Arun Agarwal vs Mr. Ram Ratan Kanoongo & Anr.

[Per; Ms. Shreesha Merla, Member (Technical)]:

This Appeal is filed against the `Impugned Order’ dated 18.04.2023, passed in IA(IBC)96/2021 in C.P. (IB) No.166/7/HDB/2019 by the `Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Bench – II), whereby and whereunder the `Adjudicating Authority’ has allowed the IA seeking Liquidation of the `Corporate Debtor Company’. Aggrieved by this direction, the suspended Director of the `Corporate Debtor Company’ preferred this Appeal.

Facts in brief are that the Corporate Insolvency Resolution Process (`CIRP’) was initiated by the `Adjudicating Authority’ vide `Order’ dated 05.09.2019 against the `Corporate Debtor Company’ in a Section 7 Application filed by M/s. State Bank of India (`SBI’), subsequent to which, invitation for Expression of Interest (`EOI’) was issued on 30.11.2019, which was later extended to 26.12.2019, the last date for submission of the Resolution Plan being 30.01.2020. On the approval of the Committee of Creditors (`CoC’), a second extension was given for EOI on 09.01.2020 the last date for submission of the Resolution Plan being 04.03.2020. Thereafter on request of the Resolution Applicant, the CoC approved for extension of 45 days and the Resolution Plan was finally received on 31.07.2020, but the CoC did not accept the Plan as it was not compliant with the conditions under the RFRP as it was a `Conditional Plan’.

While so, the CoC Members informed the Resolution Professional (`RP’) that they have received a One Time Settlement (`OTS’) proposal for one of the `Corporate Guarantors’ of the `Corporate Debtor’, which is under consideration and the Application was moved under Section 12-A of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as `The Code’). It is averred that during the 18th CoC Meeting, the SBI informed that the OTS proposal was under active consideration and directed the RP to seek another extension of 60 days of the CIRP period. The `Adjudicating Authority’ disposed of the Application as not maintainable as there were no Resolution Plans pending before the RP and the CoC and also on the ground that an OTS proposal was a matter between the `Corporate Debtor’ and SBI.

The `Adjudicating Authority’ has observed that as the CIRP period had already expired on 13.01.2021 and there were no Resolution Plans in the offing, the Application seeking liquidation under Section 33(1) was allowed.

Learned Sr. Counsel, Mr. PH Arvindh Pandian submitted that IA 97/2021 was filed by SBI seeking extension of the CIRP, which was allowed and the CIRP was extended till 31.03.2022. IA 96/2021 was filed in February, 2021 on the premise that maximum period of CIRP had come to an end and therefore in terms of Section 33(1) of the Code, the `Corporate Debtor’ would be liquidated. The basis of this Application had challenged vide the `Order’ of the `Adjudicating Authority’ in I.A.97/2021, wherein vide `Order’ dated 05.01.2022, the CIRP was extended Suo Motu upto 31.03.2022. The Application was rendered infructuous and the RP ought to have proceeded to take steps in accordance with the tenets of IBC. It was also pointed out by the Learned Sr. Counsel that I.A.184/2021 was filed by the group entity of the `Appellant’ seeking implementation in the CIRP Proceedings, which is also connected with I.A.96/2021 and was dismissed on the same grounds vide `Order’ dated 05.01.2022. It is submitted that the same principle ought to have been applied to the facts of this I.A.96/2021 and a departure from the Doctrine of stare decisis would render this `Order’ also to be infructuous.

It is further submitted that there is a material difference in the valuation before Covid and post-Covid and that the `Appellant’ and the `Corporate Debtor’ have been making all efforts to keep alive the approvals for `financial assistance’ of Rs.100Crs./- to settle the date of the `Corporate Debtor’ on OTS basis for an aggregate sum of Rs.86.04Crs./-, payable to the three Banks. Out of the said sum of Rs. 86.04Crs./- a sum of Rs.14.84Crs./- has already been deposited by the `Appellant’ in no lien account with SBI. It is contended that the letters dated 17.10.2022 and 12.12.2022 corroborate the fact that despite withdrawal of OTS approval, SBI continue to have trust and approve additional `financial assistance’ of Rs.10Crs./-, vide their `Term Sheet’ dated 01.07.2022. It is submitted that Cantor Fitzgerald, Europe remains agreeable to fund the OTS proposal and if the `Order of Liquidation’ is set aside, the `Appellant’ would be able to complete the legal documentation and made the OTS funding. The Hon’ble Supreme Court in `K.N. Rajakumar’ Vs. `V. Nagarajan & Ors.’^{11.Civil Appeal No.1792/2021}, has observed as follows:

