Gimatex Industries Private Limited vs Formation Textiles Llc

Formation Textile LLC. ....Appellant Vs.

Bank of Baroda & Ors. ...Respondents

I.A. No. 3069 & 3070 of 2025 IN Comp. App. (AT) (Ins) No. 983 & 984 of 2023

In the matter of:

Bank of Baroda ....Appellant Vs.

Formation Textiles LLC & Ors. ...Respondents

I.A. No. 3112 & 3113 of 2025 IN Comp. App. (AT) (Ins) No. 1026 & 1027 of 2023

In the matter of:

Charu Desai, Erstwhile Resolution Professional of Gb ....Appellant Global Ltd. Formerly Known as Mandhana Industries Ltd.

Vs.

Formation Textiles LLC & Ors. ...Respondents 2

I.A. No. 3077 & 3078 of 2025 IN Comp. App. (AT) (Ins) No. 1098 & 1099 of 2023

In the matter of:

Vishal Dyes & Chemicals & Ors. ....Appellants

Vs.

Formation Textiles LLC & Ors. ...Respondents

I.A. No. 3075 & 3076 of 2025 IN Comp. App. (AT) (Ins) No. 1100 & 1101 of 2023

In the matter of:

Anglomonto Resource Pvt. Ltd. ....Appellant

Vs.

Formation Textiles LLC & Ors. ...Respondents

I.A. No. 3074 of 2025 IN Comp. App. (AT) (Ins) No. 1236 of 2023

In the matter of:

Gimatex Industries Pvt. Ltd. ....Appellant

Vs.

Formation Textiles LLC & Ors. ...Respondent 3

I.A. No. 3080 of 2025 IN Comp. App. (AT) (Ins) No. 1237 of 2023

In the matter of:

Gimatex Industries Pvt. Ltd. ....Appellant

Vs.

Formation Textiles LLC & Ors. ...Respondents

For Applicant Mr. Gopal Jain, Sr. Advocate with Mr. Madhav Kanoria, Ms. Surubhi Khattar, Ms. Neha Shivhare, Mr. Shivansh Vishwakarma, Ms. Pallavi Agarwal, Advocates for Applicant

For Respondents Mr. Anurut Joshi, Mr. Prakhar Tandon, Mr. Anuj Tiwari, Ms. Kaanchi Ahuja, Advocates. Mr. Bishwajit Dubey, Advocate for Interim Trade Creditors. Ms. Pooja Mahajan, Advocate for Erstwhile RP.

ORDER

(11th August, 2025)

Ashok Bhushan, J.

These Applications have been filed by Bank of Baroda for clarification of

judgment and order dated 22.04.2025 delivered by this Tribunal in Company

Appeal (AT) (Insolvency) Nos. 983 and 984 of 2023 and other connected

Appeals. IA Nos.3069 and 3070 of 2025 in Company Appeal (AT) (Insolvency)

Nos. 983 and 984 of 2023 have been filed by Bank of Baroda. Other IAs as

mentioned above have been filed by the Bank of Baroda in other connected

Appeals decided by the same judgment of this Tribunal dated 22.04.2025. All

Appeals were decided by common judgment dated 22.04.2025. It shall be

sufficient to refer to pleadings in IA Nos.3069 and 3070 of 2025 as well as the 4

reply filed in the said applications by Respondent No.1- Formation Textiles

LLC for deciding IA Nos.3069 and 3070 of 2025 and all other IAs mentioned

above.

2. In IA Nos.3069 and 3070 of 2025 which have been filed for clarification

of the judgment dated 22.04.2025, following prayers have been made:-

"a. Clarify that only the Applicant and Committee of Creditors are entitled to the amount of Earnest Money Deposit;

b. Clarify that any payment to Formation Textiles LLC and/ or Interim Trade Creditors shall be made only out of INR 37,99,01,370, and thus after the adjusting the EMD amount from INR 42.99 Crores and after adjusting the amount payable to Interim Trade Creditors (INR 20.9 Crores), the amount payable to Formation Textiles LLC would be INR 17.09 Crores;

c. Clarify that since share application money of INR 37,99,01,370 has been kept in a non-interest bearing account, no interest amount shall be payable to Formation and Interim Trade Creditors;

d. Direct that the timeline mentioned in Judgment dated 22.04.2025 within which CoC/ Applicant is to make payment to not commence till the present application is decided; and pass such other order(s) as this Hon'ble Appellate Tribunal may deem fit and proper in the facts and circumstances of the case."

