Edelweiss Asset Reconstruction ... vs Peter Beck And Peter ...

Edelweiss Asset Reconstruction Company Ltd. (acting in its capacity as trustee of EARC SC Trust 233) Having its registered office at Edelweiss House, Off C.S.T Road, Kalina, Mumbai-400 098. .... Appellant

Vs.

Peter Beck and Peter Vermoegensverwaltung Ltd. Having its office at Alleenster, 126, 73230 Kircheim under Tech Baden-Wuttemberg, Germany. ...Respondent No. 1

EY Restructuring LLP, Having its office at 17th Floor, The Ruby, Senapati Bapat Marg, Dadar (West), Mumbai City. Maharashtra-400028. As the Monitoring Agency constituted under the Approved Resolution Plan, and Acting through Mr. Dinkar Venkatsubramanian ...Respondent No. 2

Present For Appellant: Mr. R.P. Agrawal, Ms. Manisha Agarwal and Ms. Vidhisha Haritwal, Advocates.

For Respondents: Mr. Ankur Kashyap, Mr. Ajith Ranganathan, Mr. Rohit Rajershi and Mr. Abhay Singh, Mr. Aman Bajaj, Advocates for R-1. Mr. Yashish Chandra, Advocate for R-2.

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 1 of 30 With

Company Appeal (AT) (Ins) No. 169 of 2021

In the matter of:

State Bank of India A body corporate constituted under the State Bank of India Ct, 1955 having its Corporate Centre at State Bank Bhavan, Madame Cama Road, Mumbai-400021, Maharashtra, India and acting through Its office located at Stressed Assets Management Branch - 1, Mumbai, "The Arcade", 2nd Floor, World Trade Centre, Cuffe Parade, Colaba, Mumbai-400005 and also at Stressed Asset Management Branch I, 12th Floor, Jawahar Vyapar Bhawan, STC Building, 1 Tolstoy Marg, Janpath, New Delhi-110001. .... Appellant

Vs.

Peter Beck and Peter Vermoegensverwaltung Ltd. Having its office at Alleenster, 126, 73230 Kircheim under Tech Baden-Wuttemberg, Germany. ...Respondent No. 1

Insolvency and Bankruptcy Board of India 2nd Floor, Jeevan Vihar Building, Parliament Street, New Delhi-110001 ... Proforma Respondent No. 2

Ministry of Corporate Affairs Through its Secretary, Union of India, A-Wing, Shastri Bhawan, Rajendra Prasad Road, New Delhi-110001. ... Proforma Respondent No. 3

EY Restructuring LLP, Monitoring Agency of Sharon Bio Medicine Ltd. through Mr. Dinkar Venkatsubramanian Having its office at 17th Floor, The Ruby, Senapati Bapat Marg, Dadar (West), Mumbai City. Maharashtra-400028. ... Proforma Respondent No. 4 Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 2 of 30 Present For Appellant: Mr. Ramji Srinivasan, Sr. Advocate with Mr. Bishwajit Dubey, Mr. Madhav V. Kanoria, Ms. Srideepa Bhattacharyya and Ms. Neha Shivhare, Advocates. For Respondents: Mr. Ankur Kashyap, Mr. Ajith Ranganathan, Mr. Rohit Rajershi and Mr. Abhay Singh, Mr. Aman Bajaj, Advocates for R-1. Mr. Yashish Chandra, Advocate for R-2. Mr. Abhishek Kumar (IBBI, R2)

JUDGMENT

(Date: 05.01.2022) (Through Virtual Mode)

{Per.: Dr. Alok Srivastava, Member (Technical)}

This judgment relates to Company Appeal (AT) (Ins) No.

161 of 2021[Edelweiss Asset Reconstruction Company

Ltd.(acting in its capacity as trustee of EARC SC Trust 233) vs.

Peter Beck and Peter Vermoegensverwaltung Ltd. & Anr.] and

Company Appeal (AT) (Ins) No. 169 of 2021 [State Bank of India

vs. Peter Beck and Peter Vermoegensverwaltung Ltd. & Anr.],

which were filed against Order dated 2.2.2021 (hereafter called

"Impugned Order") passed by the Adjudicating

Authority(National Company Law Tribunal, Mumbai Bench) in Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 3 of 30 I.A No. 4003 of 2019 and in I.A No. 2220 of 2020 in CP (IB) No.

246 (MB) 2017. In CA (AT) (Ins) No. 169/2021, State Bank of

India has been authorized by other financial creditors to file the

appeal on their behalf.

2. By the Impugned Order, the Adjudicating Authority has

given an extra period of two weeks to the Successful Resolution

Applicant (Respondent No. 1) to deposit Rs. 10 crores even

though the Appellant had prayed in I.A. No. 2220 of 2020 that

since the Successful Resolution Applicant had failed to

implement the Resolution Plan as per its provisions, therefore

CIRP should be re-initiated along with reinstating the previous

Resolution Professional and 90 days of extra period should be

provided in CIRP to invite Expressions of Interest (EOI) for

inviting Resolution Plans.

