Cfm Asset Reconstruction Private ... vs Ss Natural Resources Private Limited

CFM Asset Reconstruction Private Limited, An existing company within the meaning of Companies Act, 2013 bearing CIN U67100GJ2015PTC083994 having its registered office at Block No. A/1003, West Gate, Near YMCA Club, Sur No. 835/1 + 3, S.G. Highway, Makarba Ahmedabad, Gujarat - 380051 ...Appellant

Versus

1. SS Natural Resources Private Limited, An existing company within the meaning of the Companies Act, 2013, bearing CIN: U10300WB2015TC204962, having its registered office at SS Chambers, 5 CR Avenue, 2nd Floor, Kolkata - 700072.

2. Monitoring Agency (Through Mr. Kshitiz Chhawchharia, Ex-Chairman of Monitoring Agency and Ex-Resolution Professional of Ramsarup Industries Limited, Having office at B Chhawchharia & Co. 8A & 8B Satyam Towers, 3 Alipore Road, Kolkata, West Bengal, 700027 and residing at 10A, Alipore Park Place, Kolkata - 700027

3. Mr. Kshitiz Chhawchharia, Ex-Resolution Professional and Ex-Chairman of Monitoring Agency of Ramsaraup Industries Limited, Bearing IBBI Registration No.: IBBI/IPA-001/IP- P00358/2017-18/10616 having office at B Chhawchharia & Co. 8A & 8B Satyam Towers, 3 Alipore Road, Kolkata, West Bengal, 700027 and residing at 10A, Alipore Park Place, Kolkata - 700027 ...Respondents

Present: For Appellant: Mr. Mukul Rohatgi & Mr. Krishnendu Datta, Sr. Advocates, Mr. Siddhartha Datta, Mr. Kumar -2-

Anurag Singh, Mr. Deepanjan Dutta Roy, Mr. Rahul Gupta, Ms. Gayathri Balasubramanyam, Advocates. For Respondent: Mr. Ramji Srinivasan, Sr. Advocate, Mr. Abhijeet Sinha, Mr. Shounak Mitra, Ms. Wamika Trehan, Ms. Maithili Moondra, Advocates for R-1. Mr. Abhinav Vashisht, Sr. Advocate, Ms. Priya Singh, Mr. Piyush Swami, Advocates for R-2,3.

JUDGMENT

ASHOK BHUSHAN, J:

1. This Appeal by a Financial Creditor of the Corporate Debtor has been

filed challenging the Order dated 27th June, 2023 passed by National

Company Law Tribunal, Kolkata Bench (Court-I) Kolkata (hereafter referred

to as "The Adjudicating Authority") in I.A. (IB) No. 724/KB/2022 filed by

Respondent No. 1-S.S. Natural Resources Private Limited-Successful

Resolution Applicant.

2. Brief facts of the case necessary to be noted for deciding the Appeal

are:-

i. Corporate Insolvency Resolution Process (CIRP in short) was initiated

against the Corporate Debtor-Ramsarup Industries Limited by Order

dated 08th January, 2018 passed by the Adjudicating Authority.

ii. Committee of Creditors (CoC in short) was constituted which held

various meetings in the CIRP Process of the Corporate Debtor.

Resolution Plan submitted by Respondent No. 1 - S.S. Natural

Resources Pvt. Ltd. came for consideration along with methodology of

distribution in 24th CoC Meeting held on 06th March, 2019.

Company Appeal (AT) (Insolvency) No. 960/2023 -3-

iii. Resolution Plan submitted by Respondent No. 1 - SS Natural

Resources Pvt. Ltd. and one Shyam SEL & Power Ltd. came for

consideration in the 24th CoC Meeting held on 06th March, 2019.

iv. Resolution Plan was voted and with the majority of 74.41%,

Resolution Plan of S.S. Natural Resources Pvt. Ltd. was approved

along with distribution methodology which was to be as per the

categorization of Financial Creditors based on Security Structure.

The Resolution Plan approved by the CoC was subsequently approved

by the Order of the Adjudicating Authority on 04th September, 2019.

v. Company Appeal (AT) Ins. No. 995 of 2019 was filed by the SS

Natural Resources Pvt. Ltd. challenging the Order of the Adjudicating

Authority approving the Resolution Plan in which Appeal, Appellate

Tribunal affirmed the Order vide its Order dated 04th March, 2021.

The SS Natural Resources Pvt. Ltd. also filed an Appeal before the

Hon'ble Supreme Court being Civil Appeal No. 1142 of 2021 and Civil

Appeal No. 1652 of 2021 filed by one Orissa Metaliks Pvt. Ltd. which

were dismissed by Hon'ble Supreme Court on 04th May, 2021.

vi. An Application was filed by the Appellant being I.A. No.

538/KB/2021 praying that Resolution Applicant having not

implemented the Plan the Order of Liquidation of the Corporate

Debtor be passed. I.A. No. 538/KB/2021 filed by the Appellant came

to be decided by the Adjudicating Authority vide its Order dated 06th

April, 2022 where the Adjudicating Authority issued a direction that

Resolution Plan amount parked in separate account be transferred to

Company Appeal (AT) (Insolvency) No. 960/2023 -4-

the account of the Corporate Debtor in any case not later than five

days of the Order and the said amount was to be distributed in

accordance with approved Resolution Plan immediately upon receipt

the management of the Corporate Debtor was to be transferred to the

SRA.

vii. Against the Order dated 06th April, 2022 passed by the Adjudicating

Authority, an Appeal was filed being Company Appeal (AT) Ins. No.

