Tricountry Premier Hearing Services ... vs State Bank Of India And Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 1038 of 2021 (Arising out of Order dated 24.11.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Cuttack Bench in IA (IB) No.115/CB/2021 in TP No.01/CTB/2020 CP(IB) No.1283/MB/2017])

IN THE MATTER OF:

Tricounty Premier Hearing Service Inc 707, Oaks, Shores road, Leesburg, Florida-34748 USA

Through Tri County Holding (P) Ltd. SF No. 6/684, 685, Sikkaram Palayam, 101 Bajaj Bhavan, Nariman Point, Mumbai 400021. .... Appellant

Vs

1. State Bank of India Jail Road, Arera Hills Bhopal (M.P.).

2. Axis Bank Limited Axis House, 7th Floor, C-2, Wadia International Centre, P.B. March Worli, Mumbai-400025.

3. Sundaresh Bhat, Erstwhile Resolution Professional/ Member of Monitoring Committee, Level-9, The Ruby, North West Wing, Senapati Bapat Road, Dadar (W), Mumbai. ... Respondents

Present: For Appellant: Mr. Krishnendu Datta, Ms. Aditi Sharma, Advocates.

For Respondent: Mr. Joy Saha, Sr. Advocate with Mr. Ashwini Kr. Singh, Mr. Joydip Mukherjee, Advocates for R-1

Company Appeal (AT) (Insolvency) No. 1038 of 2021 1 JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed by Successful Resolution Applicant

challenging the order dated 24th November, 2021 passed by National

Company Law Tribunal, Cuttack Bench, rejecting IA (IB) No.115/CB/2021

filed by the Appellant seeking extension of four weeks' time for making

payment as was allowed by order dated 20.09.2021 of the Adjudicating

Authority.

2. Brief facts of the case necessary to decide this Appeal are:

(i) Corporate Insolvency Resolution Process (CIRP) was initiated

against the Corporate Debtor - BSR Diagnostic Limited. The

Appellant submitted a Resolution Plan in pursuance of an

advertisement issued by Resolution Professional Inviting

Expression of Interest. The Resolution Plan was considered

and approved by the Committee of Creditors with 99.48% votes

in the 8th meeting of the CoC on 12.11.2018. The Resolution

Professional filed an Application for approval of the final

Resolution Plan dated 05.11.2018, which came to be approved

by the Adjudicating Authority by order dated 22nd January,

2019. The State Bank of India was one of the Financial

Creditor with 66.76 % majority voting share and another

Financial Creditor was Axis Bank Limited having 29.23%

voting share in the Committee of Creditors

Company Appeal (AT) (Insolvency) No. 1038 of 2021 2

(ii) As per the Resolution Plan the Financial Creditors were

required to be paid a total sum of Rs.45 crores. Following

amount was proposed to each of the Financial Creditors:

"Name of the Bank/ Lender Claim Amount Admitted Payable Axis bank Limited 31.07 13.16 State Bank of India 70.94 30.05 Siemens Financial Service Pvt. 0.79 00.33 Ltd. Clix Finance India (GE Capital) 1.10 00.47 India Infoline Finance Limited 2.36 01.00 Total 106.26 45.00"

(iii) Out of Rs.45 crores, upfront payment of Rs.12 crores was to

be made within 60 days from the date of the order of the NCLT.

Rupees 26 crores by 31st March, 2019 and Rs.3 crores by 31st

March, 2020 with interest of 8.00%. The Plan also provided

payment for Operational Creditors, unsecured Financial

Creditors, employees/ workmen, statutory dues and payment

to existing shareholders.

(iv) The Successful Resolution Applicant made payment of Rs.12

crores and in March 2021 paid further amount of Rs.3 crores.

The payment to unsecured Financial Creditor of Rs.1.01 crores

was to be paid within 5 years from the date of approval of

Resolution Plan. Out of which amount Rs.65 lakhs was paid

to Operational Creditors. Unsecured Financial Creditors was

to be paid Rs.44 lacs, which was paid. Employees and

workmen dues upto Rs.1.36 crores required to be paid within

Company Appeal (AT) (Insolvency) No. 1038 of 2021 3 three years from the date of approval of the Plan, out of which

an amount of Rs.1 crore was paid. Statutory dues of Rs.51

lakhs were required to be paid within a period of five years from

the date of approval of the Plan, out of which Rs.20 lakhs has

been paid. Rupees 7 lakhs were paid to existing shareholders.

(v) The Appellant could not pay the Financial Creditors as per the

schedule of payment provided in the Resolution Plan, hence it

filed CA No.58 of 2020 in the month of February 2020 praying

that the Applicant shall be allowed to pay till 31st October,

2021 in several installments as indicated in Application

paragraph 5.22.

(vi) The State Bank of India filed Miscellaneous Application 32 of

2020 seeking liquidation of the Corporate Debtor on the

ground that Resolution Applicant has not complied with the

terms and conditions of the approved Resolution Plan.

(vii) The Application No.58 of 2020 was heard by the Adjudicating

Authority and by order dated 12th April, 2021, the Adjudicating

Authority directed the Appellant to deposit an amount of Rs.20

crores on or before 7th June, 2021 to show their bona fide.

(viii) The Appellant could not deposit the amount of Rs.20 crores as

directed on 12th April, 2021. The Application 58 of 2020 was

heard and finally disposed of by Adjudicating Authority vide its

order dated 20th September, 2021. Application was heard and

order was reserved on 22.07.2021 and was pronounced by

Company Appeal (AT) (Insolvency) No. 1038 of 2021 4 Adjudicating Authority on 20th September, 2021. The

Adjudicating Authority granted one more opportunity to the

Appellant to fulfill all its commitment and financial obligations

as stated in the Resolution Plan by 31st October, 2021. The

Adjudicating Authority noticed that the Appellant has not

followed its commitments as directed by order dated 12th April,

2021.

