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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 ..... lines has offered to deposit entire remaining amount of Rs.29.34 Crores into an Escrow Account, which deposit is also made subject of fulfilment of condition as noted. The sequence of events indicate that the Successful Resolution Applicant has clearly failed to implement the Resolution Plan and the ground that fund cannot be infused since status of company was not made active is not sufficient to absolve the liability of the Appellant to implement the plan. It is also relevant to notice that the Resolution Applicant before the Adjudicating Authority at the time of approval of the plan has prayed for waivers which prayer was not granted by the Adjudicating Authority by order dated 25.03.2021. 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 Adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Creditors (CoC) by 88.78% voting share on 08.01.2021. Letter of intent was issued to the Appellant on 15.01.2021. (iii) I.A. No. 137 of 2021 was filed by the Resolution Professional seeking approval of the Resolution Plan which was allowed by the Adjudicating Authority vide order dated 25.03.2021. The Adjudicating Authority while approving the Resolution Plan did not grant various reliefs and concessions as was claimed by the Successful Resolution Applicant. The Adjudicating Authority held that the Successful Resolution Applicant has to approach the authority concerned. (iv) The Resolution Applicant in the Resolution Plan has offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 June, 2021 itself. In the meeting of the Monitoring Committee held from time to time update regarding litigation and different I.As. were placed before the Monitoring Committee. (xiv) The Successful Resolution Applicant filed I.A. No.2057 of 2023 seeking extension of time for payment as per the Resolution Plan for 30 days on (1) changing the status of the Company in the Registrar of Companies, (2) clarifications with respect to amended provisions of Securities Contract (Regulation) Rules 1959 and (3) setting aside of the order delisting of the shares by the Recognized Stock Exchanges. (xv) In December, 2023, the Appellant filed another I.A. No.5843 of 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 04.01.2024 and 11.03.2024 these appeals have been filed. 2. We have heard Shri Abhijeet Sinha, learned senior counsel for the Appellant and Shri Mustafa Doctor, learned senior counsel appearing for the Respondent Edelweiss. We have also heard Mr. Dhananjay Sud, learned counsel appearing for the Liquidator. 3. Shri Abhijeet Sinha, learned senior counsel for the Appellant submits that the Appellant could not have made any payment as per the Resolution Plan before status of Corporate Debtor is changed as active by the Registrar of Companies. It is submitted that the amount which was to be infused in the Corporate Debtor was to be infused as share capital as per the terms and conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lan 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 timelines for payment under the plan were to be adhered to. The Appellant failed to make even single payment as required under the Resolution Plan, which was approved as far back as on 25.03.2021. The Appellant having contravened the payment obligation, I.A. No.2969 of 2021 was filed by the Edelweiss praying for liquidation which could be decided after more than two years. The application filed by the Appellant I.A. No.5843 of 2023 proposing to offer to deposit the amount in escrow account was also conditional payer which was dependent on fulfilment of several conditions as prayed in the application itself. Appellant was never ready to implement the plan as per the timelines and was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness 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 Plan by NCLT Notes: 1. CIRP Cost as approved by COC: It shall be paid from 0 to 90 days on approval of this Resolution Plan by COC from the EMD (1) and EMD (2) totaling to Rs. 60 Lakhs (Rupees Sixty Lakhs Only) Balance amount of CIRP Cost if any shall be paid from the 1 payment of Rs.4.90 Crs (after adjusting the Rs.60 lakhs EMDs already paid) to be paid within 0 to 90 days from the date of Approval of the Resolution Plan by the adjudicating authority through own funds of Resolution Applicant. (As per regulation 38(1)(a)). 2. Labour Liabilities: No provision of payment to labour has been made as there are no claims with the Resolution Professional. (As per regulation 38(1)(b)). 3. Dissenting Financial Creditors: Liquidation value due f any to dissenting financial creditors would be paid in priority to other financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: 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 settlement of all the agreed liability would be completed. 9. Section 7 of plan deals with Liquidation Scenario (Clause 7.1). Section 8 of the plan contains indicative timelines of events for implementation of proposed plan. Para 8.1 indicate that the entire plan has to be implemented within E + 180 days. (E means approval of plan by NCLT (effective date)). In the end of Section 8 following has been proposed: The above timeline is based on the assumption that all the relevant and necessary approvals will be obtained in timely manner, however, any delay in obtaining the same, may affect the assumed timeline mentioned above. The Adjudicating Authority shall give extended moratorium for the implementation of this Resolution Plan for the duration of Implementation or 6 months whichever is earlier. 