396 of 2022 by the Appellant which Appeal came to be dismissed by

this Tribunal vide its Order dated 19th April, 2022. Appellant

aggrieved by the order dated 19th April, 2022 again filed an Appeal

before the Hon'ble Supreme Court being Civil Appeal No. 3633 of

2022 which also came to be dismissed on 12th May, 2022. After

dismissal of the Appeal, an email dated 23rd May, 2022 was written

by the Ex-Resolution Professional of the Corporate Debtor to the

Appellant informing about the transfer of amount of Rs.

12,26,23,562/- in the Bank Account of the Appellant on 20th May,

2022. Confirmation was also asked to issue No Dues Certificate by

the Appellant upon receipt of the payment shared by email dated 27th

April, 2022. There have been exchange of the email between the

Appellant and the ex-Resolution Professional on 02nd July, 2022, the

RP communicated to the Appellant that Resolution Professional vide

email dated 15th June, 2022 communicated to the Appellant that

upfront payment to the Financial Creditors was to be distributed out

of amount of Rs. 342.25 Crores. The email further communicated the

Company Appeal (AT) (Insolvency) No. 960/2023 -5-

CoC Expenses and Future Litigation Fund as Rs. 4.01 Crores and

Security Reimbursement amount as Rs. 4.74 Crores has to be

deducted from Rs. 351 Crores. The Appellant raised objection to the

email and has sent a detailed reply on 29th June, 2022 stating that

out of Rs. 351 Crores upfront amount the Appellant are entitled to

receive amount of Rs. 270.28 Crores. Appellant having 77% Security

Interest of Rs. 351 Crores they are entitled to Rs. 270.28 Crores and

deduction from amount of Rs. 351 Crores can not be accepted.

Resolution Professional vide email dated 2nd July, 2022 sent a

detailed Reply to the email of Appellant dated 29th June, 2022

contending that deduction of Security Amount towards Security as

well as the CoC are being deducted as per the approved distribution

methodology approved on 24th CoC Meeting held on 06th March,

2019. Detailed Reply was sent through the Email. Appellant on 2nd

July, 2022 sent an email to the RP requesting to continue to hold the

distribution amount of Appellant in an interest bearing account. The

SRA thereafter filed I.A. No. 724/KB/2022 seeking direction to the

Appellant to comply with the Orders dated 06th April, 2022 and

forthwith implement the Resolution Plan. Direction was also sought

that No Dues Certificate be executed. Appellant filed a Reply to the

I.A. Appellant also filed an I.A. No. 746/KB/2022 praying for certain

reliefs. The Adjudicating Authority vide the Impugned Order dated

27th June, 2023 disposed of the I.A. No. 724/KB/2022. The

Adjudicating Authority noticed that SRA has already deposited the

Company Appeal (AT) (Insolvency) No. 960/2023 -6-

amount of Rs. 351 Crores in the controlled account hence they have

fulfilled his part. The Adjudicating Authority held that Respondent is

under due obligation to provide the NDC and execute the assignment

agreement. In paragraph 29 to 31, following observations were made

by the Adjudicating Authority:

"29. Finally, we make a remark that the object of Code is to revive a Corporate Debtor and not to drag it to the grave. The SRA, despite of the huge number of litigations and passage of time has not backed out and wants to revive the Corporate Debtor. The Respondent should try to take a logical approach and not stand as a wall in the revival of the Corporate Debtor and the implementation of the Plan after three years.

30. The SRA has deposited the amount as given in the Resolution Plan in the controlled account and hence, he has fulfilled his part. The Respondent is therefore under due obligation to provide the NDC and execute the assignment agreements and further hand over the title deeds of the Corporate Debtor which are in the custody of the Respondent, to the SRA forthwith. The revival of the Corporate Debtor should not be hampered any further.

31. The MA shall determine and appropriate the amounts to be borne out by various parties as outlined above, preferably within two weeks from the date of issue of this order. A compliance affidavit be filed by the Chairman of the Monitoring committee within two weeks of completion of the above transactions. We order accordingly.

32. With these direction I.A. (IB) No. 724/KB/2022 is disposed of, with the liberty to the Chairman of the monitoring agency to approach this Adjudicating Authority

Company Appeal (AT) (Insolvency) No. 960/2023 -7-

in case of any difficulty in implementation of the above protocol."

viii. Aggrieved by the Order passed by the Adjudicating Authority dated

27th June, 2023, this Appeal has been filed by the Appellant-the

Financial Creditor.

ix. The Appellant has come up in the CIRP process of the Corporate

Debtor on the strength of assignment dated 23rd April, 2021 from

ARCIL. It was the Appellant who had filed the Application for

liquidation which was dismissed on 06th April, 2022, details of

subsequent events have already been noticed by us.

3. We have heard Mr. Mukul Rohatgi, Sr. Advocate and Mr. Krishnendu

Datta, Sr. Advocate for the Appellant. Mr. Ramji Srinivasan, Sr. Advocate

for Respondent No. 1-SRA and Mr. Abhinav Vashisth, Sr. Advocate for

Respondent No. 2 and 3.

4. Learned Sr. Counsel for the Appellant challenging the Impugned

Order contends that Appellant who is Security Interest Holder of 77% being

entitled to amount of Rs. 270.28 Crores out of upfront amount of Rs. 351

Crores having not yet been paid the amount, there is no occasion for giving

No Dues Certificate (NDC in short) and the Adjudicating Authority

committed error in issuing direction to the Appellant to issue No Dues

Certificate whereas amount has not yet been paid. It is submitted that

NCLT vide its Order dated 06th April, 2022 while directing deposit of the

amount within 5 days has directed the amount to be distributed in

accordance with the approved Resolution Plan immediately. Distribution as

Company Appeal (AT) (Insolvency) No. 960/2023 -8-

per order dated 06th April, 2022 has not yet taken place and the Monitoring

Agency has handed over the management of the Corporate Debtor to the

SRA on 05th May, 2022. It is submitted that Respondent No. 1 from very

beginning was reluctant to implement the Resolution Plan which is

apparent from the fact that against the order approving the Resolution Plan

it was Respondent No. 1 who had filed Appeal before the Appellate Tribunal

as well as before the Hon'ble Supreme Court. It is submitted that SRA

having not yet implemented the plan in so far as payment to the Appellant

has not yet been paid it is a fit case where Corporate Debtor be put to

Liquidation. There have been continuous breaches by the Respondent No. 1

of the Resolution Plan which disentitle the Respondent No. 1 to implement

the Resolution Plan. It is submitted that RP communicated the Appellant

that Appellant is only entitled for payment of Rs. 248,02,09,427/- out of

total amount available for distribution being amount of Rs. 342.25 Crores.

