National Company Law Appellate Tribunal
Lanco Infratech Limited vs Idbi Bank Limited on 21 December, 2023
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
COMPANY APPEAL (AT) (CH) (INS.) No. 363/2023
(IA Nos. 1107, 1109, 1110, 1111, 1112, 1113, 1114 & 1115/2022)
(Filed under Section 61 of the Insolvency and Bankruptcy Code, 2016)
(Against the Impugned Order dated 13.09.2023 in
I.A. (IBC) 816 & 1009 /2023 in C.P.(IB) No. 519/7/HDB/2018 passed by the
'Adjudicating Authority', National Company Law Tribunal
Hyderabad Bench - I)
In the matter of:
1. LANCO INFRATECH LIMITED
(through P. Manoj Kumar, Authorised Representative),
2nd Floor, Naina Residency, Plot No. 344
Road No. 7, Kakatiya Hills, Madhapur,
Hyderabad, Telangana - 500 081
E-mail: [email protected] ... Appellant No. 1
2. PUNJAB KRS ERECTORS PRIVATE LIMITED
(through P. Manoj Kumar, Authorised Representative),
2nd Floor, Naina Residency, Plot No. 344
Road No. 7, Kakatiya Hills, Madhapur,
Hyderabad, Telangana - 500 081
E-mail: [email protected] ... Appellant No. 2
Versus
1. IDBI BANK LIMITED
IDBI Tower, WTC Complex, Cuffe Parade,
Mumbai, Maharashtra - 400 005
E-mail: [email protected]
Phone: N/A ...Respondent No. 1
2. RAMANAGARAM ENTERPRISE PRIVATE LIMITED
iLabs Centre, Building 3, Plot No. 18
Software Units Layout, Madhapur,
Hyderabad, Telangana - 500 081
E-mail: [email protected]
...Respondent No. 2
C.A. (AT) (CH) (Ins) No. 363/2023 Page 1 of 51
3. iLABS HYDERABAD TECHNOLOGY CENTRE
PRIVATE LIMITED
iLabs Centre, Building 3, Plot No 18,
Software Units Layout, Madhapur,
Hyderabad, Telangana - 500 081.
E-mail: [email protected]
Phone: N/A ...Respondent No. 3
4. 50 HERTZ ENERGY PVT. LTD.
III Floor, D21 Corporate Park,
Section 21, Dwaraka,
New Delhi - 110 075
E-mail: [email protected]
Phone: N/A ...Respondent No. 4
5. MEIL ENERGY PRIVATE LIMITED
Flat No. 217, II Floor, Cyber Heights,
Vibhuti Khand, Gomti Nagar,
Lucknow, Uttar Pradesh - 226 010
E-mail: [email protected]
Phone: N/A ...Respondent No. 5
6. LANCO ANPARA POWER LIMITED
House No. 411/9, Riverside Apartments,
New Hyderabad,
Lucknow, Uttar Pradesh - 226 007
E-mail:
[email protected]
Phone: N/A ...Respondent No. 6
7. ANURADHA BISANI
#3-6-106/A, Flat No. 102, Om Sri Sai Towers
Street No. 19, Near Vijaya Diagnostic Centre
Himayatnagar, Hyderabad- 500 029
E-mail: [email protected]
Phone: N/A ...Respondent No. 7
8. MANISH KUMAR SHARMA
Director, Deloitte Touche Tohmatsu India LLP
22nd Floor, Building No. 5
Tower A, DLF Cyber City Complex,
DLF City Phase-III
C.A. (AT) (CH) (Ins) No. 363/2023 Page 2 of 51
Gurgaon, Haryana - 122 002
E-mail: [email protected]
Phone: N/A ...Respondent No. 8
9. DELOITTE TOUCHE TOHMATSU INDIA LLP
22nd Floor, Building No. 5
Tower A, DLF Cyber City Complex,
DLF City Phase-III
Gurgaon, Haryana - 122 002
E-mail: [email protected]
Phone: N/A ...Respondent No. 9
10. REC LIMITED
Core-4, SCOPE Complex
7, Lodhi Road,
New Delhi - 110 003
E-mail: [email protected]
Phone: N/A ...Respondent No. 10
11. AARTHI CONSULTANTS PVT. LTD
1-2-285, Domalguda,
Hyderabad, Telangana - 500 029
E-mail: [email protected]
Phone: 040 2736 8111 ...Respondent No. 11
12. REGISTRAR OF COMPANIES, KANPUR
37/17, Westcott Building,
The Mall Kanpur,
Uttar Pradesh - 208 001
E-mail: [email protected]
Phone: 0512 2310 443 ...Respondent No. 12
Present :
For Appellant: Mr. E. Om Prakash, Sr. Advocate for Mr. Pranav G, Mr.
Mayan H Jain, Ms. Moneshaa, Ms. Niveditha
Narayanan, and Mr. Sharath Chandupatla, Advocates.
For Respondent: Mr. S.R. Rajagopal, Sr. Advocate for Mr. Sagar Dhawan,
Mr. Allwin Godwin, Vimal Asthana, Aishani Roy,
Niranjana Pandian, Advocates for R1.
Mr. Muthuchharan Sundaresh, Advocate for R5.
C.A. (AT) (CH) (Ins) No. 363/2023 Page 3 of 51
Mr. Ashish Agarwal, Sr. Advocate for Mr. Nithin
Chowdary Pavuluri, Mr. Arjun Suresh, Mr. Vinay
Kumar Pandey, VSR Avadhani, Advocates for R6.
Ms. Anuradha Bisani, For Liquidator/R7.
Mr. Arun Karthik Mohan, Advocate for R10.
Mr. Shankar Narayanan, Senior Advocate for PNB
JUDGMENT
(Virtual Mode) [Per: Shreesha Merla, Member (Technical)]
1. The present Appeal is filed against the Impugned Order dated 13.09.2023 passed by the National Company Law Tribunal, Hyderabad Bench - II / Adjudicating Authority in IA (IBC) No. 816/2023 and IA (IBC) No. 1009/2023 in CP (IB) No.519/7/HBD/2018, whereby the Adjudicating Authority has observed in the Impugned Order, dated 13.09.2023, as follows:
"Ld. Senior Counsel Mr. SR Raja Gopal for Mr. Allwin Godwin, Mr. Sagar Dhawan & Mr. VVSN Raju, Adv for the Petitioners and Ld. Senior Counsel Mr. Vivek Reddy for R1 and R2 for Mr. Bheemachary, Mr. Harshavardhan Abburi for R3, present. No representation for R4.IA 816/2023
Ld. Senior Counsels have submitted that the 4th Respondent (MEIL Energy Pvt Ltd) and 1st Respondent (Ramanagaram Enterprises Private Limited/R1) have entered into share purchase agreement dated 12.09.2023 to which the IDBI Bank (Petitioner) is also a party as an Escrow Agent, where in the terms and conditions as regards the modalities of transfer of shares of Lanco Anpara Power Ltd by 1st Respondent Lanco Thermal Power Limited (now Ramanagaram Enterprises Private Limited/R1) in favour of 4th Respondent (MEIL Energy Pvt Ltd) have been worked out and in view of the said agreement the Tribunal, may C.A. (AT) (CH) (Ins) No. 363/2023 Page 4 of 51 close the proceedings in this IA as settled out of Tribunal.
Ld. Senior Counsel Mr. Raja Gopal further submitted that the subject shares (CCPS) of Lanco Anpara Power Ltd, still stand in name of Lanco Infratech Ltd (LITL) and are out of the purview of the acquisition plan approved for acquisition of assets of LITL under liquidation proceedings of LITL. Hence, the liquidator already been appointed for LITL, responsible to effect the dematerialization and transfer of the said CCPS, in name of Respondent No. 1, for onward transfer in favour of Respondent No. 4. Therefore, the said liquidator may be directed to cooperate/assist in the said process of dematerialization and transfer of the said CCPS, in name of Respondent No.1.
In the light of the representation as above by the Ld. Senior Counsels, we dispose of this IA observing that, liquidator of LITL shall assist/cooperate in the process of dematerialization and transfer of the said CCPS, in name of Respondent No. 1, for onward transfer in favour of Respondent No. 4 and all the parties to the share purchase agreement shall sincerely endeavour to implement/fulfil all the terms and conditions of the share purchase agreement dated 12.09.2023, as expeditiously as possible but not later than 60 days, from the date of this order. since the liquidation of CD being time bound process.
With these observations, this IA is disposed of however without costs.
IA/1009/2023 In the light of the order passed in 816/2023 no orders are required in this IA this application seeking amendments in IA 816/2023. Hence, this IA/100/2023 is disposed of accordingly."
2. For better understanding of the case, we briefly touch upon the parties arrayed in this matter. The fisrt Appellant namely Lanco Infratech Ltd. (`LITL') was admitted into CIRP on 07.08.2017 and thereafter, was ordered into C.A. (AT) (CH) (Ins) No. 363/2023 Page 5 of 51 liquidation on 27.08.2018. During the course of the liquidation process, the Second Appellant, namely KRS Erectors Pvt. Ltd. submitted an Acquisition Plan dated 22.09.2021 for taking over the First Appellant company as a 'Going Concern'. This Acquisition Plan was approved by the NCLT on 26.09.2022. It is submitted that being the successful bidder, the Second Appellant has reconstituted the Board of Directors with effect from 26.07.2023.
