Gammon Engineers And Contractors Pvt. ... vs Sutanu Sinha & Ors

[Arising out of Order dated 10.05.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench in I.A. No. 3954 of 2021 in CP No. 1504(PB)/2019]

IN THE MATTER OF:

GAMMON ENGINEERS & CONTRACTORS PVT. LTD., 3rd Floor, 3/8 Hamilton House, J.N. Heredia Marg, Ballard Estate, Mumbai - 400038 ...Appellant Versus 1. SUTANU SINHA, Resolution Professional, Patna Highway Projects Ltd., 41, Shakespeare Sarani, Kolkata - 700017

2. COMMITTEE OF CREDITOR Patna Highway Projects Ltd. Floor No. 4 Duck Back House, 41, Shakespeare Sarani, Kolkata - 700017

3. SILVER POINT LUXEMBOURG Platform S.A.R.I. 11-13 Boulevard De La Foire Luxembourg L-1582 ...Respondents

Present:

For Appellant: Mr. Rajshekhar Rao, Sr. Advocate with Mr. Raghavendra M. Bajaj, Mr. Agnish Aditya, Mr. Kumar Karan, Mr. Shivansh Dwivedi, Advocates. For Respondents: Mr. Krishnendu Datta, Sr. Advocate with Ms. Pooja Mahajan, Ms. Mahima Singh, Mr. Karanvir Khosla, Mr. Rahul Gupta, Advocates for RP/R-1. Mr. Ramji Srinivasan, Sr. Advocate with Mr. Abhijeet Sinha, Mr. Samar Bansal, Mr. Vedant Kapur, Advocates for CoC. Mr. Arun Kathpalia, Sr. Advocate with Mr. Prateek Kumar, Ms. Raveena Rai, Mr. Rohit Ghosh, Advocates for SRA.

Cont'd.../ -2-

JUDGMENT

ASHOK BHUSHAN, J.

1. This Appeal has been filed challenging the Order dated 10th May,

2022 passed by National Company Law Tribunal, Principal Bench, New

Delhi in I.A. 3954 of 2021 in CP(IB) No. 1504(PB)2019. By the impugned

Order, the Application filed by the Appellant praying for rejection of the

Resolution Plan submitted by Respondent No. 3 has been rejected.

2. Brief facts of the case necessary to be noticed for deciding this

Appeal are:-

i. National Highway Authority invited proposals for upgradation of

Hajipur Muzajfarpur Section of Existing NH-77. A concession

agreement was executed between NHAI and Patna Highway Project

Limited-Corporate Debtor on 24.02.2010. EPC Agreement was

executed between the Corporate Debtor and Gammon India Limited

for upgradation of Hajipur Muzaffarpur Section on 22.02.2011. A

scheme of arrangement was entered between the Appellant and

Gammon India Limited which was approved by National Company

Law Tribunal by order dated 22nd March, 2017. After approval of

scheme of arrangement, the EPC Contract for execution of the

project stood transferred to the Appellant.

ii. There were issues between the Appellant, the Corporate Debtor and

NHAI resulting in non-completion of the project. There being

dispute and difference between the Appellant and Corporate

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Debtor, Appellant issued notice of invocation and arbitration on

04.11.2019 in terms of EPC Contract.

iii. Arbitral Tribunal was constituted. Appellant filed its statement of

claim claiming an amount of Rs. 428,22,98,000/- along with

interest, cost of arbitration and applicable GST. Arbitral Tribunal

passed an order on 05.12.2019 to maintain status quo on EPC

Contract. While aforesaid Arbitral Tribunal were underway, the

Adjudicating Authority vide Order dated 03.01.2020 admitted an

application under Section 7 filed against the Corporate Debtor by

Corporation Bank.

iv. Before the Arbitral Tribunal, Resolution Professional appeared and

intimated about the Insolvency Proceeding against the Corporate

Debtor. On 22/01/2021 Resolution Professional wrote an email to

the Appellant that an amount of Rs. 24,57,78,609/- is outstanding

from the Appellant to the Corporate Debtor with respect to the work

done/services provided by the Corporate Debtor. Appellant vide

email dated 10.02.2021 informed the Resolution Professional that

no amount was outstanding and in fact amount of Rs.

