National Company Law Appellate Tribunal
Sm Milkose Ltd vs Parvinder Kumar Bhatt Deputy Zonal ... on 27 August, 2021
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Company Appeal (AT) (Ins.) No. 84 of 2021
(Arising out of Impugned Order dated 23.12.2020 passed by the
Adjudicating Authority/National Company Law Tribunal, New
Delhi in Interlocutory Application No 3047 of 2020 in Company
Petition No. IB- 334/ND/2017)
In the matter of
1. SM Milkose Limited,
5-Morar Enclave, Gola Ka Mandir,
Gwalior Madhya Pradesh-474006 ( Successful Resolution
Applicant)
... Appellant No.1
2. M/s. Applied Electro Magnetics Pvt. Ltd.
M-10, 1st Floor,
Greater Kailash-II (Market),
South Delhi-110048. (Corporate Debtor)
... Appellant No. 2
Versus
1. Parvinder Kumar Bhatt,
Deputy Zonal Manager,
Bank of India, New Delhi Zone,
Star House, 2nd Floor,
H-2, Connaught Circus,
Near PVR Plaza, New Delhi-110001
... Respondent No. 1
2. Arvind Kumar, Zonal Manager,
Bank of India, New Delhi Zone
Star House, 2nd Floor,
H-2, Connaught Circus,
Near PVR Plaza, New Delhi-110001
...Respondent No. 2
Company Appeal (AT) (Ins.) No. 84 of 2021
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3. Atanu Kumar Das,
MD & CEO,
Star House, C-5, "G" Block,
Bandra Kurla Complex,
Bandra (East), Mumbai-400051
... Respondent No. 3
4. Bank of India,
Through MD & CEO,
Star House, C-5, "G" Block,
Bandra Kurla Complex,
Bandra (East), Mumbai-400051.
.... Respondent No. 4
Present
For Appellants: Mr. Manish Kaushik, Mr. Anubhav Gupta,
Advocates.
For Respondents: Mr. Vadlamani Seshagiri and Mr. Siddharth
Sachar, Advocates (R-1 to R-4)
Judgment
(Date: 27.8.2021)
{Per: Dr. Alok Srivastava, Member (T)}
1. This appeal has been preferred by the Appellant No.1, the
successful Resolution Applicant who has stepped into shoes of
Corporate Debtor - Appellant No. 2, aggrieved by the order dated
23.12.2020 passed by the Adjudicating Authority (NCLT, New
Delhi) in IA No. 3047 of 2020 in (IB) No. 334 (ND)/2017. The
Appellant No. 1 has submitted that the impugned order
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disregards the provisions of section 14 of the Insolvency and
Bankruptcy Code, 2016 (hereinafter called IBC) according to
which no accruals can be alienated from the account of the
Corporate Debtor upon imposition of moratorium after the
initiation of the Corporate Insolvency Resolution Process (CIRP).
2. The Appellant's case is that CIRP was initiated and
moratorium was imposed on the assets of Corporate Debtor M/s.
Applied Electro Magnetic Private Limited vide order dated
26.10.2017 in Company Petition No. IB-334(ND)/2017.
3. The Appellant No.1 has submitted and argued that the
officers of Respondent No. 4 Bank which is 90% voting rights
holder in the Committee of Creditors (COC), took a decision to
keep the Corporate Debtor going concern so as to save invocation
of the bank guarantees in the first meeting of the COC.
Accordingly, an interim finance of Rupees 15 lakhs was sought
from SM. Finlease Limited, another financial creditor of the
Corporate Debtor. In the same COC meeting, the respondent
Bank of India (hereinafter called the "Bank") sought and it was
agreed to earmark 25% of the receipts received during such
operation of the Corporate Debtor during the moratorium period
Company Appeal (AT) (Ins.) No. 84 of 2021
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towards repayment of loan of the respondent Bank and kept in a
separate current account. This action, according to the Appellant
No. 1, is not in accordance with law as under no circumstances
can any creditor divert to itself the receipts of the Corporate
Debtor during the moratorium period as per the mandate of
Section 14 of IBC, and claims that such a decision was taken
under the influence of Respondent Bank which holds 90% voting
rights in the COC.
