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TMI Blog2024 (7) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... ya Vasa, Advocates for Edelweiss JUDGMENT ASHOK BHUSHAN, J. The above first five appeals have been filed against order dated 11.03.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench -1 allowing I.A. No.2969 of 2021 filed by the Financial Creditor for liquidation and deciding other I.As. by the same order filed in the case. The sixth appeal being Company Appeal (AT) (Ins.) No.975 of 2024 has been filed against order dated 04.01.2024 passed by the Authority (National Company Law Tribunal), Mumbai Bench -1 in I.A. No. 5843 of 2023 filed by the Appellant. All the appeals having arisen out of the common facts and events have been heard together and are being decided by this common judgment. Brief facts of the case necessary to be noted for deciding the appeals are: (i) The Corporate Debtor - Amar Remedies Ltd. was subjected to insolvency on an application filed by the Corporate Debtor itself under Section 10 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code") by order dated 16.06.2017. (ii) In the CIRP of the Corporate Debtor, the Appellant submitted Resolution Plan which was approved by the Committee of Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussed. Under Item No.2 discussion was made on possible action under I&B Code for non-implementation of Resolution Plan. (x) An I.A. No.2747 of 2021 was filed by the Appellant seeking direction to the Registrar of Companies to update the status of the Corporate Debtor in the records as 'active' and not 'under liquidation'. The Appellant has also written a letter to the Monitoring Committee to take steps to obtain clarifications from the Adjudicating Authority. (xi) An I.A. No.2399 of 2021 was filed by the Appellant seeking direction to the Securitization and Exchange Board of India (SEBI) to not take any coercive action against the Appellant and further Appellant sought waiver of applicability of the amendment in the Securities Contracts (Regulation) Rules 1957 so that the Resolution Plan can be implemented without contravention of any law. (xii) I.A. No. 2969 of 2023 was filed by Edelweiss Asset Reconstruction Company Limited on 13.12.2023 praying for direction to liquidate the Corporate Debtor on account of failure of the Successful Resolution Applicant to implement the Resolution Plan. (xiii) The Corporate Debtor was handed over to the Successful Resolution Applicant in J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposed of in terms of order dated 04.01.2024. (xx) The Appellant aggrieved by order dated 04.01.2024 has filed Company Appeal (AT) (Ins.) No.975 of 2024 and all other Appeals have been filed against order dated 11.03.2024. (xxi) The Adjudicating Authority passed order dated 04.01.2024 directing the SRA to deposit the amount of resolution money in the escrow account and the CoC was to appropriate the same towards implementation of the plan. The SRA did not comply with the order and did not deposit the money and filed application for modification of the order, as noted above. (xxii) The Adjudicating Authority thereafter heard the parties on all the applications and by the impugned order has directed for liquidation. The Adjudicating Authority returned the finding that the SRA has failed to implement the plan. The Adjudicating Authority has held that the payment of resolution money is dehors any of the conditions as sought to be put by the Appellant, it was also noticed by the Adjudicating Authority that Bench had allowed another opportunity to the SRA to pay the money which has already fallen due, which has not been complied with by the SRA. Aggrieved by order dated 04.01.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the escrow account and further directed the ROC to change the status of the Corporate Debtor to 'active'. On the next date i.e. 04.01.2024, direction was also issued to appropriate the amount, which was prayed to be modified by filing the application by the Appellant. The Adjudicating Authority has wrongly inferred that the de-listing of shares is a condition precedent for the implementation of the Resolution Plan. The Appellant has already filed a Writ Petition in the Bombay High Court seeking direction with respect to the listing of the company and has been actively pursuing the said Writ Petition. The Objective of the Code is value maximization of the Corporate Debtor. The plan value submitted by the Appellant is much more than the liquidation value of Rs.17,72,53,337/- and fair value of Rs.29,54,59,986/-. It is submitted that there is no default by the SRA since the amount was to be infused as share capital and the company being not active no share capital could be infused. 