It is submitted that unauthorised deduction of amount of Rs. 4.01 Crores

for CoC Expenses and Future Litigation Fund and 4.74 Crores towards

security reimbursement are being deducted which is not as per approved

Resolution Plan. It is submitted that in the 24th CoC meeting held on 06th

March, 2019 it was never resolved to make any deduction from the upfront

amount of Rs. 351 Crores. The Appellant is entitled for 77% out of total

amount of Rs. 351 Crores from which amount no deduction can be made

and non-payment of entitlement to the Appellant has to be treated as non-

implementation of the plan. The Adjudicating Authority committed error in

Company Appeal (AT) (Insolvency) No. 960/2023 -9-

directing for giving No Dues Certificate whereas payment has not yet been

paid to the Appellant of its entitlement.

5. Mr. Abhinav Vashisth, Learned Sr. Counsel appearing for Respondent

Nos. 2 and 3 submits that in the meeting of the COC held on 06th March,

2019, distribution methodology was clearly placed before the CoC where

Process Advisory of the CoC has circulated the distribution methodology

under which total amount available for distribution was Rs. 342.25 Crores.

It is submitted that in the 11th CoC Meeting held on 10th September, 2018

it was also resolved that payments made under the CoC Expenses debit

note will be repaid along with interest from resolution proceeds after

payment of all priority claims as provided under IBC thus CoC Expenses of

Rs. 4.01 Crores was to be deducted from upfront amount of Rs. 351 Crores.

It is submitted that Security Expenses which was incurred by ARCIL as

well as WBIDC Limited has also to be deducted from the upfront payment

as per Order dated 04th September, 2019 of the Adjudicating Authority. It is

submitted that the deduction of CoC expenses as well as security expenses

from the upfront payment of Rs. 351 Crores was as per the CoC decision

and the Appellant's contention that the said deductions are impermissible

cannot be accepted. It is submitted that process advisor of the CoC has

circulated the Revised Distribution Methodology where deductions were

very much reflected and no objection was raised by the predecessor interest

of the Appellant in the CoC meeting and Appellant can not be allowed to

raise any objection to the Distribution Mechanism approved by the CoC. It

is submitted that in the Monitoring Committee Meeting also decision was

Company Appeal (AT) (Insolvency) No. 960/2023 -10-

taken to implement the plan as per distribution methodology approved by

the CoC and at no point of time at the meeting of the Monitoring

Committee, the Appellant has raised any objection regarding deduction

towards CoC expenses and security expenses. It is submitted that the

Resolution Professional has offered to make the payment out of Rs. 342.25

Crores available for distribution to the Appellant however email dated 2nd

July, 2022 was received from Appellant that RP may continue to hold the

distribution amount of Appellant in an interest bearing account

consequently the amount to which the Appellant was entitled along with

accrued was kept in interest bearing account on which the interest has

accrued day by day. It is submitted that before the voting of the Resolution

Plan detail working and deduction form the upfront payment towards CoC

members were circulated by the RP on basis of circulation of revised

circulation methodology by process advisor of the CoC. It is submitted that

SRA as well as Monitoring Committee were always taking steps to

implement the plan and it was the Appellant who was creating stumbling

blocks in implementation of the plan and Appellant's endeavour had been

to put the Corporate Debtor in to liquidation.

6. Learned Sr. Counsel appearing for Respondent No. 1 has submitted

that as far Respondent No. 1 is concerned, Respondent No. 1 has deposited

the entire amount as per Order dated 06th April, 2022 of the Adjudicating

Authority on 11th April, 2022 in the controlled account of the Corporate

Debtor. Total amount of Rs. 351 Crores having been deposited by the SRA

it has complied its part. It is submitted that the Appellant cannot be heard

Company Appeal (AT) (Insolvency) No. 960/2023 -11-

in saying that there is any breach on the part of the Respondent No. 1. The

Respondent No. 1 has deposited the amount and majority of financial

creditors have already received their share of entitlement and it is Appellant

and other few who have not yet accepted the payments offered.

7. We have heard Learned Sr. Counsel for the parties and have perused

the record.

8. The Order under challenge in this Appeal is Order of the Adjudicating

Authority where the Adjudicating Authority has directed the Appellant who

was Respondent No. 1 in the Application I.A. No. 724/KB/2022 to provide

No Dues Certificate and execute the assignment agreement. We have

already noticed the operative directions issued by the Adjudicating

Authority in Order dated 27th June, 2023 as above. There is no dispute

between the parties that amount of Rs. 351 Crores was deposited in the

controlled account by the SRA on 11th April, 2022 in compliance of the

Order dated 06th April, 2022. The Issue between the parties is regarding

distribution of the amount of Rs. 351 Crores which has been deposited by

the SRA. On one hand, the Appellant is strenuously challenging the

calculation as forwarded by the ex-RP to the Appellant indicating deduction

of amount of Rs. 4.01 Crores towards CoC Expense and Future Litigation

Fund and 4.74 Crores towards the Security Reimbursement from the

upfront amount of Rs. 351 Crores. The case of the Respondent is that the

above amounts have to be deducted from the upfront payment deposited by

the SRA and the amount available for distribution to all the Financial

Creditors comes to Rs. 342.25 Crores.

