Clause 7.6.1 spells out the “conditions precedent”: 3 Clause 7.6.4 contains a stipulation for “automatic withdrawal”: 3 4 3 4 In terms of Clause 7.6.1 of the Resolution Plan, the SRA is obligated to re- commence operations as an aviation company subject to the fulfilment of five conditions precedent, namely- (i) Validation of Airline Operator Permit of the Corporate Debtor by the Director General of Civil Aviation (DGCA) and Ministry of Civil Aviation (MoCA); (ii) Submission and Approval of Business Plan by DGCA and MoCA, (iii) Slot Allotment Approval, (iv) Given the uncertainty surrounding the Effective Date, the NCLT, in its Plan Approval Order, mandated the completion of Conditions Precedent and the attainment of the Effective Date within the first 90 days from the Approval Date. The SRA communicated via email to the Lenders, affirming compliance with all prerequisites and proposing that May 20 2022, should be recognized as the effective date under the Resolution Plan. (ii), the business plan’s submission and approval to DGCA and MoCA were deemed as complete, with the issuance of the Air Operator Certificate (AOC), considered as implicit approval; (iv)
8 On 3 March 2023, the NCLAT declined to stay the order of the NCLT, which has given rise to the first in the three sets of appeals being Civil Appeal
No 3736- 3737 of 2023.
Clause 6.4.4 of the Resolution Plan is titled as “Treatment of Financial Creditors” and is reproduced below, insofar as it is relevant: 7 10 In an effort to resolve the imbroglio, on 16 August 2023, an affidavit was filed on behalf of SBI, by its Chief Manager. 12 Permission to do so was granted by the NCLAT on 28 August 2023 extending time until 31 August 2023 for the payment of Rs 100 crores; till 30 September 2023 for the payment of Rs 100 crores and for the balance of Rs 150 crores by adjusting the payment against the PBG issued by the SRA.
Clause 3.13 of the RFRP provides for performance security. Clause 3.13.7 empowers SBI as an agent of the Committee of Creditors to invoke the performance security on the occurrence of certain eventualities: 15 Clause 3.13.9 specifies that the performance security shall not be set off against or used as part of the consideration which the SRA proposes to offer in relation to the company: 10 16 Clause 9.4 of the Resolution Plan specifically contemplates that the performance guarantee provided by the Resolution Applicant can be invoked in terms of RFRP.
17 Mr N Venkataraman, Additional Solicitor General appearing on behalf of SBI, submitted that: (i) By its affidavit dated 16 August 2023, SBI had clearly stipulated three conditions, among them being that the SRA must infuse Rs 350 crores by 31 August 2023; (ii) The plain meaning of the expression “infuse” is that the SRA was liable to pay three tranches of a total amount of Rs 350 crores and the NCLAT was not justified at the interim stage in permitting an adjustment of the PBG of Rs 150 crores against the obligation to deposit the last tranche; (iii) The SRA had to undertake to comply with the other terms and conditions of the Resolution Plan besides complying with the liabilities relating to the payment to the employees. In support of this submission, reliance has been placed on the summary of payments and security package forming a part of clause 6.4.4 of the Resolution Plan; (ii) The SRA was in the first tranche required to pay an amount of up to Rs 185 crores against the creation of securities, namely, (i) PBG of Rs 47.5 crores; (ii) BKC Property (if given); and (iii) Mortgage over Dubai Property
In the last column of the table, it has been stipulated that the securities would be released, as indicated; (iii) The PBG was liable to be adjusted against the cash payment of the first tranche of Rs 185 crores; (iv) No specific date for the release of the security in relation to the PBG has been mentioned; (v) Moreover, in respect of the second tranche comprising of Rs 195 crores, there was no requirement to furnish any security in the form of a PBG; (vi) The securities, in other words, were of a revolving nature, but significantly on the release of the PBG against a cash payment of Rs 185 crores, the PBG is not required to be renewed as a fresh security for the following tranches; and (vii) As regards the creation of security in respect of the Dubai property, at all material times, the SRA has been ready and willing to effect the security and, as a matter of fact, this is evident in the 37 Meeting of the Monitoring Committee of the Corporate Debtor held on 9 October 2023. SBI’s affidavit envisaged that the lenders would not contest the issues pertaining to (a) the grant or exclusion of time; or (b) extension in terms of the orders which were passed by the NCLT on 13 January 2023 and 26 May 2023; and (c) compliance of the conditions precedent by the SRA. 13 21 Conditional on compliance with the three conditions set out above, SBI stated that it would be willing to withdraw both the company appeals which were pending before the NCLAT as well as the Civil Appeals which were pending before this Court, details of which were set out in the affidavit.
Also Read: https://newslaw.in/case-type/civil/analyzing-the-courts-legal-analysis/
22 In the circumstances, we have come to the conclusion that NCLAT was not justified in holding, in its order dated 28 August 2023, that the last tranche of Rs 150 crores which was to be paid would be adjusted against the PBG. 14 23
The lenders have submitted that: (i)
The admitted claim of the Financial Creditors is Rs 7800 crores, while the package offered by the SRA in the Resolution Plan is Rs 4783 crores payable in tranches in five years; (ii) Instead of infusing Rs 350 crores, being the first tranche of payment, which was to be paid in 180 days, the SRA has infused a sum of Rs 187 crores after two years, in addition to Rs 13 crores paid by a third party; and (iii) The lenders have already incurred Rs 386.72 crores during the CIRP and after the approval of the Plan towards maintaining the Corporate Debtor, excluding airport dues.
The lenders have been embroiled in litigation before the NCLT and NCLAT with little progress on this ground towards implementing the resolution plan. In order to furnish this SRA a final opportunity to comply and consistent with the above position, we issue the following directions: (i) The SRA shall peremptorily on or before 31 January 2024, deposit an amount of Rs 150 crores into the designated account of SBI, failing which the consequences under the Resolution Plan shall follow; (ii) The PBG of Rs 150 crores shall continue to remain in operation and effect, pending the final disposal of the appeal before NCLAT, and shall abide by the final outcome of the appeal and the directions that may be issued by NCLAT; and (iii) Whether or not the SRA has been compliant with all the conditions of the Resolution Plan as well as of the conditions set out in paragraph 8 of the affidavit dated 16 August 2023 shall be decided by the NCLAT in the pending appeal.
Also Read: https://newslaw.in/case-type/criminal/alleged-misuse-of-official-position-courts-legal-analysis/
27
Case Title: JET AIRCRAFT MAINTENANCE ENGINEERS WELFARE ASSOCIATION Vs. ASHISH CHHAWCHHARIA (2024 INSC 51)
Case Number: C.A. No.-003892 / 2023