3. In brief the factual matrix of case is that a Resolution

Plan in respect of the Corporate Debtor (Sharon Bio Medicine

Ltd.) was approved vide Adjudicating Authority's order dated

28.2.2018 and approval of Resolution Plan of Respondent No. 1

was up-held by the Hon'ble Supreme Court. The Appellants in

both the appeals have claimed that the Successful Resolution

Applicant (Respondent No. 1) has adopted dilatory practices in

implementation of the Resolution Plan and, by the Impugned

Order, the Adjudicating Authority has given additional time to Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 4 of 30 infuse funds to the Respondent No. 1 towards the

implementation of the Resolution Plan.

4. The Appellant has claimed that even though the

Resolution Plan was approved vide order dated 28.2.2018,

despite a passage of over 3 years, the Respondent No. 1 has not

implemented the Resolution Plan causing financial damage to

its stakeholders and financial creditors by not paying them their

rightful share after insolvency of the Corporate Debtor Sharon

Bio Medicine Ltd, as there have been defaults in payments due

in the approved resolution plan and failure to furnish bank

guarantee of Rs. 10 crores for the period from plan approval

date to the "Effective Date"(on which Respondent No. 1 would be

allotted equity shares of the Corporate Debtor as required under

the Resolution Plan). It is the claim of the Appellant that the

bank guarantee provided by the Appellant was refused to be

honoured by Banque De Luxembourg after being invoked by the

Appellant State Bank of India. The Respondent No. 1 has not

submitted a proper bank guarantee and overlooking many

shortcomings in the implementation of the Resolution Plan, the

Adjudicating Authority has provided reprieve to Respondent No.

1 by modifying a core requirement of the Resolution Plan and by

an order to deposit Rs. 10 crores instead of Bank guarantee,

which was mandatory under clause 12 of section 5 of the

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 5 of 30 Resolution Plan, to be provided till the implementation of the

Resolution Plan.

5. The Appellant State Bank of India has stated that

Respondent No. 1 provided the bank guarantee given by

Banquiers on 29.1.2019 in favour of Appellant State Bank of

India, which was renewed on 28.2.2019. Later, when the bank

guarantee expired on 14.6.2019, the monitoring agency issued

a letter to Respondent No. 1 to renew the bank guarantee or

provide a new bank guarantee. On 19.7.2019, the Banque De

Luxembourg issued a Bank guarantee in favour of the Appellant

State Bank of India, which could not be sent to the Appellant

via SWIFT due to certain constraints as claimed by Respondent

No. 1. Thereafter, the financial creditors decided in meeting on

28.8.2019 that Respondent No. 1 should infuse additional

amount of Rs. 5 crores by 13.8.2019 prior to the expiry of

existing Bank on 13.8.2019. Respondent No. 1 sent an e-mail

on 31.8.2019 stating that Rs. 10 crores has been remitted to

the bank account of the Corporate Debtor maintained with

Abhyudaya Cooperative Bank Limited on 23.8.2019 in lieu of

the bank guarantee. On September 11, 2019, the Banque De

Luxembourg issued a letter to the Appellant State Bank of India

refusing to renew the Bank guarantee or honour its revocation

stating that Bank guarantee cannot be considered as valid bank

guarantee, but as a "not-effective" one. In September 2019, the Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 6 of 30 Appellant State Bank of India sent an e-mail to the monitoring

agency advising it to ensure the availability of the bank

guarantee before the issuance of the shares to the Successful

Resolution Applicant (Respondent No. 1). The Appellant again

addressed an e-mail on 24.10.2019 to the Respondent No. 1

and the Monitoring Agency asking Respondent No. 1 that an

enforceable and valid bank guarantee should be submitted via

SWIFT before November 2019 and any failure regarding the

same would treated as a default. Thereafter the Respondent No.

1 sent an e-mail on 18.11.2019 to the monitoring agency

claiming that Rs. 10 crores, which was deposited in Abhyudaya

Cooperative Bank Limited, was in respect of share application

money and sought its return as per applicable laws in respect of

the share application money.

6. The Appellant filed IA No. 4003 of 2019, inter alia,

requesting the Adjudicating Authority to allow a fresh process of

resolution for the Corporate Debtor and to annul declaration of

Respondent No. 1 as the Successful Resolution Applicant. The

Appellant filed another I.A. No. 1453 of 2020 for the

Adjudicating Authority requesting for urgent listing of earlier IA

No. 4003 of 2020 for hearing.

