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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 ..... were paid in time and the fourth tranche, which was due on 15.04.2023, could not be paid and fifth tranche also became due in October 2023. It is relevant to notice certain clauses of the Resolution Plan, which contains the sources of fund. Para 5.1.2 refers to Sources of funds and one of the items, which was mentioned at Item 10 in table funds for Resolution is Recoveries from Litigation, from which it was expected that between 18-24 months Rs.51.40 lakhs would be recovered and total recovery was expected to be Rs.1040.85 lakhs. The 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 ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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 to be paid by the Appellant in April 2023, amount of fifth tranche was to be paid in October 2023 and last tranche was to be paid before 16.04.2024. The period of implementation of Resolution Plan was three years, i.e. three years from 16.04.2021 to 16.04.2023. (iii) The Resolution Plan contemplated sources of fund, which included the amount from recovery expected from ongoing litigations. The recoveries as expected from the litigation, could not be made and Appellant filed IA No.483 of 2023 praying for extension of time in making the payment as prayed in paragraph-17 of the Application. IA No.483 of 2023 was filed in February, 2023 by the Appellant before the fourth tranche of payment became due. IA No.483 of 2023 remained pending and there has been correspondence between the parties. (iv) SBI filed an Application in August 2023 being IA No.4034 of 2023 praying for liquidation of the Corporate Debtor as the SRA committed default in payment of fourth tranche. The SRA filed reply to IA No.4034 of 2023 opposing the prayer of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard 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 26.02.2024, where an offer was made to sell factory at Shirwal and on sale of Shirwal factory an amount of Rs.6 Crores would be realized, which may be utilized for payment of fourth and fifth tranches and there will be also balance for payment of sixth tranche. 5. In response to the notice issued, the SBI filed its reply to which a rejoinder has also been filed. Both the parties were heard and on 27.03.2024, judgment was reserved. 6. Shri Pankaj Jain, learned Counsel for the Appellant challenging the impugned order dated 04.01.2024 passed in IA No.4034 of 2023 ordering for liquidation submits that present was not a case where Adjudicating Authority ought to have directed for liquidation. The Appellant has made payment of three tranches within time. The total amount required to be paid by the Appellant before 16.04.2024 and for payment of fourth tranche the amount was available, which request was made to SBI to utilize the amount, which the SBI did not accept. It is submitted that Appellant in his IA No.483 of 2023 has given sufficient reason for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be permitted to be modified or withdrawn by the SRA. 8. We have considered the submissions of learned Counsel for the parties and have perused the records. 9. The Resolution Plan, which has been approved on 16.04.2021 is part of the record. The Resolution Plan indicates that Resolution Applicant is a technocrat entrepreneur, who is a M. Tech from Indian Institute of Technology (IIT), Mumbai and holds more than three decades of experience in the field of Boilers and Thermal systems related equipment s design and manufacturing. In his Resolution Plan, the Appellant claimed completion of various projects and detailed the potential and technologies developed by the CD. 10. As per the Resolution Plan, the amount was to be paid in six tranches. There is no dispute that first three tranches were paid in time and the fourth tranche, which was due on 15.04.2023, could not be paid and fifth tranche also became due in October 2023. It is relevant to notice certain clauses of the Resolution Plan, which contains the sources of fund. Para 5.1.2 refers to Sources of funds and one of the items, which was mentioned at Item 10 in table funds for Resolution is Recoveries from Litigation, from wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al factory to meet up the shortfall. The RA would closely monitor and evaluate the progress of recovery through litigations and would initiate the above steps as and when necessary with due intimation to the Monitoring Committee. 12. IA No.483 of 2023 was filed by the Appellant before the time for payment of fourth tranche came, i.e., before 15.04.2023. In the Application, the Appellant has given the details including details regarding the amount, which was earned by the Corporate Debtor after the approval of the Plan. In the Application in paragraph-10, Payment schedule was noticed, which is as follows: 10. The total amount payable to all the creditors under the Resolution Plan was Rs. 19,72,02,000/- (Rupees Nineteen Crores Seventy-Two Lakhs and Two Thousand only) over a period of three years from the date of approval of the Resolution Plan i.e., up to 16th April 2024. The payment schedule is set out hereunder S. No. Payment Schedule [Amount in Lakhs] 1. 0-6 months 326.63 2. 6-12 months 182.82 3. 12-18 months 182.82 4. 18-24 months 91.41 5. 24-30 months 274.23 6. 