Tricountry Premier Hearing Services ... vs State Bank Of India And Ors on 20 January, 2022

[Cites 2, Cited by 2]

National Company Law Appellate Tribunal

Tricountry Premier Hearing Services ... vs State Bank Of India And Ors on 20 January, 2022

This Appeal has been filed by Successful Resolution Applicant challenging the order dated 24th November, 2021 passed by National Company Law Tribunal, Cuttack Bench, rejecting IA (IB) No.115/CB/2021 filed by the Appellant seeking extension of four weeks' time for making payment as was allowed by order dated 20.09.2021 of the Adjudicating Authority.

2. Brief facts of the case necessary to decide this Appeal are:

(i) Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor - BSR Diagnostic Limited. The Appellant submitted a Resolution Plan in pursuance of an advertisement issued by Resolution Professional Inviting Expression of Interest. The Resolution Plan was considered and approved by the Committee of Creditors with 99.48% votes in the 8th meeting of the CoC on 12.11.2018. The Resolution Professional filed an Application for approval of the final Resolution Plan dated 05.11.2018, which came to be approved by the Adjudicating Authority by order dated 22nd January, 2019. The State Bank of India was one of the Financial Creditor with 66.76 % majority voting share and another Financial Creditor was Axis Bank Limited having 29.23% voting share in the Committee of Creditors Company Appeal (AT) (Insolvency) No. 1038 of 2021 2

(ii) As per the Resolution Plan the Financial Creditors were required to be paid a total sum of Rs.45 crores. Following amount was proposed to each of the Financial Creditors:

                "Name of the Bank/ Lender        Claim         Amount
                                                Admitted       Payable
              Axis bank Limited                      31.07          13.16
              State Bank of India                    70.94          30.05
              Siemens Financial Service Pvt.          0.79          00.33
              Ltd.
              Clix Finance India (GE Capital)         1.10            00.47
              India Infoline Finance Limited          2.36            01.00
              Total                                 106.26           45.00"

(iii) Out of Rs.45 crores, upfront payment of Rs.12 crores was to be made within 60 days from the date of the order of the NCLT.

Rupees 26 crores by 31st March, 2019 and Rs.3 crores by 31st March, 2020 with interest of 8.00%. The Plan also provided payment for Operational Creditors, unsecured Financial Creditors, employees/ workmen, statutory dues and payment to existing shareholders.

(iv) The Successful Resolution Applicant made payment of Rs.12 crores and in March 2021 paid further amount of Rs.3 crores. The payment to unsecured Financial Creditor of Rs.1.01 crores was to be paid within 5 years from the date of approval of Resolution Plan. Out of which amount Rs.65 lakhs was paid to Operational Creditors. Unsecured Financial Creditors was to be paid Rs.44 lacs, which was paid. Employees and workmen dues upto Rs.1.36 crores required to be paid within Company Appeal (AT) (Insolvency) No. 1038 of 2021 3 three years from the date of approval of the Plan, out of which an amount of Rs.1 crore was paid. Statutory dues of Rs.51 lakhs were required to be paid within a period of five years from the date of approval of the Plan, out of which Rs.20 lakhs has been paid. Rupees 7 lakhs were paid to existing shareholders.

(v) The Appellant could not pay the Financial Creditors as per the schedule of payment provided in the Resolution Plan, hence it filed CA No.58 of 2020 in the month of February 2020 praying that the Applicant shall be allowed to pay till 31st October, 2021 in several installments as indicated in Application paragraph 5.22.

(vi) The State Bank of India filed Miscellaneous Application 32 of 2020 seeking liquidation of the Corporate Debtor on the ground that Resolution Applicant has not complied with the terms and conditions of the approved Resolution Plan.

(vii) The Application No.58 of 2020 was heard by the Adjudicating Authority and by order dated 12th April, 2021, the Adjudicating Authority directed the Appellant to deposit an amount of Rs.20 crores on or before 7th June, 2021 to show their bona fide.

(viii) The Appellant could not deposit the amount of Rs.20 crores as directed on 12th April, 2021. The Application 58 of 2020 was heard and finally disposed of by Adjudicating Authority vide its order dated 20th September, 2021. Application was heard and order was reserved on 22.07.2021 and was pronounced by Company Appeal (AT) (Insolvency) No. 1038 of 2021 4 Adjudicating Authority on 20th September, 2021. The Adjudicating Authority granted one more opportunity to the Appellant to fulfill all its commitment and financial obligations as stated in the Resolution Plan by 31st October, 2021. The Adjudicating Authority noticed that the Appellant has not followed its commitments as directed by order dated 12th April, 2021.

(ix) Another Application being I.A. no.115 of 2021 dated 29th October, 2021 was filed by the Appellant stating various difficulties due to which financial obligations could not be complied with. By the Application, the Applicant prayed for grant of 30 days' time till 30th November, 2021 to comply with order dated 20th September, 2021, so as to fulfill the financial obligations of the Applicant as per approved Resolution Plan. The said Application was opposed by the State Bank of India.

(x) The Adjudicating Authority after hearing the parties held that as per order dated 12th April, 2021, the Applicant was directed to pay Rs.20 crores out of Rs.30 crores before 7th June, 2021, which has not been complied with. The Applicant has grossly failed in complying with the order dated 12th April, 2021. There are great lapses on the part of the Resolution Applicant and the Resolution Applicant cannot take shelter and take advantage of the COVID-19 pandemic because the default has taken place much before the occurrence of the pandemic. The Company Appeal (AT) (Insolvency) No. 1038 of 2021 5 Application was rejected by order dated 24th November, 2021. Aggrieved against which order this Appeal has been filed.