4. Appellant No. 1 has further stated that it submitted a
resolution plan dated 4.4.2018 which proposed to give 15% of the
total amount claimed by the Respondent No. 4 Bank of India,
being a secured financial creditor, equal to Rs.6.22 crores. This
amount of Rs.6.22 crores was considered inadequate and
unacceptable to the Bank of India and its officials put forward a
condition to the Resolution Applicant for retention of the monies
received by the Bank prior to 1.4.2018, over and above Rs.6.22
crores offered under the Resolution Plan, whereupon the Bank
would agree to approve the Resolution Plan. Thus a revised
Resolution Plan was drawn up by the Resolution Applicant,
wherein the Respondent Bank was permitted to retain amounts
received by the Corporate Debtor and kept in the separate
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account in the same bank (Bank of India) prior to 1.4.2018
during the currency of moratorium. This arrangement was
specifically mentioned in the revised Resolution Plan submitted
on 4.5.2018 to the COC.
5. The Appellant No. 1 has further claimed that since the
Respondent Bank wanted a still larger amount from the
resolution of the Corporate Debtor, the officials of the Bank sent
an email dated 29.6.2018 seeking resolution amount of Rs. 9
crores. The Resolution Applicant in the 8th meeting of the COC
accepted the resolution amount of Rs. 9 crores proposed by the
Respondent Bank. In the final version of the Resolution Plan
which was approved by the COC and thereafter by the
Adjudicating Authority, there was no mention of any retention of
the amount received during the moratorium period by the Bank
which was kept in the separate current account of the Bank of
India.
6. The Appellant No. 1 has stated that the Respondent Bank
received a total sum of Rs. 1,68,23,462 in the separate bank
account, which includes Rs. 88,16,071 received during the period
23.1.2018 to 3.3.2018 and Rs. 80,07,391 received during the
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period 3.4.2018 to 23.8.2018. Appellant No. 1 has further stated
that while the Bank has taken Rs. 80,07,391 from this account
as part of the resolution amount of Rs. 9 crores, it is refusing to
part with Rs. 88,16,071 and has dishonest intention of
appropriating this amount over and above the sum of Rs. 9 crores
which is the share of the Respondent Bank in the successful
Resolution Plan. Hence Appellant No. 1 along with the erstwhile
Resolution Professional requested that the Respondent Bank be
directed to give Rs. 88,16,071 to the Appellant No. 1 who is the
successful Resolution Applicant. The Appellant No. 1 has also
sought NOC for removal of charge from the Respondent Bank
which is not being given on one pretext or the other and which is
being used to armtwist the successful Resolution Applicant to pay
amounts over and above what is approved in the Successful
Resolution Plan.
7. Continuing his arguments, the Learned Counsel for
Appellant No. 1 has urged that CIRP was initiated against the
corporate debtor Applied Electro Magnetics Private Limited vide
order of the Adjudicating Authority (NCLT, New Delhi) order dated
26.10.2017 and Navin Kumar Jain was appointed as the Interim
Resolution Professional. Later the financial creditors including
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the respondent Bank (Bank of India) proposed the name of Vinay
Talwar as Resolution Professional which was confirmed by the
Adjudicating Authority vide order dated 29.1.2018. After issuing
of Expression of Interest, a resolution plan that sought to provide
Rs. 6.22 crores to the Respondent Bank was submitted by the
Appellant. This amount was considered inadequate by the
Respondent Bank which asked for a larger share, and therefore
the resolution plan was revised and submitted on 4.5.2018 which
provided an amount of Rs. 6.22 crores to the Respondent Bank
along with certain stipulations regarding the retention of amount
by Bank of India which had accrued in the separate bank account
prior to 1.4.2018 in compliance of a decision in the first meeting
of COC. The respondent Bank again sought an increase in its
share and a resolution plan; revised a second time was submitted
which provided Rs. 9 crore to the respondent Bank. This last
version of Resolution Plan was approved unanimously in the
8thmeeting of COC held on 19.7.2018 and finally approved by the
Adjudicating Authority.
8. Elucidating his arguments, the Learned Counsel for
Appellant No. 1 has invited our attention to the discussions and
decisions taken in the first COC meeting held on 22.12.2017 (
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attached at pp. 305-310, Appeal Paperbook, Volume II) wherein
in the section „Discussions on the Amount, Terms of Usage of
Interim Finance being raised to M/s. SM Finlease Limited‟
appearing after paragraph 10 the decision that „25% of the net
receipts from all the debtors shall be earmarked for payment to
the Bank of India Loan Accounts and only subsequent to which
the payments to the SM Finlease shall be made‟ is recorded. He
has also brought to our attention the „Written Synopsis‟ filed by
the Resolution Professional Vinay Talwar before the Adjudicating
Authority in IA No. 3047 of 2020 (attached at pp. 365-369, Appeal
Paperbook, Volume II) wherein in para 4, the Resolution
Professional Vinay Talwar raised the issue as to how 25% of all
receivables could be allowed to be kept for the Bank of India
keeping in mind the moratorium provisions of Section 14 of IBC.