(ix) Another Application being I.A. no.115 of 2021 dated 29th

October, 2021 was filed by the Appellant stating various

difficulties due to which financial obligations could not be

complied with. By the Application, the Applicant prayed for

grant of 30 days' time till 30th November, 2021 to comply with

order dated 20th September, 2021, so as to fulfill the financial

obligations of the Applicant as per approved Resolution Plan.

The said Application was opposed by the State Bank of India.

(x) The Adjudicating Authority after hearing the parties held that

as per order dated 12th April, 2021, the Applicant was directed

to pay Rs.20 crores out of Rs.30 crores before 7th June, 2021,

which has not been complied with. The Applicant has grossly

failed in complying with the order dated 12th April, 2021.

There are great lapses on the part of the Resolution Applicant

and the Resolution Applicant cannot take shelter and take

advantage of the COVID-19 pandemic because the default has

taken place much before the occurrence of the pandemic. The

Company Appeal (AT) (Insolvency) No. 1038 of 2021 5 Application was rejected by order dated 24th November, 2021.

Aggrieved against which order this Appeal has been filed.

3. When this Appeal was taken up on 09.12.2021, learned Counsel for

the Appellant sought permission to file additional affidavit in pursuance to

which an additional affidavit dated 10th December, 2021 was filed. In the

additional affidavit, Appellant has given the details of payment already

made and details of its source of fund for making other payments as

required to be made. In the additional affidavit, the Appellant also brought

on record letter dated 11th November, 2021 of Kotak Mahindra Bank, where

decision of Kotak Mahindra Bank 'in-principle offer' was communicated to

the Appellant, proposing a term loan of Rs.20 crores.

4. The State Bank of India on 23rd December, 2021 sought time to file

reply to the application. The State Bank of India has filed detailed reply to

the Appeal as well as the Application to which rejoinder affidavit has also

been filed by the Appellant. Although, the advance copy of the Appeal was

sent to Respondent No.1 and Respondent No.2, but they did not file any

appearance. The State Bank of India, the main contesting party having

appeared and filed detail reply and effectively presented the case of

Financial Creditors, no further notice was issued to Respondent Nos.2 and

Respondent No.3.

5. We have heard Shri Krishnendu Datta, learned Senior Counsel for

the Appellant and Shri Joy Saha, learned Senior Counsel for State Bank of

India - Respondent No.1.

Company Appeal (AT) (Insolvency) No. 1038 of 2021 6

6. The learned Senior Counsel for the Appellant submits that Appellant,

after approval of the Resolution Plan has already made payment of more

than Rs.20 crores and has been making serious efforts for implementation

of the Resolution Plan. When the Application No.115 of 2021 was pending

before the Adjudicating Authority, the Appellant had received the offer of

Kotak Mahindra Bank to advance the term loan of Rs.20 crores and had

the Adjudicating Authority extended the 30 days' time, the Appellant could

have been able to meet all financial obligations under the Plan. Shri Datta

submits that in the additional affidavit filed, the Appellant has given details

of source of fund for payment of Rs.30 crores, which it is required to pay

to the Financial Creditors. It is submitted that although the Kotak

Mahindra Bank has 'in-principle offer' communicated its offer to advance

Rs.20 crores, but after rejection of the Application on 24th November, 2021,

the Bank has not disbursed the amount and unless the Appellant is

granted some time to make the deposit, the disbursal of the amount would

not be made by the Kotak Mahindra Bank. The Appellant in the additional

affidavit has also given details of three Bank accounts, where amount of

about Rs.10 crores are deposited, which shall be utilized in making the

payment. Shri Datta submits that there is no dispute that the Appellant

defaulted in complying the payment schedule as provided in the Resolution

Plan. He submits that there have been several reasons as has been

highlighted in I.A. No.58 of 2020 and 115 of 2020, which difficulties were

genuine and it is not a case that Appellant due to any mala fide intention

did not deposit the amount. The Appellant having already made payment

Company Appeal (AT) (Insolvency) No. 1038 of 2021 7 of Rs.15 crores to the Financial Creditors and full CIRP cost amounting to

Rs.4.25 crores and other payments have also been made, the Appellant has

shown its bona fide to comply the Plan and it is earnestly prayed to this

Tribunal that time of only four weeks be extended for making entire deposit

by the Appellant. It is submitted that the Appellant is running the

Corporate Debtor, which is running a diagnostic center in four States of

the Country and has given services to people in wake of COVID-19, which

engulfed the entire country. Shri Datta submits that impugned order dated

24th November, 2021 has only considered the past conduct of the Appellant

and when order was passed on 20th September, 2021 by the Adjudicating

Authority extending the time till 31st October, 2021, the earlier defaults

stood condoned. The reasons given in the Application No.115 of 2021 and

the grounds taken have not been adverted by the Adjudicating Authority.

The order does not advert to the source of funds as indicated in the

Application No.115 of 2021. It is submitted that the liquidation application

filed by the Bank has been heard, but orders have not yet been

pronounced. It is submitted that permitting the Corporate Debtor to go for

liquidation would yield no better result and the Appellant with all bona fide

intention seeks only four weeks' time to comply all financial obligations of

the Plan.

