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TMI Blog2024 (4) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... .483 of 2023 filed by the Appellant - SRA seeking extension of timeline for making the payments under the approved Resolution Plan. The Appellant aggrieved by the aforesaid two orders has filed these Appeal(s). 2. Brief facts necessary to be noticed for deciding the Appeal(s) are: (i) The Appellant, who is a technocrat entrepreneur and is the promoter and founder of the Corporate Debtor - M/s Transparent Energy Systems Pvt. Ltd., submitted a Resolution Plan for revival of the Corporate Debtor. Under the Resolution Plan, the Appellant offered a settlement amount totaling to Rs.1972.02 lakhs. The Corporate Debtor is a registered MSME. (ii) The Resolution Plan submitted by the Appellant was approved by the Committee of Creditors ("CoC"), which consists of State Bank of India ("SBI") as sole CoC Member, having 100% vote share. The Resolution Plan was approved by the Adjudicating Authority vide order dated 16.04.2021. Under the Resolution Plan, total amount was to be paid in six tranches. The first three tranches were to be paid on 15.10.2021, 15.04.2022 and 15.10.2022. The Appellant paid amount of first three tranches amounting to Rs.692.27 lakhs. The amount of fourth tranche was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment of fourth instalments within 30 days from today in terms of the plan. List this Appeal on 11th March, 2024. In the meantime, liquidator in pursuance of the impugned order shall not proceed with the liquidation proceeding. Issue notice. Requisites along with process fee be filed within three days. Let Reply be filed by the Respondent within two weeks. Appellant may file Rejoinder within two weeks, thereafter. 4. After order dated 07.02.2024, the Appellant wrote to the SBI to permit the Appellant to make payment of fourth tranche. The Appellant in the email wrote to SBI as well as Chairman of Monitoring Committee to permit payment of fourth tranche of Rs.91.41 lakhs, which was scheduled on 15.04.2023 by utilizing the sources of fund as mentioned in the letter. A reply was sent on behalf of the SBI that amount of Performance Guarantee of INR 0.4 crores cannot be permitted to be utilized for payment of fourth tranche and further amount of Rs.23,65,865/-, which is yet to be paid to various creditors cannot be used. However, with regard to two payments, i.e. Rs.28,50,119/- and Rs.1,32,500/-, the Bank expressed its no objection. The Appellant again wrote to the SBI on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant submits that Appellant had not made the payment of fourth tranche which was due on 15.04.2023, hence the Bank had filed IA No.4034 of 2023 for liquidation. It is submitted that subsequent request received from the Appellant to utilize the amount lying in different accounts, which included the utilization of Performance Guarantee of Rs.40 lakhs was duly replied by the Bank. It is submitted that Appellant having not paid the amount, SBI has rightly initiated proceedings for liquidation. It is further submitted that Adjudicating Authority has rightly rejected IA No.483 of 2023 filed by the Appellant for extension of time for payment of fourth, fifth and sixth tranches. It is submitted that extension of time is nothing but modification of the Resolution Plan, which jurisdiction is not with the Adjudicating Authority. The learned Counsel for the SBI has relied on the judgment of Hon'ble Supreme Court in Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Ltd. and Anr. - (2022) 2 SCC 401, as per which the Resolution Plan cannot be permitted to be modified or withdrawn by the SRA. 8. We have considered the submissions of learned Counsel for the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l through any of the following sources within a reasonable time and as expeditiously as possible: 1. Equity infusion: The RA has already taken substantial efforts to infuse equity in the last three years through strategic investors. Once the prevailing economic situations improves, the RA would once again explore to rope in strategic investors for equity infusion in the CD, the proceeds of which would be utilized to compensate for any shortfall in the funds. 2. Funding through Debt: The RA would also favourably consider meeting any unlikely shortfall by raising fresh debt. It would need the consent of FC at relevant time to extend charge on the assets mortgaged with the FC to such future lenders. It is expected that the FC would extend reasonable cooperation in this regard. 