Order:
"With regard reliefs, concessions and waivers as sought by the Resolution Applicant, this Bench orders that the reliefs and concessions are guaranteed as per the judgment of the Hon'ble Supreme Court in Ghanshyam Mishra and Sons Vs. Edelweiss Asset Reconstruction Company Limited, where at para 95(i) it was held that once a resolution plan was approved a creditor cannot initiate proceedings for recovery of the claim which are not part of the Resolution Plan. Hence, all past liabilities arising out of any levies/tax dues to any government authority such as VAT, CST, Customs Excise Duty and employees, workmen, operational creditor, financial creditor etc., which are not part of the resolution plan and pertaining to the pre CIRP period, shall stand extinguished, post approval of the resolution plan.
1. The unpaid debt shall stand converted into non-convertible redeemable preference share. Hence, the excluded securities are no longer enforceable as defined under the resolution plan.
2. The approval of the Resolution Plan shall not be construed as waiver of any statutory obligations/liabilities of the Corporate Debtor and shall be dealt by the appropriate Authorizes in accordance with law. Any waiver sought in the Resolution Plan, shall be subject to approval by the Authorities concerned."
15. The Order passed by the Adjudicating Authority approving the Plan was subject to observations made in the Order i.e. subject to directions no. 1
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under the heading 'Reliefs, Concessions and Dispensations'. Further in clarification Order in Paragraph 29 following observations have been made:
"Heard the counsel for the applicant and the counsel for the Respondent/RP and perused the documents. This bench is of the prima facie view that though the excluded securities as defined under the resolution plan means the promoter guarantee, Corporate guarantee issued by the Ushdev International Limited, the encumbrance created on the following immovable by the promoter of third parties, but however, these expressly declared excluded security are subsumed under clause 3.3.(iii)(c) and (h) wherein the plan proposal any balance financial debt forming part of admitted debt (unpaid debt) shall be converted into non-convertible redeemable preference share of the company being zero dividend and non-cumulative in nature at their face value. Further, the unpaid debt shall be converted into new preference share as detailed in schedule V. When the unpaid debt is converted into preference share there is no question of any outstanding liability which is available for enforcement qua the excluded the securities as provided to the Financial Creditor. It is seen that 91.06% of the CoC have taken a commercial decision to approve the said resolution plan, hence the approval of the resolution plan ipso facto discharge the enforcement of excluded securities. When there is no debt which is realisable there is no question of any enforcement thereof. The applicant being dissenting Financial Creditor has opted to choose out of the plan but will be entitled to the rights available to the dissenting Financial Creditor as per Section 53 of the Code."
16. The view which was taken by the Adjudicating Authority both in the Order dated 03.02.2022 approving the Resolution Plan and Clarification Order was that in view of the fact that unpaid debt shall stand converted into non-convertible redeemable preference share hence the excluded
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securities are no longer enforceable. The Adjudicating Authority held that excluded securities are subsumed under Clause 3.3.(iii). The Adjudicating Authority obviously referred to Paragraph 3.3. (e) (H) which provided that balance Financial Debt forming part of the Admitted Debt shall stand converted into non-convertible redeemable preference shares of the company which shall be issued to the Financial Creditors upon conversion of the unpaid debt. The above provision in the Plan for conversion into non- convertible redeemable preference shares of the balance financial debt has no bearing on specific provisions in the plan by 3.3.(iii)(g) which clearly provided that excluded securities shall not be extinguished or waived under this Resolution Plan. When the Resolution Plan itself states that excluded securities shall not be extinguished under the Resolution Plan which is the provisions in the plan made in 3.3.(iii)(h). Further as noted in 3.3.(v) there was again clear provision that excluded securities shall continue to survive. When the plan is ready as a whole it is clear that excluded securities were to continue and no contrary intention is reflected in the plan. It is due to the above contents of the plan that Learned Counsel for the Resolution Applicant also does not dispute that the Plan never contemplated for extinguishment of excluded securities. Both the parties had argued that plan never contemplated for extinguishment of the excluded securities. The Adjudicating Authority thus committed error in making observation in issuing direction no. 1 of the Impugned Order under the heading 'Reliefs, Concessions, and Dispensations. Hence the following part of the Direction no. 1 " Hence, excluded securities are no longer enforceable as defined under
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the resolution plan" are deleted from the Order. The deletion of the above Direction No. 1 shall in no manner affect the approval of the Resolution Plan vide Order dated 03.02.2022. The Order dated 03.02.2022 is untouched with regard to other aspects of the Impugned Order.