7. Since the implementation of the approved Resolution Plan

was quite delayed, the monitoring agency wrote to Respondent Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 7 of 30 No. 1 on 27.8.2020 requesting for step-wise timeline for

implementation of the Resolution Plan, whereupon Respondent

No. 1 vide e-mail dated 1.9.2020 informed that the

implementation was estimated to take atleast two more months

without give a step-wise timeline for implementation. Again in a

meeting of the Financial Creditors, it was decided by them that

a final opportunity would be provided to Respondent No. 1 to

implement the Resolution Plan with strict timeline of 45 days

i.e. up to 7.11.2020, and Respondent No. 1 was informed

accordingly vide e-mail dated 23.9.2020.Since Respondent No. 1

was not taking interest in implementing the Resolution Plan,

the monitoring agency again sent an e-mail to Respondent No. 1

on 28.10.2020 a stepwise action plan for implementation of the

Resolution Plan by 7.11.2020. In all this string of

communications, the Financial Creditors took a decision on

10.11.2020 by majority for not providing any additional time to

Respondent No. 1 for implementation of the Plan and on

30.11.2020, the monitoring agency requested Respondent No. 1

to stop implementation of the Plan since last opportunity given

had lapsed and Respondent No. 1 had failed to provide any

definite timeline for resolution plan implementation. The I.A.

No. 4003/2019 was heard after notice to Respondent No. 1 on

2.2.2021, whereupon the Impugned Order was passed.

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 8 of 30

8. In the appeal filed by Edelweiss Asset Reconstruction

Company Ltd. (CA (AT) (Ins) No. 161 of 2021), the course of

events as mentioned by the Appellant SBI have been stated and

it is prayed that the Impugned Order dated 2.2.2021 passed by

the Adjudicating Authority be set aside and in accordance with

prayer in I.A. No. CA (AT)(Ins.) 2220 of 2020, order for re-

instating the Committee of Creditors and erstwhile Resolution

Professional after allowing extension of 90 days in CIRP for

inviting fresh EOIs has been prayed for.

9. The Impugned Order of the Adjudicating Authority dated

2.2. 2021 records as follows:

"Counsel for the Resolution Applicant further submitted that the Bank guarantee has been issued for Rs. 10 crores from the Banque De Luxembourg Bank. When the CoC invoked the Bank guarantee, the issuing bank, i.e. Banque De Luxembourg Bank informed the CoC that it is a non- enforceable guarantee. Since Resolution Applicant has already deposited Rs. 10,000,000 in lieu of the Bank guarantee. The Counsel for the RA also submitted that the approval from the Regulatory Authorities were obtained and they are ready to implement the plan as approved by this bench.

The Resolution Applicant assures that the balance sum of Rs. 10 crores will be infused within 2 weeks. No fruitful purpose presently will be served by invoking the Bank guarantee. Since an amount of Rs.10 crores has already been deposited the Bank guarantee, the CoC (State Bank of India) is directed to write to the Bank which has issued the Bank guarantee for Rs. 10 crores releasing the Bank guarantee."

10. The Learned Senior Counsel for Appellant SBI (in

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 9 of 30 Company Appeal No. 169 of 2021) has argued that providing a

valid and subsisting bank guarantee to the implementation of

the resolution plan is a core requirement under the Approved

Resolution Plan which cannot be overlooked. He has pointed

out to the binding obligation of successful resolution applicant

under clause 12 of section 5 of the resolution plan (attached at

Appeal paperbook Vol-1, pp. 155 - 160) to claim that a bank

guarantee for Rs. 10 crores from the date of approval of the

resolution plan by the COC until the "Effective Date" (which is

the date the equity the shares of the Corporate Debtor are

allotted to Respondent No.1) is a necessary and binding

condition in the resolution plan. He has also argued that when

Respondent No.1 furnished the bank guarantee for Rs. 10

crores, then upon Respondent No.1's failure to comply with the

plans binding obligations, the Appellant sought to invoke the

bank guarantee issued by Banque De Luxembourg. The

Banque De Luxembourg declared the bank guarantee as "non

effective" on September 11, 2019. He has claimed that this

shows unreliability of Respondent No.1 as also illegal and

malafide action of Banque De Luxembourg. The Learned Senior

Counsel has also pointed out certain key steps in the resolution

plan that have not been complied with by Respondent No.1,

which are as follows (attached at pg. 8 of Appeal Paperbook in

IA No. 161 of 2021):-

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 10 of 30 C. Indicative timeline of events for implementation of Proposed Plan Phase I. Approval Process of the Proposed Plan.

1. Approval by NCLT Z 18.2.2018 (Zero Date) Phase II. Implementation of Proposed Plan

8. Execution of material agreements giving effect Z+180 Pending to the proposed plan

9. Increase in authorized share capital, conversion of debt to equity by Z+180 Pending secured lenders, issuance of RTS and CCES to secure lenders and capital reduction.

