed fifteen days. (3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely: (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. (4) An appeal against a liquidation order passed under section 33, or sub-section (4) of section 54L, or sub-section (4) of section 54N, may be filed on grounds of material irregularity or fraud committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been made. A person aggrieved must be a man who had suffered a legal grievance, a man against whom a decision has been pronounced which had wrongfully deprived him of something, or wrongfully refused him something or wrongfully affected his title to something . The important words in this definition are a benefit which he might have received and a legal grievance against the decision which wrongfully deprives him of something or affects his title to something . 8. The definition was held in later cases to be not exhaustive and several other features of the phrase were pointed out. Thus under the Bankruptcy Acts, where the Board of Trade summoned to support the validity of the appointment of a trustee, went before the Judge, and failed, it was considered a person aggrieved on the principle that a person who is brought before the Court to submit to its decision, but not a person who is heard in a dispute between others must be treated as a person aggrieved (see In Re Lamb, Ex p. Board of Trade [(1894) 2 QBD 805 at 812] per Lord Esher). Here again the words to notice are brought before the court to submit to its decision , that is to say, a person who is in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnorance, illiteracy or indigence, receive compensation for their lands without protest, they would be denied of their right to obtain higher compensation while the comparatively affluent landowners of their neighbouring lands who take advantage of the reference under Section 18 would get higher compensation determined by the court. Hence Section 28-A makes the award under Section 26 the foundation for obtaining higher compensation by poor and inarticulate people. In Mewa Ram v. State of Haryana [(1986) 4 SCC 151] this Court held that the right and remedy under Section 28-A was meant for that class of persons who were poor and inarticulate and by reason of their poverty and ignorance, should have failed to take advantage of the right of reference to the court for higher compensation under Section 18. However, this Court concluded that to avail of the remedy under Section 28-A, the conditions laid down therein were to be fulfilled. 17. In Collin's English Dictionary, the word aggrieved has been defined to mean to ensure unjustly especially by infringing a person's legal rights . In Webster's Comprehensive Dictionary, International Edition at page 28, aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant Company as a `going concern is an aggrieved party and we hold that it has the locus to file this Appeal. We have consciously not given any of our observations or commented on the merits of the constitution of the Board, except for observing that IDBI had received Notice and was silent till 02.11.2023, when the Application was filed subsequent to the filing of this Appeal, on 16.10.2023, and there is no denial regarding the email communication by the Liquidator on 14.09.2023 to IDBI and PNB Banks regarding the Board Constitution. Though, initially this Tribunal was of the considered opinion that the matter may be remanded to the Adjudicating Authority by giving liberty to all parties and hear the matter afresh, having heard this matter spending considerable amount of time on 19.10.2023, 02.11.2023, 09.11.2023, 10.11.2023 (when the matter was adjourned), 17.11.2023, 21.11.2023, and on 28.11.2023, we are of the view that the main Appeal itself may be decided. 29. IA No. 816/2023 in CP (IB) No. 519/07/HDB/2018 was filed by IDBI for implementation of Approved Resolution Plan by R3 and R4 under Sections 74(3) r/w. Section 60(5) of the IBC, 2016 seeking reliefs pertaining to n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be transferred to VIPL, such that the transfer is effective inter-se LITL and VIPL, as on the Effective Date of this Agreement. It is agreed between the Parties that such transfer shall be presented in dematerialised form for recording in the books/register of the Company upon LITL getting dematerialisation of these shares, until which time the said shares would be held in trust by LITL for VIPL, however, in the books of the Company, the name of LITL will continue as holder of these shares. (c) 7,742 Equity Shares held by LITL, in physical form on which pledge had been created by LITL in favour of the Lenders, shall be transferred to the VIPL, such that the transfer is effective inter-se LITL and the VIPL as on the Effective Date Agreement. It is agreed between the Parties that such transfer shall be presented in dematerialised form for recording in its books/register of the Company upon: (a) LITL arranging the necessary approvals from the Lenders with whom the said shares have been plegded; (b) VIPL acceding under the terms of the financing documents as may be required by the Lenders; and (c) LITL getting dematerialisation of the shares, until which time the said shares wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of the paid-up preference share capital of the Company). (Emphasis Supplied) 31. Share Purchase Agreement Amendment dated 01.04.2012 entered into between Lanco Infratech Vs. Vamshi Industrial Power Ltd./REPL/R2 specifies as follows: 1. LITL Vs VIPL-Share Purchase Agreement - For purchase of Lanco Kondapalli Power Ltd Equity Shares 20,06,00,000. 2. LITL Vs VIPL-Share Purchase Agreement - For purchase of Lanco Tanjore Power Company Ltd Equity Shares 6,72,48,768. 3. LITL Vs VIPL- Share Purchase Agreement - For purchase of Lanco Amarkantak Power Ltd Equity Shares 57,46,22,637. 4. LITL Vs VIPL- Share Purchase Agreement For purchase of Lanco Anpara Power Ltd Equity Shares 23,40,000 and Preference Shares 121,72,96,000. Now both the Parties have mutually agreed to amend all the above agreements as under: In case of share purchase agreements as mentioned above as Sl. No. 1 to 9, after 3.1 (B) add the following para: 3.1. (C) It is further agreed that, until the full consideration is paid, LITL will have a charge on the unpaid amount till the full payment and all the benefits including but not limited to Dividends, receipts from Sale of shares, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor shall vest in the reconstituted Board. 