State Bank Of India & Others vs The Consortium Of Mr. Murari Lal Jalan ...

IN THE MATTER OF: State Bank of India & Ors. ... Appellants

Vs

The Consortium of Murari Lal Jalan and Mr. Florian Fritsch & Anr. ... Respondents

Present:

For Appellants : Mr. Gopal Jain, Sr. Advocate with Mr. Raunak Dhillon, Ms. Isha Malik and Ms. Niharika Shukla

For Respondents: Mr. Ravi Shankar Prasad, Mr. Krishnendu Datta, Sr. Advocate with Ms. Pooja Mahajan, Ms. Arveeza Sharma, Ms. Kamal Abrol, Ms. Mehak Nayak, Mr. Rajat Sinha and Mr. Aashish Vats. Advocates for SRA.

Mr. Raghav Chadha, Advocate for RP

ORDER

ASHOK BHUSHAN, J.

These three Interlocutory Applications have been filed by Appellant

(IA No.1975 of 2023) and Respondent No.1 (IA Nos.2028-2029 of 2023 and

IA Nos.2159-2160 of 2023) in the Company Appeal (AT) (Insolvency) Nos.

129 & 130 of 2023 filed by the State Bank of India and Ors. vs. The

Consortium of Murari Lal Jalan and Mr. Florian Fritsch & Anr.

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 1

2. Before we come to the respective submissions made in the IAs filed

by the parties, a brief background giving rise to Company Appeal (AT)

(Insolvency) Nos. 129 & 130 of 2023 and the filing of the IAs need to be

noted:

(i) Jet Airways (India) Limited - (Corporate Debtor) was admitted

in insolvency on 20.06.2019. A Resolution Plan was submitted

by Respondent No.1, which came to be approved by the

Committee of Creditors ("CoC") on 21.09.2020. The

Adjudicating Authority vide its order dated 22.06.2021

approved the Resolution Plan of Respondent No.1.

(ii) Various Appeals were filed in this Tribunal challenging the

order dated 21.06.2021, which came to be decided by

judgment of this Tribunal dated 21.10.2022, upholding the

approval of the Plan with certain directions.

(iii) The conditions precedent as contemplated in the Resolution

Plan for operationalizing the Corporate Debtor were achieved

on 20.05.2022 as per Successful Resolution Applicant/

Respondent No.1. (hereinafter referred to as the "SRA"), which

factum was contested by the Appellant - Monitoring

Committee of Lenders (hereinafter referred to as the "MC

Lenders"). The SRA wrote to MC Lenders to share necessary

documents for execution and completion of necessary steps to

enable SRA to start capital infusion in the Corporate Debtor

and settle dues of the creditors in compliance with the

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 2 approved Resolution Plan. The MC Lenders disputed the

fulfillment of conditions precedent.

(iv) The SRA filed IA No.3398 of 2022 (implementation Application)

and IA No.3508 of 2022 (Exclusion Application) before the

Adjudicating Authority seeking exclusion of the period in

Company Petition (IB) 2205/MB/2019 and also for direction

to the MC Lenders to give control and management of the

Corporate Debtor to SRA and declare 20.05.2022 to be an

effective date. Further SRA sought exclusion of time from

20.05.2022 till the decision of the Adjudicating Authority, i.e.

from the 180 days' period granted to infuse the first tranche of

funds required under the Plan. The Application was contested

by the MC Lenders contending that effective date has not been

achieved, since the SRA has not fulfilled the conditions

precedent.

(v) By an order dated 13.01.2023 the Adjudicating Authority

allowed the IA Nos.3398 and 3508 of 2022. The Adjudicating

Authority held that SRA has fulfilled conditions precedent and

20.05.2022 was the effective date as per the Resolution Plan.

The Adjudicating Authority further excluded the period of 180

days from the period available with SRA to implement the

Resolution Plan. As per the exclusion allowed by the

Adjudicating Authority the timeline for the execution of the

Plan stood extended till 15.05.2023.

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 3 (vi) After order dated 13.01.2023 of the Adjudicating Authority, the

SRA wrote to the MC Lenders to cooperate with

implementation of the Resolution Plan. The MC Lenders did

not act as per the directions contained in the order dated

13.01.2023, rather challenged the order dated 13.01.2023 by

filing the Company Appeal (AT) (Insolvency) Nos. 129 & 130 of

2023 in this Tribunal on 24.01.2023. The MC Lenders in the

Appeal also prayed for stay of the order dated 13.01.2023 of

the Adjudicating Authority.