10. Purchase of equity share by Resolution Applicant Z+180 Pending and inclusion of funds towards Resolution Applicant debt

11. Conversion of CCPS held by secured lenders, Z+180 Pending FCCB holders into equity shares

12. Change in Memorandum and Articles of Z+180 Pending Association and other documentation, if required under the proposed Plan

13. Management of Company -

(i) Formation of Board

(ii) Appointment of key Z+180 Pending managerial employees of the Company

(iii) Appointment of current and statutory auditors

11. The Learned Senior Counsel for SBI further claimed that

certain payment obligations such as equity capital infusion [in

accordance with section 4 clause 3(a)] of Rs. 5 crores to be done

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 11 of 30 within 180 days of the zero date, payment of insolvency process

cost (in accordance with section 5, clause 1.1) of Rs. 5 crores to

be paid within 30 days of the approval of the resolution plan,

upfront payment [in accordance with section 5, clause 1.2(A)] of

Rs. 10 crores within 15 days of regulatory approval by

Authorities or 45 days from effective date, whichever is later,

and providing bank guarantee (in accordance with section 5,

clause 12) of Rs.10 crores from the date of approval of

resolution plan by COC till "Effective Date" were not complied

with.

12. The Learned Senior Counsel for Appellant SBI has further

argued that the Adjudicating Authority has erroneously

accepted the submission of Respondent No.1 that remittance of

an amount of Rs. 10 crores by Respondent No.1 is in lieu of

bank guarantee and therefore satisfactory, is in reality a

deviation from the Approved Resolution Plan. He has cited the

judgment of the Hon'ble Supreme Court in Rahul Jain versus

Rave Scans Private Limited (2019 10 SCC 548) wherein it is

held that after a resolution plan has been approved by the

Authorities, no directions modifying the plan can be given. He

has also cited the judgment of this Tribunal in QVC Exports

Private Limited versus United Tradico FZC (2020 SCC

Online NCLAT 555) wherein it is held that Learned

Adjudicating Authority has no jurisdiction to allow rectification Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 12 of 30 of an Approved Resolution Plan. Furthermore, in the matter of

Jaypee Kensington Boulevard Apartments Welfare

Association and Others versus NBCC (India) Ltd. and Others

(Civil Appeal No.3395 of 2020), it is held that even at the

stage of plan approval, the Learned Adjudicating Authority can

only remand back to the CoC for modifications and cannot

alter/modify terms by itself.

13. The Learned Senior Counsel for the Appellant SBI has

finally urged that this Tribunal has the inherent power under

rule 11 of NCLAT Rules, 2016 to pass orders necessary for

meeting the ends of justice. He has claimed that since the

previously Approved Resolution Plan has failed, the company

under insolvency resolution should not be allowed to go into

liquidation which would mean corporate death of the company

and therefore, in the interest of fairness and justice to

stakeholders of the Corporate Debtor, this Tribunal has the

power to direct re-initiating the insolvency resolution process of

Corporate Debtor after setting aside the order dated 2.2.2021 of

the Adjudicating Authority, with a further period of 90 days

provided to there-instated Resolution Professional to invite EOIs

and complete the insolvency resolution process of the Corporate

Debtor.

14. The Learned Sr. Counsel for the Appellant Edelweiss Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 13 of 30 Asset Reconstruction Company Limited(in short EARC)(in

Company Appeal No. 161 of 2021) has argued that Respondent

No.1 has not adhered to the provisions and timelines given in

the Approved Resolution Plan by not complying with the

following conditions: -

(i) Non-payment of CIRP costs of Rs. 5 crores within

30 days from the date of approval of the resolution

plan i.e. 28.2.2018 (Appeal paper book, Company

Appeal No. 161/2021, page 86).

(ii) Non-payment of workers' dues of Rs. 0.16crore

within 30 days from the date approval of the plan

(attached at pg. 86 of Appeal paperbook, Company

Appeal No. 161 of 2021).

(iii) Failure to provide valid bank guarantee in terms of

section 5 clause 12 (ii) of the Approved Resolution

Plan as, the bank guarantee submitted on

19.7.2019 was not via SWIFT mode and therefore

not enforceable. No valid bank guarantee was given

for the period 1.4.2018 to 28.1.2019.

(iv) Failure to deposit Rs. 5 crores towards equity

capital infusion in terms of section 4 clause 3 (A) of

Approved Resolution Plan (pg.85 of Appeal

paperbook, in Company Appeal No. 161 of 2021).

(v) Default in cash payment of Rs. 10 crores to secured Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 14 of 30 creditors in terms of section 5 para (I) (2)(A) of the

Approved Resolution Plan (at pg. 86 of Appeal

paperbook in Company Appeal No. 161 of 2021).

