Rishima Sa Investments Llc (Mauritius) vs Sarga Hotel Private Limited & Anr

[Arising out of order dated 04.01.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Division Bench, Court No. II, Kolkata in IA (IB) No.1054/KB/2023 in CP (IB) No.302(KB) of 2021]

IN THE MATTER OF:

Rishima SA Investments LCC (Mauritius) 1st Floor, Wing A, Cyber Towers 1, Ebene Cybercity, Mauritius Email:vamsi@lapisindiacapital.com ...Appellant

Versus

1. Sarga Hotels Pvt. Ltd, Through its Resolution Professional, Mr. Avishek Gupta, CK 104, Sector 2, Salt Lake, Kolkata-700091, West Bengal Email: cirp.sargahotel@gmail.com

2. Shri Ram Multicom Private Limited Unit No.3, 3rd Floor Ideal Centre, 9 A.J.C. Bose Road, Kolkata, WB 700017 India Email: sidhartha.sharma@sharmaandsharmalegal.com ...Respondents

Present: For Appellant: Ms. Malvika Trivedi, Sr. Advocate with Ms. Bani Dikshit, Mr. Uddhav Khanna, Mr. Shalendra Slania, Ms. Sujal Gupta, Advocates For Respondents: Mr. Ramji Srinivasan, Sr. Advocate with Ms. Pooja Mahajan, Ms. Mahima Singh, Ms. Shreya Mahalwan, Ms. Shruti Pandey, Ms. Namrata Sarogani, Mr. Kartik Pandey, Advocates for R-1 (RP).

Cont'd.../ -2-

Mr. Raunak Dhillon, Ms. Madhavi Khanna, Mr. Nihaad Dewan, Advocates for CoC.

Mr. Joy Saha, Sr. Advocate with Mr. Sidhartha Sharma, Mr. Arjun Asthana, Ms. Shalini Basu, Advocates for SRA.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by shareholder of the Corporate Debtor has been filed

challenging the order dated 04.01.2024 passed by the Adjudicating

Authority (National Company Law Tribunal), Division Bench, Court No. II,

Kolkata in IA (IB) No.1054/KB/2023 by which order the Adjudicating

Authority has allowed the application filed by the Resolution Professional

for approval of Resolution Plan submitted by Successful Resolution

Applicant, Respondent No.2 herein. Appellant aggrieved by approval of

Resolution Plan has come up in this Appeal. Brief facts of the case

necessary for deciding this appeal are:

(i) On 07.08.2008, a Share Subscription and Shareholders'

Agreement was executed between the Appellant - Rishima SA

Investments LLC (Mauritius), Shristi Infrastructure Development

Corporate Ltd. and the Corporate Debtor, wherein the Appellant

and Shristi acquired 35% and 65% shareholding of the Corporate

Debtor, respectively.

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(ii) A Singapore-seated Arbitration against Shristi Infrastructure

Development Corporate Ltd. and the Corporate Debtor was

commenced by the Appellant in which partial award dated

30.04.2019 and final award dated 12.07.2020 was passed. Under

the final award payment of Rs.132.39 Crores was directed

towards costs, interest, damages. Partial and final awards from

Singapore Arbitration led to filing of enforcement petition before

the Delhi High Court by the Appellant, which proceedings are still

pending.

(iii) The CIRP against the Corporate Debtor - Sarga Hotel Pvt. Ltd.

commenced by order dated 11.02.2022 by the Adjudicating

Authority on application filed under Section 7 by Yes Bank Ltd.

(i) Appellant filed its claim in Form C on 25.02.2022 followed by

Form F, both were rejected by the Resolution Professional vide

communications dated 16.03.2022 and 01.06.2022 on the

ground the Corporate Debtor has filed objections to the partial

award and the final award before the Delhi High Court.

(ii) Appellant has also filed I.A. (IB) No.1271/KB/2022 before the

Adjudicating Authority seeking direction to the Resolution

Professional to reject the claim made by Yes Bank to the tune of

Rs.370,36,10,306/-.