7. Shri Joy Saha, learned Senior Counsel appearing for State Bank of

India has vehemently opposed the Appeal and has made elaborate

submissions. It is submitted that Resolution Plan was approved by CoC

on 12.11.2018, which subsequently was approved by the Adjudicating

Company Appeal (AT) (Insolvency) No. 1038 of 2021 8 Authority. The Successful Resolution Applicant was to make payment of

Rs.38 crores by 31st March, 2019. On 06.02.2019, the Corporate Debtor

was handed over to Successful Resolution Applicant, who was running the

diagnostic centers in different parts of the Country. Only payments

towards the Financial Creditor is Rs.12 crores and Rs.3 crores in SBI

Escrow account. Shri Saha has also referred to an order dated 06.01.2021

passed by the Adjudicating Authority by which the Adjudicating Authority

has appointed a special officer for making inventory of the machinery in

different centers, before the Application No.32 of 2020 filed by the Bank for

liquidation is taken for consideration. Shri Saha referring to the order

dated 12th April, 2021 passed by the Adjudicating Authority contends that

Adjudicating Authority by its order granted time till 7th June, 2021 to the

Resolution Applicant to deposit amount of Rs.20 crores out of Rs.30 crores

to show their bona fide. However, no payment at all were made by the

Resolution Applicant in compliance of the order dated 12th April, 2021. He

submits that Resolution Applicant has been running the diagnostic center

but has not made payment as directed by the Adjudicating Authority. It is

submitted that by order dated 20th September, 2021, last opportunity was

granted to the Successful Resolution Applicant to make entire payment by

31st October, 2021. The Resolution Applicant has not complied the said

order also and before 31st October, 2021 has filed another Application No.

115 of 2021 seeking further time of 30 days. It is submitted that

Adjudicating Authority in the impugned order rightly come to the

conclusion that no case has been made out for grant of any further time.

Company Appeal (AT) (Insolvency) No. 1038 of 2021 9 The Appellant has failed to deposit the entire amount by 31st October,

2021. It is submitted that Adjudicating Authority has rightly observed that

the Resolution Applicant cannot take shelter and advantage of COVID-19

pandemic because the default has taken place much before the occurrence

of the pandemic. It is submitted that in pursuance of the order dated 20th

September, 2021, the Appellant has not filed the Weekly Progress Report

as was directed by the Adjudicating Authority. He submits that Resolution

Plan can neither be modified nor changed at the instance of Resolution

Applicant and Adjudicating Authority could not have granted the time as

prayed by the Appellant. With regard to letter dated 11.11.2021 issued by

Kotak Mahindra Bank offering to propose financial facility of Rs.20 crores,

it is submitted that this was only an 'in-principle offer' approval and there

is no commitment by Kotak Mahindra Bank to grant financial assistance

of Rs.20 crores. The letter of Kotak Mahindra Bank cannot be treated to

be final offer by the Bank. The Appellant had given fresh proposal by letter

dated 26th July, 2021 and 21st August, 2021, which were wholly

impermissible.

8. Shri Joy Saha, learned Senior Counsel for Respondent No.1 has also

placed reliance on judgment of the Hon'ble Apex Court in Ebix Singapore

Private Limited vs. CoC Educomp in Civil Appeal No.3224 of 2020 decided

on 13th September, 2021 and relied on paragraph 202, 203 and 204 of the

judgment.

9. Shri Saha lastly submitted that the Rajesh Kumar Sinha, who has

filed this Appeal claiming to be Authorised Signatory has no authority to

Company Appeal (AT) (Insolvency) No. 1038 of 2021 10 file this Appeal. It is submitted that the Appeal instituted by Tricounty

Premier Hearing Service Inc. through its subsidiary Tri County Holding (P)

Ltd. and affirmed by alleged Authorised Representative of Tri County

Holding (P) Ltd. being Rajesh Kumar Sinha is not maintainable. The Tri

County Holding (P) Ltd. could not have sub-delegated its authority to

Rajesh Kumar Sinha. There is no Resolution by Tricounty Premier Hearing

Service Inc. giving authority to Rajesh Kumar Sinha. Minutes of the

meeting of Tricounty Premier Hearing Service Inc. is not signed by Board

of Directors, but only by the alleged CEO of the said Company. Shri Saha

submits that present Appeal cannot be instituted on the basis of purported

Resolution of Tri County Holding (P) Ltd.

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

parties and have perused the record.

11. We may first consider the submissions of Shri Joy Saha, learned

Senior Counsel for Respondent No.1 raising objection to very

maintainability of the Appeal filed by Rajesh Kumar Sinha, claiming to be

Authorised Signatory of Tricounty Premier Hearing Service Inc. The Memo

of Appeal described the Appellants in following manner:

"Tricounty Premier Hearing Service Inc 707, Oaks, Shores road, Leesburg, Florida-34748 USA

Through Tri County Holding (P) Ltd.

SF no. 6/684, 685, Sikkaram Palayam, 101 Bajaj Bhavan, Nariman Point, Mumbai 400021. .... Appellant"

Company Appeal (AT) (Insolvency) No. 1038 of 2021 11

12. In the Appeal, the Appellant has filed extract of Minutes of the

Meeting of sole shareholder of the Tri County Holding Pvt. Ltd. dated 26th

November, 2021 along with Annexure A-2. Two Minutes of the Meeting

have been placed on record i.e. Minutes of Tri County Holding Pvt. Ltd. and

Tri County Hearing Services at pages 36 and 37. Tri County Hearing

Services has resolved that Tri County Holding (P) Ltd., authorized

representative is authorized to take all necessary action to file, pursue and

defend all court cases, before any Court, Tribunal, Authority etc. The

Appeal has been filed by Tricounty Premier Hearing Service Inc. through

Tri County Holding (P) Ltd. Tri County Holding (P) Ltd. is subsidiary of

Tricounty Premier Hearing Service Inc. When Tricounty Holding (P) Ltd. is

authorised to represent the Appellant, there is no invalidity in its

authorizing Shri Rajesh Kumar Sinha as Authorised Representative to sign

all petition papers, applications etc. In this context, we may refer to order

of Adjudicating Authority dated 20th September, 2021, where Adjudicating

Authority has in paragraph 5 has clearly held that Trycounty Holding Pvt.

