State Bank Of India & Others vs The Consortium Of Mr. Murari Lal Jalan ... on 26 May, 2023

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National Company Law Appellate Tribunal

State Bank Of India & Others vs The Consortium Of Mr. Murari Lal Jalan ... on 26 May, 2023

These three Interlocutory Applications have been filed by Appellant (IA No.1975 of 2023) and Respondent No.1 (IA Nos.2028-2029 of 2023 and IA Nos.2159-2160 of 2023) in the Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 filed by the State Bank of India and Ors. vs. The Consortium of Murari Lal Jalan and Mr. Florian Fritsch & Anr. IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 1

2. Before we come to the respective submissions made in the IAs filed by the parties, a brief background giving rise to Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 and the filing of the IAs need to be noted:

(i) Jet Airways (India) Limited - (Corporate Debtor) was admitted in insolvency on 20.06.2019. A Resolution Plan was submitted by Respondent No.1, which came to be approved by the Committee of Creditors ("CoC") on 21.09.2020. The Adjudicating Authority vide its order dated 22.06.2021 approved the Resolution Plan of Respondent No.1.

(ii) Various Appeals were filed in this Tribunal challenging the order dated 21.06.2021, which came to be decided by judgment of this Tribunal dated 21.10.2022, upholding the approval of the Plan with certain directions.

(iii) The conditions precedent as contemplated in the Resolution Plan for operationalizing the Corporate Debtor were achieved on 20.05.2022 as per Successful Resolution Applicant/ Respondent No.1. (hereinafter referred to as the "SRA"), which factum was contested by the Appellant - Monitoring Committee of Lenders (hereinafter referred to as the "MC Lenders"). The SRA wrote to MC Lenders to share necessary documents for execution and completion of necessary steps to enable SRA to start capital infusion in the Corporate Debtor and settle dues of the creditors in compliance with the IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 2 approved Resolution Plan. The MC Lenders disputed the fulfillment of conditions precedent.

(iv) The SRA filed IA No.3398 of 2022 (implementation Application) and IA No.3508 of 2022 (Exclusion Application) before the Adjudicating Authority seeking exclusion of the period in Company Petition (IB) 2205/MB/2019 and also for direction to the MC Lenders to give control and management of the Corporate Debtor to SRA and declare 20.05.2022 to be an effective date. Further SRA sought exclusion of time from 20.05.2022 till the decision of the Adjudicating Authority, i.e. from the 180 days' period granted to infuse the first tranche of funds required under the Plan. The Application was contested by the MC Lenders contending that effective date has not been achieved, since the SRA has not fulfilled the conditions precedent.

(v) By an order dated 13.01.2023 the Adjudicating Authority allowed the IA Nos.3398 and 3508 of 2022. The Adjudicating Authority held that SRA has fulfilled conditions precedent and 20.05.2022 was the effective date as per the Resolution Plan. The Adjudicating Authority further excluded the period of 180 days from the period available with SRA to implement the Resolution Plan. As per the exclusion allowed by the Adjudicating Authority the timeline for the execution of the Plan stood extended till 15.05.2023.



IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in
Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023                          3
       (vi)    After order dated 13.01.2023 of the Adjudicating Authority, the

              SRA   wrote   to   the   MC    Lenders   to   cooperate   with

implementation of the Resolution Plan. The MC Lenders did not act as per the directions contained in the order dated 13.01.2023, rather challenged the order dated 13.01.2023 by filing the Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 in this Tribunal on 24.01.2023. The MC Lenders in the Appeal also prayed for stay of the order dated 13.01.2023 of the Adjudicating Authority.

(vii) The Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 came to be heard by this Tribunal on 03.03.2023 on which date this Tribunal declined to pass any interim order with regard to staying the order of the Adjudicating Authority dated 13.01.2023.

(viii) In the meantime, the order passed by this Tribunal approving the order of the Adjudicating Authority dated 21.10.2022 was challenged before the Hon'ble Supreme Court and Hon'ble Supreme Court by an order dated 30.01.2023 has dismissed the Civil Appeal No.407 of 2023.