3. When this Appeal was taken up on 09.12.2021, learned Counsel for the Appellant sought permission to file additional affidavit in pursuance to which an additional affidavit dated 10th December, 2021 was filed. In the additional affidavit, Appellant has given the details of payment already made and details of its source of fund for making other payments as required to be made. In the additional affidavit, the Appellant also brought on record letter dated 11th November, 2021 of Kotak Mahindra Bank, where decision of Kotak Mahindra Bank 'in-principle offer' was communicated to the Appellant, proposing a term loan of Rs.20 crores.

4. The State Bank of India on 23rd December, 2021 sought time to file reply to the application. The State Bank of India has filed detailed reply to the Appeal as well as the Application to which rejoinder affidavit has also been filed by the Appellant. Although, the advance copy of the Appeal was sent to Respondent No.1 and Respondent No.2, but they did not file any appearance. The State Bank of India, the main contesting party having appeared and filed detail reply and effectively presented the case of Financial Creditors, no further notice was issued to Respondent Nos.2 and Respondent No.3.

5. We have heard Shri Krishnendu Datta, learned Senior Counsel for the Appellant and Shri Joy Saha, learned Senior Counsel for State Bank of India - Respondent No.1.

Company Appeal (AT) (Insolvency) No. 1038 of 2021 6

6. The learned Senior Counsel for the Appellant submits that Appellant, after approval of the Resolution Plan has already made payment of more than Rs.20 crores and has been making serious efforts for implementation of the Resolution Plan. When the Application No.115 of 2021 was pending before the Adjudicating Authority, the Appellant had received the offer of Kotak Mahindra Bank to advance the term loan of Rs.20 crores and had the Adjudicating Authority extended the 30 days' time, the Appellant could have been able to meet all financial obligations under the Plan. Shri Datta submits that in the additional affidavit filed, the Appellant has given details of source of fund for payment of Rs.30 crores, which it is required to pay to the Financial Creditors. It is submitted that although the Kotak Mahindra Bank has 'in-principle offer' communicated its offer to advance Rs.20 crores, but after rejection of the Application on 24th November, 2021, the Bank has not disbursed the amount and unless the Appellant is granted some time to make the deposit, the disbursal of the amount would not be made by the Kotak Mahindra Bank. The Appellant in the additional affidavit has also given details of three Bank accounts, where amount of about Rs.10 crores are deposited, which shall be utilized in making the payment. Shri Datta submits that there is no dispute that the Appellant defaulted in complying the payment schedule as provided in the Resolution Plan. He submits that there have been several reasons as has been highlighted in I.A. No.58 of 2020 and 115 of 2020, which difficulties were genuine and it is not a case that Appellant due to any mala fide intention did not deposit the amount. The Appellant having already made payment Company Appeal (AT) (Insolvency) No. 1038 of 2021 7 of Rs.15 crores to the Financial Creditors and full CIRP cost amounting to Rs.4.25 crores and other payments have also been made, the Appellant has shown its bona fide to comply the Plan and it is earnestly prayed to this Tribunal that time of only four weeks be extended for making entire deposit by the Appellant. It is submitted that the Appellant is running the Corporate Debtor, which is running a diagnostic center in four States of the Country and has given services to people in wake of COVID-19, which engulfed the entire country. Shri Datta submits that impugned order dated 24th November, 2021 has only considered the past conduct of the Appellant and when order was passed on 20th September, 2021 by the Adjudicating Authority extending the time till 31st October, 2021, the earlier defaults stood condoned. The reasons given in the Application No.115 of 2021 and the grounds taken have not been adverted by the Adjudicating Authority. The order does not advert to the source of funds as indicated in the Application No.115 of 2021. It is submitted that the liquidation application filed by the Bank has been heard, but orders have not yet been pronounced. It is submitted that permitting the Corporate Debtor to go for liquidation would yield no better result and the Appellant with all bona fide intention seeks only four weeks' time to comply all financial obligations of the Plan.

7. Shri Joy Saha, learned Senior Counsel appearing for State Bank of India has vehemently opposed the Appeal and has made elaborate submissions. It is submitted that Resolution Plan was approved by CoC on 12.11.2018, which subsequently was approved by the Adjudicating Company Appeal (AT) (Insolvency) No. 1038 of 2021 8 Authority. The Successful Resolution Applicant was to make payment of Rs.38 crores by 31st March, 2019. On 06.02.2019, the Corporate Debtor was handed over to Successful Resolution Applicant, who was running the diagnostic centers in different parts of the Country. Only payments towards the Financial Creditor is Rs.12 crores and Rs.3 crores in SBI Escrow account. Shri Saha has also referred to an order dated 06.01.2021 passed by the Adjudicating Authority by which the Adjudicating Authority has appointed a special officer for making inventory of the machinery in different centers, before the Application No.32 of 2020 filed by the Bank for liquidation is taken for consideration. Shri Saha referring to the order dated 12th April, 2021 passed by the Adjudicating Authority contends that Adjudicating Authority by its order granted time till 7th June, 2021 to the Resolution Applicant to deposit amount of Rs.20 crores out of Rs.30 crores to show their bona fide. However, no payment at all were made by the Resolution Applicant in compliance of the order dated 12th April, 2021. He submits that Resolution Applicant has been running the diagnostic center but has not made payment as directed by the Adjudicating Authority. It is submitted that by order dated 20th September, 2021, last opportunity was granted to the Successful Resolution Applicant to make entire payment by 31st October, 2021. The Resolution Applicant has not complied the said order also and before 31st October, 2021 has filed another Application No. 115 of 2021 seeking further time of 30 days. It is submitted that Adjudicating Authority in the impugned order rightly come to the conclusion that no case has been made out for grant of any further time. Company Appeal (AT) (Insolvency) No. 1038 of 2021 9 The Appellant has failed to deposit the entire amount by 31st October, 2021. It is submitted that Adjudicating Authority has rightly observed that the Resolution Applicant cannot take shelter and advantage of COVID-19 pandemic because the default has taken place much before the occurrence of the pandemic. It is submitted that in pursuance of the order dated 20th September, 2021, the Appellant has not filed the Weekly Progress Report as was directed by the Adjudicating Authority. He submits that Resolution Plan can neither be modified nor changed at the instance of Resolution Applicant and Adjudicating Authority could not have granted the time as prayed by the Appellant. With regard to letter dated 11.11.2021 issued by Kotak Mahindra Bank offering to propose financial facility of Rs.20 crores, it is submitted that this was only an 'in-principle offer' approval and there is no commitment by Kotak Mahindra Bank to grant financial assistance of Rs.20 crores. The letter of Kotak Mahindra Bank cannot be treated to be final offer by the Bank. The Appellant had given fresh proposal by letter dated 26th July, 2021 and 21st August, 2021, which were wholly impermissible.