(iii) An I.A. (IB) No.1131/KB/2022 was filed by the Appellant

challenging the communications sent by the Resolution

Company Appeal (AT) (Insolvency) No.143 of 2024 -4-

Professional vis-à-vis the Appellant's claim which application was

partly allowed by the Adjudicating Authority vide order dated

30.11.2023. The Adjudicating Authority although held that the

Appellant is not a Financial Creditor but directed setting aside the

order of the Resolution Professional rejecting entire claim of the

Appellant of Rs.132 Crore.

(iv) Appellant wrote to the Resolution Professional on 07.12.2023 and

thereafter to adhere to the direction issued by the Adjudicating

Authority on 30.11.2023.

(v) On 04.01.2024, the Adjudicating Authority approved the

Resolution Plan submitted by Respondent No.2 and allowed I.A.

(IB) No.1054 (KB)/2023 filed by the Resolution Professional.

Appellant aggrieved by which order has come up in this appeal.

2. Learned counsel for the Appellant challenging the approval of the

Resolution Plan submits that the Adjudicating Authority has not adverted

to order dated 30.11.2023 by which order the claim of the Appellant as

'Other Creditor' was rejected. It is submitted that the Resolution Plan does

not balance the interest of all stakeholders. The Appellant who has claim

of Rs.132,89,75,268/- has been offered in the Resolution Plan only an

amount of Rs.1 Lakh. It is submitted that the Resolution Plan deserves

rejection. It is submitted that under order dated 30.11.2023 the amount

of Rs.132,89,75,268/- has to be kept in the Escrow Account, which having

not done, the approval of the resolution plan is vitiated.

Company Appeal (AT) (Insolvency) No.143 of 2024 -5-

3. Learned counsel for the Resolution Professional refuting the

submissions of learned counsel for the Appellant submits that the

Resolution Professional has rightly not accepted the claim of the Appellant

as Financial Creditor, however, under the order of the Adjudicating

Authority dated 30.11.2023, the Appellant's claim has been accepted as

'Other Creditor', taking which into consideration, the Successful

Resolution Applicant has already allocated an amount of Rs.1 Lakh in the

Resolution Plan for the Appellant. It is submitted that the order passed in

I.A. (IB) No.1131/KB/2022 has been misread by the Appellant. There was

no direction that amount of Rs.132,89,75,268/- should be kept in the

escrow account. It is submitted that the Adjudicating Authority observed

that the value provided against the Applicant's claim in the plan would be

paid subject to the outcome of the execution petition pending before the

Delhi High Court and till such time amount could be held in escrow

account. There is no direction by the Adjudicating Authority that the entire

amount of Rishima's claim has to be set aside and placed in escrow

account. The total outlay of the plan is Rs.301 Crores out of which Rs.145

Crores is the first tranche payable within 45 days of the plan approval

order, the Adjudicating Authority could not have directed for 50% of the

total amount to be kept in escrow account. The plan already makes

provision against Rishima's claim as 'Other Creditor'. Learned counsel for

the Resolution Professional has referred to clause 7.10.1 and clause 7.10.2

of the Resolution Plan. It is submitted that the plan has been approved by

the CoC in its commercial wisdom, which needs no interference by this

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Appellate Tribunal. It is submitted that the Appellant is 35% shareholder

i.e. related party of the Corporate Debtor, hence, its claim could be treated

differently from non-related parties.

4. Learned counsel appearing for the Successful Resolution Applicant

also refuting the submissions of the Appellant submits that the

Adjudicating Authority vide order dated 30.11.2023 accepted the claim of

the Appellant as 'Other Creditor' and the decision of the Resolution

Professional was upheld. It is submitted that the order dated 30.11.2023

has been wrongly interpreted by the Appellant. The Resolution Plan

considered the claim of the Appellant in Para 7.10.1 and 7.10.2. The plan

provides assured financial proposal to the Appellant's contingent claim by

providing payment of Rs.1 Lakh as final payment.