Again, in the same Written Synopsis, on page 369/appeal paper
book, volume II, paragraph 11, the Resolution Professional Vinay
Talwar has stated that "as per my understanding this money
amounting to Rs. 1.68 crores belongs to the Corporate Debtor as
the same was realized by it from its debtors during the CIRP period
and as no payment could have been made during the said CIRP
period to any creditor, in preference to other creditors, the said
money was earmarked and kept outside for payment to Bank of
Company Appeal (AT) (Ins.) No. 84 of 2021
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India." By referring to the Written Synopsis of the Resolution
Professional submitted to the Adjudicating Authority, the Learned
Counsel has contended that the Resolution Professional Vinay
Talwar had made it clear the this amount which accrued due to
the operations of the Corporate Debtor during the CIRP was kept
in a separate account, but was not to be appropriated by the
Respondent Bank of India.
9. The Ld. Counsel for Appellant No. 1 has shown the share of
the respondent Bank of India in the approved Resolution Plan
(attached on pp. 204 - 246 of the Appeal Paperbook, Volume II)
wherein in paragraph 2.3.1.1 it is stated: -
"2.3 Secured Financial Creditors: the claims of the secured
financial creditors shall be satisfied in the manner set out
below.
2.3.1 amount:
2.3.1.1. Bank of India amount:: the bank shall be paid an
amount of INR 9,00,00,000 (Indian ₹9 crores only) towards
full and final settlement of all dues, including any default
Company Appeal (AT) (Ins.) No. 84 of 2021
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interest or any other charges pertaining to the outstanding
amount."
10. The Learned Counsel for Appellant No. 1 has contrasted the
above provision for the Respondent Bank‟s share in the
Resolution Plan referring to the provision in the earlier resolution
plan (which was later revised after request by the respondent
Bank) wherein a condition about the appropriation of the amount
received by the corporate debtor to the Bank of India during the
moratorium period was specifically included. He has clarified
that with the revision of respondent Bank‟s share to Rs. 9 crores
in the Successful Resolution Plan, this condition does not find
mention.
11. The Ld. Counsel of Appellant No. 1 has claimed that the
Respondent Bank is trying to take advantage of the fact that the
said separate bank account is in the Bank of India and hence it is
not releasing the amount which does not belong to it. He has
cited judgment in the case of UCO Bank versus G.
Ramachandran (CA (AT)(Ins) No. 761 of 2020 and IA No. 203
of 2020, decided on 3.11.2020) wherein the Hon‟ble Appellate
Tribunal has held that during the currency of moratorium
Company Appeal (AT) (Ins.) No. 84 of 2021
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enforced under Section 14, no business majority in the COC can
take advantage of its position.
12. Arguing on behalf of all the respondents, the Learned
Counsel has contended that this appeal is not maintainable
because the party that has filed the appeal is the Successful
Resolution Applicant and not the Corporate Debtor or the
erstwhile Resolution Professional. He has added that the
Successful Resolution Applicant is not the erstwhile Corporate
Debtor but he has only stepped into the shoes of the Corporate
Debtor. He has further stated that this appeal has been filed
when the Resolution Plan stands approved and is under
implementation.
13. The Learning Counsel for Respondents has argued that the
decision in the first COC meeting (which allows appropriation of
the monies kept in the separate bank account by the Bank of
India) can't be challenged now as it should have been challenged
at the time the minutes of the COC meeting were issued. He has
also pointed out that Resolution Plan which was approved by the
Adjudicating Authority, is still awaiting full implementation as no
monitoring committee is in place to oversee its implementation.
Company Appeal (AT) (Ins.) No. 84 of 2021
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He has referred to para 8 in the impugned order of Adjudicating
Authority (attached at page 247/Appeal Paperbook, Volume II)
wherein the Adjudicating Authority has been pleased to direct
that the Resolution Applicant and Resolution Professional shall
ensure implementation of the successful Resolution Plan. The
Learned Counsel for respondents has maintained that the
Successful Resolution Applicant cannot play hot and cold, as
earlier in his role as financial creditor in the COC he had
accepted the condition enumerated in the minutes of the first
COC meeting, but now as Successful Resolution Applicant he is
raising the legality of such a condition.