3. The IAs filed by the Bank of Baroda states that by the impugned

judgment, this Tribunal has set aside the order dated 06.07.2023 passed by 5

the Adjudicating Authority in IA No.443 of 2021. The Respondent- 'Formation

Textile LLC' was Successful Resolution Applicant who failed to implement the

plan. Subsequently, the Resolution Plan of another Resolution Applicant was

approved. Thereafter, the Respondent No.1- Formation Textile LLC filed an

application IA No.443 of 2021 seeking direction to refund an amount of

Rs.93.83 Crore. The amount deposited by Formation Textile LLC was Rs.93.82

Crore in following manner:-

(i) Rs.5 Crore as Earnest Money Deposit (EMD)

(ii) Rs.50 Crore as Performance Bank Guarantee (PBG)

(iii) Rs.37,99,01,370/- towards equity infusion.

4. In paragraph 5 of the Application, details of deposit by Formation Textile

LLC has been given which is to the following effect:-

S. No. Particulars Amounts Status

1. Amount towards INR 50,00,00,000 Performance Bank guarantee performance invoked and appropriated bank guarantee

2. Amount towards INR 5,00,00,000 Earnest Money Deposit invoked Earnest Money and kept in a fixed deposit deposit account Note: The Earnest Money Deposit which was encashed and put in a fixed deposit. It was never appropriated by the CoC at the relevant time.

3. Amount towards INR 37,99,01,370 Amount kept in an escrow equity infusion current non-interest bearing account as on the date of the Judgment. Note: This is also noted in the audited financial 6

statements that this amount was lying in an escrow current account and not in any fixed deposit.

Total INR 92,99,01,370

5. The Adjudicating Authority by order dated 06.07.2023 allowed the

Application and directed refund of amount to the Formation Textile LLC

aggrieved by which order, Company Appeal (AT) (Insolvency) Nos. 983 and 984

of 2023 was filed by the Bank of Baroda, Company Appeal (AT) (Insolvency)

Nos. 1026 & 1027 of 2023 filed by Charu Desai, Erstwhile Resolution

Professional, Company Appeal (AT) (Insolvency) Nos. 1098 & 1099 of 2023,

1100 & 1101 of 2023, 1236 of 2023 & 1237 of 2023 were filed by Interim Trade

Creditors who had also prayed for payment of their dues from the Corporate

Debtor. Respondent No.1- Formation Textile LLC filed Company Appeal (AT)

(Insolvency) Nos. 1163 of 2023 challenging the order insofar as Adjudicating

Authority did not direct refund with interest. All the Appeals were disposed of

by this Tribunal by judgment and order dated 22.04.2025. The operative part

of the judgment is contained in paragraph 100 which is as follows:-

"100. In view of the forgoing discussions, we dispose of all the above Appeals in following manner:

i. Company Appeal (AT) (Ins.) Nos. 983 and 1026 of 2023, insofar as it relates to order dated 06.07.2023 passed in IA N0.443 of 2021 is allowed. Order passed by Adjudicating Authority in IA No.443 of 2021 directing for refund of amount of Rs.93.82 Crores is set-aside and modified to the extent that Formation shall be entitled to refund of only 7

Rs.22.09 Crores along with interest earned on it, which was kept in the fixed deposit of Rs.42.99 Crores under the orders of Adjudicating Authority.

ii. Company Appeal (AT) (Ins.) Nos.984 and 1027 of 2023, insofar as it relates to order dated 06.07.2023 passed in lA No.1847 of 2021 are dismissed. Order passed by Adjudicating Authority while rejecting IA No.1847 of 2021 is upheld, but for the reasons as indicated in this order.

iii. Company Appeal (AT) (Ins.) No. 1163/2023 filed by Formation Textile is dismissed.

iv. Company Appeal (AT) (Ins.) Nos. 1098, 1099, 1100, 1101, 1236 & 1237/2023 are allowed. The respondent, CoC is directed to make payment of outstanding amounts of Interim Trade Creditors of Rs.20.9 Crores along with interest earned on it out of the fixed deposit amount of Rs.42.99 Crore. The payment to the Interim Trade Creditors shall be made by the CoC within a period of 30 days from today. Order dated 06.07.2023 is set aside and I.A. Nos. 1785 / 2021, 1986 / 2021 & 1052 /2022 are allowed to the extent as indicated above."