8. Shri Joy Saha, learned Senior Counsel for Respondent No.1 has also placed reliance on judgment of the Hon'ble Apex Court in Ebix Singapore Private Limited vs. CoC Educomp in Civil Appeal No.3224 of 2020 decided on 13th September, 2021 and relied on paragraph 202, 203 and 204 of the judgment.

9. Shri Saha lastly submitted that the Rajesh Kumar Sinha, who has filed this Appeal claiming to be Authorised Signatory has no authority to Company Appeal (AT) (Insolvency) No. 1038 of 2021 10 file this Appeal. It is submitted that the Appeal instituted by Tricounty Premier Hearing Service Inc. through its subsidiary Tri County Holding (P) Ltd. and affirmed by alleged Authorised Representative of Tri County Holding (P) Ltd. being Rajesh Kumar Sinha is not maintainable. The Tri County Holding (P) Ltd. could not have sub-delegated its authority to Rajesh Kumar Sinha. There is no Resolution by Tricounty Premier Hearing Service Inc. giving authority to Rajesh Kumar Sinha. Minutes of the meeting of Tricounty Premier Hearing Service Inc. is not signed by Board of Directors, but only by the alleged CEO of the said Company. Shri Saha submits that present Appeal cannot be instituted on the basis of purported Resolution of Tri County Holding (P) Ltd.

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

11. We may first consider the submissions of Shri Joy Saha, learned Senior Counsel for Respondent No.1 raising objection to very maintainability of the Appeal filed by Rajesh Kumar Sinha, claiming to be Authorised Signatory of Tricounty Premier Hearing Service Inc. The Memo of Appeal described the Appellants in following manner:

"Tricounty Premier Hearing Service Inc 707, Oaks, Shores road, Leesburg, Florida-34748 USA Through Tri County Holding (P) Ltd.

SF no. 6/684, 685, Sikkaram Palayam, 101 Bajaj Bhavan, Nariman Point, Mumbai 400021. .... Appellant"

Company Appeal (AT) (Insolvency) No. 1038 of 2021 11

12. In the Appeal, the Appellant has filed extract of Minutes of the Meeting of sole shareholder of the Tri County Holding Pvt. Ltd. dated 26th November, 2021 along with Annexure A-2. Two Minutes of the Meeting have been placed on record i.e. Minutes of Tri County Holding Pvt. Ltd. and Tri County Hearing Services at pages 36 and 37. Tri County Hearing Services has resolved that Tri County Holding (P) Ltd., authorized representative is authorized to take all necessary action to file, pursue and defend all court cases, before any Court, Tribunal, Authority etc. The Appeal has been filed by Tricounty Premier Hearing Service Inc. through Tri County Holding (P) Ltd. Tri County Holding (P) Ltd. is subsidiary of Tricounty Premier Hearing Service Inc. When Tricounty Holding (P) Ltd. is authorised to represent the Appellant, there is no invalidity in its authorizing Shri Rajesh Kumar Sinha as Authorised Representative to sign all petition papers, applications etc. In this context, we may refer to order of Adjudicating Authority dated 20th September, 2021, where Adjudicating Authority has in paragraph 5 has clearly held that Trycounty Holding Pvt. Ltd. is an Indian subsidiary/ associate concern of the Resolution Applicant, who is managing the Corporate Debtor post the Effective Date and it is Trycounty Holding Pvt. Ltd., which is making the payment to the creditors in the Approved Resolution Plan. It is useful to extract paragraph 5 of judgment, which is to the following effect:

"5. Tricounty Holding Pvt. Ltd. is an Indian subsidiary/ associate concern of the Resolution Applicant, and this entity has been managing the Corporate Debtor post the Effective Date. The Company Appeal (AT) (Insolvency) No. 1038 of 2021 12 entity is making the payments to the creditors under the Approved Resolution Plan and to the employees and suppliers of the Corporate Debtor to maintain the Corporate Debtor as going concern."