The Hon’ble Supreme Court in `Kridhan Infrastructure Pvt. Ltd. (Now Appellant(s) Known as Krish Steel & Trading Pvt. Ltd.’ Vs. `Venkatesan Sankaranarayan & Ors.’^{22.Civil Appeal No.3299/2020}, has observed as hereunder:

Mr. Y. Suryanarayana appearing for the Liquidator submitted that during the hearing of I.A.96/2021 on 22.03.2022, the `Appellant’/`Shareholder’ was present before the `Adjudicating Authority’ and requested for one opportunity for OTS, subsequent to which, the Bench granted additional time till 30.03.2022 for settlement of the matter. On 29.03.2022, an email was received from SBI stating that there is no scope of any compromise or settlement between the parties and that the OTS proposal was cancelled vide letter dated 11.02.2022. On 31.03.2022, once again, the Erstwhile Promoter/the `Appellant’ herein appeared in present and informed the Bench that an amount of Rs.5Crs./-was paid and they were trying to settle the matter with SBI. Once again, the Bench had granted another period of 15 days for making payment to SBI. The matter was listed again on 18.04.2022 and was simpliciter adjourned to 06.06.2022. It is submitted that on 06.06.2022 also another opportunity was given by way of a last opportunity to the `Appellant’ herein and `Conditional Order’ was passed by the `Adjudicating Authority’ that if the settlement fails a `Liquidation Order’ would be passed.

It is submitted by Mr. Y. Suryanarayana that the Bench had granted additional four weeks’ time, as the Bench was a `Special Bench’ and the matter stood slated for 16.08.2022. Thereafter, an I.A.688/2022 was filed on 08.07.2022 by the ERP to have the Liquidation pursued. On 01.09.2022, the Counsel appearing for SBI pressed for Liquidation of the `Corporate Debtor’, as despite several opportunities, the settlement could not be arrived at. Learned Counsel submitted that several opportunities were given and there was no settlement arrived at and therefore the `Adjudicating Authority’ was perfectly justified in passing the `Order of Liquidation’.

Learned Sr. Counsel for the Appellant also drew our attention to the Minutes of the 18^th CoC Meeting wherein it was observed as follows:

From the aforenoted Minutes, it is clear that it is dated way back on 11.01.2021 and the following sequence of events is being detailed hereunder for better understanding of the subsequent events.

Apart from the sequence of events submitted by the Learned Counsel, Mr. Y Suryanarayana, it is seen from the record that though the `Order’ in I.A.96 of 2021 was heard and reserved on 05.01.2022, and was listed for pronouncement, it was only on account of the `Appellant’ having been personally present before the Bench and having sought for additional time for settlement of the matter, that the Bench had granted additional time on the following dates;

At this juncture, Learned Counsel drew our attention to the letter dated 18.04.2023 issued by Cantor Fitzgerald that they are ready and willing to pay the funds of SBI;

On behalf of the Appellant, `Notice’ is drawn to the Order of the Hon’ble Supreme Court dated 31.05.2023 in the matter of `Arun Agarwal’ Vs. `Ram Ratan Kanoongo & Arn.’^{33.Civil Appeal No(s).3823/2023}, whereby and whereunder the Hon’ble Apex Court in paras 4 and 5 have noted as follows:

It is stated in the letter that M/s. Cantors Fitzgerald is ready and willing to fund any settlement ‘even during the Liquidation Process’. In the event, any such settlement is able to be executed, with funds infused, keeping in view the spirit and intent of the Code, the `Adjudicating Authority’ shall proceed in accordance with law giving 14 days time peremptorily, ofcourse from the date of this `Order’ failing which, this Tribunal does not find any tangible ground(s) to interfere with the `Order of Liquidation’ as `more than sufficient time’ was granted by the `Adjudicating Authority’/`Tribunal’ to the `Appellant’ herein to settle the matter.

With the aforesaid observations and directions, this Company Appeal (AT) (CH) (Ins.) No.109/2023 stands disposed of. No costs. The connected pending `Interlocutory Applications’, if any, are closed.