3. The First Respondent / IDBI is the Financial Creditor of both the First Appellant Company and the Second Respondent and has filed IA No. 816/2023 before the NCLT. The Second Respondent is a step/down subsidiary of the First Appellant Company and was admitted into CIRP on 09.05.2019. A Resolution Plan was jointly submitted by M/s. iLABS Hyderabad Technology Centre Pvt. Ltd. and M/s. 50 Hertz Energy Pvt. Ltd., arrayed as Respondents 3 and 4 respectively, which was approved by the Adjudicating Authority vide Order dated 26.04.2021. The Second Respondent namely M/s. Ramanagaram Enterprise Pvt. Ltd. was initially incorporated under the name M/s. Vamshi Industrial Power Ltd. and thereafter, renamed as Lanco Thermal Power Ltd. The Fifth Respondent Company is stated to be the identified bidder for 42,00,00,000 CCPS of Lanco Anpara Power Ltd. / the Sixth Respondent which forms the subject matter of the Appeal. It is submitted that the First Appellant held Equity and Preference Shares in the Sixth Respondent Company which were to be sold to the Second Respondent against Payment of Consideration as agreed under the Share Purchase Agreement dated 30.03.2012. The Seventh Respondent is a Liquidator C.A. (AT) (CH) (Ins) No. 363/2023 Page 6 of 51 of the First Appellant Company appointed by the Adjudicating Authority vide Order dated 10.10.2022, while the Acquisition Plan submitted by the Second Appellant was approved by the Adjudicating Authority vide dated 26.09.2022. The Eighth Respondent is the Authorised Person appointed by the Seventh Respondent / Liquidator vide letter dated 03.10.2023 to execute the Release Agreement on behalf of the First Appellant Company in order to relinquish the title and interest of LANCO Anpara in favour of REPL. It is submitted that vide email dated 09.10.2023 of the Tenth Respondent / REC Ltd./ the Security Agent who held the pledge of the CCPS, the 42,00,00,000 CCPS have been released to the Eighth Respondent on 05.10.2023 and are hence, in their custody. The Eleventh Respondent is the Registrar and Transfer Agent of the Sixth Respondent which is responsible for the conversion of the 42,00,00,000 CCPS to DEMAT Form. The Twelfth Respondent is the Registrar of Companies having jurisdiction in respect of Lanco Anpara Power Ltd.
4. Succinctly put, the First Appellant and the Second Respondent Companies entered into a Share Purchase Agreement (SPA) dated 30.03.2012 whereby, the First Appellant had agreed to sell its entire Equity and Preference Share Holding in the Sixth Respondent Company to the Second Respondent against payment of consideration. Learned Senior Counsel for the Appellant submitted that as per Section 3 of the SPA, Rs. 734.26/- Crores was to be paid as consideration by the Second Respondent immediately upon the execution of the SPA and further consideration of Rs. 485.376/- Crores was to be paid within one month after the C.A. (AT) (CH) (Ins) No. 363/2023 Page 7 of 51 approval by its lenders for the transfer of the shares from the First Appellant Company to the Second Respondent or within such time as may be mutually agreed but not later than 31.12.2012. Parallel to the execution of SPA, on the same date, on 30.03.2012, the Appellant, the Second Respondent and Lanco Anpara Power Ltd., executed a Shareholders Agreement (SHA). It is submitted that the Second Appellant became aware of these Agreements in the month of March 2023 when a copy was furnished to them.
5. Learned Senior Counsel for the Appellant submitted that as per Section 3.2
(ii)(c) of the SPA, 42,00,00,000 CCPS which stood pledged to the lenders of the First Appellant were to be transferred to the Second Respondent with effect from the date of the SPA. The consent of the project lenders for the transfer of the pledged CCPS was not given and therefore by mutual consent of both the First Appellant and the Second Respondent herein, the timelines for transfer of the CCPS was extended from time to time. It is submitted by the Learned Counsel for the Appellant that the Second Respondent had only paid Rs. 734.26/- Crores out of the total consideration of Rs. 1219.636/- Crores agreed under the SPA. The transfer never took place as the consent of the lenders was not forthcoming and because the balance sale consideration was never paid. It is argued that the timeline for conversion of the CCPS to Equity Shares was also extended from time to time till 30.09.2023. It is contended that Lanco Anpara never sought extension of the timelines for conversion from CCPS to Equity Shares from either the Monitoring Committee or the Second Appellant which had acquired 100% C.A. (AT) (CH) (Ins) No. 363/2023 Page 8 of 51 shareholding in the First Appellant Company pursuant to the Acquisition Plan. It is submitted that the Liquidator, pursuant to her appointment on 10.10.2022, filed an Application before the Adjudicating Authority seeking, interalia, stay of the implementation of the approved Acquisition Plan and also sought clarification regarding her Role and Responsibilities during the implementation of the approved Acquisition Plan. While so, IDBI filed IA No. 816/2023 on the ground that Respondents 2 to 4 had failed to comply with the terms of the approved Resolution Plan as they had not taken steps for transfer of CCPS held by the First Appellant Company in Lanco Anpara.
6. For ready reference, the prayers made in IA No. 816/2023 are extracted hereunder:
"In view of the foregoing, it is most humbly prayed that this Hon'ble Tribunal may be pleased to:
a) Direct the Respondent No 1, Respondent No 2 and Respondent No 3 to take all necessary actions and measures towards effecting the sale share processes and other related steps envisaged under the Approved Resolution Plan of the Corporate Debtor in a time-bound manner;
b) Pass an order making a reference to the Insolvency and Bankruptcy Board of India of the defaults committed by the Respondent No 1, Respondent No 2 and Respondent No 3 and recommending the initiation of proceedings under Section 74(3) read with Section 236 of the Code, in the event of the continued failure of Respondent No 1, Respondent No 2 and Respondent No 3 to implement the Approved Resolution Plan as per the directions of this Hon'ble Tribunal in terms of prayer (a) above;C.A. (AT) (CH) (Ins) No. 363/2023 Page 9 of 51
c) Pass an order directing the Respondent No 1, Respondent No 2 and Respondent No 3 to make good the losses which the Applicant and other members of LITL Consortium Lenders would incur on account of the non-adherence to the terms of the Approved Resolution Place to the extent envisaged under the present application; and
d) Pass any other order(s) which this Hon'ble Tribunal may deem fit in the facts and circumstances of the case in the interest of equity, justice and good conscience."
7. It is argued by the Learned Senior Counsel for the Appellant that the Adjudicating Authority without issuing Notice to the Appellant, which had undergone change in the management, pursuant to the approval of the Acquisition Plan vide Order dated 26.09.2022, has directed the Liquidator and the Appellant herein to cooperate with respect to the transfer of the subject shares.
8. As regarding maintainability of the Appeal, raised by the Respondents, Learned Senior Counsel Mr. E. Om Prakash strenuously argued that the Appellants are necessary parties being substantially interested in the subject matter of IA No. 816/2023 and therefore, ought to have been heard, but the Adjudicating Authority, in gross violation of the Principles of Natural Justice, passed the Impugned Directions; that the subject 42,00,00,000 CCPS stand in the name of the First Appellant / Lanco Infra / LITL; that LITL was sold as a `Going Concern' to KRS Erectors; that after the 'Sale' in Liquidation, the erstwhile Liquidator becomes functus officio and the question of directing the erstwhile Liquidator for transfer of shares of LITL does not arise; the sale is pursuant to an Acquisition Plan and the erstwhile Liquidator is only to assist the Monitoring C.A. (AT) (CH) (Ins) No. 363/2023 Page 10 of 51 Committee constituted under the Plan; that post the Sale the Authority to represent LITL lies with the reconstituted Board of Directors; that LITL having the title of the CCPS is an 'aggrieved person' as the share certificates stand in its name; that the 'Process Document' issued by the erstwhile Liquidator to KRS Erectors was on an 'as is where is' basis and these 42,00,00,000 CCPS are not excluded from the scope of the Acquisition Plan either expressly or impliedly as has been wrongly represented by IDBI. It is submitted that Clause 5.10 of the Acquisition Plan is a Residual Clause which provides that any receivables realised in respect of revenue earned prior to the CIRP of LITL shall be shared in equal proportions between LITL and the Stakeholders under Section 53 of the IBC, 2016 (the Code); that the Clause of the Resolution Plan for REPL which is relied upon by IDBI does not mention 42,00,00,000 CCPS in Lanco Anpara held by LITL; that REPL's entire shareholding in Lanco Anpara is to be sold to a bidder identified by IDBI and the subject CCPS which are in the name of LITL are not within the scope of the Resolution Plan for REPL and therefore, it is contended that both the Appellants i.e., LITL and KRS Erectors fall within the scope of 'aggrieved persons' since their legal rights are affected by the directions given in the Impugned Order.