13. TriCounty Holding Pvt Ltd., Indian subsidiary/ associate of Resolution Applicant is making the payment to creditors as has been noted by the Adjudicating Authority, we see no reason to hold that present Appeal is not maintainable, which has been filed through Tri County Holding Pvt. Ltd. Shri Datta, learned Senior Counsel for the Appellant has further submitted that even before the Adjudicating Authority, all applications were filed through Tri County Holding Pvt. Ltd. and same representative has signed the pleadings, but no objection was raised by the State Bank of India before the Adjudicating Authority regarding competence of Authorised Representative signing the pleadings. We, thus, are of the view that this Appeal cannot be thrown out on the submission, which have been made by learned Counsel for the State Bank of India.

14. As per Resolution Plan, the payment of Rs.45 crores was to be made to the Financial Creditors, out of which Rs.30.05 crores was to be received by the State Bank of India. According to para 8.3(ii) sub-clause (b) payment of Rs.45 crores was proposed in following manner:

b) On the basis of the proposed fund infusion by the Resolution Applicant the total restructured debt of Rs.45.00 crore is proposed to be repaid as under:

Company Appeal (AT) (Insolvency) No. 1038 of 2021 13  Upfront payment of Rs.12.00 Crores within 60 Days from the date of order of NCLT.

 Payment of amount of Rs.26.00 Crore by 31st March, 2019, without any interest.

 Payment of amount of Rs.3.00 Crore by 31st March 2020, with an interest of 8.00% p.a. on reducing balance from April 2019.

 Payment of amount of Rs.4.00 Crore by 31st March, 2021, with an interest of 8.00% p.a. on reducing balance from April 2019.

 The source of funds to make the above payments to be Secured financial has been provided at Clause 11 of this Plan."

15. The payment of Rs.45 Crores was to be started to be made within 60 days from the date of order of NCLT till 31st March, 2021. Rupees 12 crores was upfront. Out of Rs.45 crores, the Resolution Applicant has paid only Rs.12 crores + Rs.3 crores paid in the Escrow account of State Bank of India. Rs.30 crores is still to be paid and Appellant could not make the payment as provided in the Resolution Plan. The Application No.58 of 2020 was filed by the Applicant seeking extension of time till 31st October, 2021 for payment of entire outstanding dues. Shri Saha, learned Senior Counsel for the Respondent is correct in saying that by order dated 12th April, 2021, the Appellant was directed to make payment of Rs.20 crores by 7th June, 2021, which payment also could not be made by the Appellant. In order dated 20th September, 2021 the Adjudicating Authority has clearly noticed that Resolution Applicant has failed to make the payment as per Resolution Plan and has also failed to comply order dated 12th April, 2021, since he Company Appeal (AT) (Insolvency) No. 1038 of 2021 14 could not make the payment of Rs.20 crores as was directed to be paid till 7th June, 2021. In paragraph 13 of the order dated 20th September, 2021, the Adjudicating Authority has noticed the details of payment made by the Applicant. It is useful to extract paragraph 13 of the order dated 20th September, 2021 of the Adjudicating Authority, where Resolution Applicant had indicated the payments to show bona fide attempt on part of it:

"13. The Learned Counsel for the Resolution Applicant has submitted the following details to indicate their bona fide attempt and to show commitment on implementation of the Resolution Plan: -

"(i) Amount of ₹ 69 Lacs has been paid by RA (averred at Pg. 19 @ para 5.22, Pg. 134 @ para 3, Pg. 137 @ para 6 of CA 58);

(ii) RA made paid payment of ₹ 1.7 Crore for electricity charges. New equipment has been brought from US (Pg. 140 @ para 18 of CA 58);

(iii) Payment of ₹40 lacs were made instead of ₹19 lacs (Pg. 5 of the Addl. Affidavit dt. 15.12.2021);

(iv) RA has made several payments totaling to ₹21.76 Crore (Pg. 51 of Reply Affidavit in MA 32; averred at Para 14 @ Pg.8 of the Addl. Affidavit 01.12.2020);

(v) RA has been paying the employees (Averred at Para 11 @ Pg.7, annexed at Pg.138 of Addl. Affidavit dt. 01.12.2020);

(vi) RA has deposited a sum of ₹3 crore in a no lien account to show their bona fide in accordance with the terms of the order passed by this Tribunal dt.

16.03.2021. (Averred at Para 4 @ Pg.2, annexed @ Pg.7 of Addl. Affidavit dt. 08.04.2021; averred at para 6 @ Pg.5 of I.A. 62 of 2021);

Company Appeal (AT) (Insolvency) No. 1038 of 2021 15

(vii) The RA has made payment of ₹10.61 Lakhs towards the CIRP Costs as on 22.01.2019 (Averred at Para 9 @ Pg. 6, annexed at Pg.26 @ pg. 29 of Reply Affidavit dt. 23.11.2020 to MA 32: averred at Para 5.8 @ Pg.10 of CA 58);

(viii) RA has been making continuous payments and has paid the entire CIRP Costs in full and has also paid the entire dues of workmen and employee of the Corporate Debtor. (Averred at Para 19 @ Pg. 11 of Reply Affidavit dt. 23.11.2020 to MA 32);

(ix) RA has shown their bona fide intention by appropriating Rs.12 Crore to the creditors even after SBI has filed the liquidation application. (Averred at Para 24@ Pg. 14 of Reply Affidavit dt. 23.11.2020 to MA 32);

(x) The amount of ₹ 12 Crore has been paid by the RA from its personal funds as no financial institution agreed to provide loans due to incomplete handover by FCs. (Averred at Para 25 @ Pg. 15 of Reply Affidavit dt. 23.11.2020 to MA

32);

(xi) The RA has been making full payment of the dues of the doctors, technicians, employees and vendors throughout the period and has been keeping the company a going concern and has paid an amount of ₹10.04 Crores (Averred at Para 28 @ Pg.16 and at Para 30 @ Pg. 17, annexed at Pg. 51 of Reply Affidavit dt. 23.11.2020 to MA 32 and Pg. 51 and 52 of Addl. Affidavit dt.