(vi) Default in restructuring of debt in terms of section

5 para (I)(2)(A) of Approved Resolution Plan (pg. 86

of the Appeal paper book of Company Appeal No.

161 of 2021).

(vii) Default in payment to unsecured creditors and

operational creditors in terms of section 5 para

1(2)(B) of Approved Resolution Plan (pg. 86 of

Appeal paperbook, Company Appeal No. 161 of

2021).

(viii) Failure to obtain regulatory clearances within the

indicated timeline of 120 days in terms of section 6,

note 1 of Approved Resolution Plan (pg. 93, of

Appeal Paperbook in Company Appeal No. 161 of

2021).

15. The Learned Senior Counsel for EARC has also submitted

that the Impugned Order dated 2.2.2021 itself indicates default

on the part of Respondent No.1 as the order directs Respondent

No.1 to bring in Rs. 5 crores towards CIRP cost and Rs. 5 crores

towards issue of shares and these payments were required to be

made by Respondent No.1 quite sometime back. Moreover,

Respondent No.1 had assured to implement the Approved Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 15 of 30 Resolution Plan by August 2019 but in its email dated

4.11.2020 (attached at pp.246 - 248 of Appeal paperbook in

Company Appeal No. 169/2021) has not given any timelines for

its implementation.

16. The Learned Senior Counsel for Appellant EARC has

pointed to the letter dated 11.11.2019 of Banque De

Luxembourg by which it refused to renew the bank guarantee

issued by them, which was only valid till 30.8.2019. Moreover,

he has claimed that the amount of Rs. 10 crore deposited by

Respondent No.1 in Abhyudaya Cooperative Bank Ltd. on

23.8.2019 was initially claimed by Respondent No.1 to be in lieu

of bank guarantee, but subsequently stated by Respondent No.1

that it was share application money. Such a statement of

Respondent No.1 itself shows non-compliance in providing

Bank guarantee. The Learned Senior Counsel has also referred

to numerous opportunities provided by the financial creditors to

Respondent No.1for implementation of the resolution plan

which are recorded duly in the minutes of meetings dated

3.10.2018, 17.1.2019, 26.2.2019, 26.6.2019, 4.7.2019,

13.8.2019, 28.8.2019, 24.8.2020 and 4.9.2020 which were

conveyed to Respondent No.1 by the monitoring agency EY

Restructuring LLP and also by SBI vide e-mail dated

12.9.2019.He has claimed that in all, there has been a delay of

more than 108 days in implementation of the Approved Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 16 of 30 Resolution Plan, which is sufficient proof of the time granted to

the Successful Resolution Applicant Respondent No. 1 by the

financial creditors and the monitoring agency.

17. The Learned Senior Counsel for Appellant EARC has

reiterated the argument of the Appellant SBI that the Impugned

Order amounts to modification of the Approved Resolution Plan

which is not permissible as has been laid down by the Hon'ble

Supreme Court in numerous judgments. He has further claimed

that since Respondent No. 1 has failed to implement the

approved Resolution Plan, the Corporate Debtor should not be

sent into liquidation. He has cited the judgment of Hon'ble

Supreme Court in the matter of Swiss Ribbons Pvt. Ltd versus

Union of India (2019 4 SCC 17) wherein it is held that the

primary focus of IBC is to ensure revival and continuation of the

Corporate Debtor and protecting it from its own management

and from corporate death by liquidation. He has also referred to

the judgments of Hon'ble Supreme Court in the cases of CoC of

Amtek Auto Limited vs Dinkar T Venkatsubramanian and

Others (Civil Appeal No. 6707 of 2019),and of NCLAT,

Mumbai in State Bank of India vs Metalyst Forgings Ltd (MA

No. 1272 of 2018 and MA No. 956 of 2018and Bank of

Baroda vs Mandhana Industries Limited (MA No. 2326 of

2019) wherein fresh bids have been permitted to be invited to

avoid liquidation. He has finally urged that this Tribunal has Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 17 of 30 inherent powers under Rule 11 of NCLAT Rules, 2016 to grant

prayer sought in the present appeal and as have been upheld in

judgments in Swadeshi Woolen Mills Pvt. Ltd versus Vinod

Krishan (Company Appeal (AT)(Ins.) No. 202 of 2020) and

Vijaykumar versus Gopalsamy Ganesh Babu and Others

(2020 SCC online NCLAT 936).