30-36 months 914.10 Total 1972.01 13. It was mentioned that pending recovery litigations did not proceed initially on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngineers (ASME) for manufacturing boilers and pressure vessels as per the ASME Code, which has global acceptance for export. The Corporate Debtor has already earned revenue of Rs. 24 Lakhs from the export to USA through its group companies, as contemplated in the approved resolution plan. Even on this front, the Corporate Debtor has been facing certain delays due to uncertainties prevailing in international market on account of the ongoing Ukraine-Russia war and such other factors. 15. The SBI opposed the prayer for extension of timeline and has raised objection, which is noted by the Adjudicating Authority in paragraph-4, which is as follows: 4. The SBI has opposed the prayer for extension of timelines stating that the Resolution Plan provides for alternative sources of payment; the extension is permissible only with the assent of CoC; and this Tribunal cannot invoke its residuary powers to extent the timelines dehors COC consent. It is stated the clause 5.1.2.12 of the Resolution Plan dealing with alternative source of funds specifies (i) equity infusion through strategic investor, (ii) funding through Debt, and (iii) Sale of factory at Shirwal, and exercise of these options woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal was filed in the Hon ble Supreme Court. The Hon ble Supreme Court in the facts of the said case has held that Plan once approved, both SRA as well as CoC are bound by the Plan and SRA cannot be allowed to withdraw from the Plan. This Tribunal had occasion to consider the question of extension of time in payment under the Resolution Plan in a judgment Tricounty Premier Hearing Service Inc. vs. State Bank of India and Ors. in Company Appeal (AT) (Insolvency) No.1038 of 2021, where this Tribunal took the view that extension of time in the payment as per Resolution Plan is not a modification of the Resolution Plan, which jurisdiction can be exercised by the Adjudicating Authority/ Appellate Tribunal and extension of time for payment cannot be treated to be withdrawal of the Resolution Plan or modification of the Resolution Plan. In Tricounty case also, the Tribunal noticed the judgment of the Hon ble Supreme Court in Ebix Singapore. The relevant paragraph in Tricounty noticing the judgment of the Hon ble Supreme Court in Ebix Singapore and conclusion are as follows: 22. We may also refer to the judgment of the Hon ble Supreme Court in Ebix Singapore Private Limited (supra) reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eshold for approval by the CoC (as the case may be). They must also contemplate at which stage the Corporate Debtor may be sent into liquidation by the Adjudicating Authority or otherwise, in the event of a failed negotiation for modification and/or withdrawal. These are matters for legislative policy. In the present framework, even if an impermissible understanding of equity is imported through the route of residual powers or the terms of the Resolution Plan are interpreted in a manner that enables the appellants desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor. Pertinently, 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 Adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing to grant extension by 30 days as prayed by Resolution Applicant or not? The judgment of the Hon ble Supreme Court in the Ebix Singapore Private Limited (supra) thus, does not support the submission of learned Counsel for the State Bank of India that Adjudicating Authority has no jurisdiction to extend the time for complying the financial obligations in the Resolution Plan. 19. Judgment of this Tribunal in GP Global Energy Pvt. Ltd. vs. Mr. Sandeep Mahajan and Anr. in Company Appeal (AT) (Insolvency) No.954 of 2021 decided on 6th May, 2022 has also clearly laid down that extension of timelines for complying the financial obligations under the Resolution Plan is not modification of the Plan. In the said case also the Adjudicating Authority has rejected the Application holding that it was not the powers of the Tribunal to make amendments to the approved Resolution Plan. It is useful to extract paragraphs 25 and 26 of the judgment in the GP Global Energy Pvt. Ltd., which is as follows : 25. In Para 13, the Adjudicating Authority has observed that it is beyond the powers of this Tribunal to make amendments to the approved resolution plan . The above observation of the Tribunal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atute. Since the 330 days outer limit of the CIRP under Section 12(3) of the IBC, including judicial proceedings, can be 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 Company Appeal (AT) (Insolvency) No. 1038 of 2021 28 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. 203 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IBC cannot exercise jurisdiction, which is not provided in IBC. Hon ble Apex Court in the said judgment has held that residual powers of the Adjudicating Authority 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 modificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Limited (TESPL) to make the balance payments under approved resolution plan. Ref: Our following letters/ meetings to SBI and the monitoring committee 1. Letter to Chairman, Monitoring Committee dated 10.10.2023. 2. Letter to DGM, SAMB II Branch, SBI dated 25.10.2023. 3. Our meeting with DGM, SAMB II Branch, SBI on 27.10.2023 4. Letter to DGM, SAMB II Branch, SBI dated 30.10.2023. 5. Letter to the Chairman, SBI dated 31.10.2023. 6. Letter to Chairman, Monitoring Committee dated 01.11.2023. 7. Letter to the Chairman, SBI dated 03.11.2023. 