5. Learned counsel appearing for the CoC also supported the

submission of learned counsel for the Resolution Professional and

submitted that the Resolution Plan having been approved by the CoC, the

commercial wisdom of the CoC cannot be questioned. It is further

submitted that the liquidation value of the Corporate Debtor is much less

than the total admitted claims of the Corporate Debtor. The liquidation

value is not sufficient to discharge the debt of Secured Financial Creditors.

In event, the Corporate Debtor is liquidated the entitlement of the Appellant

as 'Other Creditor' would be 'Nil' in the waterfall mechanism. Under

Section 53, the Appellant is not to receive any amount under the waterfall

mechanism.

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

parties and perused the record.

7. As noted above, the Appellant in the CIRP of the Corporate Debtor

has filed its claim in Form C and Form F, which were not accepted by the

Resolution Professional. The Appellant has filed I.A. (IB)

No.1131/KB/2022 before the Adjudicating Authority challenging the

communications of the Resolution Professional dated 16.03.2022 and

01.06.2022. The Adjudicating Authority vide its order dated 30.11.2023

decided the application. The Adjudicating Authority has framed two

questions in I.A. (IB) No.1131/KB/2022 in Para 31, which is as follows:

"31. For the sake of brevity, we are not reproducing the complete details of the case as what needs to be addressed in this application are:

a. Whether the claim made by the Applicant would qualify as "financial debt" or "other debt".

b. Whether the Resolution professional's action of admitting only Rs.1 against claim of Rs.132,89,52,568/- is legally correct or not.

8. The Adjudicating Authority in Para 35 held that the Appellant cannot

be held as Financial Creditor, however, it was held that the Appellant being

decree holder should be allowed as 'Other Creditor'. In Para 36 of the order

it was held that the debt arising out of a foreign award has to be treated as

'other debt'. In Para 36 following has been held:

Company Appeal (AT) (Insolvency) No.143 of 2024 -8-

"35. Therefore, we are of the view that the Applicant cannot be called as financial creditor, and he is not entitled to participate in the Committee of Creditors (CoC) meeting of the corporate debtor during CIRP process."

9. The Adjudicating Authority disapproved the action of the Resolution

Professional in admitting the claim of the Appellant for notional value of

INR 1. In Para 41, 42 and 43 following has been held:

"41. However, the plan could state that the value provided against the Applicant's claim in the plan would be paid subject to the outcome of the execution petition pending before the Hon'ble Delhi High Court and till such time amounts could be held in escrow account.

42. In case the Applicant fails in his execution petition, the amount held in the escrow account can be redistributed as per the Commercial wisdom of CoC. The provision in the plan against the claim made by the Applicant may be made based on the commercial wisdom of CoC but to be made on fair and equitable basis keeping in mind, that one of the objectives of IBC is to balance the interests of all the stakeholders.

43. In view of above this application being I.A. (IB) 1131/KB/2022 filed by Rishima SA Investments LLC (Mauritius). Applicant herein is partly allowed and disposed of in terms of the directions above."

10. One of the issue which has arisen for consideration is as to what is

the import of order dated 30.11.2023, whether the entire amount of claim

Company Appeal (AT) (Insolvency) No.143 of 2024 -9-

of Rs.132,89,52,568/- was to be kept in escrow account or only the amount

provided in the plan against the admitted claim has to be kept in the escrow

account.

11. When we look into Para 41 and 42 of the order, it is clear that what

was intended by the Adjudicating Authority was that value provided

against the claim in the plan should be held in escrow account subject to

decision in the execution petition. Resolution Plan has provided amount

of Rs.1 Lakh against the claim of the Appellant and the Successful

Resolution Applicant proposed to pay said amount to the Appellant. The

submission of the Appellant that order meant that entire amount of Rs.132

crores be kept in escrow account cannot be accepted. We, thus, are of the

view that order dated 30.11.2023 cannot be read to mean that amount of

Rs.132,82,52,568/- has to be kept in escrow account.