Ltd. is an Indian subsidiary/ associate concern of the Resolution Applicant,

who is managing the Corporate Debtor post the Effective Date and it is

Trycounty Holding Pvt. Ltd., which is making the payment to the creditors

in the Approved Resolution Plan. It is useful to extract paragraph 5 of

judgment, which is to the following effect:

"5. Tricounty Holding Pvt. Ltd. is an Indian subsidiary/ associate concern of the Resolution Applicant, and this entity has been managing the Corporate Debtor post the Effective Date. The

Company Appeal (AT) (Insolvency) No. 1038 of 2021 12 entity is making the payments to the creditors under the Approved Resolution Plan and to the employees and suppliers of the Corporate Debtor to maintain the Corporate Debtor as going concern."

13. TriCounty Holding Pvt Ltd., Indian subsidiary/ associate of

Resolution Applicant is making the payment to creditors as has been noted

by the Adjudicating Authority, we see no reason to hold that present Appeal

is not maintainable, which has been filed through Tri County Holding Pvt.

Ltd. Shri Datta, learned Senior Counsel for the Appellant has further

submitted that even before the Adjudicating Authority, all applications

were filed through Tri County Holding Pvt. Ltd. and same representative

has signed the pleadings, but no objection was raised by the State Bank of

India before the Adjudicating Authority regarding competence of

Authorised Representative signing the pleadings. We, thus, are of the view

that this Appeal cannot be thrown out on the submission, which have been

made by learned Counsel for the State Bank of India.

14. As per Resolution Plan, the payment of Rs.45 crores was to be made

to the Financial Creditors, out of which Rs.30.05 crores was to be received

by the State Bank of India. According to para 8.3(ii) sub-clause (b) payment

of Rs.45 crores was proposed in following manner:

b) On the basis of the proposed fund infusion by the Resolution Applicant the total restructured debt of Rs.45.00 crore is proposed to be repaid as under:

Company Appeal (AT) (Insolvency) No. 1038 of 2021 13  Upfront payment of Rs.12.00 Crores within 60 Days from the date of order of NCLT.

 Payment of amount of Rs.26.00 Crore by 31st March, 2019, without any interest.

 Payment of amount of Rs.3.00 Crore by 31st March 2020, with an interest of 8.00% p.a. on reducing balance from April 2019.

 Payment of amount of Rs.4.00 Crore by 31st March, 2021, with an interest of 8.00% p.a. on reducing balance from April 2019.

 The source of funds to make the above payments to be Secured financial has been provided at Clause 11 of this Plan."

15. The payment of Rs.45 Crores was to be started to be made within 60

days from the date of order of NCLT till 31st March, 2021. Rupees 12 crores

was upfront. Out of Rs.45 crores, the Resolution Applicant has paid only

Rs.12 crores + Rs.3 crores paid in the Escrow account of State Bank of

India. Rs.30 crores is still to be paid and Appellant could not make the

payment as provided in the Resolution Plan. The Application No.58 of 2020

was filed by the Applicant seeking extension of time till 31st October, 2021

for payment of entire outstanding dues. Shri Saha, learned Senior Counsel

for the Respondent is correct in saying that by order dated 12th April, 2021,

the Appellant was directed to make payment of Rs.20 crores by 7th June,

2021, which payment also could not be made by the Appellant. In order

dated 20th September, 2021 the Adjudicating Authority has clearly noticed

that Resolution Applicant has failed to make the payment as per Resolution

Plan and has also failed to comply order dated 12th April, 2021, since he

Company Appeal (AT) (Insolvency) No. 1038 of 2021 14 could not make the payment of Rs.20 crores as was directed to be paid till

7th June, 2021. In paragraph 13 of the order dated 20th September, 2021,

the Adjudicating Authority has noticed the details of payment made by the

Applicant. It is useful to extract paragraph 13 of the order dated 20th

September, 2021 of the Adjudicating Authority, where Resolution Applicant

had indicated the payments to show bona fide attempt on part of it:

"13. The Learned Counsel for the Resolution Applicant has submitted the following details to indicate their bona fide attempt and to show commitment on implementation of the Resolution Plan: -

"(i) Amount of ₹ 69 Lacs has been paid by RA (averred at Pg. 19 @ para 5.22, Pg. 134 @ para 3, Pg. 137 @ para 6 of CA 58);

(ii) RA made paid payment of ₹ 1.7 Crore for electricity charges. New equipment has been brought from US (Pg. 140 @ para 18 of CA 58);

(iii) Payment of ₹40 lacs were made instead of ₹19 lacs (Pg. 5 of the Addl. Affidavit dt. 15.12.2021);

(iv) RA has made several payments totaling to ₹21.76 Crore (Pg. 51 of Reply Affidavit in MA 32; averred at Para 14 @ Pg.8 of the Addl. Affidavit 01.12.2020);

(v) RA has been paying the employees (Averred at Para 11 @ Pg.7, annexed at Pg.138 of Addl. Affidavit dt. 01.12.2020);

(vi) RA has deposited a sum of ₹3 crore in a no lien account to show their bona fide in accordance with the terms of the order passed by this Tribunal dt.