Company Appeal (AT) (Insolvency) No. 960/2023 -12-

9. 11th CoC meeting held on 10.09.2018 and 24th CoC meeting was held

on 06th March, 2019 where Resolution Plan of the SRA was discussed and

put to vote. We may first notice the minutes dated 10.09.2018 of the CoC.

11th CoC meeting dated 10.09.2018 has been brought on record by the

Respondent No. 2 and 3 in their reply at page 34 of the Reply. Item No. 9 of

the Agenda Item of the Meeting was to the following effect:

"ITEM NO. 09- TO DISCUSS ABOUT THE EXPENSES I CURRED ON BEHALF OF THE CoC AND REThf BURSEMENT THEREOF"

10. It is useful to extract the entire agenda item No. 9:

""ITEM NO. 09- TO DISCUSS ABOUT THE EXPENSES I CURRED ON BEHALF OF THE CoC AND REThf BURSEMENT THEREOF"

Further, to the discussions held in the 10th meeting of the CoC on 8 August 20 18 the RP stated that the payments to the Process Advisers to the CoC - EY, and to the Legal Counsel of the CoC - Alliance Laws shall be made by the RP on behalf of the CoC. The RP clarified that as per the regulations of IBC, such costs do not constitute CIRP costs. The RP has made payment against the invoice raised by the Process Advisors for the month of June. However, further payments shall be made post receipt of contribution from the members of the CoC. The RP has raised and circulated Debit Notes for this purpose ("CoC Expense Debit Notes").

Mr Ralhan from ARCIL mentioned that it is essential to make payments to the Process Advisors and to the Legal Counsel and in case contribution is not received from certain members of the CoC, such outstanding contribution

Company Appeal (AT) (Insolvency) No. 960/2023 -13-

shall be adjusted against the amount of final settlement to be paid to such CoC members on receipt of proceeds from a resolution applicant. It was also put forth by Mr Ralhan that the contributions made by members against these debit notes should also carry interest @ 18% p.a. which got a general consensus amongst the members.

Hence, following understanding was concluded relating to these payments:

a) The CoC has granted specific approval to RP to pay one invoice of the process advisor fees from the money available;

b) All subsequent payments of CoC expenses will be done on the basis of money received from specific debit notes raised for such expenses ("CoC Expense Debit Notes");

c) Payments being made under the CoC Expense Debit Notes will not form part of insolvency resolution process cost;

d) Payments made under the CoC Expense Debit Notes will bear an interest of 18% per annum;

e) Payments made under the CoC Expense Debit Notes will be repaid along with interest, from resolution proceeds after payment of all priority claims: as provided under IBC.

All CoC members agreed to the above and have accordingly instructed RP of the same. The RP will be acting on this issue only on express instructions of the CoC."

11. The above minutes of the CoC clearly records the consensus that

process advisor's fee was to be paid from the money received from specific

debit note raised for such expenses which payment shall not be part of

Company Appeal (AT) (Insolvency) No. 960/2023 -14-

Insolvency Resolution Process Cost. It was further resolved that payments

made under the CoC Debit Note will be repaid along with interest from

Resolution Proceeds after payment of all priority claims as provided under

IBC. Rs. 4.01 Crores which has been earmarked for the Process Advisor's

Fee thus is not part of CIRP Cost and the said payments were made out of

amount provided by the Members of the CoC which has to be repaid from

Resolution Proceeds along with interest at the rate of 18% per annum. The

above resolution clearly indicates that the amount which is paid by

Financial Creditors as members of the COC for payment of process

advisor's fee has to be repaid to them from the Resolution Proceeds. The

above obviously means that resolution proceeds which has been deposited

by the SRA for payment to the Financial Creditors i.e. Rs. 351 Crores out of

said amount, this amount has to be repaid to the Members of the CoC. The

Resolution Plan does not envisage any other amount to be paid by the SRA,

thus the amount paid by the Member of CoC be refunded to them by the

decision of the CoC as noted above. It is clear that said amount was not

treated as part of the CIRP Cost. Process Advisor's Fee shall not be included

in the CIRP Cost as defined in CIRP Regulation, 2016.

12. Now we come to the minutes of 24th CoC meeting dated 06th March,

2019. In the minutes, the Resolution Plan submitted by the SRA came to be

considered. In the Reply field by Respondent No. 2 & 3, a copy of email

dated 05th March, 2019 have been brought on record where proposed

distribution draft was revised based on security profile based on financial

creditor was circulated. In the Distribution Draft out of Rs. 351 Crores, Rs.

Company Appeal (AT) (Insolvency) No. 960/2023 -15-

4.01 Crores towards CoC expense and Future Litigation Fund and Rs. 4.56

Crores towards Security Reimbursement was clearly mentioned and it was

further stated that fund available for distribution were only Rs. 342.43

Crores. The proposed distribution to ARCIL was Rs. 258.85 Crores

(predecessor interest of the Appellant). When the meeting of CoC was held

on 06th March, 2019 proposed distribution draft was very much available

before the Members of the CoC. Under Item No. 7 of the minutes two

resolutions were up for consideration as mentioned at 'A' and 'B' of item No.