32. Mr. S.R. Rajagopal, learned Senior Counsel for IDBI places reliance on Clause vii of the approved Resolution Plan: 4. It is submitted that as per Clause vii of the Approved Resolution Plan, under the title Other Considerations for successful implementation of the Resolution Plan , the following commitment is envisaged, which is reproduced hereunder: vii. IHTC agrees to cause the Company to sell its entire shareholding (equity and CCPS) in Lanco Anpara Power Limited ( LAPL ) to successful bidder nominated by IDBI Bank Limited, who is the lead financial institution for CDR lenders of Lanco Infrastructure Limited for a consideration of INR 20 Crores (the sale consideration shall compound at a rate of 10% per annum from the Effective Date), at the request of Financial Creditors. However, pledge on this shareholding by project lenders of LAPL shall not be affected by this sale. This sale consideration of INR 20 Crores shall be utilized to reduce the IHTC Outstanding Amount. 33. It is the main case of the Respondent that the subject 42,00,00,000 CCPS falls outside the scope of the approved Acquisition Plan. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proval, cannot be sustained as a ground for the said directions as the fact remains that the said Agreement was admittedly amended from time to time on account of non-approval of the lenders and the balance consideration for the said 42,00,00,000 CCPS was not paid and hence, the question of the contract having been concluded and the Shares thereafter being held in trust by LITL does not arise. If the terms of the Agreement have been adhered to, then the question of the Shares being held in trust by LITL would come into the picture. The words `shall be transferred which appears in Clause 3.2(ii)(c) of the SPA further clarifies that the transfer would be affected only when the condition stipulated under the said Clause are adhered to. It is not in dispute that the said conditions were never satisfied as the lenders of the Sixth Respondent had never approved the transfer. Therefore, the contention of the Learned Sr. Counsel for the Respondent that the entire shareholding of the First Appellant in the Sixth Respondent Company stood transferred to the Second Respondent Company with effect from 30.03.2012, is untenable. The sum and substance of Clause 3.2(ii)(c) of the SPA is that LITL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty Percent) 150 Cr 70% (Seventy Percent) 30% (Thirty Percent) 37. A brief perusal of the Acquisition Plan shows that the existence of the First Appellant investment in the Sixth Respondent Company is not identified as part of the list of the Assets by the erstwhile Liquidator and the same was not specifically mentioned in the list of Assets under the Acquisition Plan. Nevertheless, Clause 2.4 of the process document makes it clear that the Sale was on an `as is where is basis . It is contended by the Learned Sr. Counsel for the Appellants that the factum of the Appellant holding the subject CCPS in the Sixth Respondent Company was not earlier known to the Second Appellant but the First Appellant rights in respect of such shares cannot be defeated merely because the same was not specifically included in the list of Assets prepared by the Liquidator. The Minutes make it clear that the representative of the Second Appellant was responding to the proposal of IDBI to give effect to the proposition of the subject CCPS and in response to the said proposal, there was a consensus to obtain a lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L and hence, it is all the more significant that the Appellants ought to have been heard. ii. There is no denial that as on the date of submission of the Resolution Plan, REPL owned only ₹ 16,95,12,258/- Equity Shares of the First Appellant and 42,00,00,000 CCPS were not yet transferred to the Second Respondent/ REPL and therefore, we are of the view that they could not have been made a part of the Resolution Plan without satisfying the terms of the SPA, as it is the specific case of the Appellants that the balance sale consideration was never paid. Though it is the argument of the Learned Counsel for the Respondents that the balance consideration remained unpaid on account of the fact that the lenders have not given approval, the fact remains that the second tranche of the payment was never made. Therefore, we find force in the contention of the Learned Sr. Counsel Mr. E. Omprakash that even in the current scenario, REPL could have transferred the Equity Shares of Lanco Anpara/Sixth Respondent owned by them i.e., 16,95,12,258/- and not the 42,00,00,000 CCPS which stand in the name of LITL. As regarding the case of the Respondents that they do not figure in the Assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the regular Bench was not available on that day and there were Diwali holidays the Shares were transferred during pendency of the Appeal on 10.11.2023. The Learned Counsel for the Sixth Respondent has stated so in his Reply that the shares stood transferred on 10.11.2023. The conduct of the Respondents in transferring the shares during the pendency of the Appeal specifically when the matter was being heard at length due to the chequered history and the fact that the Impugned Order did not reflect the factual matrix, is not appreciated. v. Though initially, we were of the view that this matter be sent back to the Adjudicating Authority for hearing afresh, keeping in view that substantial time has been spent before this Tribunal in understanding the factual matrix of the matter and the matter was heard at length over a considerable period of time, and having regard to the fact that IBC is a time bound process, we are of the earnest view that the Appeal itself be decided. vi. The Hon ble Supreme Court in `Embassy Property Developments (P) Ltd. Vs. `State of Karnataka Ors. , (2020) 13 SCC 308, has held that when the Corporate Debtor has to exercise rights in Judicial, Quasi-Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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