16.03.2021. (Averred at Para 4 @ Pg.2, annexed @ Pg.7 of Addl. Affidavit dt. 08.04.2021; averred at para 6 @ Pg.5 of I.A. 62 of 2021);

Company Appeal (AT) (Insolvency) No. 1038 of 2021 15

(vii) The RA has made payment of ₹10.61 Lakhs towards the CIRP Costs as on 22.01.2019 (Averred at Para 9 @ Pg. 6, annexed at Pg.26 @ pg. 29 of Reply Affidavit dt. 23.11.2020 to MA 32: averred at Para 5.8 @ Pg.10 of CA 58);

(viii) RA has been making continuous payments and has paid the entire CIRP Costs in full and has also paid the entire dues of workmen and employee of the Corporate Debtor. (Averred at Para 19 @ Pg. 11 of Reply Affidavit dt. 23.11.2020 to MA 32);

(ix) RA has shown their bona fide intention by appropriating Rs.12 Crore to the creditors even after SBI has filed the liquidation application. (Averred at Para 24@ Pg. 14 of Reply Affidavit dt. 23.11.2020 to MA 32);

(x) The amount of ₹ 12 Crore has been paid by the RA from its personal funds as no financial institution agreed to provide loans due to incomplete handover by FCs. (Averred at Para 25 @ Pg. 15 of Reply Affidavit dt. 23.11.2020 to MA

32);

(xi) The RA has been making full payment of the dues of the doctors, technicians, employees and vendors throughout the period and has been keeping the company a going concern and has paid an amount of ₹10.04 Crores (Averred at Para 28 @ Pg.16 and at Para 30 @ Pg. 17, annexed at Pg. 51 of Reply Affidavit dt. 23.11.2020 to MA 32 and Pg. 51 and 52 of Addl. Affidavit dt.

01.12.2020);

Company Appeal (AT) (Insolvency) No. 1038 of 2021 16

(xii) Despite not being given the Complete handover of the company the RA has been investing out of its own funds to purchase new diagnostic equipment. (Averred at Para 12 @ Pg. 09 of I.A. 62/ 2021);

(xiii) RA has already paid an amount of ₹ 8.04 Crores to SBI (Averred at Para 3 @ Pg.1 of the Settlement Affidavit dt. 15.03.2021). RA has duly deposited ₹3 Crore with SBI in March 2021 (Averred at Para 4 @ Pg.2 of the Addl. Affidavit dt. 8.4.2021);

(xiv) The RA has been able to resolve the issue with one of the landlords at one of the centres in Jabalpur (MP) by making a payment of ₹40 Lacs instead of ₹19 Lacs as per the Resolution Plan.

(Averred at Para 6 @ Pg. 4-5 of the Settlement Affidavit dt. 15.03.2021);

(xv) The RA has been constantly working towards improvement and had cleared certain dues of CIRP Costs and dues of the employees/ workmen and some other operational creditors. (Averred in Para 5.20 @ Pg.17, Annexure at Pg.149 of CA 58/2020);

(xvi) During the hearing on 22.07.2021, this Tribunal enquired the RA to bring forward its proposal which pays the lenders in full of ₹45 Crores. On 9.8.2021, it was submitted before this Tribunal that the RA has made a proposal on 7.8.2021, which was prayed to this Tribunal to direct the lenders to consider the same. Stating as follows:-

a. Out of ₹45 Crores, ₹12 Crores has been paid to FCs

Company Appeal (AT) (Insolvency) No. 1038 of 2021 17 b. Out of remaining ₹33 Crores ₹ 3 Crores has been deposited with SBI in no-lien account in March 2021.

c. RA shall deposit ₹5 Crores within 15 days, after this Tribunal allows the FCs to consider the proposal of RA.

d. Another ₹5 Crores shall be deposited within 15 days from receipt of written communication from FCs accepting the proposal of RA.

e. Within 60 days from approval of this Tribunal of this proposal modifying the Resolution Plan--

 ₹9 Crores shall be paid by the RA to the FCs through an NBFC, on simultaneous assignment of their debt in favour of the said NBFC so that the security held by the FCs is immediately transferred in favour of the NBFC.

 For ₹11 Crores, 8% fully redeemable debentures shall be issued. 50% of the said debentures shall be redeemed at the end of 1 year and the balance 50% shall be redeemed at the end of 2 years from the date of their issuance. Interest on the said debentures shall accrue @ 8% on simple basis and shall be paid at the time of their redemption. The RA shall also give security of this amount which shall be to the satisfaction of the lenders."

16. After noticing all the relevant facts of the parties, the Adjudicating

Authority in para 16 of the order dated 20th September, 2021, allowed one

Company Appeal (AT) (Insolvency) No. 1038 of 2021 18 last opportunity to the Resolution Applicant to fulfill all its commitment by

31st October, 2021. Para 16 of the order is as follows:

16. This Adjudicating Authority is of the view that although the Resolution Applicant has grossly failed in meeting its commitments in respect of implementation of the Resolution Plan, liquidation is the last resort when all other available options fail in the CIRP. In the interest of all the stakeholders and also the implementation of the Resolution Plan, after considering all the facts and circumstances of the case, this Adjudicating Authority allows one last opportunity to the Resolution Applicant to fulfil all its commitments and financial obligations stated in the Resolution Plan by 31.10.2021 failing which actions as may be deemed appropriate as per law, shall be taken."

17. There is no dispute that even after extension granted by Adjudicating

Authority till 31.10.2021 the Appellant could not make the payment and

filed another Application No.115 of 2021 for granting extension of 30 days

for making payment, which came to be rejected, giving rise to this Appeal.