01.12.2020);

Company Appeal (AT) (Insolvency) No. 1038 of 2021 16

(xii) Despite not being given the Complete handover of the company the RA has been investing out of its own funds to purchase new diagnostic equipment. (Averred at Para 12 @ Pg. 09 of I.A. 62/ 2021);

(xiii) RA has already paid an amount of ₹ 8.04 Crores to SBI (Averred at Para 3 @ Pg.1 of the Settlement Affidavit dt. 15.03.2021). RA has duly deposited ₹3 Crore with SBI in March 2021 (Averred at Para 4 @ Pg.2 of the Addl. Affidavit dt. 8.4.2021);

(xiv) The RA has been able to resolve the issue with one of the landlords at one of the centres in Jabalpur (MP) by making a payment of ₹40 Lacs instead of ₹19 Lacs as per the Resolution Plan.

(Averred at Para 6 @ Pg. 4-5 of the Settlement Affidavit dt. 15.03.2021);

(xv) The RA has been constantly working towards improvement and had cleared certain dues of CIRP Costs and dues of the employees/ workmen and some other operational creditors. (Averred in Para 5.20 @ Pg.17, Annexure at Pg.149 of CA 58/2020);

(xvi) During the hearing on 22.07.2021, this Tribunal enquired the RA to bring forward its proposal which pays the lenders in full of ₹45 Crores. On 9.8.2021, it was submitted before this Tribunal that the RA has made a proposal on 7.8.2021, which was prayed to this Tribunal to direct the lenders to consider the same. Stating as follows:-

a. Out of ₹45 Crores, ₹12 Crores has been paid to FCs Company Appeal (AT) (Insolvency) No. 1038 of 2021 17 b. Out of remaining ₹33 Crores ₹ 3 Crores has been deposited with SBI in no-lien account in March 2021.

c. RA shall deposit ₹5 Crores within 15 days, after this Tribunal allows the FCs to consider the proposal of RA.

d. Another ₹5 Crores shall be deposited within 15 days from receipt of written communication from FCs accepting the proposal of RA.

e. Within 60 days from approval of this Tribunal of this proposal modifying the Resolution Plan--

 ₹9 Crores shall be paid by the RA to the FCs through an NBFC, on simultaneous assignment of their debt in favour of the said NBFC so that the security held by the FCs is immediately transferred in favour of the NBFC.

 For ₹11 Crores, 8% fully redeemable debentures shall be issued. 50% of the said debentures shall be redeemed at the end of 1 year and the balance 50% shall be redeemed at the end of 2 years from the date of their issuance. Interest on the said debentures shall accrue @ 8% on simple basis and shall be paid at the time of their redemption. The RA shall also give security of this amount which shall be to the satisfaction of the lenders."

16. After noticing all the relevant facts of the parties, the Adjudicating Authority in para 16 of the order dated 20th September, 2021, allowed one Company Appeal (AT) (Insolvency) No. 1038 of 2021 18 last opportunity to the Resolution Applicant to fulfill all its commitment by 31st October, 2021. Para 16 of the order is as follows:

16. This Adjudicating Authority is of the view that although the Resolution Applicant has grossly failed in meeting its commitments in respect of implementation of the Resolution Plan, liquidation is the last resort when all other available options fail in the CIRP. In the interest of all the stakeholders and also the implementation of the Resolution Plan, after considering all the facts and circumstances of the case, this Adjudicating Authority allows one last opportunity to the Resolution Applicant to fulfil all its commitments and financial obligations stated in the Resolution Plan by 31.10.2021 failing which actions as may be deemed appropriate as per law, shall be taken."

17. There is no dispute that even after extension granted by Adjudicating Authority till 31.10.2021 the Appellant could not make the payment and filed another Application No.115 of 2021 for granting extension of 30 days for making payment, which came to be rejected, giving rise to this Appeal.

18. The Application No.115 of 2021 has been brought on record by State Bank of India in its counter reply. In paragraph 4, 5 and 6 of the Application, following was pleaded:

"4. That it is submitted that after the Order dated 20.09.2021 was passed, there has been several positive developments which have taken place in procurement and securing of funds to successfully implement and fulfill the financial obligation set Company Appeal (AT) (Insolvency) No. 1038 of 2021 19 out in the Resolution Plan. Details of funds secured are listed below:

                   a.     5,00,000 USD which is Rs.3.75 Crores in
                          Tricounty USA Account. Copy of the bank
                          statement evidencing the same is annexed
                          herewith as ANNEXURE - B.
                   b.     5,00,000 USD which is Rs.3.75 Crores in
                          Tricounty's CD account. Copy of the bank
                          statement evidencing the same is annexed
                          herewith as ANNEXURE - C.
                   c.     Rs. 2 Crores is deposited in Tricounty's
                          India Bank account.
                   d.     Rs.12.5       Crores    sanctioned    by    Caparo
                          Financials.          Copy of the letter dated
                          29.10.2021       is     annexed      herewith   an
                          ANNEXURE - D.

5. That it is submitted that M/s. Caparo Financials, a financer of the Applicant has approved disbursement of funds of Rs.12.5 Crores for payment to SBI. However, it has been requested that Mr. Parvesh Khirbat should be personally present to sign the documents in person as the entire funding is being done on the personal guarantee of Mr. Pravesh Khirbat. Accordingly, M/s Caparo Financials has also issued a letter regarding the same dated 29.10.2021 referred as Annexure - E in the above paragraph.