(ix) This Tribunal in its order dated 03.03.2023 passed in the present Appeal, took the view that Resolution Plan having been approved by the Adjudicating Authority and by this Tribunal as well as by the Hon'ble Supreme Court, all stake holders have to act in a manner so as to implement the Resolution IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 4 Plan, this Tribunal declined to pass any interim order for staying the order dated 13.01.2023 passed by the Adjudicating Authority, which was impugned in the Appeal. In paragraph 14 and 15, following was observed by this Tribunal:

"14. The Resolution Plan having been approved by the Adjudicating Authority which received approval from this Tribunal as well as up to Hon'ble Supreme Court, all stakeholders have to act in a manner so as to implement the Resolution Plan. The Monitoring Committee is constituted as per the I&B Code and Regulations to take steps to oversee the implementation of the Resolution Plan. The Resolution Applicant has filed the Application seeking certain direction for implementation which has been allowed and we as on date are of the view that no grounds have been made out to grant any interim order staying the order impugned passed by the Adjudicating Authority or to direct the parties to maintain Status Quo.

15. The steps regarding the implementation of the plan has to be taken by the SRA which need to be overseen and cooperated by the Monitoring Committee. Learned Sr. Counsel appearing for the SRA has submitted that SRA shall discharge all its obligations under the Resolution Plan for successful implementation of the resolution plan. In view of the above, we see no reason to pass any Interim Order as on date reserving the right to the parties to pray for any interim direction after pleadings are complete."

(x) The order passed by this tribunal on 03.03.2023 has been challenged by the Appellant before the Hon'ble Supreme Court IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 5 by filing Civil Appeal No.16091 of 2023, which is pending consideration before the Hon'ble Supreme Court.

3. During the pendency of this Appeal, the above three IAs have been filed by the parties as noted above. Now we proceed to notice the prayers made in the above three IAs.

4. IA No.1975 of 2023 has been filed by the Appellant. In the Application the Appellant has pleaded that for the purpose of infusion of funds by SRA certain approvals may be required at appropriate stage in accordance with the applicable legal and regulatory requirements, as set out in the Resolution Plan. It is pleaded that there are corporate and regulatory actions, which as part of general corporate compliances under law in respect of the Corporate Debtor, can only be done if the Corporate Debtor has the requisite number of Directors on its Board. By the Application the Appellant sought necessary direction and approval of the Tribunal for appointment of certain number of Directors in order to enable the Corporate Debtor to be able to make necessary, regulatory and legal compliances in accordance with the provisions of Companies Act, 2013, to enable effective implementation of the Resolution Plan. In the Application, following prayers have been made:

(a) Permit appointment of directors to the board of directors of the Corporate Debtor, as identified by the representatives of the financial creditors on the Monitoring Committee of the Corporate Debtor, to enable certain regulatory and legal compliances IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 6 under the provisions of the Companies Act, 2013;

                   and
            (b)    Pass such orders as this Hon'ble Appellate

Tribunal deems fit and proper in the circumstances of the case and thus render justice."

5. IA Nos.2028-2029 of 2023 has been filed by the SRA. In the Application it is pleaded that as per order dated 13.01.2023, 180 days' time was extended till 15.05.2023 to implement the Resolution Plan by infusing first tranche of money of INR 175 crores. The Applicant pleaded that SRA cannot suo moto infuse funds in the Corporate Debtor and take control of the Corporate Debtor unless corresponding steps are taken by MC Lenders and the order dated 13.01.2023 passed by the Adjudicating Authority, came to be challenged by the MC Lender in this Appeal, where the interim order was declined on 03.03.2023. It is further stated that even though there is no interim order against 13.01.2023 of the Adjudicating Authority, the MC Lenders did not take steps in spite of several requests made by the SRA. On 13.04.2023, the MC Lenders took first step towards the implementation of the Resolution Plan by sharing details of the bank account of the Corporate Debtor for infusion of share application money. The MC Lenders also filed an Application being IA No.1975 of 2023 in this Tribunal on 08.05.2023 in this Appeal seeking directions of the Tribunal to permit appointment of Board of Directors of the Corporate Debtor. It is pleaded that account details, which has been communicated by MC Lenders are also not in accordance with Section 42, sub-section (6) of the IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 7 Companies Act, 2013 and there has to be a designated account for infusing the fund for share application money. The SRA had also filed an Application before the NCLT being IA No.1863 of 2023 seeking exclusion of period from 16.11.2022 till 13.04.2023, which Application could not be heard and next date fixed is 06.06.2023. The learned Senior Counsel for the SRA submitted that in view of filing IA Nos.2028-2029 the SRA will withdraw the IA No.1863 of 2023 filed before the Adjudicating Authority. In the Application 2028-2029 of 2023, following prayers have been made:

