Ajr Infra And Tolling Ltd vs Sutanu Sinha Resolution Professional ...

[Arising out of order dated 10.05.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi in I.A. No. 1538 of 2021 in C.P. (IB) 1504 (PB)/2019]

IN THE MATTER OF:

AJR Infra and Tolling Ltd. (formerly Gammon Infrastructure Projects Ltd.) 3rd Floor, Hamilton House J. N. Heredia Marg, Ballard Estate Mumbai - 400038. ...Appellant

Vs.

1. Sutanu Sinha Resolution Professional Patna Highway Projects Ltd. Floor No. 4, Duck Back House, 41, Shakespeare Sarani, Kolkata - 700017.

2. Committee of Creditors Patna Highway Projects Ltd. Floor No. 4, Duck Back House, 41, Shakespeare Sarani, Kolkata - 700017.

3. Silver Point Luxembourg Platform S.A.R.L. 11-13 Boulevard de la Foire, Luxembourg, L- 1528. ...Respondents

Present:

For Appellant: Mr. Amit Saxena, Sr. Advocate, Mr. Saurabh Suman Sinha, Mr. Varad Nath, Ms. Archi Agarwal, Ms. Rishbha Shivhare, Advocates.

For Respondents: Mr. Krishnendu Datta, Sr. Advocate with Ms. Pooja Mahajan, Ms. Mahima Singh, Ms. Mehak Nayak, Advocates for R-1(RP).

Cont'd.../ -2-

Mr. Ramji Srinivasan, Sr. Advocate with Mr. Abhijeet Sinha, Mr. Samar Bansal, Mr. Vedant Kapur, Ms. Namrata, Ms. Shruti, Advocates for R-2(CoC).

Mr. Arun Kathpalia, Sr. Advocate with Mr. Prateek Kumar, Ms. Raveena Rai, Mr. Rohit Ghosh, Advocates for R-3(SRA).

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed against order dated 10.05.2022 passed by the

Adjudicating Authority (National Company Law Tribunal), Principal Bench,

New Delhi allowing I.A. No. 1538 of 2021 filed by the Resolution Professional

for approval of the Resolution Plan. The Appellant - Promoter of the Corporate

Debtor, M/s Patna Highway Projects Ltd. has come up in this Appeal

challenging the order of the Adjudicating Authority approving the Resolution

Plan. Brief facts of the case are:

i. National Highways Authority of India (NHAI) issued Tender Notice

for upgradation of Hazipur-Muzaffarpur Section of NH-77 to four

lane dual carriageway. The NHAI issued Letter of Acceptance in

favour of the Appellant on 18.11.2019. A Special Purpose Vehicle

namely M/s Patna Highway Projects Ltd. (Corporate Debtor) was

incorporated to carry on the project.

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ii. A Concession Agreement dated 24.02.2010 was executed by NHAI

in favour of the Corporate Debtor. In due course, a Common

Loan Agreement, Escrow Agreement and Substitution Agreement

were also executed.

iii. NHAI declared Provisional Certificate of Completion on

01.09.2016. Annuities were released, which according to

Appellant, were appropriated by lenders.

iv. On account of default committed by the Corporate Debtor, CIRP

was initiated on application filed by the Corporation Bank, by

order dated 03.01.2020.

v. Appellant has given proposal for accepting Resolution Plan,

which was not accepted by the CoC. In the CIRP process

Resolution Plan submitted by Respondent No.3 - Silver Point

Luxembourg Platform S.A.R.L. was accepted by the CoC. CoC

approved the Resolution Plan with 97.95% voting share in the

CoC meeting dated 12.03.2021.

vi. The Resolution Professional filed I.A. No. 1538 of 2021 for

approval of the Resolution Plan which has been approved by the

impugned order dated 10.05.2022. The Appellant, the erstwhile

Promoter of the Corporate Debtor has filed this Appeal

challenging the order dated 10.05.2022.

2. We have heard Shri Amit Saxena, learned Senior Counsel for the

Appellant and Shri Arun Kathpalia, learned Senior Counsel for the Successful

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Resolution Applicant. Shri Ramji Srinivasan, learned Senior Counsel has

appeared for the Committee of Creditors and Shri Krishnendu Datta, learned

Senior Counsel appeared for Respondent No.1.