(vii) The Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023

came to be heard by this Tribunal on 03.03.2023 on which

date this Tribunal declined to pass any interim order with

regard to staying the order of the Adjudicating Authority dated

13.01.2023.

(viii) In the meantime, the order passed by this Tribunal approving

the order of the Adjudicating Authority dated 21.10.2022 was

challenged before the Hon'ble Supreme Court and Hon'ble

Supreme Court by an order dated 30.01.2023 has dismissed

the Civil Appeal No.407 of 2023.

(ix) This Tribunal in its order dated 03.03.2023 passed in the

present Appeal, took the view that Resolution Plan having been

approved by the Adjudicating Authority and by this Tribunal

as well as by the Hon'ble Supreme Court, all stake holders

have to act in a manner so as to implement the Resolution

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 4 Plan, this Tribunal declined to pass any interim order for

staying the order dated 13.01.2023 passed by the Adjudicating

Authority, which was impugned in the Appeal. In paragraph

14 and 15, following was observed by this Tribunal:

"14. The Resolution Plan having been approved by the Adjudicating Authority which received approval from this Tribunal as well as up to Hon'ble Supreme Court, all stakeholders have to act in a manner so as to implement the Resolution Plan. The Monitoring Committee is constituted as per the I&B Code and Regulations to take steps to oversee the implementation of the Resolution Plan. The Resolution Applicant has filed the Application seeking certain direction for implementation which has been allowed and we as on date are of the view that no grounds have been made out to grant any interim order staying the order impugned passed by the Adjudicating Authority or to direct the parties to maintain Status Quo.

15. The steps regarding the implementation of the plan has to be taken by the SRA which need to be overseen and cooperated by the Monitoring Committee. Learned Sr. Counsel appearing for the SRA has submitted that SRA shall discharge all its obligations under the Resolution Plan for successful implementation of the resolution plan. In view of the above, we see no reason to pass any Interim Order as on date reserving the right to the parties to pray for any interim direction after pleadings are complete."

(x) The order passed by this tribunal on 03.03.2023 has been

challenged by the Appellant before the Hon'ble Supreme Court

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 5 by filing Civil Appeal No.16091 of 2023, which is pending

consideration before the Hon'ble Supreme Court.

3. During the pendency of this Appeal, the above three IAs have been

filed by the parties as noted above. Now we proceed to notice the prayers

made in the above three IAs.

4. IA No.1975 of 2023 has been filed by the Appellant. In the

Application the Appellant has pleaded that for the purpose of infusion of

funds by SRA certain approvals may be required at appropriate stage in

accordance with the applicable legal and regulatory requirements, as set

out in the Resolution Plan. It is pleaded that there are corporate and

regulatory actions, which as part of general corporate compliances under

law in respect of the Corporate Debtor, can only be done if the Corporate

Debtor has the requisite number of Directors on its Board. By the

Application the Appellant sought necessary direction and approval of the

Tribunal for appointment of certain number of Directors in order to enable

the Corporate Debtor to be able to make necessary, regulatory and legal

compliances in accordance with the provisions of Companies Act, 2013, to

enable effective implementation of the Resolution Plan. In the Application,

following prayers have been made:

(a) Permit appointment of directors to the board of directors of the Corporate Debtor, as identified by the representatives of the financial creditors on the Monitoring Committee of the Corporate Debtor, to enable certain regulatory and legal compliances

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 6 under the provisions of the Companies Act, 2013;

and (b) Pass such orders as this Hon'ble Appellate

Tribunal deems fit and proper in the circumstances of the case and thus render justice."

5. IA Nos.2028-2029 of 2023 has been filed by the SRA. In the

Application it is pleaded that as per order dated 13.01.2023, 180 days' time

was extended till 15.05.2023 to implement the Resolution Plan by infusing

first tranche of money of INR 175 crores. The Applicant pleaded that SRA

cannot suo moto infuse funds in the Corporate Debtor and take control of

the Corporate Debtor unless corresponding steps are taken by MC Lenders

and the order dated 13.01.2023 passed by the Adjudicating Authority,

came to be challenged by the MC Lender in this Appeal, where the interim

order was declined on 03.03.2023. It is further stated that even though

there is no interim order against 13.01.2023 of the Adjudicating Authority,

the MC Lenders did not take steps in spite of several requests made by the

SRA. On 13.04.2023, the MC Lenders took first step towards the

implementation of the Resolution Plan by sharing details of the bank

account of the Corporate Debtor for infusion of share application money.

