Earthin Projects Limited vs Mr. Anup Kumar Singh & Anr.

NARESH SALECHA, MEMBER (TECHNICAL)

The present `Appeal’ is filed against the ‘Impugned Order’ dated 05.09.2022 passed in IA 283 of 2022 and IA 655 of 2022 in CP (IB) 372/7/HDB/2018, by the ‘Adjudicating Authority’ (`National Company Law Tribunal’, Hyderabad Bench-II), whereby, the ‘Adjudicating Authority’, dismissed the Petition filed under the Insolvency & Bankruptcy Code, 2016 (in short ‘I & B Code’, 2016).

M/s Earthin Projects Ltd. is the ‘Appellant’ in present `Appeal’, before this ‘Appellate Tribunal’ is the ‘Successful Resolution Applicant’. Mr. Anup Kumar Singh is a `Resolution Professional’ of `Indu Projects Ltd.’, is the 1<sup>st</sup> Respondent herein. `Indu Projects Ltd.’, is the ‘Corporate Debtor’ under ‘Corporate Insolvency Resolution Process’, is the 2^nd Respondent herein.

On an application filed by the Bank of India as Financial Creditor of the Corporate Debtor (Indu Projects Ltd.), the ‘Adjudicating Authority’ admitted ‘Corporate Insolvency Resolution Process’ on 25.02.2019 and Mr. Gopi Krishna Byadigera was appointed as ‘Interim Resolution Professional’ on 05.03.2019. However, on the recommendation of the ‘Committee of Creditors’, Mr. Anup Kumar Singh was appointed as ‘Resolution Professional’ by the ‘Adjudicating Authority’, on 04.06.2019.

The 1^st Respondent invited ‘Expression of Interest’ in Form-G on 16.07.2019 inviting prospective ‘Resolution Applicants’ to submit ‘Expression of Interest’ and seven prospective ‘Resolution Applicant’ participated, however only two prospective ‘Resolution Applicants’ submitted the ‘Resolution Plan’. The ‘Committee of Creditors’ rejected and recommended for liquidation of the ‘Corporate Debtor’. During pendency of liquidation application, the ‘Appellant’ desired to submit his ‘Resolution Plan’. After getting fresh approval of the ‘Adjudicating Authority’, the 1^st Respondent again published fresh Form- G on 25.07.2020 and receipt two applications by prospective ‘Resolution Applicants’. The ‘Committee of Creditors’ with 97.33% of voting shares approved ‘Resolution Plan’ of the ‘Appellant’ and accordingly 1^st Respondent filed I.A 861 of 2020 as ‘Plan Approval Application’ which was approved by the ‘Adjudicating Authority’ vide order dated 01.10.2021. It has however been brought out by the ‘Appellant’ that order was uploaded only on 25.10.2021. As per approved ‘Resolution Plan’, Rs. 4531.44 crores were claimed by the ‘Creditors’ and out of which claim for Rs. 4138.5 crores were admitted and finally amount of Rs. 501 crores was proposed to be settled with the ‘Creditors’ as per approved ‘Resolution Plan’ and in addition Rs. 40 crores was to be infused as working capital thus, total amount of Rs. 541 crores was approved as amount of settlement. This ‘Appellate Tribunal’ also note from the ‘Resolution Plan’ approval dated 01.10.2021 that the fair value of the ‘Corporate Debtor’ was of Rs. 394.12 crores and the liquidation value was of Rs. 220.90 crores.

This ‘Appellate Tribunal’ further notes from the approved Resolution plan the definition of ‘Effective Date – The date of approval of the Resolution Plan by the Adjudicating Authority’.

Further, as per approved ‘Resolution Plan’ Clause 4 A

In terms of Clause 7 of the approved ‘Resolution Plan’, following additional term was specified whereby there was specific provision for interest payment on delayed payment and forfeiture of payment made in case default beyond 60 days.

In terms of the approved ‘Resolution Plan’ a monitoring committee was formed on 28.10.2021 consisting of three representative one each from ‘Resolution Professional’, ‘Financial Creditor’ and ‘Successful Resolution Applicant’ (the ‘Appellant’ herein).