18. In his arguments, Learned Counsel for Respondent No. 1

has urged that both the appeals are not maintainable under

IBC and the only permissible course of action in a case of non-

implementation of Approved Resolution Plan is liquidation as

provided under sections 33(3) & 33(4) of the IBC. Such a course

of action has been upheld by NCLAT in the case of the Yavar

Dhala versus GM Financial Asset Reconstruction Company

Ltd.[Company Appeal (AT) (Ins) No.30 of 2019]. He has

further claimed that the reliance of Learned Senior Counsel of

Appellant on the judgment of the Hon'ble Supreme Court in

Committee of Creditors of Amtek Auto Ltd. vs Dinkar T

Venkatsubramanian and Others (Civil Appeal No. 6707 of

2019) are not applicable in the present case because no

jurisdiction is conferred upon this Tribunal in the present case

as was available to Hon'ble Supreme Court under Article 142 of

the Constitution of India whereby the Resolution Applicants

were allowed additional time to file resolution plans afresh. Also,

in the CoC of Amtek Auto Ltd. (supra)the orders dated Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 18 of 30 24.9.2019 and 2.12.2019 are based on agreement between the

parties that fresh offers were allowed to be considered, whereas

in the present case the Successful Resolution Applicant did not

consent to reinstating the CIRP and calling fresh EOIs.

19. Learned Counsel for Respondent No. 1 has also argued

that the bonafide of the Successful Resolution Applicant is

established because prior to initiation of CIRP, the Respondent

No.1 was a Foreign Currency Convertible Bond holder (FCCB

holder) of the Corporate Debtor who had invested a sum of

approximately Rs.146.08 crores in the Corporate Debtor. He is,

therefore, an unsecured lender of the Corporate Debtor and has

interest in successful resolution of the Corporate Debtor. He

has further claimed that after the approval of the resolution

plan by the Learned Adjudicating Authority on 28.2.2018, it

was challenged by the former promoters/Directors of the

Corporate Debtor right upto Hon'ble Supreme Court and on

5.4.2019, after the Hon. Supreme Court dismissed the appeal

preferred by the former promoters/Directors of the Corporate

Debtor, Respondent No.1 started to implement the successful

resolution plan in the right earnest. Furthermore, the COC

allowed the implementation of the resolution plan by giving the

Successful Resolution Applicant a fresh time-limit upto

November 7, 2020 for its implementation. On 6 November 2020

the Successful Resolution Applicant requested the monitoring Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 19 of 30 agency to provide bank account for immediate transfer of Rs.

5.00 crores towards implementation but was not provided the

bank account details. He has claimed that, therefore, the

Appellants are trying to mislead this Hon'ble Tribunal by stating

that the resolution plan has not been implemented for three

years. He has referred to the judgment of Hon. Supreme Court

in Arcelor Mittal Pvt. Ltd. vs Satish Kumar Gupta [2009 2

SCC] case wherein it is held that "a reasonable and balanced

construction of the statute would, therefore, lead to the result

that, where a "Resolution Plan" is upheld by the Appellate

Authority either by way of allowing or dismissing an appeal

before it, the time taken in litigation ought to be excluded."He

has also argued that the Approved Resolution Plan has not been

contravened because the "Effective Date" would be triggered

only after equity shares were allotted to the Successful

Resolution Applicant, and when the Successful Resolution

Applicant was ready to infuse Rs. 5 crores towards allotment of

equity shares, he was not permitted to do so. He has also

claimed that the time required for obtaining statutory approvals

for carrying out the steps for conversion of debt into equity and

infusion of money for allotment of equity shares are outside the

control of the Successful Resolution Applicant and in their

absence he has not been able to take positive steps in the

resolution plan's implementation.

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 20 of 30

20. The Learned Counsel for Respondent No.1 has argued

that Respondent No. 1 has always complied with the

requirement of furnishing bank guarantee and four bank

guarantees were issued by two reputed international banks. He

has claimed that the COC agreed to infusion of Rs. 10 crores in

the Corporate Debtor in lieu of bank guarantee but has later

retracted from this agreement and taken the drastic step of

directly writing to Banque De Luxembourg seeking

renewal/invocation of bank guarantee which has resulted in

freezing of Rs. 10 crores of Respondent No. 1.He has claimed

that the ulterior motive of the Appellants is to compel the

resolution applicant into compensating the lenders for the

purported loss of interest due to alleged delay in the

implementation of the Approved Resolution Plan, which is not

the fault of Respondent No.1, and now the Appellants are arm

twisting the Successful Resolution Applicant for appropriation

of cash Corporate Debtor and sharing of profits generated by

the Corporate Debtor, which is completely outside the terms

and conditions of the Approved Resolution Plan and contrary to

law.

21. We have heard the oral arguments of the Learned Senior

Counsel and Counsel of the Appellants and Respondent No. 1

respectively in both the appeals. We have also considered the

pleadings and documents submitted by all the parties. Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 21 of 30

22. The issues that arise in these appeals are two-fold:

(i) Whether the default of Respondent No. 1 in

implementing the successful resolution plan is

justified because of appeals in NCLAT and in

Hon'ble Supreme Court and the delay because of

the time for litigation and in making initial

payments as required in the approved Resolution

Plan?