6. That it is submitted that due to continuous Covid 19 restrictions on the international travel by the Government of India, Mr. Parvesh Khirbat being a resident of Florida, USA, was unable to come to India since he is presently in USA. Moreover, due Company Appeal (AT) (Insolvency) No. 1038 of 2021 20 to the relexation in norms for international travel Mr. Pravesh Khirbat has finally been able to book the flight tickets for 16.11.20212 and upon his arrival to India, all the processes with respect to procuring and securing of funds shall be executed and complied within 14 days. Copy of the flight tickets dated 16.11.2021 is annexed herewith as ANNEXURE - E."

18. The Application No.115 of 2021 has been rejected by the impugned order on 24th November, 2021. The Adjudicating Authority has referred to its order dated 12th April, 2021 and has observed that Appellant has failed to comply its order dated 12th April, 2021 and last opportunity was granted till 31.10.2021, hence, it has failed to comply the order and conduct of the Successful Resolution Applicant is completely lacking in its bona fide.

Paragraph 6 and 7 of the impugned judgment is as below:

6. This Adjudicating Authority after hearing all the counsel, constraining pandemic situation in the country etc., had passed an Order on April 12, 2021 allowing time up to 07.06.2021 to the Resolution Applicant and from the total outstanding amount of ₹30.00 crore to pay ₹20.00 crore on or before 07.06.2021 to show their bona fides and also to file an affidavit stating that the plan is being complied within all other aspects. It has been noted that the Resolution Applicant has grossly failed in complying with the aforesaid Order dated April 12, 2021. There are great lapses on the part of the Resolution Plan. The Resolution Applicant cannot take shelter and take advantage Company Appeal (AT) (Insolvency) No. 1038 of 2021 21 of the COVID-19 pandemic situation because the default has taken place much before the occurrence of the pandemic.

7. Although, this Adjudicating Authority was of the view that the Resolution Applicant has grossly failed in meeting its commitments in respect of implementation of the Resolution Plan, liquidation is the last resort when all other available options fail in the CIRP. In the interest of all the stakeholder and also the implementation of Resolution Plan, after considering all the facts and circumstances of the case, allowed one last opportunity to the Resolution Applicant to fulfil all its commitments and financial obligations stated in the Resolution Plan by 31.10.2021, clearly stating that if it fails this time, actions as may be deemed appropriate as per law, shall be taken. The Resolution Applicant was also directed to submit a Weekly Progress Report in implementation of the Resolution Plan in the Registry. In total disregard to Orders of this Tribunal the Applicant has grossly failed in its commitments. It has not adhered to the stated timelines or the extensions allowed by this Tribunal to report compliances. Despite Orders it has not submitted any weekly progress report in the registry. The conduct of the successful resolution applicant is completely lacking in bona fides and is therefore questionable. After such non-compliances seeking further time for the required compliances, for any reason whatsoever, is not acceptable to this Tribunal at this stage, more particularly when conduct of the applicant in Company Appeal (AT) (Insolvency) No. 1038 of 2021 22 its earlier commitments and compliances in response to earlier Orders of Tribunal in itself is questionable. We are inclined to outrightly reject this Application while questioning the conduct of the Resolution Applicant in the entire matter."

19. There is no dispute that Appellant failed to adhere to its commitment in Resolution Plan and also failed to comply order dated 12th April, 2021 and 20th September, 2021. The extension of 30 days was sought by the Appellant by its Application dated 29th October, 2021. The Adjudicating Authority ought to have adverted to the grounds and reasons given in the Application to find out as to whether there is any ground to grant any extension of time of 30 days as prayed for.

20. It is well settled that time line in IBC proceedings has its salutary value and Resolution Applicant has to adhere to its commitment as made in the Resolution Plan, when it is approved by the Adjudicating Authority.

We may also notice that in this Appeal, the Appellant has in addition to pleas taken in the Application No.115 of 2021 has brought on the record letter dated 11.11.2021 of Kotak Mahindra Bank proposing to offer term loan facility of Rs.20 crores, which has been brought on record along with additional affidavit. Mr. Joy Saha, learned Senior Counsel appearing for the Bank has submitted that, that letter is not a formal commitment for extending any term loan by Kotak Mahindra Bank, hence, that letter means no consideration. It is submitted that, that letter is only 'in-principle offer'. Shri Saha has referred to following statement in the letter:

Company Appeal (AT) (Insolvency) No. 1038 of 2021 23 "Kindly note that this letter is an "in-principle offer" and is subject to due diligence and final approval from the bank. It should not be in any manner construed as a commitment from the Bank to extend the above mentioned financial facilities. The Bank shall have the absolute right to vary/modify/withdraw/rescind/cancel the offer without any notice to the Applicant and the decision of the Bank in this regards shall be final, conclusive and binding on the Applicant, both in and out of court/judicial/quasi judicial authority."