3. Sale of factory at Shirwal: As reiterated above, the RA is confident of meeting its commitments under this Plan. It is therefore very unlikely that any of the alternate sources of funding will actually be needed. However, in the worst case scenario and if there is no other alternative whatsoever, as a last resort, the RA would consider selling its Shirwal factory to meet up the shortfall. The RA w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril 2021 till hearing and final disposal of the present Application; c. That this Hon'ble Tribunal be pleased to pass such other and further directions and reliefs as this Hon'ble Tribunal may deem fit and proper to meet the ends of justice" 14. As noted above, the SBI has filed an Application being IA No.4034 of 2023 praying for liquidation on account of non-payment of the amount. The Adjudicating Authority in the impugned order has noticed the submissions of the Appellant as well as of the SBI. The submissions of SRA has been noticed by the Adjudicating Authority in paragraph-3, which is as follows: "3.1. The SRA has accordingly sought extension by 2 years and proposed a revised payment plan as follows : S. No. Amount (Rs. Lakh) Original timeline Revised timeline 1. 91.41 April 2023 April 2024 2. 274.23 October 2023 July 2025 3. 914.10 April 2024 April 2026" 3.2. It is case of SRA that, after taking over the operations of the Corporate debtor, it has also taken the necessary steps for revamping the manufacturing establishments, particularly for exploring exports to USA and other countries. The Corporate Debtor, for the said purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation of the Corporate Debtor. We find force in the contention of CoC that the SRA ought to have explored the alternative source of funding to avoid missing the deadlines for payment of money. 5.2. In view of the express unwillingness of the CoC to consider the extension of timelines, we are of considered view that the Corporate Debtor ought to be liquidated." 17. The Adjudicating Authority in the impugned order has observed that Tribunal should refrain from modifying the terms of approved Resolution Plan unless the same is concurred by the CoC. The reason which was reflected in paragraph 5.1, is the reason for rejecting the extension of timeline. 18. The learned Counsel for the SBI before us has also advanced the same submission stating that SRA has no jurisdiction to pray for modification of the Plan and the Plan once approved, cannot either be modified or withdrawn, which is the law laid down by the Hon'ble Supreme Court in Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Ltd. and Anr. - (2022) 2 SCC 401. The judgment of the Hon'ble Supreme Court in Ebix Singapore was a case where an Application filed by the SRA for withdrawal of Resolution Plan wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extended only in exceptional circumstances, this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time. A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is the case in the present three appeals before us. Permitting such a course of action would either result in a down-graded resolution amount of the Corporate Debtor and/or a delayed liquidation with depreciated assets which frustrates the core aim of the IBC. If the legislature in its wisdom, were to recognize the concept of withdrawals or modifications to a Resolution Plan after it has been submitted to the Adjudicating Authority, it must specifically provide for a tether under the IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissible and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be exercised to create procedural remedies, which have substantive outcomes on the process of insolvency. The above observations have been made in a case where the question before the Hon'ble Apex Court was as to whether after submission of Resolution Plan, Resolution Applicant can withdraw the Plan. Hon'ble Apex Court held that it is only Section 12-A, which enables withdrawal from the CIRP, hence, it was held that Resolution Applicant cannot withdraw from the Plan. The Hon'ble Apex Court has also laid down in the above case that existing insolvency framework in India provides no scope for effecting further modification and withdrawals of CoC approved Resolution Plans, at the behest of the Successful Resolution Applicant. 