3. Learned counsel for the Appellant challenging the order of the

Adjudicating Authority submits that the Adjudicating Authority committed

error in approving the conditional Resolution Plan. It is submitted that

objection was raise by the Appellant. The Resolution Plan being conditional

could not have been approved. A conditional plan whose implementation can

be withdrawn by the Resolution Applicant is inherently unviable and such

plan does not merit acceptance. The Adjudicating Authority did not

adjudicate on the above issue and ignoring the fact that the plan is conditional

has granted its approval. Submission raised by the Appellant urging ground

of fraud and collusion has also not been adverted to while approving the

Resolution Plan. The Adjudicating Authority has to satisfy itself that the

Resolution Plan meets the criterial prescribed under Section 30(2). The

Approved Resolution Plan does not fulfil the mandatory requirements as

prescribed under Regulation 38(3) of the Regulations, 2016. The Resolution

Applicant, as per the plan, has not infused any money and only on the basis

of annuity received the plan is sought to be implemented. Financial proposal

which was given by the Resolution Applicant was not required to be accepted

since the Resolution Applicant was to run the Corporate Debtor on the basis

of amount received by the Corporate Debtor without infusing any fund of its

own.

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4. Learned counsel appearing for the Respondent No.1, Resolution

Professional has opposed the submission of learned counsel for the Appellant

and submits that the Resolution Plan has been approved by the Committee of

Creditors in its commercial wisdom which is paramount and non-justiciable.

Appellant has failed to show any legal infirmity or non-compliance of Section

30(2) of the Code. There is no ground under Section 61(3) warranting any

interference with the impugned order of the Adjudicating Authority. The

alleged conditionality as contended by the Appellant was not a condition

imposed by the Successful Resolution Applicant to wriggle out of their

obligation to be performed under the Resolution Plan. Clause 3.5.1 of the

Concession Agreement specifically requires NHAI approval for change in

ownership/ control of the Corporate Debtor. Committee of Creditors have

considered such aspects while approving the Resolution Plan. There is no

provision or requirement of procuring upfront approval of the NHAI for change

in ownership even before approval of the plan. NHAI by letter dated

20.12.2022 has granted its in-principle approval for transfer of 100% change

in ownership of the Corporate Debtor in favour of SRA. Allegation that there

was any collusion or fraud are baseless and without any material. There being

no cogent grounds in support of Appeal, this Appeal is nothing but an attempt

to scuttle the resolution and revival of the Corporate Debtor. It is submitted

that Resolution Plan has already been implemented, the Resolution

Professional has demitted office and the Corporate Debtor is now under the

management and control of the Successful Resolution Applicant.

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5. We have considered the submissions of learned counsel for the

parties and perused the record.

6. The principal submission which has been advanced by learned

counsel for the Appellant is alleged conditionality of the plan. It is submitted

that in view of the judgment of Hon'ble Supreme Court in "Ebix Singapore

Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Ltd., (2022)

2 SCC 401", no conditional plan can be approved. To appreciate the

submission of learned counsel for the Appellant, it is necessary to notice the

effective part of the Resolution Plan which is said to be conditional plan. The

impugned order has referred to Para 2.1 Schedule 2 of the Resolution Plan.

Schedule 2 contains the implementation provision and in the Schedule 2 Para

2 deals with Regulatory and other approvals and conditions precedent to the

implementation of the Plan. Para 2.1 is as follows:

"2.1 Notwithstanding anything contained in this Plan, performance of the obligations under the Plan is subject to the prior completion (unless waived in writing by the Resolution Applicant) of the conditions set out immediately below, to the satisfaction of the Resolution Applicant, between the date of submission of the Plan by the Resolution Professional to the NCLT in accordance with Section 30(6) of the Code and the Long Stop Date. If the conditions set forth in this Paragraph (B) 2 (except the condition set forth in Paragraph (B) 2.1.1) are not met to the satisfaction of the Resolution Applicant

Company Appeal (AT) Insolvency No. 920 of 2022 -7-

by the Long Stop Date, this Plan shall cease to have any effect and shall not bind the Resolution Applicant, the Committee of Creditors, the Resolution Professional or any other Person notwithstanding anything to the contrary contained in the Plan.

Accordingly, in case of any breach, non- fulfilment, changes or modifications to any of the foregoing, the Resolution Applicant shall be entitled to seek suitable modifications or withdraw the Plan, and such modification or withdrawal shall not result in any claim or liability on the Resolution Applicant (including in the Information Memorandum, RFRP, EOI, Invitations or supporting documents submitted along with the Plan (the terms of which shall be amended).