7. The minutes which is filed as Annexure D to the Reply of Respondent No.

2 and 3 indicate that the predecessor in interest of the Appellant was part

of the minutes and has not objected to the deduction of CoC expenses and

security expenses. It is useful to extract the discussion on Item No. 7 and

clarification with regard to CoC expense which is to the following effect:

"Pursuant to the Twenty-third meeting of the Committee of Creditors held on 02 March 20 1 9. the Committee of Creditors had discussions to decide on the methodology of distribution of proceeds to be received under the Resolution Plan from the successful Resolution Applicant. This would be either on the basis of share of voting or security structure, amongst the members of the Committee of Creditors. The methodology of distribution is supposed to form part of the Resolution Plan filed by the RP with the Adjudicating Authority under Section 30(6) of the Code. To make it binding on persons mentioned in Section 31 of the Code, it will have to form part of the Resolution Plan approved by the Adjudicating Authority under Section 31 of the Code.

Company Appeal (AT) (Insolvency) No. 960/2023 -16-

The Process Advisors to the COC, EY, had emailed a modified distribution pattern based on security structure to the members on 05 March 2019. The RP invited the Process Advisors to the CoC to present the aforesaid revised methodology of distribution of resolution proceeds circulated to the members on 05 March 20 1 9. Mr. Rohit from EY presented the calculation pertaining to the distribution pattern and briefed the CoC about the assumptions made for the mentioned calculations. He explained that the CoC and the Security Expenses (incurred prior to commencement of CIRP) are also distributed Unit wise - Lender wise.

Upon the presentation made by the Process Advisors, EY, on the proposed distribution pattern, ARCIL raised a concern over the adequate examination of charge related documentation for implementation of such distribution pattern. It was therefore, proposed that considering the time constraints for such due diligence, the RP/Process Advisors (EY) shall ensure that the members shall submit relevant charge related documentation before receipt of their entitlement in the Resolution Plan as proposed in the distribution pattern. It is further mentioned that the members shall also furnish a suitable undertaking and indemnity in this regard.

Mr. Ralhan from ARCIL stated that the distribution of CoC Expenses as per the Process Advisor's presentation is unacceptable to ARCIL on the grounds that these expenses pertain to the entire CoC and therefore, should be reimbursed to the members as per their actual contribution and the same had been decided in earlier CoC meetings.

Company Appeal (AT) (Insolvency) No. 960/2023 -17-

Contrary to ARCIL's suggestion, Mr. Suresh from Phoenix suggested that the CoC expenses should also be distributed as per the voting share of the members. It was clarified that CoC expenses have been demanded and funded in accordance with the relevant voting share of the CoC members. As discussed and finalised in earlier CoC meetings, whoever has funded these CoC expenses would be reimbursed in priority from the proceeds received from the Resolution Applicant, as part of upfront payment to the financial creditors."

13. The decision of CoC taken in the meeting in the end of Agenda No. 7

is as follows:

"After a series of discussions, the CoC decided as follows:

(i) The minutes of the current meeting would be circulated by 07 March 2019.

(ii) The CoC and the RP team would discuss with SS Naturals on the finer points in the plan on 06 March 20 1 9. They would request SS Naturals to submit the final plan by 07 March 2019

(iii) The voting would be on each of the options of distribution methodology along with the Resolution Plan.

(iv) The voting portal would be kept open from Friday, 08 March 08 2019 from 8 p.m. to 8 p.m. on Monday, 11 March 20 1 9.

(v) Depending on the results of the voting received on 11 March 20 1 9, in case the Resolution Plan along with the proposed distribution methodology is approved by the CoC with 66% voting share, the RP and his legal counsel would work towards filing the Resolution Plan with NCLT by 12 March 2019. In the event, that the same is

Company Appeal (AT) (Insolvency) No. 960/2023 -18-

not approved by the CoC; a liquidation application shall be filed.

RESOLVED THAT the Resolution Plan shall be approved along with the distribution methodology which shall be as per the share of voting of each financial creditor. RESOLVED THAT the Resolution Plan shall be approved along with the distribution methodology which shall be as per the categorisation of Financial Creditors based on the security structure and as discussed in the 24th CoC."

14. Learned counsel for both the parties are not ad-idem as to what was

decided by the CoC in its 24th CoC meeting. Learned Counsel for the

Appellant submits that since the only resolution which was passed by

requisite voting share was that the distribution methodology as per

categorisation of financial creditors based on the security structure was

passed hence all proposed distribution which was suggested by process

advisor was neither voted nor approved thus only decision taken in the CoC

meeting was that distribution shall be as per security structure of the

Financial Creditors. Nothing more can be read in the minutes of the COC.

The Learned Counsel for the Respondents on the other hand contends that

the revised distribution of each financial creditor wise having been

circulated by the Process Advisor which was part of the discussion of

members, who all were aware that CoC Process Advisor's Fee i.e. COC

Expenses as well as Security Expenses have to be deducted from the

upfront payment of Rs. 351 Crores to which no disagreement was shown by

any of the CoC Member.

Company Appeal (AT) (Insolvency) No. 960/2023 -19-

15. We have carefully looked into the minutes of the 24th CoC meeting

held on 06th March, 2019. It is true that there was discussion regarding

CoC expenses which was to reimburse from the amount as part of the

upfront payment to the Financial Creditors but for the voting only two

resolutions were put as noted above. The Resolution which received 74.41%

vote and was approved was "Resolve that Resolution Plan shall be approved

along with the distribution methodology which shall be as per

categorisation of Financial Creditors based on the security structure and as

discussed in 24th CoC Meeting". As noted above two discussion

methodology was up for consideration that is one based on the share of

voting of each financial creditor and other based on security structure of

the Financial Creditor.