6. The clarification which has been sought by the Bank of Baroda in the

Application is that payment to Formation Textiles LLC and Interim Trade

Creditors shall be made only out of Rs. 37,99,01,370/- which is equity

infusion after adjusting the EMD amount of Rs. 5 Crore from Rs.42.99 Crores.

It is stated that after adjusting the amount payable to Interim Trade Creditors

i.e. 20.9 Crores, the amount payable to Formation Textiles LLC would be Rs.

17.09 Crores. In the Application reference has been made to the judgment of 8

this Tribunal dated 22.04.2025 where this Tribunal while deciding all the

Appeals finally has held that the CoC was entitled to invoke the EMD of Rs.5

Crores and PBG of Rs.50 Crores. EMD was invoked in October 2018 by the

Committee of Creditors, on Formation Textile LLC not extending the EMD as

per the provisions of the Process Memorandum which finding is returned in

Paragraph 55 of the judgment. This Tribunal further upheld the forfeiture of

PBG of Rs.50 Crore and EMD of Rs.5 Crore which findings are returned in

paragraph 72. In paragraph 72 of the judgment, following has been held:-

"72. Insofar as the forfeiture of PBG and earnest money, the same is fully covered by the RFRP as noted above, thus we uphold the invocation of PBG and earnest money deposit by the CoC, which is in accordance with the RFRP."

7. Counsel for the Applicant submits that in support of the Application

that amount of Rs.42.99 Crores which has been mentioned in the operative

part of the judgment included equity infusion of Rs.37,99,01,370/- and EMD

of Rs.5 Crore. EMD having been permitted to invoke entire Rs.42.99 Crores

was not entitled to be refunded and distribution to Interim Trade Creditors of

Rs.20.9 Crores was to be made out of amount Rs.37,99,01,370/- and in the

operative portion, this Tribunal in paragraph 100 has directed that after

payment of Interim Trade Creditors of Rs.20.9 Crores, the rest amount

Rs.22.09 Crore be refunded to Formation Textile LLC with accrued interest.

Submission is that both refund of payment to Interim Trade Creditors and

Formation Textile LLC was intended only from equity infusion amount of

Rs.37,99,01,370/- and direction in operative portion is not inconformity with

the judgment which needs clarification. Counsel for the Applicant submits 9

that the amount of equity infusion which was made by the Formation Textile

LLC of Rs.37,99,01,370/- was kept in Escrow Account which has also been

noticed in the impugned judgment. The amount did not earn any interest,

hence, no interest is payable.

8. Counsel appearing for the Respondent No.1- Formation Textile LLC has

filed reply to the Application has opposed the prayers. It is submitted by the

Counsel for the Respondent No.1 that Application filed by Bank of Baroda is

not maintainable. Applicant by the Application is seeking review of the

judgment which is impermissible. It is submitted that the prayers made by the

Applicant in event is allowed payment as directed to Formation Textile LLC is

to be reduced by Rs.5 Crore which is impermissible. Application under the

guise of clarification seeks to modify and review the finding of this Tribunal

which is impermissible. It is submitted that the amount of Rs.42.99 Crore was

kept in fixed deposit as has been noticed by Adjudicating Authority in its

earlier order.

9. Shri Bishwajit Dubey, Learned Counsel appearing for the Interim Trade

Creditors submits that this Tribunal has directed payment to Interim Trade

Creditors along with the interest earned on it, hence, allowing clarification will

be denying payment of interest to the Interim Trade Creditors.

10. We have considered the submissions of the Counsel for the parties and

perused the application and its reply.