18. The Application No.115 of 2021 has been brought on record by State

Bank of India in its counter reply. In paragraph 4, 5 and 6 of the

Application, following was pleaded:

"4. That it is submitted that after the Order dated 20.09.2021 was passed, there has been several positive developments which have taken place in procurement and securing of funds to successfully implement and fulfill the financial obligation set

Company Appeal (AT) (Insolvency) No. 1038 of 2021 19 out in the Resolution Plan. Details of funds secured are listed below:

a. 5,00,000 USD which is Rs.3.75 Crores in Tricounty USA Account. Copy of the bank statement evidencing the same is annexed herewith as ANNEXURE - B. b. 5,00,000 USD which is Rs.3.75 Crores in Tricounty's CD account. Copy of the bank statement evidencing the same is annexed herewith as ANNEXURE - C. c. Rs. 2 Crores is deposited in Tricounty's India Bank account. d. Rs.12.5 Crores sanctioned by Caparo Financials. Copy of the letter dated 29.10.2021 is annexed herewith an ANNEXURE - D.

5. That it is submitted that M/s. Caparo Financials, a financer of the Applicant has approved disbursement of funds of Rs.12.5 Crores for payment to SBI. However, it has been requested that Mr. Parvesh Khirbat should be personally present to sign the documents in person as the entire funding is being done on the personal guarantee of Mr. Pravesh Khirbat. Accordingly, M/s Caparo Financials has also issued a letter regarding the same dated 29.10.2021 referred as Annexure - E in the above paragraph.

6. That it is submitted that due to continuous Covid 19 restrictions on the international travel by the Government of India, Mr. Parvesh Khirbat being a resident of Florida, USA, was unable to come to India since he is presently in USA. Moreover, due

Company Appeal (AT) (Insolvency) No. 1038 of 2021 20 to the relexation in norms for international travel Mr. Pravesh Khirbat has finally been able to book the flight tickets for 16.11.20212 and upon his arrival to India, all the processes with respect to procuring and securing of funds shall be executed and complied within 14 days. Copy of the flight tickets dated 16.11.2021 is annexed herewith as ANNEXURE - E."

18. The Application No.115 of 2021 has been rejected by the impugned

order on 24th November, 2021. The Adjudicating Authority has referred to

its order dated 12th April, 2021 and has observed that Appellant has failed

to comply its order dated 12th April, 2021 and last opportunity was granted

till 31.10.2021, hence, it has failed to comply the order and conduct of the

Successful Resolution Applicant is completely lacking in its bona fide.

Paragraph 6 and 7 of the impugned judgment is as below:

6. This Adjudicating Authority after hearing all the counsel, constraining pandemic situation in the country etc., had passed an Order on April 12, 2021 allowing time up to 07.06.2021 to the Resolution Applicant and from the total outstanding amount of ₹30.00 crore to pay ₹20.00 crore on or before 07.06.2021 to show their bona fides and also to file an affidavit stating that the plan is being complied within all other aspects. It has been noted that the Resolution Applicant has grossly failed in complying with the aforesaid Order dated April 12, 2021. There are great lapses on the part of the Resolution Plan. The Resolution Applicant cannot take shelter and take advantage

Company Appeal (AT) (Insolvency) No. 1038 of 2021 21 of the COVID-19 pandemic situation because the default has taken place much before the occurrence of the pandemic.

7. Although, this Adjudicating Authority was of the view that the Resolution Applicant has grossly failed in meeting its commitments in respect of implementation of the Resolution Plan, liquidation is the last resort when all other available options fail in the CIRP. In the interest of all the stakeholder and also the implementation of Resolution Plan, after considering all the facts and circumstances of the case, allowed one last opportunity to the Resolution Applicant to fulfil all its commitments and financial obligations stated in the Resolution Plan by 31.10.2021, clearly stating that if it fails this time, actions as may be deemed appropriate as per law, shall be taken. The Resolution Applicant was also directed to submit a Weekly Progress Report in implementation of the Resolution Plan in the Registry. In total disregard to Orders of this Tribunal the Applicant has grossly failed in its commitments. It has not adhered to the stated timelines or the extensions allowed by this Tribunal to report compliances. Despite Orders it has not submitted any weekly progress report in the registry. The conduct of the successful resolution applicant is completely lacking in bona fides and is therefore questionable. After such non-compliances seeking further time for the required compliances, for any reason whatsoever, is not acceptable to this Tribunal at this stage, more particularly when conduct of the applicant in

Company Appeal (AT) (Insolvency) No. 1038 of 2021 22 its earlier commitments and compliances in response to earlier Orders of Tribunal in itself is questionable. We are inclined to outrightly reject this Application while questioning the conduct of the Resolution Applicant in the entire matter."

19. There is no dispute that Appellant failed to adhere to its commitment

in Resolution Plan and also failed to comply order dated 12th April, 2021

and 20th September, 2021. The extension of 30 days was sought by the

Appellant by its Application dated 29th October, 2021. The Adjudicating

Authority ought to have adverted to the grounds and reasons given in the

Application to find out as to whether there is any ground to grant any

extension of time of 30 days as prayed for.

20. It is well settled that time line in IBC proceedings has its salutary

value and Resolution Applicant has to adhere to its commitment as made

in the Resolution Plan, when it is approved by the Adjudicating Authority.

We may also notice that in this Appeal, the Appellant has in addition to

pleas taken in the Application No.115 of 2021 has brought on the record

letter dated 11.11.2021 of Kotak Mahindra Bank proposing to offer term

loan facility of Rs.20 crores, which has been brought on record along with

additional affidavit. Mr. Joy Saha, learned Senior Counsel appearing for

the Bank has submitted that, that letter is not a formal commitment for

extending any term loan by Kotak Mahindra Bank, hence, that letter means

no consideration. It is submitted that, that letter is only 'in-principle offer'.

