AI Structured Summary
Not yet generated for this judgment
Judgment
Ashok Bhushan, J.
This Appeal has been filed against order dated 10.05.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi allowing I.A. No. 1538 of 2021 filed by the Resolution Professional for approval of the Resolution Plan. The Appellant – Promoter of the Corporate Debtor, M/s Patna Highway Projects Ltd. has come up in this Appeal challenging the order of the Adjudicating Authority approving the Resolution Plan. Brief facts of the case are:
National Highways Authority of India (NHAI) issued Tender Notice for upgradation of Hazipur-Muzaffarpur Section of NH-77 to four lane dual carriageway. The NHAI issued Letter of Acceptance in favour of the Appellant on 18.11.2019. A Special Purpose Vehicle namely M/s Patna Highway Projects Ltd. (Corporate Debtor) was incorporated to carry on the project.
A Concession Agreement dated 24.02.2010 was executed by NHAI in favour of the Corporate Debtor. In due course, a Common Loan Agreement, Escrow Agreement and Substitution Agreement were also executed.
NHAI declared Provisional Certificate of Completion on 01.09.2016. Annuities were released, which according to Appellant, were appropriated by lenders.
On account of default committed by the Corporate Debtor, CIRP was initiated on application filed by the Corporation Bank, by order dated 03.01.2020.
Appellant has given proposal for accepting Resolution Plan, which was not accepted by the CoC. In the CIRP process Resolution Plan submitted by Respondent No.3 - Silver Point Luxembourg Platform S.A.R.L. was accepted by the CoC. CoC approved the Resolution Plan with 97.95% voting share in the CoC meeting dated 12.03.2021.
The Resolution Professional filed I.A. No. 1538 of 2021 for approval of the Resolution Plan which has been approved by the impugned order dated 10.05.2022. The Appellant, the erstwhile Promoter of the Corporate Debtor has filed this Appeal challenging the order dated 10.05.2022.
We have heard Shri Amit Saxena, learned Senior Counsel for the Appellant and Shri Arun Kathpalia, learned Senior Counsel for the Successful Resolution Applicant. Shri Ramji Srinivasan, learned Senior Counsel has appeared for the Committee of Creditors and Shri Krishnendu Datta, learned Senior Counsel appeared for Respondent No.1.
Learned counsel for the Appellant challenging the order of the Adjudicating Authority submits that the Adjudicating Authority committed error in approving the conditional Resolution Plan. It is submitted that objection was raise by the Appellant. The Resolution Plan being conditional could not have been approved. A conditional plan whose implementation can be withdrawn by the Resolution Applicant is inherently unviable and such plan does not merit acceptance. The Adjudicating Authority did not adjudicate on the above issue and ignoring the fact that the plan is conditional has granted its approval. Submission raised by the Appellant urging ground of fraud and collusion has also not been adverted to while approving the Resolution Plan. The Adjudicating Authority has to satisfy itself that the Resolution Plan meets the criterial prescribed under Section 30(2). The Approved Resolution Plan does not fulfil the mandatory requirements as prescribed under Regulation 38(3) of the Regulations, 2016. The Resolution Applicant, as per the plan, has not infused any money and only on the basis of annuity received the plan is sought to be implemented. Financial proposal which was given by the Resolution Applicant was not required to be accepted since the Resolution Applicant was to run the Corporate Debtor on the basis of amount received by the Corporate Debtor without infusing any fund of its own.
Learned counsel appearing for the Respondent No.1, Resolution Professional has opposed the submission of learned counsel for the Appellant and submits that the Resolution Plan has been approved by the Committee of Creditors in its commercial wisdom which is paramount and non-justiciable. Appellant has failed to show any legal infirmity or non-compliance of Section 30(2) of the Code. There is no ground under Section 61(3) warranting any interference with the impugned order of the Adjudicating Authority. The alleged conditionality as contended by the Appellant was not a condition imposed by the Successful Resolution Applicant to wriggle out of their obligation to be performed under the Resolution Plan. Clause 3.5.1 of the Concession Agreement specifically requires NHAI approval for change in ownership/ control of the Corporate Debtor. Committee of Creditors have considered such aspects while approving the Resolution Plan. There is no provision or requirement of procuring upfront approval of the NHAI for change in ownership even before approval of the plan. NHAI by letter dated 20.12.2022 has granted its in-principle approval for transfer of 100% change in ownership of the Corporate Debtor in favour of SRA. Allegation that there was any collusion or fraud are baseless and without any material. There being no cogent grounds in support of Appeal, this Appeal is nothing but an attempt to scuttle the resolution and revival of the Corporate Debtor. It is submitted that Resolution Plan has already been implemented, the Resolution Professional has demitted office and the Corporate Debtor is now under the management and control of the Successful Resolution Applicant.
We have considered the submissions of learned counsel for the parties and perused the record.