The ‘Appellant’ has brought out that he was under honest belief that effective date being 25.10.2021 i.e. date when approved ‘Resolution Plan’ was uploaded (in contrast to the provisions made in the ‘Resolution Plan’ which defines effective date as date of order of approved by the ‘Adjudicating Authority’ which was 01.10.2021). Be that as it may, the ‘Appellant’ failed to make payment of Rs. 501 crores within 90 days of the effective date. The ‘Appellant’ has brought out that this was due to post COVID-19 uncertainly, delayed disbursement of fund by global investors etc. The ‘Appellant’ approached the 'Adjudicating Authority' by way of I.A. 733 of 2021 in I.A. 861 of 2020 under Rule 11 r/w Rule 154 of NCLT Rules, 2016, wherein four reliefs were sought including rectifications of few errors and directing the effective date to be 25.10.2021 instead of 01.10.2021. However the ‘Adjudicating Authority’ allowed two rectifications and did not give any further relief including effective date to be 25.10.2021 instead of 01.10.2021.

Similarly, the ‘Appellant’ also filed I.A. No. 77 of 2022 in I.A. 861 of 2021, whereby, few reliefs were sought including extension of 60 days for implementation of ‘Resolution Plan’, however, the ‘Adjudicating Authority’ after detailed examination in their order dated 01.02.2022 did not give any relief, including any extension of the time.

Aggrieved by the ‘impugned order’ passed by the ‘Adjudicating Authority’ the ‘Appellant’ approached this ‘Appellate Tribunal’ by CA (AT) (CH) (Insolvency) No. 86 of 2022 in I.A No. 183 & 184 of 2022 and this ‘Appellate Tribunal’ vide order dated 13.04.2022 gave following orders:-

This ‘Appellate Tribunal’ note that in the meantime one ‘Operational Creditor’ M/s Vishal Nirmiti Pvt. Ltd. approached Hon’ble Supreme Court of India vide Civil Appeal No. 3660 of 2022 under Section 62 of I & B Code, 2016 against this ‘Appellate Tribunal’ Judgment and order dated 13.04.2022. Following relevant portion of the Judgment of the Hon’ble Supreme Court of India is being reproduce for clarity and continuity:-

The 1^st Respondent approached the ‘Adjudicating Authority’ vide I.A. 283 of 2022 in CP (IB) No. 372/7/HDB/ 2018 wherein five prayers were made including dismissal of I.A. 77 of 2022 filed by the ‘Appellant’, allowing 1^st Respondent to invoke EMD bank guarantee and extension of ‘Corporate Insolvency Resolution Process’ allowing fresh bids for the ‘Resolution Plan’ to be invited and debarring the ‘Appellant’ from participation further. The ‘Adjudicating Authority’ vide their order dated 05.09.2022 allowed this I.A No. 283 of 2022 and directed the 1^st Respondent to complete the ‘Corporate Insolvency Resolution Process’ a fresh within 60 days from the date of order dated 05.09.2022 and also made clear that no further extension would be given. The relevant portion of the judgment of the ‘Adjudicating Authority’ dated 05.09.2022 is also been quoted as under :-

Aggrieved by the ‘impugned order’ in I.A. 283 of 2022, the ‘Appellant’ has preferred the present `Appeal’, before this ‘Appellate Tribunal’ .

The Learned Counsel for the ‘Appellant’ gave overall view of the appeal and the circumstances which led to the present appeal. On coming to know that the ‘Corporate Debtor’ has been recommended for liquidation the Appellant approached 1^st Respondent expressing his intent to give his resolution plan on 04.05.2020. After getting approval from the ‘Adjudicating Authority’ on an application made by 1^st Respondent in his fresh Form- G published on 25.07.2020. The ‘Appellant’ submitted his Resolution Plan of Rs. 501 crores along with additional working capital of Rs. 40 crores. The ‘Adjudicating Authority’ vide their order dated 01.10.2021 approved the ‘Resolution Plan’ however the order of the ‘Adjudicating Authority’ was uploaded only on 25.10.2021. The Learned Counsel for the Appellant further submitted that he was under belief that this will be the effective date for calculating 90 days within which payments have to settled as indicated in the Resolution Plan.