Shri Saha has referred to following statement in the letter:

Company Appeal (AT) (Insolvency) No. 1038 of 2021 23 "Kindly note that this letter is an "in-principle offer" and is subject to due diligence and final approval from the bank. It should not be in any manner construed as a commitment from the Bank to extend the above mentioned financial facilities. The Bank shall have the absolute right to vary/modify/withdraw/rescind/cancel the offer without any notice to the Applicant and the decision of the Bank in this regards shall be final, conclusive and binding on the Applicant, both in and out of court/judicial/quasi judicial authority."

21. The offer of Kotak Mahindra Bank was immediately accepted by letter

dated 11.11.2021 by the Appellant. The statement in the letter as quoted

above on which reliance has been placed by Mr. Saha, is a normal format

when Bank communicate its 'in-principle offer'. It is true that offer and

actual disbursement are two different events, but an offer of the Bank for

extending Rs.20 crore term loan facility, so as to enable the Appellant to

comply the financial obligations is a substantial ground on which the plea

of the Appellant can be considered. The Application for liquidation No.32

of 2020 has already been filed by the State Bank of India for directing for

liquidation, which has already been heard, but orders have not been

pronounced by the Adjudicating Authority. It is well known that liquidation

is a 'corporate death' and as held by Hon'ble Supreme Court in (2019) 4

SCC 17 - Swiss Ribbons Private Limited and Anr. vs. Union of India

and Ors., the liquidation ought to be resorted to as a last resort. The

Adjudicating Authority in its order dated 20th September, 2021 has noticed

that liquidation should only be a last resort, hence, it was pleased to extend

Company Appeal (AT) (Insolvency) No. 1038 of 2021 24 the time till 31st October, 2021, despite the Appellant having not made the

payment as it had promised in its Resolution Plan. The present is a case

where Appellant has made payment of Rs.15 crores to Financial Creditors,

payments to unsecured creditors, payments to other Operational Creditors

and some payments to other creditors. In the additional affidavit in

paragraph 5, the Appellant has given a table mentioning about the

payments made and source of funds for remaining payment to the following

effect:

Nature of As per Amount Remarks Source of Fund payment Plan (Rs.) Paid (Rs.) CIRP 4.25 Crores 4.6 Crores Cost towards CIRP has Costs been paid Secured FCs 45 Crores 15 Crores As an admitted fact a Remaining amount sum of Rs.15 crore of Rs.30 crore will (Rs.12 crore in the bank be paid within four account of corporate weeks from the date debtor and Rs.3 crore of the order of this with SBI, Bhopal) has Hon'ble Tribunal already been paid allowing the present towards the dues of appeal, as follows:-

Financial Creditors and -A sum of the balance outstanding Rs.19,03,81,196/- details below remains towards the balance payable towards the claim of State Bank claim of respective of India shall be Financial creditors: paid directly by 1. State Bank of India, Kotak Mahindra a sum of Bank. Rs.19,03,81,196/- - A sum o 2. Axis Bank, a sum of fRs.9,65,10,000/- Rs.9,65,10,000/- towards the claim of 3. Siemens Financial, a Axis bank shall be sum of paid out of the Rs.24,00,000/- balance standing in 4. Clix Finance, a sum the bank accounts of Rs.34,00,000/- of the Appellant/ its subsidiaries. -A sum of Rs.24,00,000/- to Siemens Financial & a sum of Rs.34,00,000/- to Clix Finance shall be paid directly by Kotak Mahindra Bank.

Company Appeal (AT) (Insolvency) No. 1038 of 2021 25 Unsecured 44 Lacs 44 Lacs Fully paid. FCs OCs 1.01 65 Lacs The balance is required Crores to be paid within a period of 5 years from the date of approval of resolution plan by the Ld. Adjudicating Authority i.e. 22.01.2019. Employees 1.36 1 crore To be paid within 3 Workmen Crores years from the date of Dues approval of resolution plan by the Ld Adjudicating Authority i.e. 22.01.2019.

However, a sum of Rs.1 crore has already been paid to the employees retained by the Corporate Debtor subsequent to approval of the plan, and the remaining amount of Rs.36 lakhs shall be disbursed as per the timelines provided under the plan.

Statutory 51 Lacs 20 Lacs The balance is required Dues to be paid within a period of 5 years from the date of approval of resolution plan by the Ld. Adjudicating Authority i.e. 22.01.2019. Payment to 7 Lacs 7 Lacs Fully paid, but equity not Existing transferred in the name shareholders of the Appellant despite the same. Resurrection 11 Crores 4 Crores The Appellant has spent Cost Rs.4 Crores towards purchase of new machinery, remaining equipments are in possession of the landlords under dispute and will be repaired as soon as the Appellants in possession of the same."

Company Appeal (AT) (Insolvency) No. 1038 of 2021 26

22. We may also refer to the judgment of the Hon'ble Supreme Court in

Ebix Singapore Private Limited (supra) relied by learned Senior Counsel

for the State Bank of India in support of his submission. In Ebix Singapore

Private Limited (supra), following conclusion has been recorded by the

Hon'ble Supreme Court in paragraphs 202, 203 and 204:

"202 The residual powers of the Adjudicating Authority under the IBC cannot be exercised to create procedural remedies which have substantive outcomes on the process of insolvency. The framework, as it stands, only enables withdrawals from the CIRP process by following the procedure detailed in Section 12A of the IBC and Regulation 30A of the CIRP Regulations and in the situations recognized in those provisions. Enabling withdrawals or modifications of the Resolution Plan at the behest of the successful Resolution Applicant, once it has been submitted to the Adjudicating Authority after due compliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the statute. Since the 330 days outer limit of the CIRP under Section 12(3) of the IBC, including judicial proceedings, can be extended only in exceptional circumstances, this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time. A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is

Company Appeal (AT) (Insolvency) No. 1038 of 2021 27 the case in the present three appeals before us.