4. Shri Mustafa Doctor, learned senior counsel appearing for Edelweiss opposing the submission of the Appellant submits that the Resolution Plan approved on 25.03.2021 was unconditional plan. The time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital for payments to the creditors as per the Resolution Plan. We need to first notice the contents and necessary clauses of Resolution Plan to answer the question. Copy of Resolution Plan has been filed in all the appeals. In Company Appeal (AT) (Ins.) No.975 of 2024, the plan is filed as Annexure 13 to the appeal. 6. In the Resolution Plan Section 5 Clause 5.1(c) deals with infusion and utilization of funds by the Resolution Applicant, on which much reliance has been placed by the learned counsel for the Appellant. Clause 5.1(c) is as follows: "c. Infusion and Utilisation of Funds by Resolution Applicant: SOURCING OF FUNDS Rs. In Crores Sr. No. Particulars Notes Amount 1 Existing Business of Resolution Applicant (a) Share Capital 26.06 (b) Unsecured Loans 5.53 TOTAL 31.59 UTILISATION OF FUND Rs. In Crores Sr. No. Nature Notes Amount (Amt in Crs.) A. Assumed CIRP Cost (As approved by CoC -approx.) 1 2.50 B. Labour Liabilities 2 0.00 C. Financial Creditors Full & Final Consideration 3&4 29.09 GRAND TOTAL 31.59 *From the date of approval of Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over simultaneously against payment. TOTAL 3159.00 8. Clause (c) on which reliance has been placed by the Appellant is under heading 'sourcing of fund'. When we look into Clause 5.2, which is payment schedule and conditions, timelines for payment have been provided, which is 180 days from the approval of the Resolution Plan. Upfront payment of Rs.525 Lakhs was to be paid within 90 days in which Bank Guarantee of Rs.35 Lakhs and Rs.25 Lakhs deposited as EMD was to be adjusted. In Section 5, Para 5.1, Resolution Applicant submitted that the company needs to be remain listed on Bombay Stock Exchange as well as National Stock Exchange and request was made to the Adjudicating Authority to pass necessary order accordingly to facilitate the same. We need to notice one more clause of the Resolution Plan i.e. 'Terms of Resolution Plan', which provides for 180 days. Terms of Resolution Plan is as follows: "TERM OF RESOLUTION PLAN The term of the Resolution Plan would run from the approval of Resolution Plan by Adjudicating Authority under section 31 of IBC, 2016 for a period of 180 days. The Scheme Period is for period of 180 days during which full & final set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Corporate Debtor as "Active" subject to conditions placed therein. 4. The only prayer which remains is IV (2). The registry is directed to post this IA on 10.01.2024. 5. In view of this the SRA is directed to deposit the amount of resolution money within the proposed period in Escrow account and the CoC shall be at liberty to appropriate the same towards implementation of the Plan." 13. We may also notice the prayers in IA No. 5843 of 2023, which prayers have been referred to in order dated 04.01.2024. IA No.5843 of 2023 was filed by the Appellant in which following reliefs were sought: "21. In the above circumstances, the Applicants humbly pray that this Hon'ble Tribunal may be pleased to: i) Dismiss Interlocutory Application No. 2969 of 2021 filed by the Respondent No. 2; ii) Declare that Applicant is not liable to pay any interest upon the amount outstanding to be paid under the Sanctioned Resolution Plan; iii) Permit the Applicant to deposit the entirety of the amount remaining to be paid under the Sanctioned Resolution Plan, i.e., Rs. 29.34 Crores, into an Escrow Account identified and opened by the Respondent for this very purpose, within a period of three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions under the IBC 2016 for non-implementation of the Resolution Plan The Chairman of the Monitoring Committee apprised the members that Resolution Applicant was required to implement the Resolution Plan within 6 months from the date of approval of Resolution plan i.e. 25/03/2021 but no payment has been made by the successful Resolution Applicant till date therefore the remedy available with the creditors are as follows; 1. To invoke Performance Security amounting to Rs. 2 Cr. submitted by SRA during the submission of Resolution Plan 2. To initiate proceedings under Section 33(3) of the IBC 2016. The relevant extract of said section is reproduced hereunder; 33. Initiation of liquidation (3) Where the resolution plan approved by the Adjudicating Authority 3 [under section 31 or under sub-section (1) of section 54L,] is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii), (iii) of clause (b) sub-section (1). 