The principal submission which has been advanced by learned counsel for the Appellant is alleged conditionality of the plan. It is submitted that in view of the judgment of Hon’ble Supreme Court in “Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Ltd., (2022) 2 SCC 401”, no conditional plan can be approved. To appreciate the submission of learned counsel for the Appellant, it is necessary to notice the effective part of the Resolution Plan which is said to be conditional plan. The impugned order has referred to Para 2.1 Schedule 2 of the Resolution Plan. Schedule 2 contains the implementation provision and in the Schedule 2 Para 2 deals with Regulatory and other approvals and conditions precedent to the implementation of the Plan. Para 2.1 is as follows:
“2.1Notwithstanding anything contained in this Plan, performance of the obligations under the Plan is subject to the prior completion (unless waived in writing by the Resolution Applicant) of the conditions set out immediately below, to the satisfaction of the Resolution Applicant, between the date of submission of the Plan by the Resolution Professional to the NCLT in accordance with Section 30(6) of the Code and the Long Stop Date. If the conditions set forth in this Paragraph (B) 2 (except the condition set forth in Paragraph (B) 2.1.1) are not met to the satisfaction of the Resolution Applicant by the Long Stop Date, this Plan shall cease to have any effect and shall not bind the Resolution Applicant, the Committee of Creditors, the Resolution Professional or any other Person notwithstanding anything to the contrary contained in the Plan. Accordingly, in case of any breach, non-fulfilment, changes or modifications to any of the foregoing, the Resolution Applicant shall be entitled to seek suitable modifications or withdraw the Plan, and such modification or withdrawal shall not result in any claim or liability on the Resolution Applicant (including in the Information Memorandum, RFRP, EOI, Invitations or supporting documents submitted along with the Plan (the terms of which shall be amended). Thereafter, the Resolution Applicant shall have no obligations whatsoever under this Plan or otherwise to any Person, including having no obligation with respect to any bid bond guarantee, earnest money deposit guarantee, performance guarantee, letter of intent or any other obligation and each such guarantee shall be promptly returned to the Resolution Applicant
Clause 2.1.3 deals with the unconditional consent and acknowledgement of the NHAI. Clause 2.3.1 is as follows:
2.1.3The Corporate Debtor shall have obtained the irrevocable and unconditional consent and acknowledgement of the NHAI, substantially in form set out in Schedule 7 (Form of Consent Letter) hereto, subject to any modification acceptable to the Resolution Applicant, in respect of:
(a)the terms of this plan, including change in shareholding and control of the Corporate Debtor pursuant to the steps set out in Paragraphs (A) 1, (A) 2 and A (5) of this Schedule 2 (implementation Provisions);
(b)modification to the financing documents (including security therein) of the Corporate Debtor pursuant to the restructuring of the Reconstituted Debt in accordance with Schedule 5 (Restructured Terms of the Reconstituted Debt);
(c)continued effectiveness of the Concession Agreement (including unconditional revocation and irrevocable waiver of all past and existing defaults, penalties, among others, relating to the Corporate Debtor); and
(d)execution of a Supplementary Agreement-2021 to the Concession Agreement on the terms and conditions as set out in Schedule 6 (Key Terms of the Supplementary Agreement 2021) hereto.
The various clauses under Clause 2 of Schedule 2 are clauses which are towards the implementation of the plan which is clear from the heading of the Schedule 2 itself.
Hon’ble Supreme Court in the ‘Ebix Singapore’ (supra), on which much reliance has been placed by learned counsel for the Appellant, in Para 167 has laid down following:
“167.Regulation 38(3) mandates that a Resolution Plan be feasible, viable and implementable with specific timelines. A Resolution Plan whose implementation can be withdrawn at the behest of the successful Resolution Applicant, is inherently unviable, since open-ended clauses on modifications/ withdrawal would mean that the Plan could fail at an undefined stage, be uncertain, including after approval by the Adjudicating Authority. It is inconsistent to postulate, on the one hand, that no withdrawal or modification is permitted after the approval by the Adjudicating Authority under Section 31, irrespective of the terms of the Resolution Plan; and on the other hand, to argue that the terms of the Resolution Plan relating to withdrawal or modification must be respected, in spite of the CoC’s approval, but prior to the approval by the Adjudicating Authority. The former position follows from the intent, object and purpose of the IBC and from Section 31, and the latter is disavowed by the IBC’s structure and objective. The IBC does not envisage a dichotomy in the binding character of the Resolution Plan in relation to a Resolution Applicant between the stage of approval by the CoC and the approval of the Adjudicating Authority. The binding nature of a Resolution Plan on a Resolution Applicant, who is the proponent of the Plan which has been accepted by the CoC cannot remain indeterminate at the discretion of the Resolution Applicant. The negotiations between the Resolution Applicant and the CoC are brought to an end after the CoC’s approval. The only conditionality that remains is the approval of the Adjudicating Authority, which has a limited jurisdiction to confirm or deny the legal validity of the Resolution Plan in terms of Section 30 (2) of the IBC. If the requirements of Section 30(2) are satisfied, the Adjudicating Authority shall confirm the Plan approved by the CoC under Section 31(1) of the IBC.”