The MC Lenders also filed an Application being IA No.1975 of 2023 in this

Tribunal on 08.05.2023 in this Appeal seeking directions of the Tribunal

to permit appointment of Board of Directors of the Corporate Debtor. It is

pleaded that account details, which has been communicated by MC

Lenders are also not in accordance with Section 42, sub-section (6) of the

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 7 Companies Act, 2013 and there has to be a designated account for infusing

the fund for share application money. The SRA had also filed an

Application before the NCLT being IA No.1863 of 2023 seeking exclusion of

period from 16.11.2022 till 13.04.2023, which Application could not be

heard and next date fixed is 06.06.2023. The learned Senior Counsel for

the SRA submitted that in view of filing IA Nos.2028-2029 the SRA will

withdraw the IA No.1863 of 2023 filed before the Adjudicating Authority.

In the Application 2028-2029 of 2023, following prayers have been made:

"(a) allow the Application and exclude the period from 16 November, 2022 till the date of Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 is decided by this Hon'ble Adjudicating Authority, from the 180 days' period granted under the Resolution Plan for infusion of the first tranche of funds and achieving the Closing Date;

(b) pass interim/ ad-interim reliefs in terms of prayers

(a) above;

(c) pass any other such order(s0 as this Hon'ble Appellate Authority may deem fit and proper in the facts and circumstances of this case."

6. The third Application being IA Nos.2159-2160 of 2023 is filed by the

SRA. In the Application after narrating the sequence of events the SRA has

referred to IA No.2028-2029 filed in this Appeal. It is stated that on

13.05.2023 in late evening SRA received a letter from SBI asking SRA to

infuse amounts as referred in the letter. The SBI's letter further stated that

the identified bank account details has been shared on 13.04.2023 and in

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 8 29th Monitoring Committee Meeting held on 28.04.2023 the concern shown

by the SRA has been addressed. The letter further stated that if the

payment obligations are not honoured by 15.05.2023, the MC Lenders may

exercise their rights and remedies as available in law (which includes

invocation of Performance Bank Guarantee as well). In the Application,

following prayers have been made:

"(a) allow the Application and pass an order restraining/ injuncting the Respondents from encashing or appropriating the Performance Bank Guarantee and Ernest Money deposited by the Applicant/ SRA in favor of Respondent No.1 under the Resolution Plan.

(b) pass interim/ ad-interim reliefs in terms of prayers

(a) above;

(c) pass any other such order(s) as this Hon'ble Appellate Authority may deem fit and proper in the facts and circumstances of this case."

7. We have heard Shri Gopal Jain, learned Senior Counsel assisted by

Shri Raunak Dhillon appearing for the Appellant - State Bank of India.

Shri Ravi Shankar Prasad, learned Senior Counsel and Shri Krishnendu

Datta, learned Senior Counsel for the SRA.

8. Shri Gopal Jain, learned Senior Counsel in support of IA No.1975 of

2023 submits that permission of Tribunal is required for appointment of

Board of Directors, so that necessary regulatory actions as part of general

corporate compliances under the law can be taken. The prayers made in

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 9 the IA No.1975 of 2023 have not been opposed by the learned Senior

Counsel for the SRA. It is submitted that the Board of Directors need to be

appointed. Shri Prasad, however, submits that while appointing the Board

of Directors, the Appellant may also consider including one representative

of SRA.

9. The learned Senior Counsel for SRA in support of IA Nos.2028-2029,

praying for exclusion contended that even after order dated 13.01.2023

passed by the Adjudicating Authority, appropriate corresponding steps

have not been taken by the MC Lenders, so as to proceed further by the

SRA and 13.04.2023 is the first step taken by the MC Lenders, intimating

the bank account, which bank account is also not a designated bank

account as required by law, in which share application money can be

deposited. It is submitted that SRA has filed an Application before the

Adjudicating Authority for exclusion of period, which could not be heard

and the next date before the Adjudicating Authority is 06.06.2023 and as

the 15.05.2023 was fast approaching, hence IA Nos.2028-2029 was filed

on 12.05.2023 seeking exclusion. The learned Senior Counsel submits

that at least the period from 16.11.2022 to 13.04.2023 be excluded for the

period of implementation of the Plan. The learned Senior Counsel further

submits that the SRA is ready and willing to infuse the first tranche of INR

175 crores, and to show the bonafide of the SRA, the SRA shall infuse INR

50 crores within 30 days and rest within time as allowed.