17. Now we come to the I.A. No. 1799/MB/C-II/2021 filed by the ICICI Bank Limited. The Copy of the Application have been filed by the ICICI Bank Limited as Annexure A-23 in this Appeal. In the Application following are the prayers which has been made at Page 848-849:
"a) Decide the present application before adjudicating on the resolution plan for the Corporate Debtor dated
22 June 2021;
b) Consider and adjudicate the question of law i.e., whether, upon the approval of the resolution plan dated 22 June 2021 by this Hon'ble Tribunal, the Applicant and other financial creditors of the Corporate Debtor would continue to have recourse to enforce the Excluded Securities (as defined under the resolution plan dated 22 June 2021);
c) Pass an order that the Applicant's dissenting vote to the resolution plan dated 22 June 2021 shall be considered as an assenting vote, in the event that this Hon'ble Tribunal were to hold that conversion of Corporate Debtor's entire Unpaid Debt into preference shares would not impact the enforceability of the Excluded Securities (as defined under the resolution plan dated 22 June 2021);
d) Pass such other and further orders that this Hon'ble Tribunal may deem fit and necessary; and
e) For costs of this Application"
18. In the clarification Order dated 03.02.2022, the Adjudicating Authority in Paragraph 29 has again observed that excluded securities are subsumed under Clause 3.3(iii)(c )(h) wherein the plan proposed that any balance financial debt forming part of admitted debt shall be converted into non-
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convertible redeemable preference share, for the reasons which we have noticed above, the above observations in Paragraph 29 of the Clarification Order also cannot be sustained and deserves to be deleted. The observations of the Adjudicating Authority in Paragraph 29 that 'the approval of the resolution plan ipso facto discharge the enforcement of excluded securities' is not in accordance with the Resolution Plan and is hereby deleted.
19. Mr. Krishnendu Datta, Sr. Advocate for the ICICI Bank Limited has further submitted that his prayers made in the I.A. No. 1799/MB/C-II/2021 that Applicant's dissenting vote to the resolution plan dated 22ndJune, 2021 shall be considered as assenting vote has not been considered. The Resolution Plan has been approved by the CoC with 91.06% of votes. With regard to the prayer made by Mr. Dutta regarding permitting his dissenting vote to the Resolution Plan be considered as assenting vote to the Resolution Plan, the CoC has no objection as noted above. The approval of the Resolution Plan which was by 91.06% majority of votes shall not be affected by converting dissenting vote of ICICI Bank Limited to Assenting Vote of Resolution Plan. The submission of Mr. Dutta has substance that in event ICICI Bank Limited is permitted to convert his dissenting vote into the assenting vote it will receive payments as a Financial Creditor which may be to the same extent as will be received by the other Financial Creditors. CoC which consists of all the Financial Creditors having expressed its no objection to the aforesaid prayer, we are inclined to accept the said prayer of ICICI Bank. We however make it clear that we are accepting the prayer of ICICI Bank Limited in this respect only due to the reason that CoC has
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expressed its no objection. This direction/order be not treated as precedent in any other matter. We are thus of the view that I.A. No. 1799/MB/C- II/2021 filed by the ICICI Bank Limited deserves to be allowed to the extent that the observations as noted above in paragraph 29 be deleted and the dissenting vote of ICICI Bank to the Resolution Plan be treated as assenting vote.
In result, Company Appeal (AT) (Ins.) No. 172-173 of 2022 are allowed by deleting the relevant part in Direction 1 of the Impugned Order under the heading 'Reliefs, Concessions and Dispensations to the extent 'hence, the excluded securities are no longer enforceable as defined under the resolution plan'. Company Appeal (AT) Ins. No. 199-200 of 2022 are also allowed by deleting the observation in paragraph 29 of the Impugned order to the effect that 'Resolution Plan ipso facto discharge the enforcement of excluded securities'. The third prayer in I.A. No. 1799/MB/C-II/2021 filed by the ICICI Bank Limited seeking conversion of dissenting vote to assenting vote to the Resolution Plan is also allowed. Parties shall bear their own costs.
[Justice Ashok Bhushan] Chairperson
[Dr. Alok Srivastava] Member (Technical)
NEW DELHI
11th March, 2022
Basant B.