Western Coalfields Limited vs Sai Wardha Power Generation Limited & Ors.

[Per: Justice Sharad Kumar Sharma, Member (Judicial)]

The proceeding that were held in IA No. 703/2019, which was preferred in CP (IB) No. 275/7HDB/2018, being the proceedings, which were instituted under Section 30 (6) and 31 of IBC 2016, to be read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, before the Ld. NCLT and the same has been affirmed with the approval of the Resolution Plan, by an order passed by the Ld. Adjudicating Authority on the said application.

The facts are that, Respondent No. 2, is the Financial Creditor, as well as the Respondent No. 3 being the Operational Creditor and Debenture Trustee, had filed company petition for initiation of CIRP as against the Corporate Debtor. The aforesaid company petition, stood admitted by an order passed by the Ld. Adjudicating Authority by an order dated 09.11.2018, which resulted into CIRP proceeding and consequentially resulting into an appointment of the Interim Resolution Professional. The Appellant had submitted his claim under Form B on 05.02.2019, which was in accordance with the provisions contained under Regulation 8 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, as amended by Notification No. IBBI/2017-18/GN/REG030 dated 27.03.2018, which was enforced with effect from 01.04.2018.

The claim thus raised by the Appellant was rejected by the Resolution Professional, without assigning any reasons.

The Appellant contends that being aggrieved as against the order of rejection of “Form B” dated 05.02.2019, he has filed an application under Section 60 (5) of I & B Code, 2016. The same too has been rejected by the Ld. Adjudicating Authority, observing that, under the I & B Code, there is no such concept of 'contingent claims', and thus the Ld. Adjudicating Authority held that, the Resolution Professional shall consider the claim of the Appellant, as ordinary claims, subject to the outcome of the litigations that were pending before various courts, including the Hon'ble Apex Court. It is because of the aforesaid reason, the Ld. Adjudicating Authority passed an order directing the Resolution Profession to treat the claim of the Appellant, as ‘ordinary claim’, after considering it on merits, instead of treating it as a contingent claim, as it was actually claimed by the Appellant.

The Appellant's case is that, in the meeting of the CoC held on 25.07.2019, and as per the report of the transaction reviewer, which was submitted along with the Resolution Plan by the Resolution Professional, the voting was conducted based upon the report, obtained by electronic means and the Resolution Plan was approved by the CoC with the voting majority of 75.91% of the CoC. And accordingly, the list of creditors was uploaded on 20.07.2019. The name of the Appellant was at Serial No. 1 in the list of Operational Creditors, with the claim of Rs. 753,93,00,000/- as "contingent claim". There were various parameters, which were prescribed to be considered in the Resolution Plan, which provided for the classification of claims of the Operational Creditors into three wider categories, namely.

The IA No. 703/2019 seeking for approval of plan was allowed by an order dated 19.10.2019. The Resolution Plan submitted by the Resolution Applicant, consortium of Sri City Private Limited and KCR Enterprises LLP, (Resolution Applicant), along with the addendum, which is approved by the CoC having 75.91% voting, was approved by the orders of Ld. Adjudicating Authority as per the provisions contained under Section 30 (1) of the I & B Code, 2016.

The Appellant/ Operational Creditor herein, aggrieved against the said order, has preferred this company appeal, as against the approved Resolution Plan, as on 17.10.2019.

As per the case of the Appellant, he contended that, the orders passed by the Ld. Tribunal would be bad in the eyes of law for the reason being that, the logic which has been assigned by the Ld. Tribunal, while passing the order consequentially approving the Resolution Plan, is contrary to law, hence, also the Appellant herein had filed IA No. 434/2019 wherein, he prayed for to set aside the decision of the Resolution Professional of rejecting the claim of the Applicant (Appellant herein)and further direct the Resolution Professional to admit the claim in its entirety. The said application, was considered the Ld. Tribunal and recorded its finding in the order that, was passed on 06.09.2019 whereby making an observation in para 9 of the discussion, that, since in the I & B Code there is no provision prescribed to treat the claim as a contingent claim, the CCI held that, the Applicant since in a dominant position, the order, which was also confirmed by the appellate authority and the matter is presently pending before the Hon’ble Apex Court. All the claims of the Applicant were arising due to the alleged breach of terms of the FSA. The same cannot be treated as to be a contingent claim, and the relevant conclusion that has been drawn by the order dated 06.09.2019, the IA preferred by the Applicant, being IA No. 434/2019, it was disposed of, directing the Resolution Professional to treat the claim of the Applicant (i.e., the Appellant herein) as an ordinary claim, after considering it on merits instead of as a "contingent claim", and that was liable to be redetermined subject to the result of the proceedings pending before the various authorities including the Hon’ble Apex Court.