10. The learned Senior Counsel for the SRA in support of IA Nos.2159-

2160 of 2023 submits that the SRA is implementing his part and it was

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 10 due to corresponding steps not being taken by MC Lenders, first tranche

of money could not be infused. There is no lapse in performing the

obligations on the part of SRA as per the Plan and the State Bank of India

issued the letter on 13.05.2023 only to frustrate the implementation of the

Plan. The MC Lenders have threatened to invoke the Performance Bank

Guarantee, which is not permissible in the facts of the present case. This

Tribunal may grant appropriate interim order so that Performance Bank

Guarantee may not be invoked frustrating the implementation of the Plan.

11. Shri Gopal Jain, learned Senior Counsel appearing for MC Lenders

submits that the SRA having filed an Application before Adjudicating

Authority praying for exclusion of period, they are not entitled to file the

present Application praying for exclusion. Shri Jain further submits that

period for exclusion prayed for is excessive and cannot be allowed.

Replying to IA Nos.2159-2160, Shri Jain submits that Performance Bank

Guarantee is an independent contract where the lenders have right to

invoke the Bank Guarantee, which cannot be made subject matter of the

Application. It is submitted that SRA has to infuse INR 175 Crores, which

is first tranche of money.

12. We have considered the submissions of learned Counsel for the

parties and have perused the record.

13. The IA No.1975 of 2023 filed by the MC Lenders, seeks permission

for appointment of Board of Directors of the Corporate Debtor. The

Application as noted above is not opposed by the SRA and it is stated that

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 11 the appointment of Board of Directors to the Corporate Debtor is the step,

which is essential for taking various regulatory actions as part of general

corporate compliances under law. We allow the IA No.1975 of 2023 in

terms of prayer (a).

14. Now we come to the IA Nos.2028-2029 of 2023, where the SRA has

prayed for exclusion of time prayed for in the Application from 16.11.2022

till the Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 is

decided. As noted above, the SRA has already filed an Application before

the Adjudicating Authority, praying for exclusion of time, which is fixed for

06.06.2023 being IA No.1863 of 2023 and the same has not yet been

considered. The SRA had filed this Application on 12.05.2023, since the

180 days period as per order passed by the Adjudicating Authority dated

13.01.2023 was coming to an end on 15.05.2023. We having already by

our order dated 03.03.2023 passed in this Appeal directed that steps

regarding the implementation of the Plan need to be undertaken by the

SRA, which need to be overseen and cooperated by the Monitoring

Committee, all necessary steps have to be taken by both the parties. From

the facts, which have been brought on record, it appears that even after

order dated 13.01.2023 passed by the Adjudicating Authority, allowing the

implementation of the Plan filed by the SRA, the directions issued by

Adjudicating Authority on 13.01.2023 were not implemented by the MC

Lenders. Rather, MC Lenders have challenged the order dated 13.01.2023

by means of Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023. In

Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 the MC Lenders

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 12 have filed an Application praying for interim relief. The prayers in the

interim relief application filed by the Appellant in IA No.512-513 of 2023

are to the following effect:

"(a) Stay the effect and operation of the Impugned Order dated January 13, 2023 passed by the Hon'ble National Company Law Tribunal, Mumbai in I.A. No.3358 of 2022 and I.A. 3508 of 2022 filed in Company Petition (I.B.) No.2205 of 2019 till the hearing and final disposal of the present Appeal; and

(b) Direct that pending the hearing and final disposal of the present Appeal, the control and management of the affairs of Corporate Debtor be vested with Mr. Ashish Chhawchharia, erstwhile Resolution Professional of the Corporate Debtor.

(c) Remand the Resolution Plan to the CoC for fresh consideration/ approval in light of the non-

fulfillment of the Conditions Precedent, thereby altering the commercial wisdom basis which the CoC had originally approved the Resolution Plan; and

(d) Pass such other further reliefs as the nature and circumstances of the case may require."