Thereafter, the Resolution Applicant shall have no obligations whatsoever under this Plan or otherwise to any Person, including having no obligation with respect to any bid bond guarantee, earnest money deposit guarantee, performance guarantee, letter of intent or any other obligation and each such guarantee shall be promptly returned to the Resolution Applicant

7. Clause 2.1.3 deals with the unconditional consent and

acknowledgement of the NHAI. Clause 2.3.1 is as follows:

2.1.3 The Corporate Debtor shall have obtained the irrevocable and unconditional consent

Company Appeal (AT) Insolvency No. 920 of 2022 -8-

and acknowledgement of the NHAI, substantially in form set out in Schedule 7 (Form of Consent Letter) hereto, subject to any modification acceptable to the Resolution Applicant, in respect of:

(a) the terms of this plan, including change in shareholding and control of the Corporate Debtor pursuant to the steps set out in Paragraphs (A) 1, (A) 2 and A (5) of this Schedule 2 (implementation Provisions);

(b) modification to the financing documents (including security therein) of the Corporate Debtor pursuant to the restructuring of the Reconstituted Debt in accordance with Schedule 5 (Restructured Terms of the Reconstituted Debt);

(c) continued effectiveness of the Concession Agreement (including unconditional revocation and irrevocable waiver of all past and existing defaults, penalties, among others, relating to the Corporate Debtor); and

(d) execution of a Supplementary Agreement-2021 to the Concession Agreement on the terms and conditions as set out in Schedule 6 (Key Terms of

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the Supplementary Agreement 2021) hereto.

8. The various clauses under Clause 2 of Schedule 2 are clauses which

are towards the implementation of the plan which is clear from the heading

of the Schedule 2 itself.

9. Hon'ble Supreme Court in the 'Ebix Singapore' (supra), on which

much reliance has been placed by learned counsel for the Appellant, in Para

167 has laid down following:

"167. Regulation 38(3) mandates that a Resolution Plan be feasible, viable and implementable with specific timelines. A Resolution Plan whose implementation can be withdrawn at the behest of the successful Resolution Applicant, is inherently unviable, since open-ended clauses on modifications/ withdrawal would mean that the Plan could fail at an undefined stage, be uncertain, including after approval by the Adjudicating Authority. It is inconsistent to postulate, on the one hand, that no withdrawal or modification is permitted after the approval by the Adjudicating Authority under Section 31, irrespective of the terms of the Resolution Plan; and on the other hand, to argue that the terms of the Resolution Plan relating to withdrawal or modification must be respected, in spite of the CoC's approval, but prior to the approval by the Adjudicating Authority. The former position follows from the intent, object and purpose of the IBC and from Section 31, and the latter is disavowed by the IBC's structure and objective. The IBC does not envisage a dichotomy in the binding

Company Appeal (AT) Insolvency No. 920 of 2022 -10-

character of the Resolution Plan in relation to a Resolution Applicant between the stage of approval by the CoC and the approval of the Adjudicating Authority. The binding nature of a Resolution Plan on a Resolution Applicant, who is the proponent of the Plan which has been accepted by the CoC cannot remain indeterminate at the discretion of the Resolution Applicant. The negotiations between the Resolution Applicant and the CoC are brought to an end after the CoC's approval. The only conditionality that remains is the approval of the Adjudicating Authority, which has a limited jurisdiction to confirm or deny the legal validity of the Resolution Plan in terms of Section 30 (2) of the IBC. If the requirements of Section 30(2) are satisfied, the Adjudicating Authority shall confirm the Plan approved by the CoC under Section 31(1) of the IBC."

10. In "Ebix Singapore", Hon'ble Supreme Court was considering

question as to whether Resolution Applicant after approval of the plan by

Committee of Creditors can withdraw/ modify Resolution Plan. It was held

that a Resolution Plan whose implementation can be withdrawn at the behest

of the Successful Resolution Applicant, is inherently unviable. The Hon'ble

Supreme Court laid down that no condition in the Resolution Plan permitting

withdrawal by Resolution Applicant is valid. In view of the law laid down by

Hon'ble Supreme Court, after approval of the Committee of Creditors,

Resolution Applicant can neither withdraw nor modify the Resolution Plan.