428,22,98,000/- is due and payable by the Corporate Debtor to

Appellant which is subject matter of arbitration. Appellant

submitted a claim of Rs. 481,57,58,500/- to the Resolution

Professional in Form-B. The Resolution Professional vide email

dated 04th March, 2021 informed the Appellant that their claim has

Company Appeal (AT) (Insolvency) No. 1072 of 2022 -4-

been kept under the disputed category in view of the ongoing

arbitration between the parties.

v. The CoC of the Corporate Debtor approved the Resolution Plan

submitted by Respondent No. 3 on 12th March, 2021. Resolution

Professional filed an I.A. No. 1538 of 2021 before the Adjudicating

Authority seeking approval of the Resolution Plan. Appellant on

28th June, 2021 requested the Resolution Professional to provide

copy of the approved Resolution Plan. Appellant filed an I.A. No.

3954 of 2021 praying for rejection of the Resolution Plan submitted

by Respondent No. 3 with some other prayers. The Adjudicating

Authority heard the parties and passed an order on 10th May, 2022

rejecting I.A. No. 3954 of 2021 filed by the Appellant. By an order of

same date i.e. 10th May, 2022, I.A. No. 1538 of 2021 filed by the

Resolution Professional was allowed and the plan submitted by

Respondent No. 3 was approved by the Adjudicating Authority.

vi. Appellant aggrieved by the order dated 10th May, 2022 rejecting I.A.

No. 3954 of 2021 has come up in this Appeal.

3. We have heard Mr. Rajshekhar Rao, Learned Sr. Counsel for the

Appellant and Mr. Krishnendu Datta, Learned Sr. Counsel for

Respondent No. 1 and Mr. Ramji Srinivasan, Learned Sr. Counsel for CoC

and Mr. Arun Kathpalia, Learned Sr. Counsel for SRA.

4. Mr. Rajshekar Rao, Learned Sr. Counsel appearing for the

Appellant submitted that the claim filed by the Appellant before the

Resolution Professional was kept under disputed category and in the

Company Appeal (AT) (Insolvency) No. 1072 of 2022 -5-

Resolution plan, the SRA has provided for receiving of the same amount

from the NHAI. It is submitted that on the one hand the claim of the

Appellant is kept under disputed category and on the other hand, same

amount is being claimed from NHAI which is to be received by the SRA. It

is submitted that Resolution Plan containing such clause could not have

been approved and the Adjudicating Authority committed error in

rejecting I.A. No. 3954 of 2021 by which the Appellant has prayed for

rejection of the Resolution Plan. It is submitted that in the Resolution

Plan the same amount of Rs. 428,22,98,000/- is referred to as a claim

raised by contractor i.e. the Appellant and which amount was to be

reimbursed from the NHAI to the Corporate Debtor whereas in the

Insolvency Process of the Corporate Debtor neither the said claim is

admitted nor any provision has been made for payment of any amount to

the Appellant which is arbitrary and it was due to actions of NHAI,

Appellant had to incur huge losses. It is submitted that due to initiation

of insolvency process the Arbitration proceeding initiated by the Appellant

has also not proceeded any further and the Resolution Plan approved by

the Adjudicating Authority is prejudicial to the interest.

5. Learned Sr. Counsel appearing for the Respondents refuting the

submissions of the Appellant submits that Resolution Plan approved by

the Adjudicating Authority by the Order dated 10th May, 2022 has already

been upheld by this Tribunal vide its Judgment dated 25th May, 2023 in

C.A.(AT) Ins. No. 920 of 2022 hence nothing survives in this Appeal to be

decided. The Application filed by the Appellant was to reject the

Company Appeal (AT) (Insolvency) No. 1072 of 2022 -6-

Resolution Plan, Resolution Plan having been approved by the Tribunal

which order has received approval by this Tribunal vide Order dated 25th

May, 2023, this Appeal deserves to be rejected on this ground. It is

further submitted that with regard to decision of Resolution Professional

to treat the claim of the appellant in disputed category, at no point of time

Appellant challenged such categorization by the Resolution Professional.