3. To initiate proceedings under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Resolution Plan. 18. There is one more aspect which need to be considered. The submission which has been pressed by the Appellant is that he has to infuse share capital of Rs.26.06 Crores which has to be infused as per the 'sourcing of funds' in the Resolution Plan and Rs.5.53 Crores was to be realized by unsecured loans. Even upfront payment of Rs.525 Lakh which payment was obligation of the Resolution Applicant and could have been discharged as per Clause 5(c) itself. The Appellant cannot make even the upfront payment of Rs.525 Lakh which was noticed in the 4th Monitoring Committee meeting. Even prior to 4th meeting of Monitoring Committee, in the 2nd Monitoring Committee meeting it was noticed that that the Appellant has defaulted in making the payment as per the Resolution Plan. 19. It is also relevant to notice that in June, 2021 itself the complete control of the company was handed over to the Resolution Applicant which although was contemplated to complete after payment. An application was filed by the Chairman of the Monitoring Committee for taking back the custody of the assets from the Successful Resolution Applicant being IA No.2494 of 2022. 20. The submission of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered by the appropriate authorities in accordance with law." 21. When the Adjudicating Authority expressly refused to grant any reliefs and concessions, as prayed, the plan was to be implemented by the Successful Resolution Applicant and Appellant cannot be heard to say that unless the Registrar of Companies change the status of the Corporate Debtor into active implementation of plan cannot proceed further. It is also relevant to notice that when no waiver was granted to the Successful Resolution Applicant and there was no challenge to the order of the Adjudicating Authority approving the Resolution Plan, the order dated 25.03.2021 has become final and plan as approved by the Adjudicating Authority along with refusal to grant any waiver and relief was liability of the SRA to implement and it was binding on the SRA. The Adjudicating Authority in the impugned order has considered all the aspects of the matter. The Adjudicating Authority rightly observed that the applications filed by the Corporate Debtor clearly indicates the mindset of the SRA that the plan is conditional and it shall be implemented only after the status of the Corporate Debtor is updated on MCA Portal. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A to deposit the money within three weeks from 14.01.2024. 7.9. Instead of payment of the money SRA filed an application No. 327/2024 on 29.01.2024 praying for rectification of the order dated 04.01.2024 contending that without clarity as to whether the shares of the Corporate Debtor will be listed again on the recognized stock exchange, the deposit into Escrow account and appropriation of the funds by the CoC will be premature. This Application was taken up on 06.02.2024 and the learned Counsel for SRA submitted that the SRAs counsel had never proposed for deposition of the money as recorded in order dated 04.01.2024. After hearing the parties this Bench passed the following order. "Ld. Counsel for the SRA in this case has filed another Interlocutory Application No.327/2024, seeking recall of Para 5 of the order dated 04.01.2024. However, this Bench finds that the recording was made after due deliberation of the Counsel present on that day and this deliberation was carried forward in the next hearing also when another Counsel appeared. Now the third Counsel has come before us saying that earlier two Counsels have never made any submission. The earlier Counsels shall be at libe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t he is ready to deposit the entire amount, said order was passed. The insistence of the Appellant that amount in the escrow account should not be appropriated, is clearly unjustified. The amount of the Resolution Plan has to be disbursed as per the Resolution Plan and it is for the benefit of the creditors. Appellant could not be heard to say that although he be permitted to deposit the amount in the escrow account but the amount should not be disbursed and it should be disbursed after fulfilment of conditions as indicated in his application, which was filed being IA No.5843 of 2023. We do not find any infirmity in the order dated 04.01.2024 warranting any interference in exercise of our appellate jurisdiction. 24. The Adjudicating Authority after considering all aspects of the matter and after returning the finding that the SRA has failed to implement the plan has rightly allowed IA No. 2969 of 2021 filed by the Financial Creditor directing for liquidation. When the Resolution Plan has not been implemented by the SRA, there was no option left with the Adjudicating Authority except for direction for liquidation. The Adjudicating Authority has rightly passed the order for liquidat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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