14. The Learned Counsel for Respondents has urged that the
Successful Resolution Applicant is twisting facts for its own
benefit, which is not in accordance with the provisions of IBC. He
has cited the decision in Kalparaj Dharamshi versus Kotak
Advisories Limited (2021 SCC online SC 204) wherein the
Hon‟ble Supreme Court has held that the court ought to respect
the commercial wisdom of the COC of approving the resolution
plan:
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150. "It will therefore be clear, that this Court, in
unequivocal terms, held, that the appeal is a creature
of statute and that the statute has not invested
jurisdiction and authority either with NCLT or NCLAT,
to review the commercial decision exercised by COC of
approving the resolution plan or rejecting the same.
155. This court observed, that the court ought to cede
ground to the commercial wisdom of the creditors
rather than assess the resolution plan on the basis of
quantitative analysis. This Court clearly held, that the
appellate authority ought not to have interfered with
the order of the adjudicating authority by directing the
successful resolution applicant to enhance their fund
inflow upfront.
156. It would thus be clear, that the legislative scheme, as
interpreted by various decisions of this Court, is
unambiguous. The commercial wisdom of CoC is not
to be interfered with, excepting the limited scope as
provided under Section 30 and 31 of the I&B Code"
15. In response to the arguments made on behalf of the
respondents, the Ld. Counsel for Appellant No. 1 in rejoinder has
Company Appeal (AT) (Ins.) No. 84 of 2021
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reiterated that the final resolution plan as recommended by the
COC with the respondent Bank as its majority voting rights
holder, was approved by the Adjudicating Authority. Hence the
Respondent Bank is bound to comply with it. He has stated that
in case the Respondent Bank is allowed to keep all the monies
generated during the CIRP period through the operations of the
Corporate Debtor it will receive a total of Rs. 9.88 crores, instead
of Rs. 9 crores as is stipulated in the approved resolution plan.
16. We have considered the detailed arguments of both the
parties and also perused the relevant records and documents
submitted by the parties. The basic issue that is relevant in this
case is that whether the COC can take a decision regarding
payments to a particular financial creditor during the CIRP and
whether any amounts that belong to the corporate debtor can be
adjusted towards the claim of any particular financial creditor
during the moratorium period imposed under Section 14 of the
IBC.
17. The COC, in its first meeting took a decision regarding
interim finance of Rs. 50 lakhs from SM Finlease Private Limited
for keeping the corporate debtor as a „going concern‟. The relevant
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extract from the said minutes (attached at pp. 109-114 of Appeal
Paperbook, Vol. I) is reproduced below:
"MINUTES OF FIRST COC MEETING HELD ON 22.12.2017
AT THIRD FLOOR, BANK OF INDIA STAR HOUSE, H-2,
CONNAUGHT CIRCUS, NEW DELHI FROM 11 AM TO 13.30
PM.
xxxxxxxxxx
Discussions on the amount, terms & usage of Interim
Finance being raised through M/s SM Finlease Ltd.
Mr. Sharad Maheshwari of M/s SM Finlease Limited has
agreed to advance as loan Rs. 50 lacs to the company with
the condition that ~ Rs.27.50 lacs will be utilized for salaries
of the employees and ~ Rs. 16 lacs will be utilized for raw
material and remaining for essential cost of the CIRP.RP
expressed that an agreement to this effect can be executed
today itself and the amount be disbursed at the earliest
possible. To facilitate the terms of Interim Finance wherein it
was agreed in the meeting held on December 14, 2017 that,
25% of the net receipts from all the Debtors shall be
earmarked for payment to the Bank of India Loan Accounts
and only subsequent to which the repayments to the SM
Finlease shall be made, Bank of India representatives
indicated the need of opening a separate Current Account of
the Corporate Debtor with the Bank of India to facilitate the
above term. Mr. Jain approved the opening of the said
Current Account with the Bank of India."