12. The challenge in this Appeal is to the order of the Adjudicating

Authority approving the Resolution Plan. The Adjudicating Authority in

the impugned order has noticed the amount claimed, amount admitted and

amount provided under the Resolution Plan in Para 6 of the order, which

is as follows:

"6. The Shriram Multicom Private Limited under this Resolution Plan, has provided for a total plan value for the Corporate Debtor of Rs.30,099.01 Lakhs. The amount claimed, amount admitted and the amount provided under the Resolution Plan are enumerated below:

Company Appeal (AT) (Insolvency) No.143 of 2024 -10-

Class of Amount Amount Amount provided Creditors/ Claimed Admitted under the Particulars (Amount in (Amount in Resolution Plan Lakhs) Lakhs) (Amount in Lakhs) Secured 76,382.63 76,382.63 30,033.17 Financial Creditor Unsecured 2,329.60 2,327.89 23.28 Financial Creditors Operational 8,705.25 2,927.56 41.56 Creditors Other Debts 13,289.75 1.00 1.00 and Dues Grand Total 1,00,707.23 81,639.08 30,099.01

13. When we look into Para 6 of the order, it is clear that against the

column 'Other Debts and Dues' the admitted claim of the Appellant of

Rs.132,289.75 Lakhs has been noted against which amount of Rs.1 Lakh

was proposed in the Plan. From Para 6 of the order, it is clear that amount

claimed by the Secured Financial Creditor was Rs.76,382.63 Lakhs against

which total plan value of Rs.30,099.01 Lakhs has been proposed.

14. Hon'ble Supreme Court in "Committee of Creditors of Essar Steel

India Limited through Authorised Signatory vs. Satish Kumar Gupta

and Others, (2020) 8 SCC 531" has held that allocation of plan value to

different category of creditors can be different. It was held that Operational

Creditor has to be given priority of payment above all Financial Creditors.

In Para 88 of the judgment following has been held:

"88. By reading para 77 (of Swiss Ribbons) dehors the earlier paragraphs, the Appellate Tribunal

Company Appeal (AT) (Insolvency) No.143 of 2024 -11-

has fallen into grave error. Para 76 clearly refers to the UNCITRAL Legislative Guide which makes it clear beyond any doubt that equitable treatment is only of similarly situated creditors. This being so, the observation in para 77 cannot be read to mean that financial and operational creditors must be paid the same amounts in any resolution plan before it can pass muster. On the contrary, para 77 itself makes it clear that there is a difference in payment of the debts of financial and operational creditors, operational creditors having to receive a minimum payment, being not less than liquidation value, which does not apply to financial creditors. The amended Regulation 38 set out in para 77 again does not lead to the conclusion that financial and operational creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under the resolution plan before it can pass muster. Fair and equitable dealing of operational creditors' rights under the said regulation involves the resolution plan stating as to how it has dealt with the interests of operational creditors, which is not the same thing as saying that they must be paid the same amount of their debt proportionately. Also, the fact that the operational creditors are given priority in payment over all financial creditors does not lead to the conclusion that such payment must necessarily be the same recovery percentage as financial creditors. So long as the provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of

Company Appeal (AT) (Insolvency) No.143 of 2024 -12-

creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors."

15. It is also relevant to notice that commercial wisdom of the CoC in

approving Resolution Plan has to be given paramount importance and

NCLT and this Appellate Tribunal can interfere in the order approving the

Resolution Plan only when there is violation of statutory provisions of

Section 30(2) of the Code. Present is not a case where violation of any

statutory provision under Section 30(2) of the Code has been alleged by the

Appellant. Appellant's claim was accepted as 'Other Creditor' and in the

allocation of amount of Rs.1 Lakh against the claim of the Appellant it is

not shown that there is any violation of any statutory provision. We, thus,

do not find any ground to interfere with the order dated 04.01.2024 passed

by the Adjudicating Authority approving the Resolution Plan by allowing IA

(IB) No.1054/KB/2023. We do not find any error in the order impugned.

Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) NEW DELHI

4th April, 2024

Archana

Company Appeal (AT) (Insolvency) No.143 of 2024