9. It is contended by the Learned Counsel Mr. E. Om Prakash that Clause 3.9 of the Acquisition Plan contemplates formation of the Monitoring Committee to facilitate the handover of control of LITL to KRS Erectors. In the second meeting of the Monitoring Committee held on 18.11.2022, the Monitoring Committee C.A. (AT) (CH) (Ins) No. 363/2023 Page 11 of 51 specifically authorised KRS Erectors to represent LITL in legal matters and also to initiate the taking over of documents and assets from the erstwhile Liquidator. In the third meeting of the Monitoring Committee held on 06.04.2023, the representatives of KRS Erectors were authorised in broad terms to represent LITL for implementation of Acquisition Plan. It is pointed out by the Learned Counsel that in the seventh meeting dated 22.06.2023, agenda item numbers 11-13 of the proposed agenda related to discussion regarding reconstitution of Board of Directors of LITL by appointing new directors, but no objection was raised by IDBI to the proposed agenda. However, the secured Financial Creditors stated that they were unable to attend the seventh meeting and hence, the same was postponed to 27.06.2023, on which date none of the secured Financial Creditors were attended and no reasons were given and hence agenda item numbers 11-13 were approved and hence the Board of Directors of LITL was reconstituted with effect from 27.06.2023and now IDBI cannot object to the same as it was very much aware of the agenda of the seventh meeting and raised no objections. In fact, the erstwhile Liquidator issued an email dated 14.09.2023 to all Stakeholders stating that the Board of Directors of LITL is reconstituted. Even then no objection was raised. IDBI was aware of the reconstitution as early as 27.06.2023 and no later than 14.09.2023. It was only on 17.10.2023 after filing of the present Appeal that IDBI had filed IA No. 1722/2023 as an after-thought. The said Application was listed for the first time on 07.11.2023 and an Interim Order was C.A. (AT) (CH) (Ins) No. 363/2023 Page 12 of 51 passed keeping the resolutions passed in agenda item numbers 11-13, in abeyance.
10. It is vehemently contended that IDBI had raised an objection whether the newly constituted Board can maintain the present Appeal, in its Counter Statement dated 01.11.2023, which is prior to 07.11.2023, and has not been disclosed to the Adjudicating Authority that the issue regarding reconstitution of the Board was pending consideration. One of the specific reliefs in IA No. 1722/2023 was for reversal of all such actions taken by KRS Erectors which are in contravention of the terms of the Acquisition Plan. The Appeal is maintainable on behalf of KRS Erectors also, being the purchasers of LITL as a 'Going Concern' and therefore, being an `Aggrieved Party'. It was unanimously decided by the Monitoring Committee that a written Legal Opinion would be sought for regarding the issue of transfer of the subject CCPS, but the Legal Opinion could not be sought as REPL did not have the documents relating to the SPA dated 30.03.2012 as they were shared by IDBI only on 30.05.2020. Neither LITL nor REPL were made parties to the Application despite the question of transfer of the subject CCPS being still under consideration by the Monitoring Committee. IDBI did not mention the pendency of IA No. 816/2023 to the representatives of KRS Erectors during the Monitoring Committee meetings held between 05.06.2023 and 13.06.2023. When REPL addressed an email dated 13.06.2023 to the erstwhile Liquidator calling for transfer of the 42,00,00,000 CCPS, the erstwhile Liquidator responded that she is no longer in control of LITL and that the same C.A. (AT) (CH) (Ins) No. 363/2023 Page 13 of 51 has been handed over to KRS Erectors. REPL addressed a similar email to KRS Erectors seeking transfer of the CCPS, but did not mention the pendency of the IA No. 816/2023. IDBI has wilfully suppressed these facts before the Adjudicating Authority and did not make LITL and KRS Erectors as parties though they are materially interested and affected by the subject matter.
11. Apart from the aforenoted issues, the Learned Senior Counsel Mr. E. Om Prakash submitted that as the ownership of the shares falls within the scope of assets of LITL and any question relating to such shares should be decided in proceedings relating to the CIRP and Liquidation of LITL. By choosing to file IA No. 816/2023 in CP No.519/2018, which relates to the CIRP of REPL instead of in CP No. 111/2017, IDBI has approached the Adjudicating Authority behind the back of LITL and KRS Erectors. It is strenuously argued by the Learned Senior Counsel that the Adjudicating Authority in its order dated 12.06.2023 has specifically directed IDBI to clarify its locus to file the IA on behalf of the consortium of lenders of LITL.
12. The Learned Sr. Counsel, Mr. S.R. Rajgopal appearing for the First Respondent/IDBI Bank submitted that IDBI has also challenged the reconstitution of the Board of Directors of LITL vide I.A. No.1722/2023 in C.P. (IB) No. 111/07/ HDB/2017, since the Second Appellant have not adhered to the terms of the approved Acquisition Plan for reconstitution of the Board of Directors of LITL and therefore the authority of LITL to challenge the Order is not maintainable. It is submitted that this Appeal has been filed in disregard of C.A. (AT) (CH) (Ins) No. 363/2023 Page 14 of 51 the LTPL approved Resolution Plan which was approved by the Adjudicating Authority in I.A. No.839/2020 in C.P. (IB) No.519/7/HDB/2018, which is binding in terms of the Section 31 of the Code. It is contended that the `rights', `title' and `interest' of the CCPS has been transferred to Lanco Anpara and has already passed on to REPL from LITL in terms of Share Purchase Agreement. All Financial Liabilities of REPL has been settled and the First Appellant is not entitled to any amount on account of the balance consideration under the SPA. Further, it is submitted that the Adjudicating Authority vide Order dated 24.01.2023, in I.A. No.1455/2022, in C.P. (IB) No.111/07/HDB/2017 has directed that the seventh Respondent would be the Chairman of the Monitoring Committee of LITL and this Order has not been challenged. Further, vide Order dated 16.10.2023, the Adjudicating Authority has confirmed all the previous Orders in I.A.1455/2023 and also clarified that the Liquidator's fee shall be paid from the Liquidation Account. KRS Erectors Private Limited/the Second Appellant is also a party to I.A. 1415/2023 and is aware of all the proceedings and, therefore, the role of the seventh Respondent as a Liquidator continues, till discharged.
13. It is strenuously argued by the Learned Sr. Counsel that LITL has filed the present Appeal vide Resolution of the Board of Directors dated 14.09.2023 and does not have any locus to file the present Appeal since the Board of Directors of LITL have been illegally reconstituted in contravention of the provisions of the accused Resolution Plan. The approved Plan states that the all decisions of the C.A. (AT) (CH) (Ins) No. 363/2023 Page 15 of 51 Monitoring Committee should be taken by unanimous consent and that the Monitoring Committee should facilitate the reconstitution of the Board of Directors of LITL. IDBI did not attend the seventh MCA Meeting and as such the unanimous consent of all the MCA Members was not obtained and no Resolution could have been passed towards reconstitution of the Board of Directors of LITL. Despite not having the unanimous consent KRS Erectors Private Limited want ahead to constitute the Board of Directors of LITL, for which again, IDBI, filed I.A.1722/2023 in C.P. (IB) No.111/07/HDB/2017, in which Application, the Adjudicating Authority vide Interim Order dated 07.11.2023, directed that the resolutions passed in Items 11 to 14 pursuant to the Notice of the seventh Meeting of Monitoring Committee be kept in abeyance in the interest of smooth and proper implementation of the Acquisition Plan.
14. It is argued by the Learned Sr. Counsel, Mr. S.R. Rajagopal that I.A. 816/2023 was filed in C.P. (IB) No.519/7/HDB/2018 for implementation of the approved Resolution Plan by Respondents 3 & 4 with respect to REPL. Clause VII under the title `other considerations for successful implementation of the Resolution Plan' of the approved Resolution Plan specifically vest certain rights with IDBI and does not envisage the role of or implicate LITL or the Second Appellant in any way. Respondents 3 & 4 did not implement Clause VII of the approved Resolution Plan citing procedural infirmities inter alia in the status of Preference Shares forming part of the Shares of LITL held in Lanco Anpara Power Limited. It is stated that REPL Shares constitute 28.66% Equity Shares C.A. (AT) (CH) (Ins) No. 363/2023 Page 16 of 51 and 54.33% Preference Shares (LAPL CCPS) held by REPL in Lanco Anpara. It is contended that the Preference Shareholding of REPL in Lanco Anpara which was in physical form still reflected in the name of LITL as a physical share were pledged in favour, and therefore held with the tenth Respondent/REC Limited had raised a roadblock for implementation of the approved Resolution Plan. During the hearing in I.A. 816/2023, the Adjudicating Authority in an attempt to amicably resolve the issues so that Clause VII of the Resolution Plan could be implemented, passed directions and the impound Order was passed between the parties to the approved Resolution Plan being Respondents 1, 2, 3, 4 & 5. As the Second Appellant/KRS Erectors Private Limited expressed an inability to authorised any action which was beyond the purview of the acquisition Plan, the Appellant approach the Adjudicating Authority for requisite directions in I.A.816/2023. The Liquidator was present for the hearing on 13.09.2023, when the Impugned Order was passed since the procedural issue of damage of the Lanco Anpara CCPS and changing the name reflected in the Physical Shares Certificate could have been reflected through the Liquidator only. It is submitted that the Appellant do not have any stake or possesses any rights over the LAPL CCPS under the approved Resolution Plan or approved Acquisition Plan. It is argued that only the upfront payment was made to LITL by RAPL since the condition for the payment of the said amount, namely, the approval of the Lenders of Lanco Anpara Limited was not satisfied and therefore the Physical Share Certificates of Lanco Anpara CCPS still reflected the name of LITL since the said C.A. (AT) (CH) (Ins) No. 363/2023 Page 17 of 51 CCPS was pledged to the Lenders of LAPL, on whose behalf Physical Share Certificate were held in the custody of the tenth Respondent Pledge.