The Appellant is not entitled to challenge the Resolution Plan. It is

submitted that Corporate Debtor has made excess payment to the

Appellant and Application being I.A. No. 1761 of 2021 seeking avoidance

of certain preferential transaction against the Appellant has already been

filed on the basis of transaction audit report which application is pending.

The request of the Appellant for copy of the Resolution Plan could not

have been acceded to. Resolution Plan being a confidential document,

Appellant is not entitled to receive copy of the same. Appellant was

promoter of the Corporate Debtor and related party. Resolution

Professional has filed a detailed reply in I.A. No. 3954 of 2021. The

commercial wisdom of the CoC in approving the Resolution plan is

paramount and unjusticeable. Resolution Plan submitted by Respondent

No. 3 has complied the provisions of the Code. Appellant has failed to

demonstrate non-compliance of the Resolution Plan with the

requirements under Section 30(2) of the Code, there is no legal infirmity

in treatment of the appellant's claim, claim was received from the

Appellant, collated and verified by the RP and upon such verification the

claim was kept under heading "amount under dispute". Considering the

Company Appeal (AT) (Insolvency) No. 1072 of 2022 -7-

appellant's claim is subject matter of the dispute in the arbitration

proceedings.

6. We have considered the submissions of Learned Sr. Counsel for the

parties and have perused the record.

7. In the application which was filed by the Appellant being I.A. No.

3954 of 2021, following prayers were made:

"a. Reject the Resolution Plan submitted by Silver Point Luxembourg S.A.R.I. on 11.03.2021: and b. Pending hearing of this Application, not pass any order or direction in I.A. 1538 of 2021 in C.P.(IB) No. 1504/PB/2019; and c. Direct the Resolution Professional to provide a copy of Resolution Plan submitted by Silver Point Luxembourg S.A.R.I. on 11.03.2021 to the Applicant; and d. Direct the Resolution Professional to issue fresh invitation for Expression of Interest; and/or e. Pass such other and further order as this Tribunal may deem fit and proper and in the facts and circumstances of the instant case."

8. We have noted above that plan submitted by Respondent No. 3 was

approved by the CoC in its meeting dated 12th March, 2021 with 97.95%

vote share. I.A. No. 1538 of 2021 was filed by the RP for approval of the

Resolution Plan. By a separate order dated 10th May, 2022 passed by the

Adjudicating Authority I.A. No. 1538 of 2021 the Resolution Plan was

approved. The promoters of the Corporate Debtor namely AJR Infra and

Tolling Limited had filed C.A.(AT) Ins. No. 920 of 2022 challenging the

Company Appeal (AT) (Insolvency) No. 1072 of 2022 -8-

order of the Adjudicating Authority dated 10th May, 2022 allowing I.A. No.

1538 of 2021. This Tribunal vide its Judgment dated 25th May, 2023 has

already dismissed the Appeal upholding the Order dated 10th May, 2022.

This Tribunal has held that Resolution Plan submitted by Respondent No.

3 complied all mandatory requirements under the Code and Regulation.

While dismissing the Appeal, in paragraph 16-17, following has been

held:

"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."

9. We have noticed above I.A. No. 3954 of 2021, the prayer made was

to reject the Resolution Plan submitted by Respondent No. 3 on

11.03.2021. When the plan submitted by Respondent No. 3 has been

approved by the Adjudicating Authority by the Order dated 10th May,

2022 which has already received approval by this Tribunal in its

judgment dated 25th May, 2023 as noted above, we are of the view that

prayer made in the I.A. No. 3954 of 2021 cannot be accepted.

10. Learned Counsel for the Appellant however submitted that several

relevant clauses of the Resolution Plan have not been pointed out to the

Court while deciding the Appeal No. 920 of 2022 on 25th May, 2023.

Company Appeal (AT) (Insolvency) No. 1072 of 2022 -9-

11. In the submission Learned Counsel for the Appellant has referred

to Schedule 6 of Resolution Plan and has referred to Clause 6 which deals

with cost claim. Schedule 6, Clause 6 is as follows:

"6. Cost Claims Given the substantial time delays suffered by the Project Highway on account of the delayed handover of Right of Way solely on account of the NHAI's defaults, the Corporate Debtor had to endure sizeable cost overruns and additional financial implication on account of idling of resources, interest costs, among others. The quantum of these cost overruns was very substantial and was one of the main reasons that induced the insolvency of the Corporate Debtor.

