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TMI Blog2025 (2) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... e waived or amended without the written consent of the parties, the letter dated 31.12.2018 cannot be relied upon which is the base of the case of the Appellant.
Conclusion - The existence of operational and financial interdependence, as evidenced by agreements like the UOMA, can substantiate a related party classification under the IBC.
There are no merit in the present appeal for the purpose of interference and hence, the same is hereby dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ered into a Utility Operation and Management Agreement (UOMA) on 08.12.2017 as per which the Appellant got a right to operate and manage some of the utility assets and to appoint a third party for it. 7. It is alleged that the Appellant and the CD agreed to appoint Thermax Limited for operating and maintaining the boilers, refrigeration and compressors. The UOMA also provided for a profit-sharing mechanism, whereby the surplus generated from the utility operations were to be shared with the Appellant and the CD in an agreed ratio. It is further alleged that UOMA had an initial term of one year which was referred to as the pilot phase. 8. The Appellant has alleged that after the completion of the pilot phase (lock in period) of the UOMA, it wrote to the CD on 31.12.2018 for termination of the UOMA alleging that Thermax Limited i.e. the entity appointed under the UOMA for regular operation and maintenance of utilities has been replaced by one Par Techno w.e.f. 15.10.2018. Further the day to day supervision of Par Techno was to be undertaken by the CD and thus, the Appellant had no further role to play under the UOMA w.e.f 15.10.2018 and it was thus agreed that UOMA would stand term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the pleadings and record. Admittedly, the Resolution Professional has taken the decision in declaring the applicant as related party based on the Annexure A-5 Utility Operation and Management Agreement dated 06.12.2017 entered between the applicant and the corporate. debtor. Today the learned counsel for the applicant across the Bar produced a letter dated 31.12.2018 issued by the applicant to the corporate debtor stating that by virtue of the terms of the ' agreement their decision to exit the Utility Operation Agreement and the notice period referred to in clause 12 (b) of the O&M Agreement will be expiring on 31 .01 .2019 and accordingly submits that the Utility Operation Management Agreement based on which the resolution professional classified the applicant as a related party itself came to an end for all purposes on 31.01.2019 and whereas the CIRP of the corporate debtor was commenced on 22.02.2019 when the CP was admitted. Learned counsel further submits that the relevant date for treating the applicant as a related party or otherwise was 22.02.2019 since agreement came to an end on 31 .01 .2019 itself, the RP's decision is illegal and liable to be set aside. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated party of the CD against which CA No. 466 of 2019 was filed by the Appellant to challenge the decision of the RP but during the course of hearing, the Appellant submitted a false and fabricated document purported to be a termination letter dated 31.12.2018 in respect of the UOMA dated 08.12.2017. The Tribunal vide its order dated 04.09.2019 while disposing of CA No. 466 of 2019 allowed the Appellant to submit document within two weeks. 18. It is alleged that even as per purported letter of termination, UOMA could have been terminated only by providing three months written notice whereas letter dated 31.12.2018 terminating UOMA was to take effect from 31.01.2019 i.e after the period of one month which is contrary to the provisions of the said agreement. It is alleged that as per clause XXI miscellaneous subclause (b) it is provided that no amendment or waiver of any of the provisions of the agreement or annexures thereof would be binding unless made in writing and signed by authorised representatives of both the parties and that the Appellant failed to produce any such document whereby the clause relating to notice for termination of the agreement was amended reducing the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning to the training procedures/manual business strategies, business plans, price lists, technology of manufacture, marketing, imports, exports and other operational, managerial of technical information. Each of the parties agrees to use such confidential information of the other party only for the purpose of this agreement." 20. It is further held in para 21 which is reproduced as under:- "21. In view of the aforementioned facts and judicial decisions, and the terms and conditions of the Utility 0 & M Agreement dated 08.12.2017 between the parties, we hold that the applicant is a "related party" of the Corporate Debtor .and the termination of the said agreement before the CIRP will not make any material change to the status of the applicant who continues to be a 'related party' of the corporate debtor after the initiation of CIRP also." 21. Counsel for the Appellant has submitted that the Tribunal has not identified the relevant sub-section of Section 5(24) on the basis of which the Appellant has been held to be a related party of the CD. It is further submitted that the impugned order only mentions that the Appellant is the related party of the CD based on the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the UOMA in which clause 12 'term and termination' sub clause (b) provides for one year lock in period (pilot phase) and right to exit by giving 3 months' notice during the lock in period of one year is provided and clause (d) provides if the agreement is not terminated during the pilot phase, the agreement shall become co-terminus with the lease agreement and the lease agreement, which was executed on 09.03.2016, having lock in period of 10 years, goes up to 09.03.2026. It is further submitted that clause XXI (b) provides that no amendment or waiver of any of the provisions of the agreement or annexures is binding unless made in writing, therefore, the fabricated document letter dated 31.12.2018 which is alleged to be a notice, to show that the agreement was terminated by giving one month's notice, just to wriggle out of the related party relationship in view of the stringent provisions of the IBC. 24. It is further submitted