NCLT Kolkata Invokes Penal Provisions Under IBC Against Tax Haven Based Resolution Applicant

The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), while adjudicating an interim application filed in Beni Gopal Singhi v EMC Ltd., has proceeded against a tax haven based Successful Resolution Applicant ("SRA") under Section 74(3) of the Insolvency and Bankruptcy Code, 2016 ("IBC") for contravention of the approved Resolution Plan. Moreover, the affidavits filed by the SRA were regarded 'impudent' by the Bench for being filed upon assumption that the judicial authorities in India cannot understand anything beyond the limited territorial jurisdiction of India. The Bench observed that such affidavits are contempt of the authority of court and the IBC. 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 tax haven 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. Contravention Of The Approved Resolution Plan Relevant law: Section 74(3) of IBC, 2016. Section 74- Punishment for contravention of moratorium or the resolution plan. 74(3) Where the corporate debtor, any of its officers or creditors or any person on whom the approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both. Non-Fulfillment Of Obligations And Doubtful Credentials 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 despite several opportunities granted to it. Further, the Performance Bank Guarantees (PBG) given by the SRA were in contradiction to clause 1.8.1 of the Request for Resolution Plans ('RFRP'), where it was specifically mentioned that the bank guarantees should be executed from a scheduled bank located in India. Few observations made of one of the Financial Creditors, Syndicate Bank, on the PBGs issued by the SRA were as follows: The credentials of Axios Credit Bank, Gambia, are not verified; The SWIFT code of Axios Credit Bank (AXCDGMG1) ends with 1 (eighth character is 1- the SWIFT Code cannot be used for direct communication with the bank). The Applicant of the BG is Konig General Trading FZE, UAE, on behalf of Almas Global Opportunity Fund. The relationship/consideration between the two is not known. Invocation of the BG is to be done by presentation of copy of BG at the counters of the Axios Credit Bank, Singapore within last 15 days of expiry. Invocation through SWIFT is not possible. Invocation of BG is to be accompanied with a BG amendment to be issued at the request of the applicant. Therefore, the beneficiary is dependent on the applicant for invocation. A discrepant claim for payment will lead to immediate termination of the BG. It is evident that the payment of the BG is solely dependent on the applicant. The BG should be unconditional as far as payment is considered. Interim Application Filed By The Chairman Of Monitoring Committee The conduct of the SRA clarified that it had no intention to implement the Resolution Plan. 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; direction to SRA to disclose the names and particulars of persons responsible for the violation of the approved Resolution Plan; and imposition of punishment and fine under Section 74(3) of...

NCLT Kolkata Invokes Penal Provisions Under IBC Against Tax Haven Based Resolution Applicant

Pallavi Mishra

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