16. Even if we accept the argument saying that distribution methodology

which was circulated by Process Advisor to all Members of CoC which was

also discussed in the meeting it having not specifically approved in the

minutes resolution can be read only to mean that distribution methodology

based on security structure have been approved. We cannot lose sight of

the fact that discussion in the CoC meeting was with regard to revised

distribution which was placed before the Member of CoC which contains

the deduction of CoC expense and security expense from the upfront

payment of Rs. 351 Crores and distribution to the Financial Creditors was

proposed on the basis of the resolution plan however as noticed above from

the 11th CoC meeting it was clear that the COC Expenses were to be

contributed by the members of the CoC and which shall be repaid with 18%

Company Appeal (AT) (Insolvency) No. 960/2023 -20-

interest from the resolution proceeds thus it is clear that CoC expenses

which is figured at 4.01 Crores was to be repaid by the members of the CoC

which has contributed the COC expenses along with resolution proceeds

which clearly indicates that said amount has to be deducted from Rs. 351

Crores Upfront amount.

17. With regard to security expense which has also been proposed to be

deducted from Rs. 351 Crores, Learned Counsel for the Respondents have

referred to the Order of the Adjudicating Authority dated 04.09.2019 by

which order the Resolution Plan was approved. From the order dated

04.09.2019 it is seen that one of the financial creditors of the corporate

debtor i.e. West Bengal Industrial Development Corporation Limited

(WBIDCL) had filed C.A.(IB) No. 921/KB/2019 praying that security

expense to the tune of Rs. 1,14,25,806/- and another amount of Rs.

17,10,476/- has been incurred by the Financial Creditor which need to be

included in the portion of upfront amount payable by the SRA to the

Creditors. The Adjudicating Authority has issued direction as prayed for

hence the Security Expense payable to WBIDCL was to be apportioned from

the upfront amount of Rs. 351 Crores deposited by the SRA. It is useful to

quote paragraphs 26 and 27 of the Order dated 04th September, 2019:

"26. One another objector is West Bengal Industrial Development Corporation Limited(WBIDCL). It filed CA(IB) NO 921/KB/2019. The Ld. Counsel appearing for the Applicant, WBIDCL submits that it is not disputing the approval of the Resolution Plan. According to him, the Applicant submitted its claim in prescribed Form C under

Company Appeal (AT) (Insolvency) No. 960/2023 -21-

Regulation {A) of the 1881 (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 , 2016 as a Financial Creditor and contends that the Applicant being the first charge holder in respect of Saimanagar Unit of the Corporate Applicant, deployed security guards in the said premises from 30-07-2012 to 31-10- 2018 against which the Applicant has incurred substantial expenses to the tune of Rs.1,14,25,806/-(Rupees One Crore Fourteen lakh twenty five thousand eight hundred six only) and another expenses of Rs.17,10,476/- (Rupees Seventeen lakh ten thousand four hundred seventy six only) and that security expenses have been incurred by the Financial Creditor. The Applicant has not been included in the portion of upfront amount payable by the successful Resolution Applicant to the Creditors. He would further submit that the security expenses incurred by the Financial Creditor, ARCIL, has been included as an upfront payment amount in priority of payment of bid amount to be distributed among the Creditors and that amounts to discrimination. He prays for issuing directions to successful Resolution Applicant to pay the security expenses incurred by the Applicant as an upfront payment.

27. 27. The Ld. Senior Counsel for the Resolution Professional submits that the applicant has not made any request for distribution of the expenses by including in the upfront amount and raising the request first time by filing this application and that RP has no objection in issuing directions to the Resolution Applicant to pay the security expenses incurred by the Applicant which has been admitted in the Resolution Plan to be included in the upfront payment. The Ld. Counsel, appearing for the Resolution Applicant, also showed his readiness to pay the

Company Appeal (AT) (Insolvency) No. 960/2023 -22-

admitted amount of security expenses incurred by the Applicant as an upfront amount. Having regard to the above we are inclined to issue directions as prayed for. The said Application can be disposed of accordingly."

18. It is relevant to notice that amount of security expense which was to

paid WBIDCL was part of Rs. 4.74 Crore which was to be deducted towards

security expense. Security expense have been only claimed by WBIDCL and

ARCIL who had incurred expenses. Thus as per order of the Adjudicating

Authority the security expenses were also to be deducted from the upfront

payment of Rs. 351 Crores.

19. Thus even if we for the sake of argument accept the submission of

the Appellant that distribution revised figures which was circulated by the

Process Advisor in the meeting dated 06th March, 2019 were not approved,

under the Order of the Adjudicating Authority dated 04.09.2019, Security

Expenses were required to be deducted from the total upfront payment of

Rs. 351 Crores.

20. Now we need to notice certain clauses of the Resolution Plan on

which reliance have been placed by Learned Counsel for the parties. The

Revised Resolution Plan filed as Annexure A-4 to the Appeal. Paragraph 2

deals with "proposal for creditors and other payments":

"2 PROPOSAL FOR CREDITORS AND OTHER PAYMENTS 2.1 The Resolutioi1 Applicants' financial proposal ("Financial Proposal") is based on the statement of assets and liabilities of the Corporate Debtor as set out in the Provisional Balance Sheet of the Corporate Debtor and as

Company Appeal (AT) (Insolvency) No. 960/2023 -23-

uploaded in the Data Room and the List of Creditors of the Corporate Debtor as uploaded on the Corporate Debtor's website www.ramsarup.com as of November 11, 2018 and as updated from time to time ("List of Creditors"). 2.2 As per the Information Memorandum and List of Creditors, total claim filed amounting to Rs. 6,046.77 Cr. (Rupees Six Thousand Forty Six Crores and Seventy Seven Lakhs), out of which claims aggregating to Rs. 5853.09 crores (Rupees Five Thousand Eight Hundred Fifty Three Crores and Nine Lakhs) have been verified and admitted ("Admitted Debt'') till date for the purpose of CIRP by the Resolution Professional."