that clause II of the said agreement provides for transfer of absolute rights in terms of the operation and management of utility assets and clause IV provides for manner of investment in utility assets by the parties. It is submitted that appropriation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income) Sharing Mechanism shall be as follows: Revenue from operations (A) Revenue generated by supplying Utilities to SDDPL, IMFPL, PSPCL, and other Persons, If any as per the terms of this Agreement. Cost of operations (B) It is agreed between the Parties that all cost & expenses to run the Utilities operation Including, but not limited to, fuel, repairs, manpower, support services, etc. Incurred by IMFPL and or SDDPL through the designated Bank Account shall be considered as cost of operation of Utilities. Details about the operating cost shall be included in the cost module as specified In Annexure "C". Surplus generated (C) i.e. (A-B) The Parties agree to appropriate the surplus generated from the utility operations during the relevant period are as under: 20% of the Surplus from Utility operations will accrue to SDDL as a O&M Fee for the period Its Investment in the Utility Operation IINR 100,000,000 (Rupees ten Crores) or more. Any Increase/decrease in the Investment would Increase/decrease the O&M Fee proportionately. 80% of the Surplus from Utility operations will accrue to IMFPL and IMFPL would retain the balance Surplus on all illy billings after deducting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations and management of the Utility Assets to the other Party .. b) Upon the completion of the Lock-in Period SDDR shall have the right to exit the utility operation agreement by providing three month written notice. i. If SDDPL decides to exit this arrangement, then the purchase value of any Inventory handed over to IMFPL. and the book value of Capex Incurred by SDDPL In the Utility. operation will be converted into a Loan to IMFPL to be recovered from the Rent/Utility Billings over a 3 years' period. Any profit or loss on the date of exit shall be apportionment In the ratio of 80:20 between IMFPL & SDDPL and the balance due from IMPPL will be converted into Loan. c) Once the Pilot phase is over and both parties decide to Continue the Utility Operation Agreement shall be Co-terminus with the Lease agreement. d) Once the Investment made by SDDPL is recovered. Parties shall have the right to assign & appoint any third party to manage operations & management of the Utility Asset after mutual discussion. This option shall be exercised jointly by the Parties with the condition that the supply of Uninterrupted Utilities would continue without any Impediment. The notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts, and other operational, managerial, or technical information, contract provisions, organizational structure or personnel data, etc. which are not known to the general public (the "Confidential Information") are to be treated as strictly confidential. Each of the parties agree to use such Confidential Information of the other Party only for the purposes of this Agreement, not to disclose them to third parties, protect them against access by third parties, and pose a corresponding obligation upon their Representatives (with IMFPL remaining responsible for any breach by Representatives and/or Contract Staff), but no less than reasonable care, with reference to this Agreement. b. 'The Parties undertake that they shall not during the subsistence of this Agreement or at any time thereafter (a) divulge, disclose or make accessible any Confidential Information of the other Party to any Person whomsoever, firm, partnership, corporation or other corporate entity; or (b) make any use whatsoever of any Confidential Information of the other Party for its own purpose or for any other purpose other than the generation, provision, and/ or consumption of the utilise hereunder; and shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for as long as the Confidential Information and/or Intellectual Property remains a trace secret and/or not known to the general public." 27. The Tribunal summarised the aforesaid terms and conditions of the said agreement in para 12 of the impugned order which has already been noticed in the early part of this order. 28. The entire case of the Appellant hinges upon the termination notice dated 31.12.2018 regarding which C.A No. 466 of 2019 was disposed of by the Tribunal and the order has already been reproduced in the early part of this order. 29. The Respondent after receiving the letter dated 11.09.2019 regarding the alleged termination replied on 23.09.2019. The said reply is also reproduced as under:- SUMAT KUMAR GUPTA Insolvency Resolution Professional (Reg. No. IBBI/IPA-001/1P-P00167/2017-18/10336) SPEED POST 23.09.2019 Mr. Jay Prakash Sharma, Company Secretary, Schreiber Dynamix Dairies Private Limited, 215, Atrium Building, C Wing. Unit No.1018, 10 Floor, Andheri Kurla Road, Andheri East, Mumbai-400093 SUBJECT: YOUR LETTER DATED 11.09.2019 REGARDING ALLEGED OF UTILITY OPERATION AND MANAGEMENT AGREEMENT DATED 06.12.2017 W.E.F. 31.01.2019 Dear S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Mr. S. Sukhwinder Singh, Chairman -cum- Managing Director duly authorised in pursuance to Board Resolution dated 06.12.2017. Contrary to this the letter of termination by giving one month's notice is signed by Mr. Leon Verdes, Chief Financial Officer of SDDPL, who is not a signatory to the agreement, and apparently does not have power to amend the Utility operations and management agreement dated 06.12.2017. 4. That the signatory of the purported letter on behalf of IMFPL is on the basis of authorisation in pursuance to Board Resolution dated 26.03.2012 whereas the agreement was executed in pursuance of the Board Resolution dated 06.12.2017 and thus this also smells manipulation/fabrication. 5. That as per the record of the corporate debtor, there is no such letter in record as has been placed before the Resolution Professional now. 6. That the NCLT, Chandigarh in its order dated 28.02.2019 in para 27 has already recorded that the borrower has been classified as "suspected fraud" based on the findings of the forensic audit. The Resolution Professional has thus the apprehension that the promoters of Corporate Debtor and SDDPL are colluding and they seem to have manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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