8. Letter to Chairman, Monitoring Committee dated 04.11.2023. Dear Shri V.K. Jainji, This letter is in furtherance of our above-mentioned letters, discussions and meetings with you and the officers of SBI on the above issue. We have attached herewith the arbitration award received pronounced by the arbitrator on 9th November, 2023 in the arbitration proceedings against M/s Lloyd Steel Industries Ltd. The arbitrator has awarded on amount of approx. Rs.102 Lacs in favour of the Corporate Debtor against the projected amount of Rs.50 Lacs in the resolution plan. The abovementioned award amount of Rs.102 Lacs and the amount of Rs.25 Lacs available from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angalore Pune Highway, Maharashtra ( Shirwal Factory ) Ref: Resolution Plan of Transparent Energy Systems Private Limited Dear Sir, I am pleased to hereby provide an update about the firm proposal received for sale factory of the Corporate Debtor at Shirwal - 1) Please take Notice that pursuant to newspaper advertisement published in Economic Times, Pune edition dated May 24, 2023 by the Corporate Debtor in terms of t arrangement for alternative sources of funds for payments of funds under the approved resolution plan of Transparent Energy Systems Private Limited ( Corporate Debtor ) by the Hon'ble NCLT, Mumbai Bench vide its order dated 16.04.2021, we had received expression of interest/ Letter of Intent for purchasing the factory of the Corporate Debtor located at Shirwal on NH4 Highway, Bangalore Pune Highway Maharashtra from a prospective Buyer. A Copy of the said Letter of Intent (LOI) is annexed for your kind consideration and approval. 54 2) In terms of the approved Resolution Plan -the SBI being sole Financial Creditor / member of Monitoring Committee is bound to support the sale of assets of the Company as alternate source of funds for raising funds in order for succes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective buyer can complete its due diligence and proceed with the execution of Sale Deed for the said factory. You are also requested to release security interest on the said asset to complete the sale transaction. 7) This proposal for sale of Shirwal factory is with the condition precedent that on completion of the sale transaction and payment of 4th and 5th of tranche from the proceeds of the sale transaction as per the approved resolution plan, the SBI should unconditionally agree to the following - a) The timeline for the payment of 6th tranche of the resolution plan shall get extended as prayed for in the IA 483 of 2023 before the Hon'ble NCLT, i.e. upto 16th April 2026 and Company Appeal (AT) INS 221 and 221 of 2024 before the Hon'ble NCLAT. b) The progress of recovery litigations will be reviewed by the SRA and SBI on a quarterly basis; and if the progress of recovery litigations is not found to be on expected lines after as on 31st March 2025, the sale of Lonand factory will be explored as alternate source of funds. c) In the unlikely event of any further delay in realization of funds from either of two sources mentioned above, the SBI would be entitled for payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch submission was accepted by the Adjudicating Authority, we are of the view that SRA is fully entitled to take steps to sell Shirwal Factory to pay the dues under the Resolution Plan. 24 The learned Counsel for the Appellant has also relied on 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. in Company Appeal (AT) (Insolvency) No.129 130 of 2023. The above judgment of this Tribunal was also a case where time was sought to be excluded/ extended as per the Resolution Plan. The Adjudicating Authority has allowed the Application filed by the SRA for implementation of the Resolution Plan and exclusion of time, which order was challenged by the SBI. The Appeal was dismissed upholding the order of the Adjudicating Authority, which allowed implementation of the Resolution Plan and exclusion of time. This Tribunal further held that Financial Creditors have to adopt positive approach to help the SRA to implement the Plan. In paragraph 126, 127 and 128 of the judgment, following was held : 126. The implementation of Resolution Plan is a collaborative process, which require positive action from all the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of fourth and fifth tranches and the balance amount shall be earmarked for sixth tranche as per the proposal submitted by the Appellant. 26. As observed above, the Adjudicating Authority committed error in rejecting IA No.483 of 2023 filed by the Appellant seeking extension of time for payment, on the wrong premise that since the CoC has not approved the extension, the extension cannot be granted. The extension of time in payment is not the modification of the Plan. We, thus, are of the view that order passed by the Adjudicating Authority rejecting IA No.483 of 2023 filed by the Appellant is unsustainable and is set aside. In consequence to setting aside the order of the Adjudicating Authority dated 04.01.2024 in IA No.483 of 2023, the order of liquidation passed by the Adjudicating Authority allowing IA No.4034 of 2023 is also set aside. 27. After we had reserved the judgment on 27.03.2024, IA Nos.2366 and 2367 of 2024 were filed by the Appellant/ Applicant, which Applications have been taken on record after hearing both the parties by our order dated 05.04.2023. In the Application, the Appellant has prayed direction for sale of Factory and Machinery of the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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