10. The above indicates that in event of delay in obtaining the necessary approval extended moratorium shall be granted for the durati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 weeks from the date of the order permitting it to do so; iv) Direct that the amount deposited into the Escrow Account shall be appropriated by the Respondent towards payments to stakeholders under the Sanctioned Resolution Plan only after: (1) Change of status of Corporate Debtor from a company in liquidation to an active company, in the records of the Registrar of Companies, as sought in IA/2747/2021; (2) Clarity as to the applicability of the amended provisions of the Securities Contracts (Regulations) Rules, 1959, as sought in 1A/2399/2021; (3) Setting aside of the illegal order of delisting of the shares of the Corporate Debtor during its CIRP. by the recognized stock exchanges; v) For costs of this interlocutory application; vi) Any other order that this Hon'ble Tribunal may deem fit in the facts and circumstances of this case. 14. When we look into the prayers made in the application, it is clear that the Appellant after having failed to make infusion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 74(3) of the IBC 2016. The relevant extract of Section 74(3) of the IBC 2016 is reproduced hereunder; 74. Punishment for contravention of moratorium or the resolution plan (3) Where the corporate debtor, any of its officers or creditors or any person on whom the approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both. 4. To initiate proceedings under Regulation 39(9) of the CIRP Regulations 2016. The relevant extract of the said Regulation is reproduced hereunder; 39. Approval of resolution plan. (9) A creditor, who is aggrieved by non-implementation of a resolution plan approved under sub-section (1) of section 31, may apply to the Adjudicating Authority f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the learned counsel for the Appellant is that payment under the Resolution Plan was conditional and dependent on sourcing of fund as contemplated under Clause 5(c). The funds being not available for SRA to implement the plan is itself sufficient ground to hold the plan to have been contravened by the Successful Resolution Applicant. Appellants submission that plan could not be held to be contravened unless the funds are available as per Clause 5(c) cannot be accepted. Furthermore, we have noticed the various applications filed by the Appellant seeking direction to set aside the order of delisting of the company and prayers made in IA No.5843 of 2023, as extracted above, which clearly makes the deposit in the escrow account conditional of three conditions, as noted above. The sequence of events indicate that the Successful Resolution Applicant has clearly failed to implement the Resolution Plan and the ground that fund cannot be infused since status of company was not made active is not sufficient to absolve the liability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indset 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. It is useful to notice the observations made by the Adjudicating Authority in Para 7.6, 7.7, 7.8, 7.9 and 7.10 in order dated 11.03.2024: 7.6. The Application in IA 2057/2021 filed on 17.05.2023, clearly indicates the mindset of the SRA that the said plan is conditional and it shall implement the Plan only after i. status of the Corporate Debtor is updated on MCA Portal; ii. The shares of the Corporate Debtor are re-listed; iii. Amendment to the security contract regulation act, mandating minimum 5% public shareholding, held to be not applicable to the present Resolution Plan. 7.7. Nonetheless, on 04.01.2024, this Bench passed an interim order in LA 5843/2023 providing the SRA another opportunity to deposit the amount of resolution money within the period proposed by it in escrow account and dealt with the conditions in this Application in the following manner : 2. Heard the Counsel. The Ld. Counsel for SRA pleaded that the withdrawal of Resolution money by the CoC is depended on adjudication of three conditions, subject to which the mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has come before us saying that earlier two Counsels have never made any submission. The earlier Counsels shall be at liberty to place on record their personal affidavit, in case they still feel that the contents of Para 5 are not in accordance with what they pleaded before this Bench. 710. The above discussion clearly evidence that the .in so far as it has time and again linked the payment of Resolution Money to the issues raised by it. This Bench is of the considered view that the payment of resolution money is dehors any of the condition and holding this view, this Bench allows the another opportunity to the SRA to pay the money which is already fallen due after issuance of direction to the RoC to update the status of the Corporate Debtor and holding that the issue of listing has attained finality qua this Tribunal. We are of the considered view that the plea of listing and Applicability of amendments is either a condition precedent to the implementation of the Plan or the grounds made out for deferring the payment to unspecified time period. It is trite law that no conditional plan can be approved by this Tribunal u/s 31 of the Code and the insistence of the SRA at this junctur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority except for direction for liquidation. The Adjudicating Authority has rightly passed the order for liquidation under Section 33 Sub-section (3) read with Section 33(1)(b) of the I B Code. After directing for liquidation, the Adjudicating Authority has also not committed any error in dismissing different applications filed by the Appellant. 25. Learned counsel for the Appellant has referred to judgment of this Tribunal in Tricounty Premier Hearing Service Inc. vs. State Bank of India, Company Appeal (AT) (Ins.) No. 1038 of 2021 , Cosmos Co-operative Bank Limited vs. Edelweiss Asset Reconstruction Company Ltd. Ors., Company Appeal (AT) (Ins.) No.499 of 2023 as well as State Bank of India Ors. vs. The Consortium of Murari Lal Jalan and Mr. Florian Fritsch Anr., Company Appeal (AT) (Ins.) No. 129 130 of 2023 decided on 26.05.2024. In the above cases, this Tribunal was considering the issue as to whether timelines as per the approved Resolution Plan can be extended by the Adjudicating Authority and whether the grant of extension of timelines shall amount to modification of the Resolution Plan. This Tribunal held that the timelines which were directed in the Resolution Plan can v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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