(emphasis supplied)
18. In the first resolution plan dated 4.4.2018 (attached at
pp.115-154, Appeal paperbook Vol.-I of CA No. 800/2020), the
relevant para 2.3 in „Schedule 8: Financial Plan‟ shows Rs. 6.22
Company Appeal (AT) (Ins.) No. 84 of 2021
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crores included as the share of the Respondent Bank of India. It
is reproduced below:
"2.3 Secured Financial Creditors: The Claims of the Secured
Financial Creditors shall be satisfied in the manner set out
below:
2.3.1. Amount:
2.3.1.1. Bank of India Amount: The Bank shall be paid
an amount of INR 6,22,00,000 (Indian Rupees
Six crores and Twenty two lakhs) towards full
and final settlement of all dues including any
default interest or any other charges pertaining
to the outstandings.
2.3.1.2. Open Bank guarantees of the bank shall be
honoured to the Resolution Applicant and the
deficit margins, if any, shall be made good by
the resolution Applicant within 9 months of the
effective date."
19. This amount of Rs. 6.22 crores as its share in the
resolution plan was not found adequate by the Bank of India, and
hence the Resolution Applicant amended the resolution plan. The
revised Resolution Plan dated 4.5.2018 (attached at pp. 155-198
of Appeal Paperbook, Vol-I) had the following as Bank of India‟s
share, which is included in para 2.3 of "Schedule 8: Financial
Plan" at page 185:
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"2.3 Secured Financial Creditors: The claims of the Secured
Financial Creditors shall be satisfied in the manner set out below.
2.3.3. Amount:
2.3.1.1. Bank of India Amount: The Bank shall be
paid an amount of INR 6,22,00,000 (Indian Rupees Six crores and
Twenty two lakhs) towards full and final settlement of all dues
including any default interest or any other charges pertaining to
the outstanding. On the request of the Bank, it is further clarified
and committed that the amount of Rs. 6.22 crores is reckoned
effective 01.04.2018 (any payment made to the bank prior to
01.04.2018 shall not be deducted from this amount). Any payment
made on or after 01.04.2018 shall be deemed to be part of this
offered amount of Rs. 6.22 Cr."
20. However, this amount of Rs. 6.22. crores with the condition
mentioned in commitment to the Bank of India to keep amounts
accrued in the separate bank account before 01.04.2018 was also
not found to its satisfaction by the Bank of India. Hence, the
officer of the Recovery Department of the Respondent Bank of
India vide email dated 29 June 2018 (attached at pg. 199 of
Appeal Paperbook, Vol-I), which is reproduced below, sought
increase of the resolution amount to the level of Rs. 9 crores:
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21. Thereafter the Resolution Plan was again revised (attached
at pp. 204.246 of Appeal Paperbook, Vol - II) which made a
Company Appeal (AT) (Ins.) No. 84 of 2021
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specific provision of payment of Rs. 9 crores to the Respondent
Bank of India „as full and final payment of its total admitted claim
of Rs.41.50 crores This resolution plan was approved by the COC
in its 8th meeting held on 22.12.2017. The relevant extract from
the minutes of the 8th COC meeting is as hereunder:
"MINUTES OF THE 8TH MEETING OF THE COMMITTEE OF
CREDITORS OF APPLIED ELECTRO MAGNETICS PRIVATE
LIMITED (THE "COMPANY") HELD ON THURSDAY, JULY 19,
2018 AT BANK OF INDIA, ZONAL OFFICE, MEETING
R4OOM, 3RD FLOOR, H-2, STAR HOUSE, MIDDLE CIRCLE,
CONNAUGHT PLACE, DELHI - 110001._____________________
ITEM No.4: TO CONSIDER AND DECIDE UPON THE
RESOLUTION PLAN SUBMITTED BY THE RESOLUTION
APPLICANT.
The Chairman informed the members that he has received an
amended Resolution Plan from the Resolution Applicant
today afternoon. The RA submitted physical copies of the
same during the meeting. The Chairman then enquired from
the BOI team as well as the Resolution Applicant w.r.t the
status of their discussions and the decision taken on the
Resolution Plan. The BOI team member informed the
members that their Head Office has rejected the amended
proposal given by the Resolution Applicant. On hearing this
the Resolution Applicant, through its representative, Mr.
Sharad Maheshwari, immediately gave his unconditional
acceptance of the earlier minimum figure of Rs. 9 crores
suggested by the H.O. and requested the Bank to now accept
and close the matter. He cited the e-mail dated 29.08.2018
sent by the Bank to the RP mentioning the figure of Rs. 9
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crores, who had in turn informed the RA of the said
suggestion."