15. It is argued that the Appellants did not bring to the attention of this Tribunal that the entire `rights', `title' and `interest' to the Lanco Anpara CCPS had already passed on from REPL from LITL in terms of the said SPA further in the CIRP of REPL, upon approval of the Resolution Plan, all Financial Liabilities of REPL stood settled and resolved, and therefore, the First Appellant is not entitled to claim any amount on account of the balance consideration under the SPA. It is also vehemently argued that the approved Acquisition Plan was approved by the Stakeholders Committee of LITL in their Commercial Wisdom, since the same would serve the best interest of all the Stakeholders of LITL as it results in a complete realisation of all the Assets of LITL. The approved Acquisition Plan only contemplates the sale of unsold Assets and assigning of actionable claim which is also mentioned in the process documents dated August, 2021. The second tranche of consideration earlier payable under the SPA considering such amounts already stand settled under the approved Resolution Plan of LTPL cannot be considered as any other unearned `revenue' or `receivable' due to LITL which has to be shared with the Stakeholders of LITL on a 50:50 ratio as per Clause 5.10 of the approved Acquisition Plan. It is vehemently contended that the Lanco Anpara CCPS do not form part of the approved Acquisition Plan and thus no rights of the Appellant arise from the approved Acquisition Plan. The Learned C.A. (AT) (CH) (Ins) No. 363/2023 Page 18 of 51 Senior Counsel Mr. S. R. Rajagopal drew our attention to the following chart for better understanding of the case:-
16. Learned Sr. Counsel Mr. Ashish Aggarwal submitted that the First Appellant is the Parent entity of M/s. Lanco Groups of Entities and Lanco Anpara is a subsidiary of the First Appellant/LITL that was floated to deal with the specific project in Uttar Pradesh, for which Project, M/s. REC Ltd. was a Project lender and entire Shareholding of Lanco Anpara which was held by the First Appellant/LITL was entirely held in its own name, free of encumbrances or pledged in favour of the Project lender, namely, M/s. REC limited or pledged in C.A. (AT) (CH) (Ins) No. 363/2023 Page 19 of 51 favour of Lenders of M/s. LITL. It is submitted that as per the terms of the Share Purchase Agreement a total sale consideration of ₹ 1219,63,60,000/- was to be paid in two tranches of ₹734.26 Crores. and ₹485.376 Crores. for the entire Shareholding of Lanco Anpara held by LITL. The first tranche in the transfer was to be completed by 30.03.2012 and the second tranche after LITL had obtained the consent of the Lenders from the date of execution of the SPA, the Shares were never reflected as an Asset in the Financial Statements of the First Appellant and it has been constantly recorded as an Asset of the Second Respondent in its Financial Statements. Pursuant to this SPA, the parties have also entered into the Shareholders Agreement whereby the nominees of the Appellant of the Board of Directors of LAPL were replaced by the nominees of the Second Respondent. An initial amendment was made to this Agreement whereby the Appellant was granted a charge in respect of receivable accruing to the Second Respondent on account of the transfer and Shareholding. The Appellant had failed to obtained consent of the Lenders and, therefore, the time limit to obtain consent of the Lenders and consequently, the payment limit to pay balance consideration was constantly extended through subsequent Amendment Agreement. The First Respondent issued a Process Document for the sale of Shares to LAPL and this Process Document included the sale of Shares held by REPL as well as the Shares placed by the Appellant with IDBI Consortium. The Sixth Respondent was chosen as an identifier and the Letter of Intent (`LoI') was also issued in favour of the Sixth Respondent on 12.09.2022 and as per the expected bid, a total C.A. (AT) (CH) (Ins) No. 363/2023 Page 20 of 51 consideration of ₹855 Crores. for the entire Shareholding of LAPL was to be paid. The LoI indicated that the definitive agreement would be entered into at a later point of time. Meanwhile, Appellant was sought to be sold as a concern under Liquidation and the Liquidator of the Appellant had issued a process document in August, 2021 and the Acquisition Plan was approved by the Adjudicating Authority on 26.09.2022. It is submitted that in both the Acquisition Plan as well as in the process document, the Shares of LAPL were never included as an Asset. Subsequent to the approval of the Resolution Plan, the Sixth Respondent had obtained NoC from REC Limited which was a Project lender of Lanco Anpara and Entity in whose favour pledged has been created on 29.12.2022. The sixth Respondent had therefore entered into Definitive Agreements for sale of Assets of Lanco Anpara held by IDBI in its own name on 31.03.2023. Upon entering into this Definitive Agreement of amount of ₹ 620 Crores. Out of the ₹ 855 Crores. Consideration to be paid by the sixth Respondent was estimated. The balance consideration of ₹ 235 Crores. Was not paid as Shares held in the beneficial interest of the Second Respondent was not transferred. IDBI sought assistance of REPL to implement the Resolution Plan and transfer of Assets in favour of the sixth Respondents as REPL was not cooperating with the Impugned Application was filed on April 2023 and during pendency of the Application, REPL agreed to pay by the terms of the Resolution Plan and an Agreement was entered into with the sixth Respondent an IDBI on 12.09.2023. On the basis of this Agreement, the Impugned Order was passed on 13.09.2023. A time period of C.A. (AT) (CH) (Ins) No. 363/2023 Page 21 of 51 60 days was given to complete the transaction, which was set to expire on 12.11.2023. The transaction was completed on 12.11.2023. The entire consideration of ₹ 855 Crores. have been paid and the Shares have been transferred in the name of the sixth Respondent.
17. It is strenuously argued by the Learned Sr. Counsel Mr. Ashish Agarwal that the case of the Appellants is that the SPA dated 30.03.2012 could never have been given effect to as the consent of the lenders was never obtained and the balance sale consideration of ₹ 485 Crores. has not been paid, is incorrect as the Impugned Order is the consent Order taking into consideration the SPA dated 12.09.2023 and that the Application was filed directing the REPL to comply with the terms of the Resolution Plan and therefore all necessary parties were arrayed and that the Appellant is not an aggrieved person. The balance sale considerations were never a pre-condition for transfer of shares and that the Appellant had held shares in trust for the Second Respondent which is excluded from the purview of the Liquidation Asset as per the provisions of the Code. It is strenuously argued by the Learned Sr. Counsel that the balance sale consideration was not paid only on account of the default on part of the First Appellant in not able to take the consent of the lenders and, therefore, the First Appellant cannot take advantage of its own default.
18. Learned Sr. Counsel Mr. Shankar Narayan appearing on behalf of the PNB submitted that Shares were transferred in 2012 itself vide the Share Purchase Agreement and placed reliance on Clause 3.2(c) and submitted that the C.A. (AT) (CH) (Ins) No. 363/2023 Page 22 of 51 Resolution Plan dated 26.04.2021 contains this Clause and the terms of the Plans were not adhered to and therefore, the Application I.A.816/2023 was filed. It is submitted that the Adjudicating Authority was justified in giving those directions for transfer of Shares as they already stood transferred in 2012 itself. Assessment:
19. The main issues which fall for consideration in this Appeal is whether the Appellant has locus to maintain this Appeal and whether the Adjudicating Authority was justified in giving the Impugned directions in the Order dated 13.09.2023; and whether the Order Impugned is a reasoned one and whether the Appellants ought to have been heard before passing the Impugned directions.
20. Whether the directions regarding transfer of 42,00,00,000 CCPS given by the Adjudicating Authority was justified keeping in view the factual matrix of the attendant case.
21. It is the main case of the First Respondent / IDBI that the Appellant / LITL lacks authority to file the present Appeal as the Board of Directors of LITL has been illegally reconstituted in the absence of IDBI having attended the meeting; that the Adjudicating Authority in IA No. 1722/2023 filed by IDBI in CP(IB)111/07/HDB/2017 has passed the following Order:
"We are therefore of the view that, pending hearing and disposal of this IA, the Resolutions passed under item No. 11 to 14 pursuant to the notice of the seventh meeting of monitoring committee can be ordered to be kept in abeyance, in the interests C.A. (AT) (CH) (Ins) No. 363/2023 Page 23 of 51 of smooth and proper implementation of acquisition plan."