In “Ebix Singapore”, Hon’ble Supreme Court was considering question as to whether Resolution Applicant after approval of the plan by Committee of Creditors can withdraw/ modify Resolution Plan. It was held that a Resolution Plan whose implementation can be withdrawn at the behest of the Successful Resolution Applicant, is inherently unviable. The Hon’ble Supreme Court laid down that no condition in the Resolution Plan permitting withdrawal by Resolution Applicant is valid. In view of the law laid down by Hon’ble Supreme Court, after approval of the Committee of Creditors, Resolution Applicant can neither withdraw nor modify the Resolution Plan.
When we look into the facts of the present case, the condition which are contained to the effect that Resolution Applicant can seek suitable modification or withdraw plan are conditions which are unenforceable on account of law declared by the Hon’ble Supreme Court in “Ebix Singapore” (Supra). The facts of the present case as detailed in the Reply filed by Respondent No.3 as well as Resolution Professional indicate that plan has been implemented and all necessary approvals including the approval by NHAI has been received for carrying out the plan. After implementation of the plan, we are of the view that the submissions of learned counsel for the Appellant that Resolution Plan was conditional plan and could not have been approved, does not furnish any ground to interfere with the impugned order, at this stage. NHAI approval was set out as a condition precedent to takeover the Corporate Debtor since it was provided in Clause 5.3.1 of the Concession Agreement, as noted above. The Corporate Debtor was set up as a special purpose company for operating this concession and it is necessary to ensure compliance of the Concession Agreement and get a clearance from NHAI before takeover. All such aspects were duly considered by the Committee of Creditors while approving the Resolution Plan. Moreover, the law declared by the Hon’ble Supreme Court in “Ebix Singapore” made categorical that no Resolution Applicant can be allowed to withdraw their plan and in facts of the present case, Resolution Applicant has never come up with any case, application or request to withdraw from the Resolution Plan. On the submission as pressed by learned counsel for the Appellant, we are not inclined to interfere with the approval of the Resolution Plan.
Submission of learned counsel for the Appellant that financial proposal given by the Successful Resolution Applicant was unviable and Successful Resolution Applicant was handed over the Corporate Debtor without infusing any finance of its own and Successful Resolution Applicant was to run the Corporate Debtor from the money received by the Corporate Debtor, we are of the view that acceptance of the plan of Successful Resolution Applicant was in the commercial wisdom of the Committee of Creditors. The question of viability and feasibility of the plan was the question which was considered by the Committee of Creditors while approving the plan. The Appellant’s submission that plan was not viable and feasible and proposal was not adequate, cannot be allowed to be raised. The issue is fully covered by the judgment of the Hon’ble Supreme Court in “K. Sashidhar vs. Indian Overseas Bank and Ors. – (2019) 12 SCC 150”.
The submission of learned counsel for the Appellant that there was collusion between the Resolution Professional and the Successful Resolution Applicant also does not merit any acceptance. Fraud and collusion is very easy to allege but difficult to prove. No such materials have been brought on the record nor there are any specific pleadings on basis of which any conclusion can be drawn that there was any fraud and collusion in the conduct of the CIRP. Learned counsel for the Respondent is right in his submission that this Appeal is nothing but an attempt to derail the resolution and revival of the Corporate Debtor.
Present is a case where Form G was issued and time to submit the plan was extended time to time. There were two Resolution Plans which were duly considered by the Committee of Creditors. The submission of the Appellant that mandatory requirements as prescribed under Regulation 38(3) of the Regulations, 2016 has not been satisfied since there are no reasons given regarding cause of default. Regulation 38(3) provides as follows:
“38(3) [A resolution plan shall demonstrate that –
(a)it addresses the cause of default;
(b)it is feasible and viable;
(c)it has provisions for its effective implementation;
(d)it has provisions for approvals required and the timeline for the same; and
(e)the resolution applicant has the capability to implement the resolution plan.]”
Learned counsel for the Respondent has submitted that the Resolution Plan provides for reasons for default. In this context, Clause 10.3 of the Resolution Plan deals with Cause of default by the Corporate Debtor. Para 10.3 of the Resolution Plan is as follows:
“10.3Causes for default by the Corporate Debtor The defaults committed by the Corporate Debtor have, in the opinion of the Resolution Applicant, arisen on account of: (i) delays in construction due to: (a) the non-availability of right of way, (b) hindrances from locals to the Corporate Debtor, and (c) delay in permission from railways, which led to an increase in construction costs; (ii) delays/lapses in collection of Annuity payments to the Corporate Debtor which resulted in an inability to service the debt out of the cash flows; and (iii) lack of any intent on the part of / support from the Promoter Group.”
The submission of learned counsel for the Appellant that mandatory requirement under Regulation 38 is not fulfilled, is not correct and the plan gives causes of default, hence, the above mandatory requirement under the plan is fulfilled.
We, thus, do not find any substance in any of the submission of learned counsel for the Appellant to interfere with the impugned order dated 10.05.2022. There is no merit in the Appeal. Appeal is dismissed.