(ii) Whether any more time could be granted as prayed

by the Appellants in both the appeals CA No. 161 of

2021 and CA No. 169 of 2021 for extension of CIRP

for invitation of fresh EOIs or liquidation of the

Corporate Debtor, in the event the Respondent No.

1 is found in default of implementation of the

Resolution Plan?

23. The Respondent No. 1 has submitted that the resolution

plan, which was approved by the Adjudicating Authority on

28.2.2018,was challenged by the former promoter/directors of

the Corporate Debtor upto Hon'ble Supreme Court. He has

given the following key dates pertaining to litigation at various

levels in this case:

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 22 of 30 S.No. Date Event

1. 11.4.2017 Section 7 proceedings initiated before Adjudicating Authority.

2. 28.2.2018 Adjudicating Authority approves the resolution plan of Respondent No. 1 (Successful Resolution Applicant).

3. 27.4.2018 NCLAT passes a status quo order in appeal preferred by former promoter/directors of the Corporate Debtor against approval of Resolution Plan.

4. 19.12.2018 The appeal before NCLAT is dismissed.

5. 5.4.2019 Hon'ble Supreme Court dismisses appeal preferred by former promoter/director of the Corporate Debtor and the Successful Resolution Plan becomes final.

24. As is seen from the table in the previous paragraph, after

the resolution plan submitted by Respondent No. 1 was

approved by the Adjudicating Authority on 28.2.2018, there

were appeals, first before NCLAT, wherein a status quo order

was given on 27.4.2018. Finally, the appeal was dismissed by

NCLAT on 19.12.2018, whereafter an appeal against the order

of the Appellant Tribunal was preferred before Hon'ble Supreme

Court, which was also dismissed on 5.4.2019. Thus, the period

from 28.2.2018 till 5.4.2019 was effectively taken up in

litigation for which Respondent No. 1 cannot be held

responsible. Out of this period, there was a status quo order

passed by NCLAT for about eight months between 27.4.2018

and 19.12.2018.

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 23 of 30

25. Therefore, we are of the opinion that effective

implementation of the Successful Resolution Plan started only

after 5.4.2019, when Hon'ble Supreme Court dismissed the

appeal of former promoter/directors of the Corporate Debtor. It

is quite apparent that the bank guarantee submitted by

Respondent No. 1 was not enforced properly because it was not

submitted in SWIFT mode. Respondent No. 1 has claimed that it

is not responsible for non-enforceability of the Bank guarantee

because it was due to the international banking practices. While

bank guarantees were submitted later, they were not to the

satisfaction of monitoring agency. Moreover, Respondent No. 1

failed to take steps towards implementation of the Resolution

Plan, which included payment of CIRP costs and workmen dues

and infusion of cash. Respondent No. 1 has submitted that CoC

agreed to infusion of funds amounting to Rs. 10 crores in the

Corporate Debtor in the lieu of bank guarantee, and based on

this agreement Respondent No. 1 infused Rs. 10 crores in the

Corporate Debtor before the expiry of the bank guarantee and

honor its commitment and this amount remains with the

Corporate Debtor till date.

26. Thus, the issue of non-adherence of the timelines in

accordance with the Approved Resolution Plan is quite

apparent. The failure to provide valid bank guarantee in terms

of Section 5 clause 12 (ii) of the Approved Resolution Plan to the Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 24 of 30 satisfaction of the monitoring agency and the financial creditors

is also a major default.

27. Both the Appellants in both appeals and Respondent No.1

have prayed for two separate lines of action. The Corporate

Debtor, which has performed quite well as a going concern

during the CIRP period and as stated by the Learned Counsel

for Appellant in written submissions, has a surplus cash of Rs.

17.23 crores as on April 30 2021, and this fact, we feel, should

be kept in mind in deciding the next course of action in the

case. Since the approved Resolution Plan is under

implementation since its approval on 28.2.2018, the moot point

is whether the Successful Resolution Applicant is serious about

implementation of the plan.

28. The Successful Resolution Applicant has claimed to be

unsecured Financial Creditor of the Corporate Debtor, and

therefore has interest in maintaining the Corporate Debtor as a

going concern. The Appellants Edelweiss and SBI are also

interested that the Corporate Debtor continues to be a going

concern and have, therefore, urged that its resolution should be

attempted rather than put it in liquidation.