The Learned Counsel for the Appellant emphasised that due to post COVID-19 circumstances including uncertain economic environment, procedural delays and delayed disbursement of fund by global investors the ‘Appellant’ could not meet the time line for settling claims as given in the ‘Resolution Plan’ and accordingly the ‘Appellant’ approached the ‘Adjudicating Authority’ by way of I.A. No. 77 of 2022 (Extension Application) for seeking extension of timelines, however the ‘Adjudicating Authority’ dismissed the extension application ignoring the prevailing circumstances and genuine ground for seeking extension.

The Learned Counsel for the Appellant pointed out that despite his best intension to resolve the matter and bring back the ‘Corporate Debtor’ from liquidation stage, the 1^st Respondent approached the ‘Adjudicating Authority’ vide I.A 283 of 2022 with several prayer, inter-alia, invoking EMD bank guarantee of the ‘Appellant’ and initiating fresh ‘Corporate Insolvency Resolution Process’.

The Learned Counsel for the Appellant mentioned that aggrieved by this he approached this ‘Appellate Tribunal’ in CA (AT)(CH) (Ins.) No. 86 of 2022. The Learned Counsel for the Appellant highlighted that this ‘Appellate Tribunal’ appreciating the genuine grievances of the ‘Appellant’ and valid circumstances allowed extension of time as well as embargo on encashment of EMD bank guarantee. The Appellate Tribunal granted three months period from the date of order i.e. from 13.04.2022 instead of six month period requested by the Appellant for making residual balance payment in the designated bank account along with over due interest @ 8% per annum from 23.01.2022.

The Learned Counsel for the Appellant pointed out that the ‘Resolution Plan’ clearly provides for provision for delayed payment and stipulate Appellant’s liability to pay interest @ 8% per annum. The Learned Counsel for the Appellant assailed the ‘impugned order’ which ignored this vital point.

The Learned Counsel for the Appellant submitted that the ex-promoters of the ‘Corporate debtor’ committed frauds and gave wrong information to the 1^st Respondent and the ‘Committee of Creditors’ and as a result of which incorrect “Information Memorandum” was prepared. The Learned Counsel for the Appellant stated that the ‘Resolution Plan’ was prepared, submitted and finally approved by the ‘Adjudicating Authority’ which was prepared by the ‘Appellant’ on the basis of incorrect “Information Memorandum”. The Learned Counsel for the Appellant further stated that in order to set the things right and to take ex-promoter to logical task, the ‘Appellant’ filed I.A. No. 654 of 2022 in C.P (IB) 372 of 2018 (Direction Application) under Section 60(5) of the I & B Code, 2016 r/w Rule 11 of NCLT Rules, 2016, whereby he prayed for immediate interim relief including forensic audit and restraining ex-promoters from disposing off and transferring moveable and immovable assets during pendency of the applications.

The Learned Counsel for the Appellant stated that an impleadment application vide I.A. 655 of 2022 was also filed regarding granting of any relief in I.A. No. 283 of 2022 filed by the ‘Respondent’ without hearing the ‘Appellant’. The Learned Counsel for the Appellant emphasised that these applications were necessary in order to implement the ‘Resolution Plan’. The Learned Counsel for the Appellant, however assailed the ‘impugned order’ dated 05.09.2022 which was issued in complete violation of principal of natural justice and “Audi Alteram Partem”. The Learned Counsel for the Appellant also assailed the ‘Adjudicating Authority’ failed to give proper speaking order.