24. The present is not a case where the Resolution Applicant wants to withdraw from the Plan or seeks any modification in the Plan. We are of the view that a prayer for extension of 30 days' time to comply financial commitments as per order dated 20th September, 2021 cannot be said to modification of the Plan when the Adjudicating Authority itself granted time to the Resolution Applicant to comply the financial obligations till 31st March, 2021. The iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal was that in view of the judgment of Hon'ble Supreme Court in 'Ebix Singapore Private Limited vs. CoC Educomp', the Adjudicating Authority cannot even extend the time for making payment. This Tribunal in Para 22, 23 and 24 laid down following: "22. We may also refer to the judgment of the Hon'ble Supreme Court in Ebix Singapore Private Limited (supra) relied by learned Senior Counsel for the State Bank of India in support of his submission. In Ebix Singapore Private Limited (supra), following conclusion has been recorded by the Hon'ble Supreme Court in paragraphs 202, 203 and 204 : "202 The residual powers of the Adjudicating Authority under the IBC cannot be exercised to create procedural remedies which have substantive outcomes on the process of insolvency. The framework, as it stands, only enables withdrawals from the CIRP process by following the procedure detailed in Section 12A of the IBC and Regulation 30A of the CIRP Regulations and in the situations recognized in those provisions. Enabling withdrawals or modifications of the Resolution Plan at the behest of the successful Resolution Applicant, once it has been submitted to the Adjudicating Authority after due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this direction has been otherwise provided in Section 33(1)(b) of the IBC when an Adjudicating Authority rejects a Resolution Plan under Section 31. In this context, we hold that the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations. In the case of Kundan Care, since both, the Resolution Applicant and the CoC, have requested for modification of the Resolution Plan because of the uncertainty over the PPA, cleared by the ruling of this Court in Gujarat Urja (supra), a one-time relief under Article 142 of the Constitution is provided with the condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfied that Adjudicating Authority has jurisdiction to grant extension of timeline in making the payment in a Resolution Plan and the view of the Adjudicating Authority that granting of extension of the timeline is modification of the terms of the Resolution Plan is not a correct view. Further, for extension of timeline it is not necessary that CoC should express its concurrence, only then the Adjudicating Authority can exercise its jurisdiction. The jurisdiction is there with the Adjudicating Authority in appropriate case. Granting extension of time in payment as per Resolution Plan for implementation of the Resolution Plan, appropriate jurisdiction is always vested with the Adjudicating Authority to pass appropriate order. We have already noticed that SRA has sent a letter to the Bank on 10.11.2023 citing the arbitration award dated 09.11.2023, which has been received by the Corporate Debtor of Rs.102 lakhs. The letter dated 10.11.2023 is as follows: "Ref: TESPL/2023/45 Date: 10th November 2023 To Mr. V.K. jain Chairman of Monitoring Committee Transparent Energy Systems Private Limited Kanchansobha Debt Resolution Advisors Pvt. Ltd. 1507-B, One BKC, G-Block, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. State Bank of India, (Member of Monitoring Committee_ SAMB II Branch, Mumbai, Represented by Mr. Hirankumar Chavah (Chief Manager) 2. Transparent Energy Systems Pvt. Ltd., Pune (Member of Monitoring Committee) Represented by Mr. Ajit Apte (Executive Director) Mr. Chintamani Vaidya (Director) Mr. Haridas Wadghule (Executive Director)" 21. In the rejoinder affidavit filed by the Appellant, several subsequent correspondences between the parties have been brought on record including offer letter dated 26.02.2024, which was submitted by SRA seeking Letter of Intent for sale of Shirwal Factory. The letter gives the details, as to how by sale of Shirwal Factory, the entire payment of fourth and fifth tranches will be made and there will be fund available for sixth tranche also. It is useful to extract the letter dated 26.02.2024 issued by the Appellant to the State Bank of India, which is as follows: "To State Bank Of India, Address at - Stressed Assets Management Branch (SAMB) 2, Raheja Chambers, Ground Floor, B Wing, Free Press Journal Marg, Nariman Point, Mumbai - 400 021 Registered Office at - State Bank Bhavan, Madam Cama Road, Nariman Point, Mumbai - 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll funds for resolution plan are deposited in this account) 1,32,500.00 3 Sale of Shirwal Factory 6,00,00,000.00 4 Total Amount available (1 + 2 + 3) 6,29,82,119.00 5. Less payment of 4th tranche of resolution plan (91,41,000.00) 6. Less payment of 5th tranche of resolution plan (2,74,23,000.00) 7. Net funds available after payment of 4th and 5th tranche (4 - 5 - 6) 3,64,18,119.00 8 Funds to be earmarked for payment of 6th tranche 3,00,00,000.00 9 Remaining funds (for operations of the Corporate Debtor for a period of 12 months (7 - 8) 64,18,119.00 5) It is hereby clarified that the utilization of funds proposed hereinabove is without prejudice to the earlier proposal, vide email dated 18th February 2024, for utilization of the funds lying in two fixed deposits to make the payments of 4th tranche of the resolution plan. The said proposal dates February 18, 2024, which has been unduly declined by the SBI, deserves reconsideration by the SBI, as the said two fixed deposits would now be utilized only for a very short time of les days and would get replenished from the consideration for proposed sale of Shirwal factory. The same would enabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Road, Andheri East, Mumbai - 400 093 Email: [email protected] 2. Mr. Ajit Apte, Mr. Chintamani Vaidya and Mr. H.N. Wadghule (representatives of the SRA/ Appellant No.2, 3 and 4 in the captioned appeal) Email : [email protected], [email protected], [email protected]" 22. The learned Counsel for the Bank has opposed the submission that Factory, which is mortgaged with the Bank cannot be permitted to be sold. We have noticed the relevant Clauses of Resolution Plan, i.e., 5.1.2.12 under the heading 'Alternate sources of funding'. The Resolution Plan itself contemplated that as a last resort, the assets can be sold to make the payment under the Resolution Plan. When Resolution Plan itself contemplated sale of assets, we are of the view that request of the Appellant for permitting sale of Shirwal Factory was in accordance with Clauses of the Resolution Plan ought to be accepted. The Appellant has been throughout ready to make the payment and have been making the efforts. 23. The Adjudicating Authority has also noticed in paragraph-4 of the order the submission of the SBI that SRA had to deal with alternative source of fund and one of the alternative sources of fund wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or implementation of the Plan have not only adversely affected the interest of the SRA, but have also created circumstances, so that workmen and employees be not paid. 127. Instead of taking positive steps for implementation of the Resolution Plan, the learned Counsel for the Lenders in their oral submission have always been pressing for directing the liquidation of Corporate Debtor, which is neither acceptable nor legal. 128. We hope and trust that Lenders shall now play a positive and collaborative role to take steps, so that different milestones under the Resolution Plan should be achieved and Corporate Debtor be revived, so that hopes of many, including the workmen and employees be not belied. The revival of the Corporate Debtor shall be in the interest of Aviation Industry as well as to all concern. 25. The judgment of this Tribunal in State Bank of India and Ors. vs. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch and Anr. (supra) has laid down that Financial Creditor has to take collaborative steps to ensure that Plan is implemented. The implementation of Plan as per Clauses of the Resolution Plan has to be ensured by all concerned including the SRA, F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harashtra, the said sale of Factory is not contemplated in Clause 5.1.2.12 of the Resolution Plan. All assets of the Corporate Debtor being mortgaged and in charge of the SBI, it is for the SBI to consider any such prayer, for which no direction can be issued in the IA Nos.2366 and 2367 of 2024 as prayed. IA Nos.2366 and 2367 are disposed of accordingly. learned Counsel for the Appellant during his submissions has also submitted that the Appellant is ready to pay interest @ 8% for any payment, which are made subsequent to 15.04.2024. 28. We, further are of the view that the Appellant is entitled for extension of sometime under the Resolution Plan, so as to ensure that the Plan is fully implemented and complied with. We, however, are also of the view that any extension beyond 16.04.2023 granted to the Appellant shall be with liability to pay prevalent rate of interest fixed by the SBI. In result, we dispose of this Appeal in following manner: (I) The order of Adjudicating Authority dated 04.01.2024 passed in IA No.4034 is set aside. (II) IA No.483 of 2023 is allowed in following manner: (a) The time for payment of fourth and fifth tranche is extended till 15.04.2024. (b) T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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