15. As noted above, this Tribunal on 03.03.2023 heard the Appeal as

well as the IAs and passed order, refusing to grant interim prayer to the

Appellant. After order dated 03.03.2023 declining the interim prayer, the

MC Lenders have taken steps, i.e. on 13.04.2023 communicating the

account number to the SRA and on being pointed out by the SRA that

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 13 account number communicated on 13.04.2023 is not a designated

account, in which amount can be infused, Shri Gopal Jain very fairly

submitted that another designated account shall be communicated to the

SRA immediately on which first tranche of INR 175 crores has to be infused

by the Appellant.

16. Shri Gopal Jain has further submitted that there being no stay on

the implementation, the SRA cannot claim exclusion of the aforesaid

period.

17. After considering the facts and sequence of events in the present

case, we are of the view that SRA is entitled for exclusion of period from

16.11.2022 till 03.03.2023, when this Tribunal in the present Appeal

passed an order declining the interim relief as prayed by the MC Lenders.

IA Nos.2028-2029 is thus allowed, excluding the period from 16.11.2022

till 03.03.2023. As undertaken by the SRA, the IA No.1863 of 2023 pending

before the Adjudicating Authority shall be withdrawn. IA No.2028-2029 of

2023 is allowed accordingly.

18. Now we come to IA Nos.2159-2160 of 2023. The SRA has given a

Performance Bank Guarantee for implementation of the Resolution Plan.

The Adjudicating Authority having come to the conclusion that conditions

precedent have been achieved by the SRA, issued directions to the MC

Lenders to implement the Plan, which order as noted above has been

challenged by the MC Lenders in this Appeal. On 03.03.2023 as noted

above, this Tribunal passed a categorical direction for taking steps

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 14 regarding the implementation of the Plan by the SRA, which were required

to be overseen and cooperated by the Monitoring Committee.

19. When the Resolution Plan of the Corporate Debtor has received

approval up to Hon'ble Supreme Court and the Monitoring Committee is

constituted under the Plan to oversee implementation, the Monitoring

Committee has to act as a facilitator for implementation of the Resolution

Plan instead of finding fault and taking steps, which does not facilitate the

implementation, rather delay the implementation. There is no doubt that

Performance Bank Guarantee can be invoked by the MC Lenders, but the

said invocation can only take place when SRA has failed to implement the

Plan. Present is a case where directions have been issued to both MC

Lenders and SRA to implement the Plan and the event of failure of the Plan

has not yet arrived. When the Adjudicating Authority has directed on

13.01.2023 to take steps towards the implementation of the Plan and

which order was not been stayed by this Tribunal on 03.03.2023, the steps

ought to have been taken by the MC Lenders in furtherance of the

implementation. The time has not arrived for invoking the Performance

Bank Guarantee. When the SRA is ready to undertake to perform its

obligations under the Plan, we are of the view that Performance Bank

Guarantee given by the SRA cannot be permitted to the invoked by the MC

Lenders. MC Lenders instead of threatening to invoke Performance Bank

Guarantee, should take steps, which may help implementation of the Plan

and to achieve the objective of Resolution Plan. The Resolution Plan has

been approved with the intent and purpose to revive the Corporate Debtor,

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 15 which revival is in accordance with objective and purpose of the IBC. We

again reiterate that efforts by MC Lenders and SRA should be coordinated

for revival of the Corporate Debtor, so as to start its operations at an early

date, which is in the interest of all stake holders as well as in the interest

of Corporate Debtor.

20. In view of the aforesaid, we direct that MC Lenders shall not invoke

the Performance Bank Guarantee in the facts of the present case as on

date, and for invocation, if any, MC Lenders may take leave of the

Adjudicating Authority. The IA Nos.2159-2160 is disposed of accordingly.

21. The learned Counsel for the parties have also submitted that looking

to the nature and issues raised, the Appeal itself be decided finally.

22. Let Appeal itself be listed for hearing on 12th July, 2022 at 02:00

PM.

23. Order in all the three IAs being passed today, the Appeal need not be

listed on 30.05.2023 as directed earlier.

[Justice Ashok Bhushan] Chairperson

[Mr. Barun Mitra] Member (Technical)

NEW DELHI

26th May, 2023

Ashwani

IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 16