11. When we look into the facts of the present case, the condition which

are contained to the effect that Resolution Applicant can seek suitable

Company Appeal (AT) Insolvency No. 920 of 2022 -11-

modification or withdraw plan are conditions which are unenforceable on

account of law declared by the Hon'ble Supreme Court in "Ebix Singapore"

(Supra). The facts of the present case as detailed in the Reply filed by

Respondent No.3 as well as Resolution Professional indicate that plan has

been implemented and all necessary approvals including the approval by

NHAI has been received for carrying out the plan. After implementation of the

plan, we are of the view that the submissions of learned counsel for the

Appellant that Resolution Plan was conditional plan and could not have been

approved, does not furnish any ground to interfere with the impugned order,

at this stage. NHAI approval was set out as a condition precedent to takeover

the Corporate Debtor since it was provided in Clause 5.3.1 of the Concession

Agreement, as noted above. The Corporate Debtor was set up as a special

purpose company for operating this concession and it is necessary to ensure

compliance of the Concession Agreement and get a clearance from NHAI

before takeover. All such aspects were duly considered by the Committee of

Creditors while approving the Resolution Plan. Moreover, the law declared by

the Hon'ble Supreme Court in "Ebix Singapore" made categorical that no

Resolution Applicant can be allowed to withdraw their plan and in facts of the

present case, Resolution Applicant has never come up with any case,

application or request to withdraw from the Resolution Plan. On the

submission as pressed by learned counsel for the Appellant, we are not

inclined to interfere with the approval of the Resolution Plan.

12. Submission of learned counsel for the Appellant that financial

proposal given by the Successful Resolution Applicant was unviable and

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Successful Resolution Applicant was handed over the Corporate Debtor

without infusing any finance of its own and Successful Resolution Applicant

was to run the Corporate Debtor from the money received by the Corporate

Debtor, we are of the view that acceptance of the plan of Successful Resolution

Applicant was in the commercial wisdom of the Committee of Creditors. The

question of viability and feasibility of the plan was the question which was

considered by the Committee of Creditors while approving the plan. The

Appellant's submission that plan was not viable and feasible and proposal

was not adequate, cannot be allowed to be raised. The issue is fully covered

by the judgment of the Hon'ble Supreme Court in "K. Sashidhar vs. Indian

Overseas Bank and Ors. - (2019) 12 SCC 150".

13. The submission of learned counsel for the Appellant that there was

collusion between the Resolution Professional and the Successful Resolution

Applicant also does not merit any acceptance. Fraud and collusion is very

easy to allege but difficult to prove. No such materials have been brought on

the record nor there are any specific pleadings on basis of which any

conclusion can be drawn that there was any fraud and collusion in the

conduct of the CIRP. Learned counsel for the Respondent is right in his

submission that this Appeal is nothing but an attempt to derail the resolution

and revival of the Corporate Debtor.

14. Present is a case where Form G was issued and time to submit the

plan was extended time to time. There were two Resolution Plans which were

duly considered by the Committee of Creditors. The submission of the

Appellant that mandatory requirements as prescribed under Regulation 38(3)

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of the Regulations, 2016 has not been satisfied since there are no reasons

given regarding cause of default. Regulation 38(3) provides as follows:

"38(3) [A resolution plan shall demonstrate that -

(a) it addresses the cause of default;

(b) it is feasible and viable;

(c) it has provisions for its effective implementation;

(d) it has provisions for approvals required and the timeline for the same; and

(e) the resolution applicant has the capability to implement the resolution plan.]"

15. Learned counsel for the Respondent has submitted that the

Resolution Plan provides for reasons for default. In this context, Clause 10.3

of the Resolution Plan deals with Cause of default by the Corporate Debtor.

Para 10.3 of the Resolution Plan is as follows:

"10.3 Causes for default by the Corporate Debtor

The defaults committed by the Corporate Debtor have, in the opinion of the Resolution Applicant, arisen on account of: (i) delays in construction due to: (a) the non-availability of right of way, (b) hindrances from locals to the Corporate Debtor, and (c) delay in permission from railways, which led to an increase in construction costs; (ii) delays/lapses in collection of Annuity payments to the Corporate Debtor which resulted in an inability to service the debt out of the cash flows; and (iii) lack of

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any intent on the part of / support from the Promoter Group."

16. The submission of learned counsel for the Appellant that

mandatory requirement under Regulation 38 is not fulfilled, is not correct and

the plan gives causes of default, hence, the above mandatory requirement

under the plan is fulfilled.

17. We, thus, do not find any substance in any of the submission of

learned counsel for the Appellant to interfere with the impugned order dated

10.05.2022. There is no merit in the Appeal. Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) NEW DELHI

25th May, 2023

Archana

Company Appeal (AT) Insolvency No. 920 of 2022