'Indian Judicial Processes Cannot Be Taken For A Ride': NCLT Kolkata

The order was passed on 20.04.2022, touching upon various aspects of insolvency such as locus standi of Chairman of the Monitoring Committee, law relating to disclosure of confidential information, commencement of fresh CIRP, punishment for contravention of resolution plan, impudent affidavits filed before Adjudicating Authority and Indian judicial process being taken on a ride by Successful Resolution Applicant. The other aspects of the Order have been dealt with in separate news articles.

Facts Of The Case

A petition under Section 9 of the IBC was filed by Mr. Beni Gopal Singhi ("Operational Creditor") against EMC Limited ("Corporate Debtor") before the NCLT, Kolkata Bench ("Adjudicating Authority"). On 12.11.2018 the Corporate Debtor was admitted into Corporate Insolvency Resolution Process ("CIRP"). After deliberations, the resolution plan of Almas Global Opportunity Fund SPC ("Successful Resolution Applicant"/"SRA"), a Segregated Portfolio Company (SPC) incorporated in the Cayman Islands, was approved by the Committee of Creditors (CoC) with 80.18% votes. The Plan was also approved by the Adjudicating Authority on 21.10.2019. Following which, the CoC was dissolved and a Monitoring Committee was appointed to supervise the implementation of the Resolution Plan.

As per the Resolution Plan, the SRA was obligated to make full payment of Rs. 568 Crores by 20.12.2019 but it failed to do so. Therefore, on 23.11.2020 the Chairman of the Monitoring Committee moved an application under Section 60(5) of the IBC before the Adjudicating Authority, seeking cancellation of the Resolution Plan of the SRA, commencement of fresh CIRP and direction to SRA to disclose the names and particulars of persons responsible for the violation of the approved Resolution Plan. During the pendency of the said application, the SRA paid Rs. 30 Crores on 08.01.2021 towards Earnest Money Deposit and Performance Bank Guarantee. No payments were received after that. The Adjudicating Authority had directed the SRA to file affidavits stating the reasons for not complying with the Resolution Plan and disclosing the road map ahead for discharging obligations under the Resolution Plan. The affidavits enumerated that payments could not be made due to Covid-19 pandemic restrictions; and because of non-issuance of in-principle NoC on the part of the secured Financial Creditors. Also, one of the affidavits was not notarized. The SRA had further submitted that as per the Confidentiality law of the Cayman Islands, it cannot reveal commercial information ostensibly related to funding of the Resolution Plan.

Observations Made By The Adjudicating Authority

The Adjudicating Authority rejected the contentions of the SRA regarding COVID-19 pandemic, since the entire payment was to be made through online mode and at least three months before the pandemic hit globally. It was observed that the affidavits do not inspire any confidence as no explanation has been proffered as to why the commitments made to the Adjudicating Authority could not be met.

The Adjudicating Authority observed that the Legislature of Cayman Islands had enacted Confidential Information Disclosure Law (CIDL), 2016, on 22.07.2016. The Section 3(1)(a) of CIDL recognizes that where a person owes a duty of confidence, the disclosure by that person of confidential information in compliance with the directions of a court pursuant to Section 4 of CIDL shall neither constitute a breach nor be actionable against such person. Section 4 also provides the mechanism by which such confidential information may be disclosed if required to do so by any court, tribunal or other authority, in a situation where the person has not been provided with the express consent of the principal for disclosure. The Bench observed that the person who is required to disclose such information either in evidence or in proceedings, whether in the Cayman Islands or elsewhere, is required to make an application to the Grand Court, which is in session throughout the year.

The Bench noted that it is apparent that the SRA had intentionally delayed the whole process over frivolous grounds and failed to make the upfront payment within stipulated time.

"The SRA has not exhibited any intention by taking some concrete steps that can instill some degree of confidence in the earnestness of the SRA. The SRA has taken the entire process for a ride, and nothing can really excuse this audacity. The attitude of the SRA really will tick every parameter that can be applied to satisfy the "knowing and wilful contravention" test laid down in section 74(3) of the Code on a reasonable construction."

"A strong message needs to go to the SRA that the majesty of law needs to be respected at all costs, and that Indian judicial processes cannot be taken for a ride like this."

The Adjudicating Authority appreciated the efficiency of the Monitoring Committee in keeping the Corporate Debtor as a going concern and observed that every effort should be made to give one more chance at resolution before liquidation is ordered as a last resort.

Decision Of The Adjudicating Authority

The Adjudicating Authority disposed off the interim application by forfeiting the amount of Rs. 30 Crores paid by the SRA through invocation of Performance Bank Guarantee; proceeded against SRA and its concerned officers under Section 74(3) of IBC; and initiated fresh CIRP against the Corporate Debtor.

Case title: Beni Gopal Singhi v EMC Limited, CP (IB) No.1237/KB/2018.

Counsel for Applicant: Sr. Adv. Mr. Joy Saha, Adv. Pratik Mukhopadhyay, Adv. Saptarishi Mandal.

Counsel for Respondent: Sr. Adv. Ratnanko Banerji, Adv. Soorjya Ganguli, Adv. Ms. Shreya Choudhary.

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