And therefore, LITL has no locus to file this Appeal. As regarding this submission, it is seen from the record that the date of the Interim Order is 07.11.2023 whereas the Notice of the 7th Monitoring Committee Meeting was issued on 22.06.2023 by KRS Erectors. Annexure F is the Notice of the 7th meeting which establishes that Notice with all the enclosures were sent to IDBI and the agenda items between 11-14 is with respect to reconstitution of the Board of Directors. The Learned Senior Counsel Mr. E. Om Prakash drew our attention to the said notice and the agenda items are reproduced as hereunder: C.A. (AT) (CH) (Ins) No. 363/2023 Page 24 of 51
From the aforenoted agenda items, it is clear that IDBI was aware of the proposed meeting but did not choose to attend or file its objections to the same and no reasons were given for not attending the meeting. There is no whisper of C.A. (AT) (CH) (Ins) No. 363/2023 Page 25 of 51 any denial of receipt of Notice of this meeting. It is also not denied that the erstwhile Liquidator had issued an email dated 14.09.2023 to all Stakeholders regarding the Board of Directors of LITL. We are addressing to this issue only because it was vehemently argued by the Respondents that the Appellants do not have locus to file the Appeal.
22. We are not commenting on the merits of the constitution of the Board, as IA 1722/2023 is pending, except for observing that IDBI has received the Notice and was silent till 02.11.2023 when the IA challenging the constitution was filed subsequent to the filing of this Appeal on 16.10.2023, and there is no denial regarding the email communication by the Liquidator 14.09.2023 to IDBI & PNB Banks regarding the Board Constitution and therefore, the constitution challenged subsequent to the filing of the Appeal, cannot render this Appeal to be `not maintainable'.
23. Section 61 of the Code refers to the definition who can file an Appeal:
"61. Appeals and Appellate Authority. - (1) Notwithstanding anything to the contrary contained under the Companies Act 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal.
(2) Every appeal under sub-section (1) shall be filed within thirty days before the National Company Law Appellate Tribunal:
Provided that the National Company Law Appellate Tribunal may allow an appeal to be filed after the expiry of the said period of thirty days if it is satisfied that there C.A. (AT) (CH) (Ins) No. 363/2023 Page 26 of 51 was sufficient cause for not filing the appeal but such period shall not exceed fifteen days.
(3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely: -
(i) the approved resolution plan is in contravention of the provisions of any law for the time being in force;
(ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period;
(iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board;
(iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or
(v) the resolution plan does not comply with any other criteria specified by the Board.
(4) An appeal against a liquidation order passed under section 33, or sub-section (4) of section 54L, or sub-
section (4) of section 54N, may be filed on grounds of material irregularity or fraud committed in relation to such a liquidation order.
(5) An appeal against an order for initiation of corporate insolvency resolution process passed under sub-section (2) of section 54-O, may be filed on grounds of material irregularity or fraud committed in relation to such an order."
24. As the Code does not specifically define as to who an `aggrieved person' is, we find it relevant to refer to the definitions/observations by the Hon'ble Supreme Court in a catena of Judgements. We find it apposite to rely on the observations made by the Hon'ble Apex Court in `Adi Pherozshah Gandhi' Vs. C.A. (AT) (CH) (Ins) No. 363/2023 Page 27 of 51 `H.M. Seervai, Advocate General of Maharashtra', (1970) 2 SCC 484 with respect to expression person aggrieved:
"6. The expression "person aggrieved" is not new, nor has it occurred for the first time in the Advocates' Act. In fact it occurs in several Indian Acts and in British statutes for more than a hundred years. In the latter a right of appeal to a "person aggrieved" is conferred in diverse contexts. It occurs in the Ale House Act, the Bankruptcy Acts, Copyright Act, Highway Act, Licensing Acts, Milk and Dairies (Amendment) Act, Rating and Valuation Act, Summary Jurisdiction Act, Union Committee Act, Local Acts, in certiorari proceedings and the Defence of Realm Regulations to mention only a few. The list of Indian Acts is equally long.
7. As a result of the frequent use of this rather vague phrase, which practice, as Lord Parker pointed out in Ealing Corporation v. Jones [LR (1959) 1 QBD 384] has not been avoided, in spite of the confusion it causes, selections from the observations of Judges expounding the phrase in the context of these varied statutes were cited before us for our acceptance. The observations often conflict since they were made in different contexts and involved the special standing of the party claiming the right of appeal. Yet these definitions are not entirely without value for they disclose a certain unanimity on the essential features of this phrase, even in the diversity of the contexts. The font and origo of the discussion is the well-known definition of the phrase by James L.J. In Re Sidebotham Ex p. Sidebotham [(1880) 14 Ch D 458 CA] . It was observed that the words 'person aggrieved' in Section 71 of the Bankruptcy Act of 1869 meant:
"not really a person who is disappointed of a benefit which he might have received if some order had been made. A 'person aggrieved' must be a man who had suffered a legal grievance, a man against whom a decision has been pronounced which had wrongfully deprived him of something, or wrongfully refused him something or wrongfully affected his title to something".
The important words in this definition are "a benefit C.A. (AT) (CH) (Ins) No. 363/2023 Page 28 of 51 which he might have received" "and" "a legal grievance" against the decision which "wrongfully deprives him of something" or affects 'his title to something".
8. The definition was held in later cases to be not exhaustive and several other features of the phrase were pointed out. Thus under the Bankruptcy Acts, where the Board of Trade summoned to support the validity of the appointment of a trustee, went before the Judge, and failed, it was considered a "person aggrieved" on the principle that a person who is brought before the Court to submit to its decision, but not a person who is heard in a dispute between others must be treated as a "person aggrieved" (see In Re Lamb, Ex p. Board of Trade [(1894) 2 QBD 805 at 812] per Lord Esher).
Here again the words to notice are "brought before the court to submit to its decision", that is to say, a person who is in the nature of a party as contra-distinguished from "a person who is next described as a person who is heard in a dispute between others". To distinguish between these two positions I may refer to a few more decisions. In Re Kitson, Ex f. Sugden (Thomas) and Sons Ltd. [(1911) 2 KB 109 at 112-14] it was further explained that "the mere fact that an order is wrongly made does not of itself give a grievance to a person not otherwise aggrieved". (per Phillimore, J.) It was added that a person deprived of the fruits of litigation which he had instituted in the hope for them, is a "person aggrieved". Similarly, a creditor who did not wish an adjudication order to be made was held not to be a "person aggrieved" -- See In Re Brown Ex. p.
Debtor v. Official Receiver [(1943) Ch D 177] . The utmost that this series of cases goes is to be found in the observations of James, L.J. in Ellis Ex. p. Ellis [(1876) 2 Ch D 797] that even a person not bound by the order of adjudication must be treated as a person aggrieved if the order embarrasses him. In a latter case (In Re Woods Ex. p. Ditton [(1879) 40 LT 297 CA] ) Cotton, L.J., held that even so the person must be aggrieved by the very order and not by any of the consequences that C.A. (AT) (CH) (Ins) No. 363/2023 Page 29 of 51 ensue. This was clarified in R. v. London County Keepers of the Peace and Justices [(1890) 20 QBD 357 at 361] by Lord Coleridge, C.J., while dealing with the Highway Act, denying the right of appeal in these words:......"
(Emphasis Supplied)
25. We also find it relevant to refer to the Judgement of the Hon'ble Supreme Court in `Babu Ram & Ors. Vs. State of U.P. & Anr.', (1995) 2 SCC 689, wherein the Hon'ble Apex Court in paras 15, 17 & 18 discussed the definition of the word 'person aggrieved':
"15. The first question that arises for determination is, who is a person 'aggrieved' within the meaning of Section 28-A(1) of the Act. Para 2(ix) of the Statement of the Objects and Reasons read with para 3 of the Financial Memorandum would indicate that Section 28- A was introduced for the first time in the second Bill to benefit poor and inarticulate people who by reason of their poverty, ignorance and illiteracy fail to take advantage of their right of reference to the civil court under Section 18. By operation of second proviso to sub- section (2) of Section 31 and Section 18(1), though such people are interested persons, if due to their ignorance, illiteracy or indigence, receive compensation for their lands without protest, they would be denied of their right to obtain higher compensation while the comparatively affluent landowners of their neighbouring lands who take advantage of the reference under Section 18 would get higher compensation determined by the court. Hence Section 28-A makes the award under Section 26 the foundation for obtaining higher compensation by poor and inarticulate people. In Mewa Ram v. State of Haryana [(1986) 4 SCC 151] this Court held that the right and remedy under Section 28-A was meant for that class of persons who were poor and inarticulate and by reason of their poverty and ignorance, should have failed to take advantage of the right of reference to the court for higher compensation under Section 18. However, this Court concluded that to avail of the C.A. (AT) (CH) (Ins) No. 363/2023 Page 30 of 51 remedy under Section 28-A, the conditions laid down therein were to be fulfilled.
......
17. In Collin's English Dictionary, the word 'aggrieved' has been defined to mean "to ensure unjustly especially by infringing a person's legal rights". In Webster's Comprehensive Dictionary, International Edition at page 28, aggrieved person is defined to mean "subjected to ill-treatment, feeling an injury or injustice. Injured, as by legal decision adversely infringing upon one's rights". In Stroud's Judicial Dictionary, 5th Edn., Vol. 1, pages 83-84, person aggrieved means "person injured or damaged in a legal sense". In Black's Law Dictionary, 6th Edn. at page 65, aggrieved has been defined to mean "having suffered loss or injury; damnified; injured" and aggrieved person has been defined to mean:
"One whose legal right is invaded by an act complained of, or whose pecuniary interest is directly and adversely affected by a decree or judgment. One whose right of property may be established or divested. The word 'aggrieved' refers to a substantial grievance, a denial of some personal, pecuniary or property right, or the imposition upon a party of a burden or obligation."......
