M/s. Sri Gomathi Energy Private Limited vs Mr. L.K Sivaramakrishnan

Per: S. VIJAYARAGHAVAN, MEMBER (TECHNICAL)

This application has been filed under section 60(5) (c) of the Insolvency Bankruptcy Code, 2016 (in short “the IBC Code, 2016”) by the Applicant namely M/s. Sri Gomathi Energy Private Limited (hereinafter referred as “Applicant”) with a prayer as follows:-

Learned counsel for the Applicant submitted that the Respondent herein who was appointed as Liquidator for M/s.Auro Mira Biopower India Private Limited (Corporate Debtor) by this Tribunal on 16.07.2018 has filed MA/711/2019 seeking permission to sell the assets of the Corporate Debtor based on the interests evinced by interested parties. The Adjudicating Authority vide its order dated 27.09.2019 permitted the Respondent/Liquidator to conduct 'private sale' to dispose the assets so as to distribute the sale proceeds in accordance IBC provisions.

It is further submitted that the Applicant herein made an offer to the Respondent for the purchase of 18 Mega Watt Power Plant, Civil Work, Shed and Land of the Corporate Debtor for Rs.10.536 crores (Rupees Ten Crores Fifty Three Lakhs and Six Thousand only) including all the applicable taxes and duties and excluding registration charges/stamp duty on the cost of the land. The Respondent/Liquidator accepting the above offer through e-mail, requested the Applicant to pay 10% of the offered amount. The total offer amount was to be paid in three tranches viz. Tranch-I 10%, Tranch-II 15% and Tranch-III 75% on or before 20.03.2020. As on 18.03.2020, the Applicant has remitted Rs.2,62,60,000/- (Rupees Two Crores Sixty Two Lakhs, Sixty Thousand only). Due to Covid-19 pandemic, on the request of Applicant, the Liquidator extended time upto 30.06.2020. Since the Applicant was unable to optimally use the extended period, the Liquidator ultimately proposed in his letter dated 03.06.2020 to extend last date of payment upto 30.09.2020 subject to the following conditions to be fulfilled by the Applicant:

It is stated that in the present economic conditions, the Applicant was unable to honour their obligations and imposition of unreasonable conditions as above by the Respondent /Liquidator and hence approached this Adjudicating Authority seeking appropriate relief.

In the reply filed on behalf of the Respondent, it was contended that as per the Letter of Intent (LoI) dated 21.01.2020, it was specifically agreed between the parties that the First Tranch of 10% payment Rs.1,05,36,000/- be paid on or before 01.01.2020, the Second Tranch of 15% payment of Rs.1,58,04,000/- be paid on or before 25.01.2020 and Third Tranch of 75% payment Rs.7,90,20,000/- be paid on or before 20.03.2020 and in case of default in any of the aforesaid payment, the Respondent is at liberty to forfeit 25% of the above payment. Terms and Conditions of Letter of Intent (LoI) dated 21.01.2020 are as follows:

It is further contended that the First and Second Tranches of payment were belatedly paid by the Applicant. It is submitted that the compliance of the LoI ought to have been completed by 20.03.2020 and since that date, the maintenance of the property was the duty of the Applicant. The Respondent had suggested to the Applicant to bear the maintenance expenses from 20.03.2020. The Corporate Debtor has no funds to bear such additional expenses and the stakeholders have also been reluctant to bear the said maintenance expenses, due to the default committed by the Applicant. In the light of the above, for the default committed by the Applicant, the aforesaid liabilities cannot be saddled upon the Corporate Debtor under liquidation.

It is also submitted that the LoI was entered between the parties on 21.01.2020 i.e. prior to the Covid-19 pandemic. The last date of payment was as late as 20.03.2020, thereby the lock down imposed by the Government does not render the compliance of the LoI an impossible act under Section 56 of the Indian Contract Act, 1872. It is settled law that where a party to a contract has already committed breach of contract, he cannot subsequently rely on a subsequent even to his benefit and detriment to the Corporate Debtor. Furthermore, this Tribunal cannot enforce specific performance of contract since it is a contract which is in its nature determinable and is so dependent on the personal qualifications of the parties. In the light of the above, it has been submitted by the Respondent/Liquidator that the prayer seeking for extension of the period of LoI is not maintainable under law and liable to be rejected.

It has been submitted by the Respondent/Liquidator that with regard to the relief seeking to restrain the Liquidator from enforcing the 'Forfeiture Clause' and selling the property under private sale, the LoI does not create any right, title or interest in the property in favour of the Applicant. Therefore, the above relief sought by the Applicant cannot be granted under the provisions of Specific Relief Act, 1963.

It has been submitted by the Respondent/Liquidator that the Applicant has not produced any document which entitles it to claim any relief whatsoever against the Respondent or with regard to the Corporate Debtor. The applicant wilfully and intentionally had chosen to prolong the payment under the guise of national lock down even though sufficient time was given upto 30.09.2020 for payment. Therefore, it is prayed that this Applicant be restrained from creating hindrances in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor and the present Application ought to be dismissed with costs in the interest of justice and equity.

Upon perusing the material placed before this Tribunal, it is seen that the Applicant ought to have made the payment towards the last tranche by 20.03.2020. It is also seen that even in the case of earlier tranches, the payments were made belatedly. The lockdown announced by the Central/State Governments was from 25th March 2020 by which date all the payments required to have been made were not paid by the Applicant. In view of this, the Applicant cannot seek to prolong the liquidation process indefinitely upto 4 months subsequent to the lifting of the lock down and also force the Corporate Debtor to bear the maintenance expenditure without imposing any penal interest on the Applicant. The Applicant has also sought for restraining the Respondent/Liquidator from enforcing the 'forfeiture clause' under the Letter of Intent (LoI) and selling of the property under "private sale".

From the facts mentioned above, it is seen that the lockdown did not in any way affect the ability of the Applicant to make the payment and the Applicant has agreed to the conditions mentioned in the Letter of Intent (LoI) and at this point of time cannot seek to renege on his undertakings. After hearing the issues raised by the Applicant as well as Respondents and in order to ensure speedy realization of the amount due to the financial and other creditors, this Tribunal is of the opinion that there is no merit in the application made by M/s. Sri Gomathy Energy Private Limited and the application is liable to be dismissed as untenable under the provisions of law.

Accordingly the application in IA/480/2020 is hereby dismissed.