22. The resolution plan which was revised a second time,
stipulated that Rs. 9 crores in total shall be paid to the Bank of
India. It did not mention any specific condition about the receipts
in the separate Current Account which was maintained in the
Bank of India with accruals during the functioning of the
corporate debtor. The relevant portion in „Schedule 8: Financial
Plan‟ of the Final Resolution Plan, which was approved by the
Adjudicating Authority vide order dated 23.12.2020 in IA No.
3047 of 2020 in (IB) 334 (ND)/2017 (attached at pp. 204-246 of
Appeal Paperbook, Vol-II) is as hereunder:
"RESOLUTION PLAN UNDER THE INSOLVENCY AND
BANKRUPTCY CODE, 2016
IN THE MATTER OF APPLIED ELECTROC MAGNETICS
PRIVATE LIMIED
SUBMITTED BY
SM MILKOSE LIMITED
xxxxxxxx.
2.9. Summary of proposed settlement
(All figures are rounded off to nearest Rs. crores)
Verified Proposed Amount Amount to be
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claims settlement before the paid within 9
expiry of 30 months of the
days of the effective date
effective
date
Rs. Cr. Rs. Cr. Rs. Cr. Rs. Cr.
IRP Costs - 0.18 0.18 -
(approx.)
Secured 41.50 9.00 2.25 6.75
Financial
Creditors
Bank of 41.50 9.00 2.25 6.75
India
xxxxxxx
B. This revised resolution plan is based on the request of
the bank to substantially increase the resolution amount to
Rs. 9.00 crores. In this revised plan, the resolution applicant
has accepted the entire amount as required by the bank."
23. The share of Bank of India is also included in Schedule 8:
Financial Plan of the finally Approved Resolution Plan (attached
at pp. 204-246 of Appeal Paperbook, Vol - II) in para 2.3. It is as
hereunder:
"2.3 Secured Financial Creditors: The Claims of the Secured
Financial Creditors shall be satisfied in the manner set out
below:
2.3.1. Amount:
2.3.1.1. Bank of India Amount: The Bank shall be
paid an amount of INR 9,00,00,000 (Indian
Rupees Nine crores only) towards full and final
Company Appeal (AT) (Ins.) No. 84 of 2021
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settlement of all dues including any default
interest or any other charges pertaining to the
outstanding."
24. In view of this last and final version of the Resolution Plan,
which included the share of Bank of India as Rupees 9 crores
only, the Adjudicating Authority has observed in Paras 33 and 34
of the impugned order as follows:
"33. In view of the discussion made above, we are of the
considered view that the Resolution Applicant is liable
to pay an amount as per the approved Resolution Plan
and they can not go beyond the approved Resolution
Plan. Accordingly, we hold that the resolution
Applicant is liable to pay an amount as per the
approved Resolution Plan and they can not go beyond
the approved Resolution Plan. Hence point no. 1 is
decided in the manner stated above.
34. So far as point no. 2 is concerned, for the
reasons discussed above, the amount paid prior to the
approval of thr Resolution Plan to the Respondent
Bank during moratorium period will not be treated as
an amount/part of the Resolution Plan as per the
terms of the plan."
25. Section 14 of the IBC, particularly sub-section (b) of section
14(1) prohibits "transferring, encumbering, alienating or
disposing of by the Corporate Debtor, any of its assets or any
legal right or beneficial interest therein". It is quite clear about
how accruals to the corporate debtor are to be treated during the
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currency of CIRP. This provision prohibits the corporate debtor,
and the resolution professional who is managing the affairs of the
corporate debtor during CIRP, from transferring any of the
corporate debtor‟s assets to creditors. The amounts received by
the corporate debtor during the currency of the CIRP are assets of
the corporate debtor whose transfer to chosen creditor in priority
without the process of Resolution Plan would be prohibited.
Therefore, such a condition as was prescribed in the first COC
meeting regarding apportioning of the accruals in the separate
bank account of corporate debtor to the Bank of India would not
be legal and against the provision in sub-section 3 of section 14,
which allows only such transactions which may be notified by the
central government, in consultation with any financial regulator,
to be exempted from the rigour of moratorium. The accruals in
the separate bank account in the Bank of India during the CIRP
are not notified by the Central Government and hence they are
the assets of the corporate debtor.