(Emphasis Supplied)
26. The communication on record dated 23.08.2023 between REPL and the First Appellant prior to the date of the impugned order dated 14.09.2023, is reproduced as hereunder as it shows that the payment for the subject CCPS was a matter of dispute between the concerned parties:
C.A. (AT) (CH) (Ins) No. 363/2023 Page 31 of 51 C.A. (AT) (CH) (Ins) No. 363/2023 Page 32 of 51
(Emphasis Supplied)
27. In the instant case, we are of the considered view that LITL in whose name the Shares still stood, is a `person aggrieved' as the admitted fact is that second tranche of consideration for the transfer of Shares remained unpaid. We have no hesitation to hold that the Appellant's legal rights have been affected and hence, falls within the ambit of the definition of `person injured or damaged in a legal sense'. Therefore, we observe that the Appellants Appeal is maintainable, specifically having regard to the fact that the Second Appellant M/s. KRS Erectors has purchased the First Appellant Company as a `Going Concern' on an `as is where is basis' and is a `person aggrieved' as its `pecuniary interest' is directly affected.
28. Having regard to the chequered history of this case and for the forgoing reasons, we are of the view that Appellants are aggrieved parties as the title of the CCPS still stands in their name and not hearing the Appellants and giving such directions would construe violation of Principles of Natural Justice. Needless to C.A. (AT) (CH) (Ins) No. 363/2023 Page 33 of 51 add, the Second Appellant/M/s. KRS Erectors Private Limited, which is the Company having acquired the First Appellant Company as a `going concern' is an 'aggrieved party' and we hold that it has the locus to file this Appeal. We have consciously not given any of our observations or commented on the merits of the constitution of the Board, except for observing that IDBI had received Notice and was silent till 02.11.2023, when the Application was filed subsequent to the filing of this Appeal, on 16.10.2023, and there is no denial regarding the email communication by the Liquidator on 14.09.2023 to IDBI and PNB Banks regarding the Board Constitution. Though, initially this Tribunal was of the considered opinion that the matter may be remanded to the Adjudicating Authority by giving liberty to all parties and hear the matter afresh, having heard this matter spending considerable amount of time on 19.10.2023, 02.11.2023, 09.11.2023, 10.11.2023 (when the matter was adjourned), 17.11.2023, 21.11.2023, and on 28.11.2023, we are of the view that the main Appeal itself may be decided.
29. IA No. 816/2023 in CP (IB) No. 519/07/HDB/2018 was filed by IDBI for implementation of Approved Resolution Plan by R3 and R4 under Sections 74(3) r/w. Section 60(5) of the IBC, 2016 seeking reliefs pertaining to non-implementation of certain provisions of the approved Resolution Plan. The Learned Senior Counsel Mr. S.R. Rajagopal appearing for IDBI submitted that R3 and R4 did not implement Clause vii of the Approved Resolution Plan citing procedural infirmities, inter alia, in the status of preference shares forming part C.A. (AT) (CH) (Ins) No. 363/2023 Page 34 of 51 of the shares of LTPL held in Lanco Anpara Power Limited ("LAPL") i.e., ("REPL Sale Shares" which constitute 28.66% equity shares and 54.33% Preference Share ("LAPL CCPS") held by LTPL in LAPL).
30. The SPA dated 30.03.2012, entered into between Lanco Infratech Ltd. and Vamshi Power Ltd./ REPL /R2:
"SECTION 2-EFFECTIVENESS 2.1 Effectiveness of Agreement ... come into force and effect without any further act or deed of the Parties on the date of this Agreement (hereinafter, the "Effective Date"). This Agreement shall continue to remain in full force and effect until terminated by the Parties.
SECTION 3-SALE AND PURCHASE OF SHARES 3.1 It is agreed between the Parties that LITL, will sell its entire shareholding in equity and preference shares of the Company and VIPL will purchase entire equity and preference shareholding of LITL, in the Company comprising of 23,40,000 Equity Shares of Rs. 10/- each and 121,72,96,000 Preference Shares of Rs. 10/- each at a consideration of Rs.10/- per equity share and Rs. 10/- per preference shares amounting to Rs.1,219,63,60,000 (Rupees One Thousand Nineteen Crores Sixty Three Lacs and Sixty Thousand only), which will be paid as under:
(a) Rs.734.26 Crores (Rupees Seven Hundred Thirty Four Crores Twenty Six Lacs only) at the time of execution of this Agreement; and
(b)Balance Rs.485,37,60,000/- (Rupees Four Hundred Eighty Five Crores Thirty Seven Lacs Sixty Thousands only) within one month of the receipt of approval from Lenders for transfer of shares to the VIPL, or within such time as may be mutually agreed upon but not later than 31st December, 2012.
3.2 It is agreed between n the Parties that C.A. (AT) (CH) (Ins) No. 363/2023 Page 35 of 51
(i) the 23,40,000 Equity Shares held by LITL, shall be transferred to VIPL in the following manner:
(a) 3,32,258 Equity Shares, which are held by LITL in dematerialised form and are free from encumbrances, shall be transferred to VIPL on 31st day of March, 2012;
(b) 20,00,000 Equity Shares, which are held by LITL, in physical mode and are free from encumbrances, shall be transferred to VIPL, such that the transfer is effective inter-se LITL and VIPL, as on the Effective Date of this Agreement.
It is agreed between the Parties that such transfer shall be presented in dematerialised form for recording in the books/register of the Company upon LITL getting dematerialisation of these shares, until which time the said shares would be held in trust by LITL for VIPL, however, in the books of the Company, the name of LITL will continue as holder of these shares.
(c) 7,742 Equity Shares held by LITL, in physical form on which pledge had been created by LITL in favour of the Lenders, shall be transferred to the VIPL, such that the transfer is effective inter- se LITL and the VIPL as on the Effective Date Agreement. It is agreed between the Parties that such transfer shall be presented in dematerialised form for recording in its books/register of the Company upon: (a) LITL arranging the necessary approvals from the Lenders with whom the said shares have been plegded; (b) VIPL acceding under the terms of the financing documents as may be required by the Lenders; and (c) LITL getting dematerialisation of the shares, until which time the said shares would be held in trust by LITL for the VIPL, however, in the books of the Company, the name of LITL will continue as holder of these shares; and
(ii) 121,72,96,000 Preference Shares held by LITL, shall be transferred to VIPL in the following manner:
C.A. (AT) (CH) (Ins) No. 363/2023 Page 36 of 51
(a) 40,16,96,000 Preference Shares, which are free from encumbrances and are held by LITL in dematerialised form, shall be transferred to VIPL on 31st March, 2012;
(b) 39,56,00,000 Preference Shares, which are free from encumbrances and are held by LITL in physical form, shall be transferred to VIPL, such that the transfer is effective inter-se LITL and VIPL as on the Effective Date. It is agreed between the Parties that such transfer shall be presented in dematerialised form for recording in the books/register of the Company upon LITL getting dematerialisation of these shares, until which time the said shares would be held in trust by LITL for VIPL, however, in the books of the Company, the name of LITL will continue as holder of these shares.
(c) 42,00,00,000 Preference Shares, which are held by LITL in physical form and on which pledge has been created by LITL in favour of the Lendes, shall be transferred to VIPL, such that the transfer is effective inter-se LITL and the VIPL as on the Effective Date. It is agreed between the Parties that such transfer shall be presented for recording in the books/registers of the Company, upon (a) LITL arranging the necessary approvals from the Lenders in whose favour such shares are pledged or Non-
Disposal Undertaking is created, (b) VIPL acceding under the terms of the financing documents as may be required by the Lenders, and (c) LITL getting dematerialisation of these shares, until such time the said shares would be held in trust by LITL for VIPL, however, in the books of the Company, the name of LITL will continue as holder of these shares.
3.3 The shareholding of VIPL in the Company upon transfer of the shares by LITL being registered in the books of the Company as per Section 3.2: (a) upon C.A. (AT) (CH) (Ins) No. 363/2023 Page 37 of 51 receipt of the necessary approvals from the Lenders with whom the said shares have been pledged; and (b) upon the VIPL acceding to the terms of the financing documents, will be 23,40,000 Equity Shares of Rs.10/- each (equivalent to 70.82% of the paid-up equity share capital of the Company) and 121,72,96,000 Preference Shares of Rs.10/- each (equivalent to 100% of the paid- up preference share capital of the Company)."
(Emphasis Supplied)
31. Share Purchase Agreement 'Amendment' dated 01.04.2012 entered into between Lanco Infratech Vs. Vamshi Industrial Power Ltd./REPL/R2 specifies as follows:
1. LITL Vs VIPL-Share Purchase Agreement - For purchase of Lanco Kondapalli Power Ltd Equity Shares 20,06,00,000.
2. LITL Vs VIPL-Share Purchase Agreement - For purchase of Lanco Tanjore Power Company Ltd Equity Shares 6,72,48,768.
3. LITL Vs VIPL- Share Purchase Agreement - For purchase of Lanco Amarkantak Power Ltd Equity Shares 57,46,22,637.
4. LITL Vs VIPL- Share Purchase Agreement For purchase of Lanco Anpara Power Ltd Equity Shares 23,40,000 and Preference Shares 121,72,96,000.