21. The offer of Kotak Mahindra Bank was immediately accepted by letter dated 11.11.2021 by the Appellant. The statement in the letter as quoted above on which reliance has been placed by Mr. Saha, is a normal format when Bank communicate its 'in-principle offer'. It is true that offer and actual disbursement are two different events, but an offer of the Bank for extending Rs.20 crore term loan facility, so as to enable the Appellant to comply the financial obligations is a substantial ground on which the plea of the Appellant can be considered. The Application for liquidation No.32 of 2020 has already been filed by the State Bank of India for directing for liquidation, which has already been heard, but orders have not been pronounced by the Adjudicating Authority. It is well known that liquidation is a 'corporate death' and as held by Hon'ble Supreme Court in (2019) 4 SCC 17 - Swiss Ribbons Private Limited and Anr. vs. Union of India and Ors., the liquidation ought to be resorted to as a last resort. The Adjudicating Authority in its order dated 20th September, 2021 has noticed that liquidation should only be a last resort, hence, it was pleased to extend Company Appeal (AT) (Insolvency) No. 1038 of 2021 24 the time till 31st October, 2021, despite the Appellant having not made the payment as it had promised in its Resolution Plan. The present is a case where Appellant has made payment of Rs.15 crores to Financial Creditors, payments to unsecured creditors, payments to other Operational Creditors and some payments to other creditors. In the additional affidavit in paragraph 5, the Appellant has given a table mentioning about the payments made and source of funds for remaining payment to the following effect:

Nature of As per Amount Remarks Source of Fund payment Plan (Rs.) Paid (Rs.) CIRP 4.25 Crores 4.6 Crores Cost towards CIRP has Costs been paid Secured FCs 45 Crores 15 Crores As an admitted fact a Remaining amount sum of Rs.15 crore of Rs.30 crore will (Rs.12 crore in the bank be paid within four account of corporate weeks from the date debtor and Rs.3 crore of the order of this with SBI, Bhopal) has Hon'ble Tribunal already been paid allowing the present towards the dues of appeal, as follows:-

                                           Financial Creditors and     -A      sum        of
                                           the balance outstanding     Rs.19,03,81,196/-
                                           details below remains       towards the balance
                                           payable towards the         claim of State Bank
                                           claim    of    respective   of India shall be
                                           Financial creditors:        paid directly by
                                           1. State Bank of India,     Kotak      Mahindra
                                               a       sum        of   Bank.
                                               Rs.19,03,81,196/-       -    A     sum      o
                                           2. Axis Bank, a sum of      fRs.9,65,10,000/-
                                               Rs.9,65,10,000/-        towards the claim of
                                           3. Siemens Financial, a     Axis bank shall be
                                               sum                of   paid out of the
                                               Rs.24,00,000/-          balance standing in
                                           4. Clix Finance, a sum      the bank accounts
                                               of Rs.34,00,000/-       of the Appellant/ its
                                                                       subsidiaries.
                                                                       -A      sum        of
                                                                       Rs.24,00,000/- to
                                                                       Siemens Financial
                                                                       &     a    sum     of
                                                                       Rs.34,00,000/- to
                                                                       Clix Finance shall
                                                                       be paid directly by
                                                                       Kotak      Mahindra
                                                                       Bank.



Company Appeal (AT) (Insolvency) No. 1038 of 2021                                        25
 Unsecured      44 Lacs     44 Lacs     Fully paid.
FCs
    OCs           1.01     65 Lacs     The balance is required
                 Crores                to be paid within a
                                       period of 5 years from
                                       the date of approval of
                                       resolution plan by the
                                       Ld.         Adjudicating
                                       Authority            i.e.
                                       22.01.2019.
Employees         1.36     1 crore     To be paid within 3
Workmen          Crores                years from the date of
Dues                                   approval of resolution
                                       plan     by    the    Ld
                                       Adjudicating Authority
                                       i.e. 22.01.2019.

                                       However, a sum of Rs.1
                                       crore has already been
                                       paid to the employees
                                       retained     by       the
                                       Corporate         Debtor
                                       subsequent to approval
                                       of the plan, and the
                                       remaining amount of
                                       Rs.36 lakhs shall be
                                       disbursed as per the
                                       timelines       provided
                                       under the plan.

Statutory       51 Lacs    20 Lacs     The balance is required
Dues                                   to be paid within a
                                       period of 5 years from
                                       the date of approval of
                                       resolution plan by the
                                       Ld.          Adjudicating
                                       Authority              i.e.
                                       22.01.2019.
Payment to       7 Lacs    7 Lacs      Fully paid, but equity not
Existing                               transferred in the name
shareholders                           of the Appellant despite
                                       the same.
Resurrection   11 Crores    4 Crores   The Appellant has spent
Cost                                   Rs.4 Crores towards
                                       purchase      of      new
                                       machinery,     remaining
                                       equipments       are     in
                                       possession      of     the
                                       landlords under dispute
                                       and will be repaired as
                                       soon as the Appellants
                                       in possession of the
                                       same."




Company Appeal (AT) (Insolvency) No. 1038 of 2021                    26

22. We may also refer to the judgment of the Hon'ble Supreme Court in Ebix Singapore Private Limited (supra) relied by learned Senior Counsel for the State Bank of India in support of his submission. In Ebix Singapore Private Limited (supra), following conclusion has been recorded by the Hon'ble Supreme Court in paragraphs 202, 203 and 204:

"202 The residual powers of the Adjudicating Authority under the IBC cannot be exercised to create procedural remedies which have substantive outcomes on the process of insolvency. The framework, as it stands, only enables withdrawals from the CIRP process by following the procedure detailed in Section 12A of the IBC and Regulation 30A of the CIRP Regulations and in the situations recognized in those provisions. Enabling withdrawals or modifications of the Resolution Plan at the behest of the successful Resolution Applicant, once it has been submitted to the Adjudicating Authority after due compliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the statute. Since the 330 days outer limit of the CIRP under Section 12(3) of the IBC, including judicial proceedings, can be extended only in exceptional circumstances, this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time. A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time, as is Company Appeal (AT) (Insolvency) No. 1038 of 2021 27 the case in the present three appeals before us.

Permitting such a course of action would either result in a down-graded resolution amount of the Corporate Debtor and/or a delayed liquidation with depreciated assets which frustrates the core aim of the IBC.