The Learned Counsel for the Appellant stated that they had already made part payment of around Rs. 60 crores under the ‘Resolution Plan’ and if the ‘impugned order’ is not set aside, the investment made by the ‘Appellant’ will go down the drain. The Learned Counsel for the Appellant also stated that the very purpose of the I & B Code, 2016 is to bring back the ‘Corporate Debtor’ from the brink of the Insolvency and put it back as a going concern. The Learned Counsel for the Appellant also mentioned that since then they have tied up the funds with foreign entities and are ready to settle the ‘Resolution Plans’. The Learned Counsel for the Appellant further stated that the ‘Resolution Plan’ itself had foreseen the circumstances of delay and provided for delayed payment @ 8% which they are willing to pay.

The Learned Counsel for the Appellant stated that the ‘Adjudicating Authority’ failed to exercise inherent powers granted to it under Section 60(5) of the I & B Code, 2016 to meet ends of justice.

The Learned Counsel for the Appellant concluding his pleadings requested this ‘Appellate Tribunal’ to set aside the ‘impugned order’ dated 05.09.2022 passed by the ‘Adjudicating Authority’ in I.A 283 of 2022 and I.A 655 of 2022 along with restraining 1^st Respondent to initiate the ‘Corporate Insolvency Resolution Process’ de-novo.

The Learned Counsel for the Respondent gave the background of the case and assailed the appeal. The Learned Counsel for the Respondent stated that the present appeal is only derail the entire process and in turn will result in eroding the economic value of the ‘Corporate Debtor’.

The Learned Counsel for the Respondent stated that all support was given to the ‘Appellant’ in order to implement the ‘Resolution Plan’ successfully and smoothly. However, right from the beginning the attitude of the ‘Appellant’ was seems to be only buying time and postponing the settlement of the claims. The Learned Counsel for the Respondent further pointed out that the ‘Adjudicating Authority’ as well as this ‘Appellate Tribunal’ extended the time line beyond 90 days, however the ‘Appellant’ could not still make substantial payments. The Learned Counsel for the Respondent emphasised that out of Rs. 501 crores claim settlement amount along with additional working capital infusion, admittedly, the ‘Appellant’ has brought in only 10% of such money till date despite the ‘Resolution Plan’ was approved way back on 01.10.2021. The Learned Counsel for the Respondent further clarified that according to the approved ‘Resolution Plan’ the ‘Appellant’ was supposed to make all payments within 90 days and further maximum 60 days were provided in the ’Resolution Plan’ @ 8% interest rate per annum for delayed payments and the terms of plan it was crystal clear that beyond 60 days of grace period, all payment made by the Appellant will be liable to be forfeited.

The Learned Counsel for the Respondent stated that the ‘Appellant’ has brought several I.A’s before the ‘Adjudicating Authority’ just to delay the whole process and the ‘impugned order’ was given correctly by the Adjudicating Authority’ after taking all due facts, provisions of the I & B Code, 2016 and this ‘Appellate Tribunal’ order dated 13.04.2022 into consideration.

The Learned Counsel for the Respondent assailed the conduct of the ‘Appellant’ and the content of the appeal. The Learned Counsel for the Respondent brought to the notice of this ‘Appellate Tribunal’ that I.A No. 654 of 2022 filed by the ‘Appellant’ for seeking urgent and immediate relief against ex-promoters/ directors of the ‘Corporate Debtor’ including request of forensic audit did not have any substance on merit and was initiated only to delay the whole proceedings and making the payments as per ‘Resolution Plans’. The Learned Counsel for the Respondent also assailed the contention of the ‘Appellant’ that he was not given an opportunity of being heard and his rights of natural justice were breached were simply misconstrued as the ‘Adjudicating Authority’ considered all the relevant factors into consideration before disposing I.A. No. 654 & 655 of 2022. The Learned Counsel for the Respondent also mentioned that the ‘Resolution Plan ’ was supposed to be prepared with due diligence and the ‘Appellant’ cannot be allowed to raise boggy issues to circumvent the settlement payments.