11. Counsel appearing for the Appellant- Bank of Baroda as well as Counsel

appearing for the Respondent No.1- Formation Textile LLC submit that they

have filed Civil Appeal before the Hon'ble Supreme Court challenging the order 10

dated 22.04.2025. We make it clear that the consideration of these

applications are without prejudice to their rights and contentions advanced by

them in respective Appeals filed before the Hon'ble Supreme Court which are

pending consideration.

12. We need to first notice the objection raised by the Counsel for the

Respondent that this Application seeks review and modification of the

judgment dated 22.04.2025 which is not permissible. It is well settled that this

Tribunal does not have any jurisdiction to review its judgement. Application

which has been filed by the Bank of Baroda has only prayed for clarification

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

Counsel for the Respondent No.1 that this Application is application for review

and modification of the judgment.

13. The judgment of this Tribunal dated 22.04.2025 has returned following

findings after the discussions:-

(i) The amount of EMD of Rs.5 Crore and PBG of Rs.50 Crore was

rightly invoked by the CoC which finding has been returned in

paragraph 72 of the judgment as noted above.

(ii) Formation Textile LLC who had deposited the amount towards the

earnest money, PBG and equity infusion is not entitled to refund the

amount of EMD and PBG and entitled to refund the amount of equity

infusion which is Rs.37,99,01,370/-. The rest of the order of the

Adjudicating Authority directing refund of the entire amount was set

aside.

11

14. By judgment dated 22.04.2025, the claim of Interim Trade Creditors to

the extent of Rs.20.9 Crore was also accepted along with the interest earned

on it which finding has been returned in paragraph 88. This Tribunal also

noted in paragraph 88 the details of total amount infused which included

EMD, PBG and equity infusion. This Tribunal, however, noticed the entire

amount lying was Rs.42.99 Crore which included the amount of EMD as well

as the amount towards the equity infusion. In the Application, Applicant-

Bank of Baroda has stated that the amount of EMD although which was

invoked in October, 2018 but said amount was not appropriated, hence, the

said amount remained along with the equity infusion amount.

15. The findings returned by this Tribunal in the judgment, thus, clearly

meant and intended that the amount of EMD and PBG has rightly been

invoked and cannot be allowed to be refunded to Formation Textile LLC, hence,

only amount of equity infusion requires refund. It is also on the record that

amount of equity infusion was kept in Escrow Account which is required to be

kept in separate account. We, thus, are satisfied that the clarification as

prayed in prayers (a), (b) and (c) deserves to be allowed. Application is allowed

in terms of prayers (a), (b) and (c).

16. In view of the clarification as above, we are of the view that the operative

portion of the judgment also need rectification to make it in conformity with

the findings and conclusions recorded in the main body of the judgment as

noted above. It is well settled that the operative portion of the judgment need

to be in conformity with the findings contained in the judgment. We having

found that EMD of Rs.5 Crore was invoked by the CoC in October, 2018 which

EMD of Rs.5 Crores is also included in amount of Rs.42.99 Crore as noticed 12

in the judgment. The amount of EMD of Rs.5 Crore which although was

invoked and not appropriated by the Bank of Baroda cannot be subject to

distribution to Interim Trade Creditors and Formation Textile LLC. We, thus,

rectify the direction in paragraph 100(i) and 100(iv) in following manner:-

(a) In paragraph 100 (i), the sentence to the extent that "Formation

shall be entitled to refund of only Rs.22.09 Crores along with interest

earned on it, which was kept in the fixed deposit of Rs.42.99 Crores under

the orders of Adjudicating Authority" is rectified as "Formation shall be

entitled to refund of only Rs.17,09,01,370/- along with the interest

earned on it, if any, which was kept in the escrow account".

(b) In paragraph 100(iv), sentence "The respondent, CoC is directed to

make payment of outstanding amounts of Interim Trade Creditors of

Rs.20.9 Crores along with interest earned on it out of the fixed deposit

amount of Rs.42.99 Crore" is rectified as "the respondent, CoC is directed

to make payment of outstanding amounts of Interim Trade Creditors of

Rs.20.9 Crores along with interest earned on it, if any, out of the amount

of equity infusion which was kept in escrow account". Paragraph 100 (i)

and (iv) stands rectified as above.

17. All the Applications are disposed of accordingly.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) New Delhi Anjali