203 If the legislature in its wisdom, were to recognize the concept of withdrawals or modifications to a Resolution Plan after it has been submitted to the Adjudicating Authority, it must specifically provide for a tether under the IBC and/or the Regulations. This tether must be coupled with directions on narrowly defined grounds on which such actions are permissible and procedural directions, which may include the timelines in which they can be proposed, voting requirements and threshold for approval by the CoC (as the case may be). They must also contemplate at which stage the Corporate Debtor may be sent into liquidation by the Adjudicating Authority or otherwise, in the event of a failed negotiation for modification and/or withdrawal. These are matters for legislative policy.

204 In the present framework, even if an impermissible understanding of equity is imported through the route of residual powers or the terms of the Resolution Plan are interpreted in a manner that enables the appellants' desired course of action, it is wholly unclear on whether a withdrawal of a CoC-approved Resolution Plan at a later stage of the process would result in the Adjudicating Authority directing mandatory liquidation of the Corporate Debtor. Pertinently, this direction has been otherwise provided in Section 33(1)(b) of the IBC when an Adjudicating Authority rejects a Resolution Plan under Section 31. In this context, we hold that the existing Company Appeal (AT) (Insolvency) No. 1038 of 2021 28 insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC- approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority. A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations. In the case of Kundan Care, since both, the Resolution Applicant and the CoC, have requested for modification of the Resolution Plan because of the uncertainty over the PPA, cleared by the ruling of this Court in Gujarat Urja (supra), a one-time relief under Article 142 of the Constitution is provided with the conditions prescribed in Section K.2."

23. Shri Saha relying on the paragraph 202 of the above judgment submits that Adjudicating Authority under the IBC cannot exercise jurisdiction, which is not provided in IBC. Hon'ble Apex Court in the said judgment has held that residual powers of the Adjudicating Authority cannot be exercised to create procedural remedies, which have substantive outcomes on the process of insolvency. The above observations have been made in a case where the question before the Hon'ble Apex Court was as to whether after submission of Resolution Plan, Resolution Applicant can withdraw the Plan. Hon'ble Apex Court held that it is only Section 12-A, Company Appeal (AT) (Insolvency) No. 1038 of 2021 29 which enables withdrawal from the CIRP, hence, it was held that Resolution Applicant cannot withdraw from the Plan. The Hon'ble Apex Court has also laid down in the above case that existing insolvency framework in India provides no scope for effecting further modification and withdrawals of CoC approved Resolution Plans, at the behest of the Successful Resolution Applicant.

24. The present is not a case where the Resolution Applicant wants to withdraw from the Plan or seeks any modification in the Plan. We are of the view that a prayer for extension of 30 days' time to comply financial commitments as per order dated 20th September, 2021 cannot be said to modification of the Plan when the Adjudicating Authority itself granted time to the Resolution Applicant to comply the financial obligations till 31st March, 2021. The issue which is sought to be raised in the Appeal that whether Adjudicating Authority erred in exercising its jurisdiction in refusing to grant extension by 30 days as prayed by Resolution Applicant or not? The judgment of the Hon'ble Supreme Court in the Ebix Singapore Private Limited (supra) thus, does not support the submission of learned Counsel for the State Bank of India that Adjudicating Authority has no jurisdiction to extend the time for complying the financial obligations in the Resolution Plan.

25. We may notice one more aspect of the matter. In order dated 20th September, 2021, the Adjudicating Authority has held that Resolution Applicant cannot take shelter and take advantage of the COVID-19 pandemic because the default has taken place much before the occurrence Company Appeal (AT) (Insolvency) No. 1038 of 2021 30 of the pandemic. There is no doubt that default was initially committed in payment to Financial Creditors much before the start of pandemic, but the Resolution Plan had provided that certain payments to be made even by 31st March, 2020 and 31st March, 2021. Thus, as noted above, the present was not a case that entire amount of Rs.45 crores was to be paid prior to March 2020. It cannot be denied that pandemic of COVID-19, which has engulfed the entire world has adverse effect on several trade and business, but in present case, the Appellant has not taken shelter of only COVID-19 for his inability to make payment, other reasons have also been given, which we need not go in any further in detail for the facts in the present case.

26. The facts and materials on record as noted above clearly indicate that although the Appellant had failed to make payment as per Resolution Plan, but it is not a case that efforts has not been made by the Appellant to make payment. Admittedly, payment of Rs.15 crores out of Rs.45 crores to the Financial Creditor has already been made apart from other payments as noted above. We, thus, are of the opinion that by granting 30 days' time to Appellant to comply its all financial obligations in Resolution Plan and make payment of balance of Rs.30 crores shall not cause any prejudice to Financial Creditors, who have already been denied the said payment for a long period of time. In event, the Appellant is unable to make the payment as prayed for, it shall be open to proceed with the liquidation, no option being left thereafter.

Company Appeal (AT) (Insolvency) No. 1038 of 2021 31

27. In the result, we allow this Appeal. Set aside order dated 24th November, 2021 passed by the Adjudicating Authority and grant 30 days' time to the Appellant from today to make the payment of balance amount of Rs.30 crores to the Financial Creditors on or before 20th February, 2022, failing which, it shall be open to proceed with the liquidation of Corporate Debtor. No order as to costs.

[Justice Ashok Bhushan] Chairperson [Dr. Ashok Kumar Mishra] Member (Technical) NEW DELHI 20th January, 2022 Ash/NN Company Appeal (AT) (Insolvency) No. 1038 of 2021 32

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