whether this conduct in raising the untenable plea and in failing to adhere to its obligations under the resolution plan can per se be regarded as a contempt of the order of this Court dated 18 June 2020.
1
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE/INHERENT JURISDICTION
I.A. No. 58156 of 2020
In
Civil Appeal No. 6707 of 2019
Committee of Creditors of AMTEK Auto Limited
Through Corporation Bank …Applicant
Versus
Dinkar T Venkatasubramanian & Ors. …Respondents
And with
Contempt Petition (C) No. 524 of 2020
In
Civil Appeal No. 6707 of 2019
Committee of Creditors of AMTEK Auto Limited
Through Corporation Bank …Appellant
Versus
Vinit Bodas, Authorised Signatory,
Deccan Value Investor LP …Alleged Contemnor
2
J U D G M E N T
Dr Dhananjaya Y Chandrachud, J
1 This judgment will govern two proceedings:
(i) A Contempt Petition1 instituted by the Committee of Creditors of AMTEK Auto
Limited (“corporate debtor”) inter alia against Deccan Value Investors LP
(“DVI”), the third Respondent in the Civil Appeal2 for violation of an order passed
by this Court on 18 June 20203
.
(ii) An application for rectification4 of the order of this Court dated 18 June 2020
instituted by DVI.
Both the proceedings are inter-related. Both have been heard together.
2 On 24 July 2017, an application under Section 7 of the Insolvency and
Bankruptcy Code 2016 (“IBC”) was admitted by the National Company Law Tribunal
(“NCLT”). Mr Dinkar T Venkatsubramanian was appointed as Interim Resolution
Professional. He was later confirmed as the Resolution Professional (“RP”).
3 On 31 August 2017, the RP published an advertisement inviting resolution plans
from prospective resolution applicants. Resolution plans were submitted by Liberty
House Group and DVI.
1 Contempt Petition (C) No.542 of 2020
2 Civil Appeal No. 6707 of 2019 3 Order dated 18 June 2020 passed in I.A. No. 54321 of 2020 in Civil Appeal No. 6707 of 2019 4 I.A. No.58156 of 2020
3
4 On 6 March 2018, a revised plan submitted by Liberty House Group emerged as
the highest evaluated plan, while DVI withdrew its plan.
5 The Committee of Creditors (“CoC”) by a majority of 94.20 per cent approved
the final revised plan of Liberty House Group on 2 April 2018. On 25 July 2018, the
NCLT approved the resolution plan of Liberty House Group.
6 On 4 December 2018, the CoC filed an application seeking a declaration that
Liberty House Group had willfully contravened the terms of the resolution plan as
approved by the NCLT and for the RP to attempt a fresh process of resolution. NCLT by
an order dated 13 February 2019 held that Liberty House Group had failed to fulfill its
obligations under the approved resolution plan and directed the reconstitution of the
CoC for consideration of the resolution plan submitted by DVI. NCLT did not accede to
the request for carrying out a fresh process by inviting the plans again.
7 As a result the CoC filed an appeal5 before the National Company Law Appellate
Tribunal (“NCLAT”). The appeal was limited to the extent of challenging the rejection of
the prayer for inviting fresh applications from prospective applicants for submitting
resolution plans. On 15 April 2019, DVI filed an interlocutory application seeking
impleadment before the NCLAT, which was allowed by an order dated 22 April 2019. In
the course of the proceedings before the NCLAT, DVI supported the plea of the CoC for
restarting the process of inviting fresh applications for resolution plans. By its order
dated 16 August 2019, NCLAT came to the conclusion that since more than 270 days
had elapsed, an order of liquidation of the corporate debtor would have to ensue and
5 Company Appeal No. 219 of 2019
4
accordingly directed the NCLT to pass appropriate orders of liquidation. The Civil
Appeal before this Court arose out of the order of the NCLAT directing liquidation of the
corporate debtor and was instituted on 26 August 2019 by the CoC.
8 This Court issued notice in the Civil Appeal on 6 September 2019 and stayed the
liquidation of the corporate debtor. The second proviso to Section 12(3) of the IBC was
amended with effect from 16 August 2019 by the Amending Act 26 of 2019 so as to
stipulate a time limit of 330 days for the completion of the corporate insolvency
resolution process from the insolvency commencement date. On 24 September 2019,
this Court accordingly directed the RP to invite fresh offers within a period of 21 days,
following which the CoC was directed to take a “final call in the matter” within two
weeks. The decision was to be placed before this Court on 5 November 2019. The RP
made a public announcement for inviting fresh resolution plans on 26 September 2019,
and the last date for submission of resolution plans was 22 October 2019. The CoC on
23 October 2019 concluded that only one resolution plan was received within the
stipulated timeline. DVI submitted a financial proposal on 4 November 2019. In the
meantime on 6 November 2019, the CoC moved an IA6 before this Court seeking an
extension of four weeks to consider three resolution offers received by the RP, including
that of DVI. On 13 November 2019 when the I.A. came up before this Court, an order
was passed that:
“The consideration to be confined to five offers received
within the time specified in the advertisement inviting offers.