The Concession Agreement specifically provides that, under Article 35.2 (Compensation for Breach of Agreement) of the Concession Agreement, the Corporate Debtor shall be reimbursed all direct and indirect costs resulting out of the defaults that are solely attributable to the NHAI. In this regard, the following cost claims are reimbursable to the Corporate Debtor by the NHAI:

S No. Particulars Amounts (IN INR) BASIS

Claims raised by 4,28,23,00,000 As filed on the 1. contractor(s) on the Corporate Debtor

Corporate Debtor

Increase in capital 8,71,00,00,000 Actual 2. costs (including completion cost

increase in interest less the capital

during construction cost planned at

over and above that the time of

Company Appeal (AT) (Insolvency) No. 1072 of 2022 -10-

envisaged at the time financial closure

of the initial financial

closure)

Total 12,99,23,00,000

12. It is submitted that plan contemplates that corporate debtor shall

be reimbursed all direct and indirect costs resulting out of the defaults

that are solely attributable to NHAI. It is submitted that amount of Rs.

4,28,23,00,000/- has been referred to the claims raised by contractor i.e.

Appellant in clause 6. It is submitted that on one hand the amount which

is being received by the NHAI is being received by the SRA whereas no

payment is proposed to the Appellant who had submitted the said claim.

13. Learned Counsel for the Respondent had submitted that claim of

the Appellant which was filed in the CIRP was verified and collated and

was kept in the disputed category claim which categorization was never

challenged by the Appellant by filing any application before the

Adjudicating Authority. When the claim of the Appellant was kept in the

disputed category and there is no determination of the claim of the

Appellant there could not have been any provision for payment in the

Resolution Plan. The Resolution Plan submitted by Respondent No. 3

have received approval by the CoC, it is well settled that commercial

wisdom of CoC is paramount. Hon'ble Supreme Court in K. Sashidhar

Vs. Indian Overseas Bank and Ors. (2019) 12 SCC 150 in paragraph 59

of the Judgment, following has been held:

Company Appeal (AT) (Insolvency) No. 1072 of 2022 -11-

"59. In our view, neither the adjudicating authority (NCLT) nor the appellate authority (Nclat) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors. The fact that substantial or majority per cent of financial creditors have accorded approval to the resolution plan would be of no avail, unless the approval is by a vote of not less than 75% (after amendment of 2018 w.e.f. 6-6-2018, 66%) of voting share of the financial creditors. To put it differently, the action of liquidation process postulated in Chapter III of the I&B Code, is avoidable, only if approval of the resolution plan is by a vote of not less than 75% (as in October 2017) of voting share of the financial creditors. Conversely, the legislative intent is to uphold the opinion or hypothesis of the minority dissenting financial creditors. That must prevail, if it is not less than the specified per cent (25% in October 2017; and now after the amendment w.e.f. 6-6-2018, 44%). The inevitable outcome of voting by not less than requisite per cent of voting share of financial creditors to disapprove the proposed resolution plan, de jure, entails in its deemed rejection."

14. Same preposition has been reiterated by the Hon'ble Supreme

Court in CoC of Essar Steel India Limited Through Authorised

Signatory Vs. Satish Kumar Gupta & Ors. (2020) 8 SCC 531.

15. The Approval of the Resolution Plan by the CoC is the commercial

wisdom of the CoC challenge to which approval can be on limited ground

when it is shown that Resolution Plan is not in compliance with Section

Company Appeal (AT) (Insolvency) No. 1072 of 2022 -12-

30(2) of the Code. No ground has been made out in the Appeal to show

that Resolution Plan is in non-compliance of Section 30(2) of the Code.

Further as noted above, this Tribunal in C.A.(AT) Ins. No. 920 of 2022 has

held that the plan is in compliance of the all mandatory requirements and

plan has already been upheld.

16. In view of the fore-going discussions, we are of the view that no

grounds have been made out to interfere with the Order impugned passed

by the Adjudicating Authority rejecting I.A. No. 3954 of 2021. There is no

merit in the Appeal, the Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI 16th January, 2024

Basant

Company Appeal (AT) (Insolvency) No. 1072 of 2022