29. The Appellants have cited judgment of Hon'ble Supreme

Court in case of Committee of Creditors of Amtek Auto Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 25 of 30 Limited versus Dinkar T Venkatasubramanian and Others

(supra) and State Bank of India versus Metalyst Forgings

Ltd. (supra). In the case of CoC of Amtek Auto Limited, all

the parties in the matter were agreeable to invitation of fresh

resolution plan and hence Hon'ble Supreme Court had directed

that one more effort should be made to resolve the issue since

expression of interest has already indicated by eight other

parties. In the case of Bank of Baroda vs. Mandhana

Industries Limited (supra), the order of NCLT was given for

invitation of fresh plans in the CIRP after the CIRP had been

already restored and the charge of the Corporate Debtor had

reverted back in the hands of the Resolution Professional. We

do not think that these judgments are in any way directly link

to the context of the present case. What is to be noted is that in

both the cases, since the Corporate Debtor was a going concern,

the liquidation order was sought to be avoided.

30. We feel that the main hindrance in implementation of the

approved resolution plan is submission of a proper bank

guarantee of Rs. 10 crores and other payments and actions that

had to be taken from zero date i.e. 28.2.2018 in accordance

with the approved resolution plan. We are, therefore, of the

opinion that it would serve the interests of justice if the

Corporate Debtor is not sent into liquidation but its insolvency

is resolved so that it continues to be a going concern as that Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 26 of 30 would be in the interest of the Corporate Debtor's stakeholders

and creditors. Hon'ble Supreme Court has ruled in the matter of

Swiss Ribbons Private Limited versus Union of India (2019

4 SCC 17) as follows:-

"28. It can thus be seen that the primary focus of the

legislation is to ensure revival and continuation of the

Corporate Debtor by protecting the Corporate Debtor from

its own management and from a corporate death by

liquidation."

31. In the present case liquidation would follow naturally

once the approved Resolution Plan is adjudged as having failed.

Under section 33(1) (a) and (b) the following is stipulated:-

33. Initiation of liquidation- (1) Where the Adjudicating Authority, -

(a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of section 30; or

(b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein, it shall -

(i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter;

(ii) issue a public announcement stating that the corporate Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 27 of 30 Debtor is in liquidation; and

(iii) require such order to be sent to the authority with which the corporate debtor is registered."

32. It is laid down in law that liquidation shall follow when no

resolution plan under sub-section 6 of section 30 is received or

resolution plan is rejected under section 31 for non -compliance

of the requirements specified therein that a liquidation order

should be given. Moreover, under section 33(2) if the Committee

of Creditors approve by not less than 66% of voting share to

liquidate the Corporate Debtor, the Adjudicating Authority is

obliged to pass a liquidation order. In the present case, no such

recommendation for liquidation has been approved by the CoC

or the financial creditors. Under section 33(3), where the

resolution plan approved by the Adjudicating Authority is

contravened by the concerned Corporate Debtor, any person

other than the Corporate Debtor, whose interests are

prejudicially affected by such contravention, may make an

application to the Adjudicating Authority for liquidation order.

In the present case, the Approved Resolution Plan has been

alleged to be contravened by the Successful Resolution

Applicant and therefore an application could have been made to

the Adjudicating Authority for liquidation. In the present case,

no such application for liquidation has been made by the

Appellants or any other stakeholder, but on the contrary the

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 28 of 30 Appellants (and also the financial creditors)have sought the re-

initiation of CIRP and invitation of fresh EOIs after its (CIRP's)

extension by 90 days. There is no express provision regarding

re-initiation of CIRP in the IBC. We do not feel that this is a fit

case for liquidation of the Corporate Debtor because it is a going

concern and all the stakeholders seem to be interested that the

Corporate Debtor remains a going concern. It is quite possible

that upon liquidation, the Corporate Debtor could be sold as a

going concern. If such an event does not happen, the

Corporate Debtor would most certainly face corporate death.

33. In view of the impugned order and the respective

submissions by the Appellants and Respondent No.1 it is clear

that the main issue in question is the submission of an

enforceable bank guarantee of Rs. 10 crores by Respondent

No.1. The other issues regarding compliance of already overdue

provisions in the Approved Resolution Plan have also been

raised by the Appellants.

34. Therefore, in light of discussion above, in partial

modification of the Impugned Order, we direct that an

enforceable bank guarantee of Rs. 10 crores, as is required to

be submitted under the Approved Resolution Plan, should be

submitted by the Successful Resolution Applicant within 30

days of this order. The payments as are already overdue in the Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 29 of 30 Approved Resolution Plan should be done by the Successful

Resolution Applicant within two months of this order. In case

Rs. 10 crores has been deposited with the Corporate Debtor by

the Successful Resolution Applicant in lieu of the bank

guarantee, that amount will be either adjusted against the

pending amounts to be paid by the Successful Resolution

Applicant or refunded to him within a period of 30 days.

35. The Appeals are disposed of as indicated above. No order

as to costs.

[Justice Jarat Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

New Delhi 5th January, 2022

/aks/

Company Appeal (AT) (Ins) No. 161 & 169 of 2021 Page 30 of 30