"(a) allow the Application and exclude the period from 16 November, 2022 till the date of Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 is decided by this Hon'ble Adjudicating Authority, from the 180 days' period granted under the Resolution Plan for infusion of the first tranche of funds and achieving the Closing Date;

(b) pass interim/ ad-interim reliefs in terms of prayers

(a) above;

(c) pass any other such order(s0 as this Hon'ble Appellate Authority may deem fit and proper in the facts and circumstances of this case."

6. The third Application being IA Nos.2159-2160 of 2023 is filed by the SRA. In the Application after narrating the sequence of events the SRA has referred to IA No.2028-2029 filed in this Appeal. It is stated that on 13.05.2023 in late evening SRA received a letter from SBI asking SRA to infuse amounts as referred in the letter. The SBI's letter further stated that the identified bank account details has been shared on 13.04.2023 and in IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 8 29th Monitoring Committee Meeting held on 28.04.2023 the concern shown by the SRA has been addressed. The letter further stated that if the payment obligations are not honoured by 15.05.2023, the MC Lenders may exercise their rights and remedies as available in law (which includes invocation of Performance Bank Guarantee as well). In the Application, following prayers have been made:

"(a) allow the Application and pass an order restraining/ injuncting the Respondents from encashing or appropriating the Performance Bank Guarantee and Ernest Money deposited by the Applicant/ SRA in favor of Respondent No.1 under the Resolution Plan.

(b) pass interim/ ad-interim reliefs in terms of prayers

(a) above;

(c) pass any other such order(s) as this Hon'ble Appellate Authority may deem fit and proper in the facts and circumstances of this case."

7. We have heard Shri Gopal Jain, learned Senior Counsel assisted by Shri Raunak Dhillon appearing for the Appellant - State Bank of India. Shri Ravi Shankar Prasad, learned Senior Counsel and Shri Krishnendu Datta, learned Senior Counsel for the SRA.

8. Shri Gopal Jain, learned Senior Counsel in support of IA No.1975 of 2023 submits that permission of Tribunal is required for appointment of Board of Directors, so that necessary regulatory actions as part of general corporate compliances under the law can be taken. The prayers made in IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 9 the IA No.1975 of 2023 have not been opposed by the learned Senior Counsel for the SRA. It is submitted that the Board of Directors need to be appointed. Shri Prasad, however, submits that while appointing the Board of Directors, the Appellant may also consider including one representative of SRA.

9. The learned Senior Counsel for SRA in support of IA Nos.2028-2029, praying for exclusion contended that even after order dated 13.01.2023 passed by the Adjudicating Authority, appropriate corresponding steps have not been taken by the MC Lenders, so as to proceed further by the SRA and 13.04.2023 is the first step taken by the MC Lenders, intimating the bank account, which bank account is also not a designated bank account as required by law, in which share application money can be deposited. It is submitted that SRA has filed an Application before the Adjudicating Authority for exclusion of period, which could not be heard and the next date before the Adjudicating Authority is 06.06.2023 and as the 15.05.2023 was fast approaching, hence IA Nos.2028-2029 was filed on 12.05.2023 seeking exclusion. The learned Senior Counsel submits that at least the period from 16.11.2022 to 13.04.2023 be excluded for the period of implementation of the Plan. The learned Senior Counsel further submits that the SRA is ready and willing to infuse the first tranche of INR 175 crores, and to show the bonafide of the SRA, the SRA shall infuse INR 50 crores within 30 days and rest within time as allowed.