21. Paragraph 2.3 contains offer as a part of the Resolution Plan to the

Financial Creditors of the Corporate Debtor. Paragraph 2.3 is as follows:

"2.3 The following table summarises the proposed offer as a part of the Resolution Plan to the financial creditors of the Corporate Debtor ("Financial Creditors") as well as other creditors specified under the Code:

Particulars Amount (In Rs. Crores) CIRP Process Cost* [.] Sustainable Debt to be paid upfront to 351.0 the Financial Creditors Payment to Operational Creditors 3.50 Payment to Workmen 7.00 Payment towards Statutory Liabilities 3.00 Capex/Working Capital 306.00 To be paid at actuals.

Company Appeal (AT) (Insolvency) No. 960/2023 -24-

22. Under part C of the Resolution Plan, paragraph 1(ii) the CIRP Costs

was to be paid by Resolution Applicant. Paragraph 1(i) and (ii) are as

follows:

"1. Insolvency resolution process cost i. As per the Code, the CIRP Costs are to be paid in priority over payments to be made of any other debt and the CIRP Costs shall, amongst other things, include the costs, fees and charges incurred by the Resolution Professional, in running the operations of the Corporate Debtor as a going concern.

ii. Within 1 (one) day after the Effective Date, the Resolution Professional shall · provide a statement, containing details of the CIRP Costs as approved by the CoC from time to time, to the Resolution Applicant, and the same Will be paid in full as per the Code and as elaborated in Annexure 2 The Resolution Applicant will infuse additional funds (if needed), by way of equity or any other appropriate means, to meet the CIRP Costs."

23. We may also notice paragraph 5(ii) under heading Debt owed to

financial creditors. 5(ii) and (iv) are as follows:

"5. Debt owed to Financial Creditors ....

ii. The maximum liability of the· Resolution Applicant towards all financial creditors of the Corporate Debtor, irrespective of whether they have filed claim or not shall not exceed Rs. 351 crore (Rupees three hundred and fifty one crore) and the Resolution Applicant shall not be required to make any payment beyond the aforesaid amount to the Financial Creditors.

Company Appeal (AT) (Insolvency) No. 960/2023 -25-

.....

iv. Payment Terms:

(a) Payment to Financial Creditors: The Resolution Applicant shall deposit the Upfront Amount as outlined in the Financial Proposal in the Controlled Account within 30 (thirty) days from the Effective Date.

Notwithstanding anything provided in this Resolution Plan, subject however to there being no stay against the order approving the Plan as. detailed in Annexure 2, the Upfront Amount shall be debited from the Controlled Account on the 90th day from the Effective Date in the manner provided in Annexure 2 of the Plan. Such payment shall be made after payment of CIRP Process Cost, Workmen dues, statutory liabilities and payment to Operational Creditors.

(b) Source of Funds: The Resolution App1icaht has submitted a comfort letter dated October 12, 2018, wherein Resolution Applicant has stated that it shall have sufficient funds to fund the Upfront Amount payable to the Fiiiancia1 Creditors."

24. Under Resolution Plan under Clause 9(iv) Resolution Applicant was

responsible to bear all costs, charges, imposts post approval of the

Resolution Plan. Part 9(iv) is as follows:

"iv. Notwithstanding anything contained in the Resolution Plan, it is hereby clarified th.at the Resolution Applicant shall be responsible to bear all such costs, charges, imposts by whatever name called post approval of the Resolution Plan."

25. Paragraph 12 which contains implementation schedule, last column

of the implementation schedule regarding No Dues Certificate is as follows:

Company Appeal (AT) (Insolvency) No. 960/2023 -26-

"12. Implementation Schedule

Activity Days Financial Creditors to Promptly upon receipt of release Encumbrances Upfront Amount by the (including making filings Financial Creditors and in with ROC/sub-registrar of any event within 30 days of assurances and other receipt of the Upfront governmental agencies for Amount.

recording such release), execute re-conveyance deeds, issuance of no- dues certificates and redeliver documents in relation to the Resolution Plan

26. From the above discussion, we are of the view that payment towards

fee of Process Advisor to the CoC was to be contributed by the CoC which

required to be reimbursed from the proceeds of the Resolution. The

Respondents' claim deduction of Rs. 4.01 Crores which is under heading

COC Expense and Future Litigation Fund which is at page 18 of the Reply

of Respondent No. 2 and 3, as held above COC expenses could have been

very well deducted from the upfront payment but there is no requirement of

deduction of future litigation fund. No Litigation Fund was required to be

created nor for that said period any amount need to be deducted from the

upfront payment. Under Clause 9(iv) we have noted that all costs, imposed

post approval of the plan has to be apportioned by the Resolution

Company Appeal (AT) (Insolvency) No. 960/2023 -27-

Applicant. We thus are of the view that out of amount of Rs. 4.01 Crores

only that much amount need to be deducted, which is COC expenses i.e.

which is required to be reimbursed to the CoC as per their contribution.

27. Now we need to notice submission of Learned Counsel for the

Appellant that since the payment to the Appellant towards its entitlement

which was Rs. 270.27 Crores having not been paid the Resolution

Applicant has not implemented the plan and the Adjudicating Authority

ought not to have issued direction to issue No Dues Certificate. From the

facts as noticed above it is clear that the Appellant had challenged the

Order passed by the Appellate Tribunal dated 19th April, 2022 before the

Hon'ble Supreme Court and the Appeal by the Appellant before the Hon'ble

Supreme Court was dismissed on 12th May, 2022. Appellant has requested

the Monitoring Committee as is apparent from the Reply filed by the

Respondent No. 2 and 3 that Monitoring Committee should hold its hand

from proceeding with the implementation of the plan since the Appeal has

already been filed by the Appellant. Thus Appellant himself was objecting to

the implementation of the plan till the Appeal was finally dismissed by the

Hon'ble Supreme Court on 12th May, 2022, after the dismissal of the Appeal

of the Appellant before the Hon'ble Supreme Court the Application was filed

by the SRA on which order was passed which is impugned in the present

Appeal. There has been correspondence between the Resolution

Professional and Appellant regarding disbursement of the amount out of

Rs. 351 Crores to the Appellant. Appellant vide email dated 29th June, 2022

has sent detailed objection to the proposed amount by the RP on the

Company Appeal (AT) (Insolvency) No. 960/2023 -28-

ground that no deductions could have been made towards CoC expenses

and Security expenses which was replied by the RP by email dated 2nd July,

2022 which is part of the Appeal where all objections raised by the

Appellant were explained. On 2nd July, 2022, the Appellant has sent an

email to the RP which has been brought on record in the Appeal at page

557. The email sent by the Appellant dated 2nd July, 2022 reads as under:

"..............