Permitting such a course of action would either result in a down-graded resolution amount of the Corporate Debtor and/or a delayed liquidation with depreciated assets which frustrates the core aim of the IBC.

203 If the legislature in its wisdom, were to recognize the concept of withdrawals or modifications to a Resolution Plan after it has been submitted to the Adjudicating Authority, it must specifically provide for a tether under the IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissible and procedural directions, which may include the timelines in which they can be proposed, voting requirements and threshold for approval by the CoC (as the case may be). They must also contemplate at which stage the Corporate Debtor may be sent into liquidation by the Adjudicating Authority or otherwise, in the event of a failed negotiation for modification and/or withdrawal. These are matters for legislative policy.

204 In the present framework, even if an impermissible understanding of equity is imported through the route of residual powers or the terms of the Resolution Plan are interpreted in a manner that enables the appellants' desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor. Pertinently, this direction has been otherwise provided in Section 33(1)(b) of the IBC when an Adjudicating Authority rejects a Resolution Plan under Section 31. In this context, we hold that the existing

Company Appeal (AT) (Insolvency) No. 1038 of 2021 28 insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC- approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations. In the case of Kundan Care, since both, the Resolution Applicant and the CoC, have requested for modification of the Resolution Plan because of the uncertainty over the PPA, cleared by the ruling of this Court in Gujarat Urja (supra), a one-time relief under Article 142 of the Constitution is provided with the conditions prescribed in Section K.2."

23. Shri Saha relying on the paragraph 202 of the above judgment

submits that Adjudicating Authority under the IBC cannot exercise

jurisdiction, which is not provided in IBC. Hon'ble Apex Court in the said

judgment has held that residual powers of the Adjudicating Authority

cannot be exercised to create procedural remedies, which have substantive

outcomes on the process of insolvency. The above observations have been

made in a case where the question before the Hon'ble Apex Court was as

to whether after submission of Resolution Plan, Resolution Applicant can

withdraw the Plan. Hon'ble Apex Court held that it is only Section 12-A,

Company Appeal (AT) (Insolvency) No. 1038 of 2021 29 which enables withdrawal from the CIRP, hence, it was held that

Resolution Applicant cannot withdraw from the Plan. The Hon'ble Apex

Court has also laid down in the above case that existing insolvency

framework in India provides no scope for effecting further modification and

withdrawals of CoC approved Resolution Plans, at the behest of the

Successful Resolution Applicant.

24. The present is not a case where the Resolution Applicant wants to

withdraw from the Plan or seeks any modification in the Plan. We are of

the view that a prayer for extension of 30 days' time to comply financial

commitments as per order dated 20th September, 2021 cannot be said to

modification of the Plan when the Adjudicating Authority itself granted time

to the Resolution Applicant to comply the financial obligations till 31st

March, 2021. The issue which is sought to be raised in the Appeal that

whether Adjudicating Authority erred in exercising its jurisdiction in

refusing to grant extension by 30 days as prayed by Resolution Applicant

or not? The judgment of the Hon'ble Supreme Court in the Ebix

Singapore Private Limited (supra) thus, does not support the submission

of learned Counsel for the State Bank of India that Adjudicating Authority

has no jurisdiction to extend the time for complying the financial

obligations in the Resolution Plan.

25. We may notice one more aspect of the matter. In order dated 20th

September, 2021, the Adjudicating Authority has held that Resolution

Applicant cannot take shelter and take advantage of the COVID-19

pandemic because the default has taken place much before the occurrence

Company Appeal (AT) (Insolvency) No. 1038 of 2021 30 of the pandemic. There is no doubt that default was initially committed in

payment to Financial Creditors much before the start of pandemic, but the

Resolution Plan had provided that certain payments to be made even by

31st March, 2020 and 31st March, 2021. Thus, as noted above, the present

was not a case that entire amount of Rs.45 crores was to be paid prior to

March 2020. It cannot be denied that pandemic of COVID-19, which has

engulfed the entire world has adverse effect on several trade and business,

but in present case, the Appellant has not taken shelter of only COVID-19

for his inability to make payment, other reasons have also been given,

which we need not go in any further in detail for the facts in the present

case.

26. The facts and materials on record as noted above clearly indicate that

although the Appellant had failed to make payment as per Resolution Plan,

but it is not a case that efforts has not been made by the Appellant to make

payment. Admittedly, payment of Rs.15 crores out of Rs.45 crores to the

Financial Creditor has already been made apart from other payments as

noted above. We, thus, are of the opinion that by granting 30 days' time to

Appellant to comply its all financial obligations in Resolution Plan and

make payment of balance of Rs.30 crores shall not cause any prejudice to

Financial Creditors, who have already been denied the said payment for a

long period of time. In event, the Appellant is unable to make the payment

as prayed for, it shall be open to proceed with the liquidation, no option

being left thereafter.

Company Appeal (AT) (Insolvency) No. 1038 of 2021 31

27. In the result, we allow this Appeal. Set aside order dated 24th

November, 2021 passed by the Adjudicating Authority and grant 30 days'

time to the Appellant from today to make the payment of balance amount

of Rs.30 crores to the Financial Creditors on or before 20th February, 2022,

failing which, it shall be open to proceed with the liquidation of Corporate

Debtor. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Dr. Ashok Kumar Mishra] Member (Technical)

NEW DELHI

20th January, 2022

Ash/NN

Company Appeal (AT) (Insolvency) No. 1038 of 2021 32