Now both the Parties have mutually agreed to amend all the above agreements as under:
In case of share purchase agreements as mentioned above as Sl. No. 1 to 9, after 3.1 (B) add the following para:
3.1. (C) It is further agreed that, until the full consideration is paid, LITL will have a charge on the unpaid amount till the full payment and all the benefits including but not limited to Dividends, receipts from Sale of shares, Bonus shares etc., accrued and received by VIPL on account of the above said shares and any C.A. (AT) (CH) (Ins) No. 363/2023 Page 38 of 51 other funding received by VIPL, should be first used to pay to LITL towards unpaid consideration.
In case of share purchase agreements as mentioned above as Sl. No. 10 to 15, after 2.2.2 add the following para:
2.2.2 (A) It is further agreed that, until the full consideration is paid, LITL will have a charge on the unpaid amount till the full payment and all the benefits including but not limited to Dividends, receipts from Sale of shares, Bonus shares etc., accrued and received by VIPL on account of the above said shares and any other funding received by VIPL, should be first used to pay to LITL towards unpaid consideration.
It is further agreed by both the parties that except for the above additional para, all other terms and conditions, rights and obligations of the original agreements as referred above remains unaltered with same force.
3.9. The implementation of the Acquisition Plan will be supervised by Monitoring Committee ("Monitoring Committee").
(a) Till the reconstitution of the Board of the Corporate Debtor by the Bidder, the Monitoring Committee shall:
1. Comprise of 2 nominees of the secured financial creditors of the Corporate Debtor, and 2 nominees from the Bidder,
2. Exercise powers of Board of Corporate Debtor to facilitate filing suitable forms with regulatory authorities as may be required and facilitate the reconstitution of New Board of Directors, and
3. During this period, The Monitoring Committee i. Shall not execute the roles and responsibilities mentioned in clause 3.10 below.
ii. Shall be assisted by erstwhile Liquidator, Deloitte IPE and Shardu Amarchand Mangaldas ("SAM"), legal counsel, each shall facilitate the implementation of transfer of control and shareholding of the Corporate Debtor to the Bidder.
C.A. (AT) (CH) (Ins) No. 363/2023 Page 39 of 51 The cost towards payment to erstwhile Liquidator, Deloitte IPE and SAM shall be borne from the cash flows available in the Liquidatior Bank Account of the Corporate Debtor and if the same is insufficient then by the Stakeholders only.
(b) Upon reconstitution of the Board of the Corporate Debtor by the Bidder, the Monitoring Committee shall:
1. Comprise of 2 nominees of the Corporate Debtor, and 2 nominees from the secured financial creditors.
2. The powers of Board of Corporate Debtor shall vest in the reconstituted Board.
32. Mr. S.R. Rajagopal, learned Senior Counsel for IDBI places reliance on Clause vii of the approved Resolution Plan:
"4. It is submitted that as per Clause vii of the Approved Resolution Plan, under the title "Other Considerations for successful implementation of the Resolution Plan", the following commitment is envisaged, which is reproduced hereunder:
vii. IHTC agrees to cause the Company to sell its entire shareholding (equity and CCPS) in Lanco Anpara Power Limited ("LAPL") to successful bidder nominated by IDBI Bank Limited, who is the lead financial institution for CDR lenders of Lanco Infrastructure Limited for a consideration of INR 20 Crores (the sale consideration shall compound at a rate of 10% per annum from the Effective Date), at the request of Financial Creditors.
However, pledge on this shareholding by project lenders of LAPL shall not be affected by this sale.
This sale consideration of INR 20 Crores shall be utilized to reduce the IHTC Outstanding Amount."
33. It is the main case of the Respondent that the subject 42,00,00,000 CCPS falls outside the scope of the approved Acquisition Plan. It is the case of the Appellants that Clause 5.10 of the Acquisition Plan makes it clear that unearned C.A. (AT) (CH) (Ins) No. 363/2023 Page 40 of 51 receivables pertaining to the period prior to the initiation of the CIRP other than those specified which are realised after the approval of the Resolution Plan shall be shared equally between the First Appellant and the stakeholders.
34. Clauses 5.10 & 5.11 read as hereunder:
"5.10. Any unearned revenue / receivables of the Corporate Debtor and/or any amount received on account of revenue generated prior to / during CIRP and Liquidation other than more clearly specified in Annexure IIIA and Annexure IIIB of the Process Document shall be shared between the Bidder/Corporate Debtor and Stakeholders in the ratio of 50%-50% respectively i.e. in the sharing mechanism for the recoveries to be made from Assets as per the Acquisition Plan.
5.11. Any recovery pursuant to any Application filed by the Resolution Professional or the Liquidator in relation to transactions covered under Section 43, 45, 50 and 66 of the Code (as applicable), as more particularly identified in Annexure IV ("Avoidance Litigation") of the Acquisition Plan, shall pass through from the Corporate Debtor to the Stakeholders of the Corporate Debtor, and shall not be available to the Bidder. Any such amounts, if received by the Corporate Debtor or Bidder shall be kept in trust and forthwith deposited into the Designated Bank Account for distribution amongst the Stakeholders. It is clarified that the Avoidance Litigation shall be continued by Bidder or Corporate Debtor at cost of secured financial creditors of the Corporate Debtor, in accordance with any directions issued by the secured Financial Creditors.
35. Clause 2.4 of the Process Document issued by the erstwhile Liquidator makes it clear that the transfer of control of the First Appellant Company and its Assets shall be on an `as is where is basis,'. It is seen from the record that the C.A. (AT) (CH) (Ins) No. 363/2023 Page 41 of 51 Acquisition Plan was approved on 26.09.2022. It is not in dispute that in the Register of Members of the Sixth Respondent Company shows that 42,00,00,000 CCPS were held in the name of the First Appellant. The case of the Respondent that the second tranche of consideration was not paid as contemplated under the SPA dated 30.03.2012 only because the Appellant had failed to obtain the approval of the lenders and the payment was conditional to the approval, cannot be sustained as a ground for the said directions as the fact remains that the said Agreement was admittedly amended from time to time on account of non-approval of the lenders and the balance consideration for the said 42,00,00,000 CCPS was not paid and hence, the question of the contract having been concluded and the Shares thereafter being held in trust by LITL does not arise. If the terms of the Agreement have been adhered to, then the question of the Shares being held in trust by LITL would come into the picture. The words `shall be transferred' which appears in Clause 3.2(ii)(c) of the SPA further clarifies that the transfer would be affected only when the condition stipulated under the said Clause are adhered to. It is not in dispute that the said conditions were never satisfied as the lenders of the Sixth Respondent had never approved the transfer. Therefore, the contention of the Learned Sr. Counsel for the Respondent that the entire shareholding of the First Appellant in the Sixth Respondent Company stood transferred to the Second Respondent Company with effect from 30.03.2012, is untenable. The sum and substance of Clause 3.2(ii)(c) of the SPA is that LITL shall arrange the necessary approvals from the Lenders C.A. (AT) (CH) (Ins) No. 363/2023 Page 42 of 51 in whose favour such shares are pledged or Non-Disposal Undertaking is created; REPL shall accede under the terms of the financing documents as may be required by the Lenders and that LITL shall get dematerialisation of these shares, until such time, the said shares would be held in trust by LITL for REPL, however, in the books of the Company, the name of LITL shall continue as holder of these shares.
36. None of the above conditions were complied with. Therefore, it is not clear as to how the Respondents have arrived at the effective date, as we are of the considered view that the transfer of Shares could be made effective only from the actual date of the transfer through the Share Certificates and Share Transfer Forms. Clause 3.1(c) of the Amendment to the SPA dated 01.04.2012 provides that, until the full consideration is paid, LITL will have the charge on the unpaid account till the full amount and all the benefits, including but not limited to dividends, received from sales of Shares, bonus Shares, etc., accrued and received by VIPL/REPL on account of the abovesaid Shares and any other funding received by VIPL/REPL should be first paid to LITL towards unpaid consideration. Interestingly in the third Meeting of the Monitoring Committee held on 06.04.2023, the issue of transfer of the subject CCPS to REPL was discussed and it was unanimously agreed to seek the legal opinion but thereafter IDBI filed I.A.816/2023 without issuing Notice to the Appellants. In the approved acquisition Plan, a sharing mechanism is provided for recoveries from sale of assets and actionable claims:
C.A. (AT) (CH) (Ins) No. 363/2023 Page 43 of 51
S. Particulars Stakeholder's Bidder Share
No. Share
a) Assets under Annexure III-A 50% (Fifty 50% (Fifty
of the Process Document Percent) Percent)
b) Actionable Claims comprising
legal cases, identified more
particularly in Annexure III-
B of the Process Document
Up to 50 Cr 30% (Thirty 70% (Seventy
Percent) Percent)
50 Cr to 150 Cr 60% (Sixty 40% (Forty
Percent) Percent)
>150 Cr 70% (Seventy 30% (Thirty
Percent) Percent)
37. A brief perusal of the Acquisition Plan shows that the existence of the First Appellant investment in the Sixth Respondent Company is not identified as part of the list of the Assets by the erstwhile Liquidator and the same was not specifically mentioned in the list of Assets under the Acquisition Plan. Nevertheless, Clause 2.4 of the process document makes it clear that the Sale was on an `as is where is basis'. It is contended by the Learned Sr. Counsel for the Appellants that the factum of the Appellant holding the subject CCPS in the Sixth Respondent Company was not earlier known to the Second Appellant but the First Appellant rights in respect of such shares cannot be defeated merely because the same was not specifically included in the list of Assets prepared by the Liquidator. The Minutes make it clear that the representative of the Second Appellant was responding to the proposal of IDBI to give effect to the proposition of the subject CCPS and in response to the said proposal, there was a consensus to obtain a legal opinion in respect of the same. The suggestion was accepted by the IDBI and the C.A. (AT) (CH) (Ins) No. 363/2023 Page 44 of 51 Liquidator and the said Agenda was deferred. In the meantime, IDBI approached the Adjudicating Authority and filed the Impugned IA.