10. The learned Senior Counsel for the SRA in support of IA Nos.2159- 2160 of 2023 submits that the SRA is implementing his part and it was IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 10 due to corresponding steps not being taken by MC Lenders, first tranche of money could not be infused. There is no lapse in performing the obligations on the part of SRA as per the Plan and the State Bank of India issued the letter on 13.05.2023 only to frustrate the implementation of the Plan. The MC Lenders have threatened to invoke the Performance Bank Guarantee, which is not permissible in the facts of the present case. This Tribunal may grant appropriate interim order so that Performance Bank Guarantee may not be invoked frustrating the implementation of the Plan.

11. Shri Gopal Jain, learned Senior Counsel appearing for MC Lenders submits that the SRA having filed an Application before Adjudicating Authority praying for exclusion of period, they are not entitled to file the present Application praying for exclusion. Shri Jain further submits that period for exclusion prayed for is excessive and cannot be allowed. Replying to IA Nos.2159-2160, Shri Jain submits that Performance Bank Guarantee is an independent contract where the lenders have right to invoke the Bank Guarantee, which cannot be made subject matter of the Application. It is submitted that SRA has to infuse INR 175 Crores, which is first tranche of money.

12. We have considered the submissions of learned Counsel for the parties and have perused the record.

13. The IA No.1975 of 2023 filed by the MC Lenders, seeks permission for appointment of Board of Directors of the Corporate Debtor. The Application as noted above is not opposed by the SRA and it is stated that IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 11 the appointment of Board of Directors to the Corporate Debtor is the step, which is essential for taking various regulatory actions as part of general corporate compliances under law. We allow the IA No.1975 of 2023 in terms of prayer (a).

14. Now we come to the IA Nos.2028-2029 of 2023, where the SRA has prayed for exclusion of time prayed for in the Application from 16.11.2022 till the Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 is decided. As noted above, the SRA has already filed an Application before the Adjudicating Authority, praying for exclusion of time, which is fixed for 06.06.2023 being IA No.1863 of 2023 and the same has not yet been considered. The SRA had filed this Application on 12.05.2023, since the 180 days period as per order passed by the Adjudicating Authority dated 13.01.2023 was coming to an end on 15.05.2023. We having already by our order dated 03.03.2023 passed in this Appeal directed that steps regarding the implementation of the Plan need to be undertaken by the SRA, which need to be overseen and cooperated by the Monitoring Committee, all necessary steps have to be taken by both the parties. From the facts, which have been brought on record, it appears that even after order dated 13.01.2023 passed by the Adjudicating Authority, allowing the implementation of the Plan filed by the SRA, the directions issued by Adjudicating Authority on 13.01.2023 were not implemented by the MC Lenders. Rather, MC Lenders have challenged the order dated 13.01.2023 by means of Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023. In Company Appeal (AT) (Insolvency) Nos. 129 & 130 of 2023 the MC Lenders IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 12 have filed an Application praying for interim relief. The prayers in the interim relief application filed by the Appellant in IA No.512-513 of 2023 are to the following effect:

"(a) Stay the effect and operation of the Impugned Order dated January 13, 2023 passed by the Hon'ble National Company Law Tribunal, Mumbai in I.A. No.3358 of 2022 and I.A. 3508 of 2022 filed in Company Petition (I.B.) No.2205 of 2019 till the hearing and final disposal of the present Appeal; and

(b) Direct that pending the hearing and final disposal of the present Appeal, the control and management of the affairs of Corporate Debtor be vested with Mr. Ashish Chhawchharia, erstwhile Resolution Professional of the Corporate Debtor.

(c) Remand the Resolution Plan to the CoC for fresh consideration/ approval in light of the non-

fulfillment of the Conditions Precedent, thereby altering the commercial wisdom basis which the CoC had originally approved the Resolution Plan; and

(d) Pass such other further reliefs as the nature and circumstances of the case may require."