Dear Mr. Chhawchharia, While we are examining the order dated 28 June 2022 passed by the Ld. Adjudicating Authority, Kolkata bench in IA (IB) No. 664/KB/2021 in CP(IB) No. 349/KB/2017, kindly provide us the distribution chart taking into account the following:

a) order dated 28 June 2022 passed by the Ld. Adjudicating Authority, Kolkata bench in IA (IB) No. 664/KB/2021 in CP(IB) No. 349/KB/2017;

b) Our earlier email dated 29 June 2022 sent to you You are requested to continue to hold the distribution amount of CFM ARC in an interest bearing account. We reserve our rights.

..........."

28. In obedience of the email sent by the Appellant the Resolution

Professional has kept the amount of Rs. 248,02,09,427/-in the fixed

deposit which has earned interest from 4th July, 2022 till 10th July, 2024 as

detailed in paragraph 3 of the written submissions filed by Respondent No.

2 and 3. According to the written submissions the interest amount accrued

on the said amount till 10th July, 2024 is Rs. 14,94,28,383/-. It goes

without saying that Appellant is entitled for the amount of interest

Company Appeal (AT) (Insolvency) No. 960/2023 -29-

accumulated on the amount, when the Appellant himself has requested the

RP to keep the amount and hold and keep it in the interest bearing

account, we cannot accept the submission of the Appellant that

Respondents have failed to implement the plan. The amount which is to be

paid to the Appellant has been kept in the interest bearing account as per

the request of the Appellant and Appellant is entitled to receive the amount,

on that basis it cannot be held that Respondent failed to implement the

plan. Mr Rohatgi has much emphasized on the fact that there has been

several breaches by the Respondent No. 1 in implementing the plan which

clearly indicate that present is a case of liquidation and not to implement

the plan. We do not accept the above submission of Mr. Rohatgi. The

liquidation application which was filed by the Appellant to liquidate the

Corporate Debtor was rejected by the Adjudicating Authority on 06th April,

2022 by which order Respondent No. 1 was given 5 days to make the

payment which order was unsuccessfully challenged by the Appellant

before this Tribunal as well as Hon'ble Supreme Court. Learned Counsel for

the Appellant has also submitted that the Adjudicating Authority ought not

to have directed for issuance of No Dues Certificate by the Appellant

without payments received by the Appellant of his dues share under

Resolution Plan. We find substance in the submission of the Appellant that

Appellant can not be asked to issue No Dues Certificate without Appellant

received the entitlement under Resolution Plan. We are however of the view

that the Adjudicating Authority ought not to have directed the Monitoring

Agency to determine and appropriate the amount. The Adjudicating

Company Appeal (AT) (Insolvency) No. 960/2023 -30-

Authority itself could have considered the issue since there was divergent

statement raised before the Adjudicating Authority which is reflected from

the pleadings in the Application which was filed by the Respondent No. 1

i.e. I.A. No. 724/KB/2022 and detailed reply filed by the Appellant. The

issue as to what is the correct amount to which the Appellant is entitled

under the Resolution Plan was very much disputed and raised before the

Adjudicating Authority and the Adjudicating Authority ought to have

proceeded to determine and ought to have directed for issuance of NDC

only after direction for payment of the Resolution Plan.

29. We have noticed above that the Appellant was already transferred the

amount of Rs. 12,26,23,565/- by RP as communicated on 23.05.2022.

30. In view of the above discussion and our conclusion, we are of the

view that Order of the Adjudicating Authority need to be modified and I.A.

No. 724/KB/2022 deserves to be disposed of in following manner:

(i) The Respondents are directed to make the payment of principal

balance amount of Rs. 248,02,09,427/- along with accrued interest

of Rs. 14,94,28,383/- (upto 10th July, 2024) along with further

interest payable upto date of payment within one week from this

order which amount shall be transferred in the account, details of

which has already been communicated by the Appellant to the ex-RP.

(ii) Out of Rs. 4.01 Crores which has been deducted towards COC

expenses and Future Litigation Fund, only COC Expenses are

required to be deducted and any amount towards Future Litigation

Fund need not be deducted from the upfront payment. The Ex-RP

Company Appeal (AT) (Insolvency) No. 960/2023 -31-

shall recalculate the amount towards COC Expenses which need only

to be deducted from the upfront payment and any amount kept

under Future Litigation Fund need to be distributed to the Financial

Creditors as per their Security Interest, which amount need to be

paid to the Appellant as per its share of security interest and shall be

paid by the Resolution Applicant. Both the proceedings i.e.

calculation of the amount be completed by Ex-RP within one month

and payment accordingly shall be made by the SRA within further

period of two weeks to the Appellant.

(iii)After receipt of the amount as directed above in (i) the Appellant shall

issue a No Dues Certificate and execute the assignment agreement in

terms of approved resolution plan and hand over title deeds of the

corporate debtor within two weeks from the date of the receipt of the

payment.

(iv) The Appeal is disposed of as above.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

New Delhi 20th October, 2023

Basant B.

Company Appeal (AT) (Insolvency) No. 960/2023