38. For better understanding of the facts regarding this issue, the Minutes of the 3rd Meeting of the Monitoring Committee held on 06/04/2023 is detailed as hereunder:
C.A. (AT) (CH) (Ins) No. 363/2023 Page 45 of 51
(Emphasis Supplied)
39. Having gone through the material on record and hearing the parties at length, at the cost of repetition, we are of the considered view that the Impugned Order dated 13.09.2023 be set aside for the following reasons:
i. I.A.816/2023 was filed in the CIRP of REPL/the Second Respondent, to which the Appellants were not parties. On 26.04.2021, the Adjudicating Authority approved the Resolution Plan submitted by iLabs Hyderabad Technology Centre Private Limited/Respondent No. 3 (IHTL) and 50 Hertz Energy Private Limited/Respondent No. 4. In the Resolution Plan of REPL/R-2. The relevant portion is extracted hereunder:
"IHTC agrees to cause the Company to sell its entire shareholding (equity and CCPS) in Lanco Anpara Power Limited (LAPL) to successful bidder nominated by IDBI Bank Limited, who is the lead financial institution for CDR lenders of Lanco Infratech Limited for a consideration of INR 20 Crores (the sale consideration shall compound at a rate of 10% per annum from the Effective Date), at the request of Financial Creditors. However, pledge on this shareholding by project lenders of LAPL shall not be affected by this sale. This sale consideration of INR 20 Crores shall be utilized to reduce the IHTC Outstanding Amount."
It is seen that in the aforenoted Resolution Plan, the equity and CCPS value has been quantified at ₹ 20 Crores, when admittedly the Shares stood in the name of LITL. There are no substantial reasons given as to how when the C.A. (AT) (CH) (Ins) No. 363/2023 Page 46 of 51 `title' of the subject CCPS was still with the LITL / the First Appellant without the consultation/consent of the Appellants/Monitoring Committee herein specifically the Second Appellant which has acquired the First Appellant Company as A `going concern' on an `as is where is basis', was not taken and peculiarly when the Monitoring Committee, in the presence of IDBI, sought for a legal opinion, which was still pending. IA No. 816/2023 filed in CP No. 519/2018 relates to CIRP of REPL and hence, it is all the more significant that the Appellants ought to have been heard. ii. There is no denial that as on the date of submission of the Resolution Plan, REPL owned only ₹ 16,95,12,258/- Equity Shares of the First Appellant and 42,00,00,000 CCPS were not yet transferred to the Second Respondent/ REPL and therefore, we are of the view that they could not have been made a part of the Resolution Plan without satisfying the terms of the SPA, as it is the specific case of the Appellants that the balance sale consideration was never paid. Though it is the argument of the Learned Counsel for the Respondents that the balance consideration remained unpaid on account of the fact that the lenders have not given approval, the fact remains that the second tranche of the payment was never made. Therefore, we find force in the contention of the Learned Sr. Counsel Mr. E. Omprakash that even in the current scenario, REPL could have transferred the Equity Shares of Lanco Anpara/Sixth Respondent owned C.A. (AT) (CH) (Ins) No. 363/2023 Page 47 of 51 by them i.e., 16,95,12,258/- and not the 42,00,00,000 CCPS which stand in the name of LITL. As regarding the case of the Respondents that they do not figure in the 'Assets' of the Appellant Company, the fact remains that they are shown as 'receivables' in the financial statements. Further, as per Sec. 2(a)(3) of the Securities Act of 1933, 'the term "sale" or "sell" shall include every contract of sale or disposition of a security or interest in a security, for value.
iii. During the sale of the Appellant as a `going concern' to the Second Appellant Company on an `as is where is basis', and on an `as is what is basis', under the Liquidation Procedure, the subject 42,00,00,000 CCPS of Lanco Anpara were not executed by the Liquidator. The Acquisition Plan includes Assets and actionable claims covered under the Plan, exclusions namely avoidance Petitions filed by the Liquidator, and other unearned `revenue'/`receivables for any amount received on account of the Revenue generated prior to/from CIRP and Liquidation other than those specified in the annexures. Clause 5.10 of the Acquisition Plan speaks about the unearned `revenue'/`receivables of the Corporate Debtor and or any amount received on account of the revenue generated which would be shared between the bidder/Corporate Debtor and the Stakeholders under the ratio of 50% in the sharing mechanism for the recovery is to be made from the Asset as per the Acquisition Plan. It is the case of the Learned Sr. C.A. (AT) (CH) (Ins) No. 363/2023 Page 48 of 51 Counsel Mr. S.R. Rajagopal that this amount does not come under receivables, but the fact remains that when there is no specific exclusion in the Acquisition Plan, reliance is to be placed on the exact terms and conditions which clearly stipulate that any amount which should be received on account of revenue generated during CIRP/Liquidation would be shared on a 50% basis. It is seen from the record that the subject CCPS do not form part of the Assets of the `Process Document' and neither fall in the exclusions list and when the Shares are still in the name of the First Appellant Company which were required to be transferred to REPL subject to the amount received and receipt of approvals from the lenders of Lanco Anpara, we are of the view that the subject CCPS could not have been transferred without the payment being received and also without the consent of the Monitoring Committee of the Second Appellant Company. iv. It is seen from the record that when the Appeal was pending before this Tribunal and the matter was adjourned on 10.11.2023 to 17.11.2023 on an account that the regular Bench was not available on that day and there were Diwali holidays the Shares were transferred during pendency of the Appeal on 10.11.2023. The Learned Counsel for the Sixth Respondent has stated so in his Reply that the shares stood transferred on 10.11.2023. The conduct of the Respondents in transferring the shares during the pendency of the Appeal specifically when the matter was being heard at length due to the C.A. (AT) (CH) (Ins) No. 363/2023 Page 49 of 51 chequered history and the fact that the Impugned Order did not reflect the factual matrix, is not appreciated.
v. Though initially, we were of the view that this matter be sent back to the Adjudicating Authority for hearing afresh, keeping in view that substantial time has been spent before this Tribunal in understanding the factual matrix of the matter and the matter was heard at length over a considerable period of time, and having regard to the fact that IBC is a time bound process, we are of the earnest view that the Appeal itself be decided. vi. The Hon'ble Supreme Court in `Embassy Property Developments (P) Ltd.' Vs. `State of Karnataka & Ors.', (2020) 13 SCC 308, has held that when the Corporate Debtor has to exercise rights in Judicial, Quasi-Judicial Proceedings, the RP cannot short circuit the same and bring a Claim before NCLT, taking advantage of Section 60(5). In the instant case, when the title of the subject CCPS was still in the name of the First Appellant, there was communication exchanged between the parties regarding this issue, the Monitoring Committee had discussed the issue of obtaining legal opinion in its meetings and the same was pending, the question whether the subject CCPS was part of the Acquisition Plan is disputed, the directions given to the Liquidator in IA No. 816/2023 filed in CP(IB) No. 519/7/HDB/2018, pertaining to the CIRP of REPL, to assist in the transfer of the Shares, is unjustified. The conduct of the Respondents in effecting C.A. (AT) (CH) (Ins) No. 363/2023 Page 50 of 51 the transfer of the CCPS during pendency of the Appeal, when the matter was still being heard, is not appreciated.
vii. The Appellants have been held to be `aggrieved parties' in the aforenoted paras 23 to 28 and for the foregoing reasons, we are of the view that the Appellants have locus to maintain this Appeal.
40. For all the foregoing reasons, this Appeal is allowed. The Impugned Order passed by the Adjudicating Authority is set aside and any actions taken by the Respondents during the pendency of the Appeal are rendered otiose. All pending IAs stand closed.
[Justice Rakesh Kumar Jain] Member (Judicial) [Shreesha Merla] Member (Technical) 21/12/2023 HA/RO/TM C.A. (AT) (CH) (Ins) No. 363/2023 Page 51 of 51