The Learned Counsel for the Respondent also denied averments made by the ‘Appellant’ that he was not given hearing in I.A. No. 655 of 2022 (‘Impleadment Applications’). The Learned Counsel for the Respondent further stated that in I.A. No. 655 of 2022 became infructuous since ‘Resolution Applicant’ failed to fulfil his commitments within the time period granted by the ‘Adjudicating Authority’ as well as extended time period granted by this ‘Appellate Tribunal’. The Learned Counsel for the Respondent also brought to the notice of this ‘Appellate Tribunal’ that the Hon’ble Supreme Court of India on a separate application filed by one ‘Operational Creditor’ challenging order of this ‘Appellate Tribunal’ in Company Appeal (AT) (CH) (Ins.) No. 86 of 2022 dated 13.04.2022 whereby the Hon’ble Supreme Court of India noted that three months’ time was granted to the ‘Resolution Applicant’ to pay the residual amount along with interest had expired without making any payment and thus, the appeal became infructuous and dismissed. The Learned Counsel for the Respondent emphasised that the ‘Appellant’ has exhausted all his legal remedies and the present appeal is therefore is liable to be dismissed.

The Learned Counsel for the Respondent stated that the ‘Appellant’ approached the ‘Adjudicating Authority’ vide I.A. No. 77 of 2022 (‘Extension Application’) for seeking extension of timelines which was rightly dismissed by the ‘Adjudicating Authority’, since the ‘Resolution Plan’ was approved on 01.10.2021 and the ‘Appellant’ was supposed to make all payment within 90 days however that was a complete failure on part of the ‘Appellant’ to arrange fund and sought only long rope to delay the process.

The Learned Counsel for the Respondent further emphasised that the ‘Appellant’ was given all the cooperation to implement the ‘Resolution Plan’ successfully, however the ‘Appellant’ was not in a position to implement the same and accordingly the 1^st Respondent had to approach the ‘Adjudicating Authority’ vide I.A. No. 283 of 2022 with prayer to dismiss I.A. no. 77 of 2022 along with permission of the Adjudicating Authority to invoke EMD bank guarantee furnished by the Appellant and to initiate fresh ‘Corporate Insolvency Resolution Process’ and the ‘Adjudicating Authority’ vide their order dated 05.09.2022 allowed the I.A. No. 283 of 2022 allowing initiation of fresh CIRP within 60 days as per ‘Prayer- C’ and ‘Prayer- A & B’ was not considered as not being pursued by the 1^st Respondent.

The Learned Counsel for the Respondent submitted that the Hon’ble Supreme Court of India in the matter of K. Shashidhar vs. Indian Overseas Bank and Others (2019) 12 SCC 150; Committee of Creditors, Essar Steel India Limited vs. Satish Kumar Gupta and Ors. (2020) 8 SCC 531; Maharashtra Seamless Limited vs. Padmanabhan Venkatesh and Others (2020) 11 SCC 467 gave very clear verdict that commercial wisdom of CoC is supreme and neither the ‘Adjudicating Authority’ not the ‘Appellate Authority’ can trespass the commercial wisdom of the ‘Committee of Creditors’.

The Learned Counsel for the Respondent mentioned that the pursuant to the ‘Adjudicating Authority’ order dated 05.09.2022, the 1^st Respondent has already issued fresh ‘Form G’ inviting ‘Expression of Interest’ from perspective Resolution Applicants on 19.09.2022 in order to revive the ‘Corporate Debtor’ and any intervention at this stage will only frustrate the whole process and reduce the economic value of the ‘Corporate Debtor’.

The Learned Counsel for the Respondent concluded his arguments with the strong plea to dismiss the Appeal.

Heard the Learned Counsel for the Appellant and the Respondents and also perused record made available to us. Several issues have been raised in the Appeal which are required to be deliberated upon before coming to final conclusion.

Issue No. (I) Whether the ‘Adjudicating Authority’ has got the sufficient power to extend the time lines for making payments as per approved ‘Resolution Plan’ and if so, whether in the present case this power was exercised or otherwise by the ‘Adjudicating Authority’ correctly?

Therefore, this ‘Appellate Tribunal’, is of the considered opinion that there is no error, in the ‘impugned order’ dated 05.09.2022, passed by the ‘Adjudicating Authority’. `Appeal’, `devoid of any merit(s)’, is dismissed. No costs. The connected pending `Interlocutory Applications’, if any, are Closed.