The ground taken by the Appellant, challenging the impugned order of 17.10.2019, that was rendered on IA No. 703/2019, on the ground, that, the rejection of the claim and the parameters of determination as made with regard to the claim was submitted by the Appellant, as a contingent claim by treating it as to be an ordinary claim, was without any rational and logical reasons and it was argued that, the order dated 17.10.2019, as passed in IA No. 703/2019, deserves to be reconsidered.

Primarily, the grievance, which has been argued by the Ld. Counsel for the Appellant was in the context of the observation, that, were made as regards to the terms of the Resolution Plan, which was considered by the Ld. Tribunal while passing the impugned order, particularly the observation that, was made in para viii (c), where it was observed that, since some of the Operational Creditors have already approached the different legal forums, challenging the rejection of their claim, in the event if some of the rejected claims or the contingent claim could get crystallized after the date of the submission of the Resolution Plan, the purpose of distribution, of the allocated amount in the manner it was described therein would justify the distribution as settled under the plan.

However, the Appellant has limited his contest on the ground that, the observation made in clause VIII (c) of the plan to the effect that, at the end of 24^th month the balance amount if any, shall be distributed amongst all the Operational Creditors, with admitted claims and that all those claims that, have not been admitted shall stand rejected and shall stand discharged with no payment, is being objected by the Appellant contending that, there was no rational, prescribed, to be adopted either by the action taken by the Resolution Professional or even by the Ld. Tribunal too, while carving out the said exception to fixation of the time period of 24 months.

However, the company appeal was confined to be considered on the question of law as framed by the Appellant in the appeal in the following manner:

The argument by the Ld. Counsel for the Appellant was that, the Ld. Adjudicating Authority has erred at law in failing to appreciate that, the claims which were statutory in nature are also included in the contingent claim. And since they are not being admitted by the Debtor, the claim amount, which is fixed by the statute is compulsory and there is no need for admission of a liability of such an amount by the Corporate Debtor. The amount of DMF and GST has already been paid by the Appellant amounting to Rs 0.63 and Rs 5.82 respectively, which was not considered by the Ld. Adjudicating Authority as well as the Interim Resolution Professional at the stage of finalization of the claims, which were pending consideration.

Besides that, it was contended that the Ld. Adjudicating Authority has failed to appreciate that the period of 24 months, prescribed in the order for crystallization of claim from the authorities, they were beyond the control and power of the Ld. NCLT.

On the other hand, the Ld. Counsel for the Respondent who had filed the written submissions contended that, in fact, as of now, no cause of action survives for the Appellant to pursue the company appeal as against the order of 17.10.2019, for the reason being that, the Resolution Plan has already been successfully implemented and the changes in the manner of the Corporate Debtor has already been effectuated. The plan has been implemented and consequential definite agreements have already been given effect by the lenders and other Resolution Applicants.

Hence, they contended that, once the Resolution Plan has already been implemented, and also the fact that, the other appeal as against the same Resolution Plan of the Corporate Debtor, once it has been dismissed on 11.03.2022. In a similar set of facts, the instant company appeal, for all practical purposes at the behest of the Operational Creditor has been rendered infructuous.

The Ld. Counsel for the Respondents, have drawn the attention of this Appellate Tribunal to the judgment rendered by the Principal Bench, in Company Appeal (AT) (Ins) No.1294/2019, in the matters of M/S Balaji Associates versus Mr. V. Venkatachalam and 3 Others, an appeal that too was preferred as against the impugned order passed on 17.10.2019 by the Ld. NCLT, in IA No. 703/2019, as preferred in CP (IB) No. 275/7HDB/2018. There were bunch of appeals, which were considered by the Principal Bench, which, vide its judgment, as rendered on 11.03.2022, had dismissed the appeal and has confirmed the Resolution Plan.

In view of the fact, that the impugned order, which is under challenge in the instant company appeal, has already been confirmed by the Principal Bench in the bunch of other company appeals as referred to herein above, with the leading company appeal being Company Appeal (AT) (Ins) No.1294/2019. Nothing much survives to be decided on merits in the instant company appeal. Hence, this ‘company appeal’ too would stand ‘dismissed’ under the same terms of the judgment of 11.03.2022 as rendered by the Principal Bench. All pending ‘interlocutory applications’ would stand ‘closed’.

[Justice Sharad Kumar Sharma]