26. Hon‟ble Supreme Court, in Kalparaj Dharmashi versus
Kotak Advisories Ltd. has made it very clear that any
commercial decision of the COC of approving the resolution plan
or rejecting the same has to be respected and the statute has not
Company Appeal (AT) (Ins.) No. 84 of 2021
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invested jurisdiction or authority, either with NCLT or NCLAT
regarding same. Thus the approval of the Resolution Plan in the
8th COC meeting and thereafter by the Adjudicating Authority
assumes finality and cannot be tinkered with.
27. We also note the judgment rendered by this tribunal in
UCO Bank versus G Ramachandran case (referred supra)
wherein it has been held that during CIRP no business majority
in the COC can take advantage of its position in apportioning any
part of the receipts to the corporate debtor to itself.
28. In the present case, the Resolution Plan, which was
approved by the Adjudicating Authority, included Bank of India‟s
share as Rs. 9 crores only as full and final settlement with no
conditions attached. Therefore ,the condition stipulated by the
COC in its first meeting regarding the receipts by the corporate
debtor during the CIRP period and apportioning of 25% of the
accruals due to the operations of corporate debtor are not part of
the final resolution plan and this has no legs to stand on vis a vis‟
the approved resolution plan and the share of Bank of India
contained therein.
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29. An important issue that has become evident in this case is
the absence of monitoring of the implementation of the successful
resolution plan. Regulation 38 sub-regulation 2 of The Insolvency
and Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 is quite clear about the
implementation aspect of a resolution plan. This provision reads
as hereunder:-
"38. Mandatory contents of the resolution plan
(1A) A resolution plan shall include a statement as to how it
has dealt with the interests of all stakeholders, including financial
creditors and operational creditors, of the corporate debtor.
xxxxx
(2) A resolution plan shall provide:
(a) the term of the plan and its implementation schedule;
(b) the management and control of the business of the
corporate debtor during its term; and
(c) adequate means for supervising its implementation.
(3) A resolution plan shall demonstrate that -
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(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."
30. Therefore, we consider it necessary that the erstwhile
Resolution Professional be made responsible for proper
monitoring of the implementation of the successful resolution
plan to ensure its complete and proper implementation and to
ensure that issues such as the one raised in this appeal do not
cause unnecessary delays and obstructions in the
implementation of the resolution plan. The erstwhile Resolution
Professional shall oversee the Successful Resolution Plan‟s
implementation in accordance with the provisions of IBC and the
order we propose to pass.
31. In view of aforesaid discussion and for the above reasons
cited in preceding paragraphs, we hold that the amounts received
Company Appeal (AT) (Ins.) No. 84 of 2021
Page 26 of 28
towards interim finance during pendency of CIRP for which
account was opened in the branch of Respondent No.4- Bank
have to be held as amounts received by the Corporate Debtor
during CIRP and are to be utilised as per the provisions of IBC,
Rules and Regulations and the Resolution Professional is
responsible for due utilisation of the same, strictly as per the
provisions of IBC, Rules and Regulations and the Resolution Plan
which was approved by the Adjudicating Authority.
32. For the above reasons, the impugned order cannot be
maintained. We pass the following order:-
ORDER
The impugned order is quashed and set aside. The Resolution Professional is directed to take account of the amounts received by Corporate Debtor during CIRP in the account opened with Respondent No.4- Bank, which decision to open the account was taken in the first CoC meeting. The Resolution Professional will ensure that all receipts of Corporate Debtor during CIRP are duly accounted for and applied as per provisions of IBC and Approved Resolution Plan. The Resolution Professional will take steps to ensure utilisation of the amounts received in the account keeping in view provisions of the IBC, Company Appeal (AT) (Ins.) No. 84 of 2021 Page 27 of 28 Rules and Regulations and the approved Resolution Plan to ensure proper utilisation and dispensation of the amounts. Balance, if any, shall enure to the benefit of the Successful Resolution Applicant who has stepped into the shoes of the Corporate Debtor.
33. The Resolution Professional will ensure completion of this process within one month of this order. Resolution Professional shall be at liberty to move Adjudicating Authority for further directions and orders for due enforcement of this Order.
34. Registry to convey copy of this order to the Resolution Professional- Mr. Vinay Talwar.
35. There is no order as to costs.
(Justice A I S Cheema) The Officiating Chairperson (Dr. Alok Srivastava) Member(Technical) New Delhi 27th August, 2021 /aks/ Company Appeal (AT) (Ins.) No. 84 of 2021 Page 28 of 28