15. As noted above, this Tribunal on 03.03.2023 heard the Appeal as well as the IAs and passed order, refusing to grant interim prayer to the Appellant. After order dated 03.03.2023 declining the interim prayer, the MC Lenders have taken steps, i.e. on 13.04.2023 communicating the account number to the SRA and on being pointed out by the SRA that IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 13 account number communicated on 13.04.2023 is not a designated account, in which amount can be infused, Shri Gopal Jain very fairly submitted that another designated account shall be communicated to the SRA immediately on which first tranche of INR 175 crores has to be infused by the Appellant.

16. Shri Gopal Jain has further submitted that there being no stay on the implementation, the SRA cannot claim exclusion of the aforesaid period.

17. After considering the facts and sequence of events in the present case, we are of the view that SRA is entitled for exclusion of period from 16.11.2022 till 03.03.2023, when this Tribunal in the present Appeal passed an order declining the interim relief as prayed by the MC Lenders. IA Nos.2028-2029 is thus allowed, excluding the period from 16.11.2022 till 03.03.2023. As undertaken by the SRA, the IA No.1863 of 2023 pending before the Adjudicating Authority shall be withdrawn. IA No.2028-2029 of 2023 is allowed accordingly.

18. Now we come to IA Nos.2159-2160 of 2023. The SRA has given a Performance Bank Guarantee for implementation of the Resolution Plan. The Adjudicating Authority having come to the conclusion that conditions precedent have been achieved by the SRA, issued directions to the MC Lenders to implement the Plan, which order as noted above has been challenged by the MC Lenders in this Appeal. On 03.03.2023 as noted above, this Tribunal passed a categorical direction for taking steps IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 14 regarding the implementation of the Plan by the SRA, which were required to be overseen and cooperated by the Monitoring Committee.

19. When the Resolution Plan of the Corporate Debtor has received approval up to Hon'ble Supreme Court and the Monitoring Committee is constituted under the Plan to oversee implementation, the Monitoring Committee has to act as a facilitator for implementation of the Resolution Plan instead of finding fault and taking steps, which does not facilitate the implementation, rather delay the implementation. There is no doubt that Performance Bank Guarantee can be invoked by the MC Lenders, but the said invocation can only take place when SRA has failed to implement the Plan. Present is a case where directions have been issued to both MC Lenders and SRA to implement the Plan and the event of failure of the Plan has not yet arrived. When the Adjudicating Authority has directed on 13.01.2023 to take steps towards the implementation of the Plan and which order was not been stayed by this Tribunal on 03.03.2023, the steps ought to have been taken by the MC Lenders in furtherance of the implementation. The time has not arrived for invoking the Performance Bank Guarantee. When the SRA is ready to undertake to perform its obligations under the Plan, we are of the view that Performance Bank Guarantee given by the SRA cannot be permitted to the invoked by the MC Lenders. MC Lenders instead of threatening to invoke Performance Bank Guarantee, should take steps, which may help implementation of the Plan and to achieve the objective of Resolution Plan. The Resolution Plan has been approved with the intent and purpose to revive the Corporate Debtor, IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 15 which revival is in accordance with objective and purpose of the IBC. We again reiterate that efforts by MC Lenders and SRA should be coordinated for revival of the Corporate Debtor, so as to start its operations at an early date, which is in the interest of all stake holders as well as in the interest of Corporate Debtor.

20. In view of the aforesaid, we direct that MC Lenders shall not invoke the Performance Bank Guarantee in the facts of the present case as on date, and for invocation, if any, MC Lenders may take leave of the Adjudicating Authority. The IA Nos.2159-2160 is disposed of accordingly.

21. The learned Counsel for the parties have also submitted that looking to the nature and issues raised, the Appeal itself be decided finally.

22. Let Appeal itself be listed for hearing on 12th July, 2022 at 02:00 PM.

23. Order in all the three IAs being passed today, the Appeal need not be listed on 30.05.2023 as directed earlier.

[Justice Ashok Bhushan] Chairperson [Mr. Barun Mitra] Member (Technical) NEW DELHI 26th May, 2023 Ashwani IA Nos.1975; 2028-2029; & 2159-2160 of 2023 in Company Appeal (AT)(INS.) Nos. 129 & 130 of 2023 16

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