Two offers received thereafter not to be considered.”
6 I.A. No.168814 of 2019
5
9 On 21 November 2019, the CoC again moved an IA7 for modification of the order
dated 13 November 2019 on the ground that while five resolution applicants had
responded to the fresh invitation of offers, only one had submitted the resolution plan
before the last date specified in the advertisement.
10 On 2 December 2019, the IA seeking modification of the earlier order was partly
allowed by this Court by directing that fresh offers be invited within 30 days after due
advertisement. The CoC was directed to evaluate the offers within three weeks
thereafter and to submit its evaluation before this Court. On 3 December 2019, the RP
made a public announcement for inviting fresh resolution plans. Fresh resolution plans
were submitted by four applicants, including DVI and LHG, and eventually on 6 January
2020, DVI was declared the highest evaluated resolution applicant. On 17 January
2020, DVI submitted its resolution plan together with a performance bank guarantee of
INR 150 crores (representing the first tranche). On 18 January 2020, DVI submitted a
revised resolution plan. The revised proposal of DVI was discussed in the 29th meeting
of the CoC, following which certain revisions were sought from DVI.
11 On 20 January 2020, when the proceedings came up before this Court, an
extension of two weeks was granted for finalizing the resolution plan. On 7 February
2020, DVI submitted an addendum along with its resolution plan dated 17 January
2020. On 10 February 2020, this Court was apprised of the fact that a resolution plan
was being voted upon by the members of the CoC in view of which an extension of one
week was granted to finalise the resolution plan. On 11 February 2020, the resolution
plan of DVI was approved by 70.07 per cent of the voting share of the CoC. On 19
7 I.A. No.177847 of 2019
6
February 2020, the RP filed an affidavit before this Court intimating it about the
outcome of the voting. On 13 May 2020, the CoC filed an IA8 seeking approval of the
resolution plan of DVI. On 8 June 2020, this Court passed an order relegating the
matter to the NCLT to decide upon the approval application within a fortnight. The time
spent before the NCLT and this Court was directed to be excluded for calculating the
long stop date. An email was addressed to DVI on the same day by the RP to submit a
performance bank guarantee for the balance of INR 150 crores by 15 June 2020. DVI
filed an application9 before this Court on 12 June 2020 seeking a modification of the
order of 8 June 2020 for grant of a period of two months to it to examine and
understand the impact of the onset of COVID-19 and to re-evaluate the resolution plan.
Simultaneously, the RP filed an application10 before the NCLT on the same day seeking
approval of the resolution plan submitted by DVI. While seeking a extension of time of
two months before this Court, DVI in its IA inter alia stated that:
“4. The Approval Application by the Appellant seeking
approval of DVI’s Resolution Plan, was listed for hearing on
08.06.2020, when the Applicant submitted that due to Covid19 pandemic DVI’s Resolution Plan (as submitted and
approved by the CoC) was unviable and not feasible in the
present circumstances and the Respondent No. 3/Applicant
required sometime to assess the impact of the Covid-19
pandemic on the Indian economy as well as the Auto Industry
(including but not limited to the impact on the overall business
and financial health of the Corporate Debtor). It was therefore
requested that this Hon’ble Court may be pleased to relegate
the issue of the approval of a resolution plan to the
Adjudicating Authority, so as to enable the parties to renegotiate the terms of the Resolution Plan and to hear all the
stakeholders before approving a resolution plan.
[…]
8 I.A. No. 48906 of 2020 9 I.A. No.54321 of 2020 10 IA No.225 of 2020 in CP (IB) No.42/CHD/HRY/2017
7
7. […]
Based on a prima facie analysis of the said information
provided by the RP and subject to a detailed examination and
verification, the Applicant, at the present stage, understands
that the significance of the information is substantial.
The information provided strongly indicates an adverse
impact which is likely to be over INR 700 crores.
[…]
9. However, COVID-19 pandemic has materially and
adversely impacted commercial assumptions underlying
the business plan and financial proposal for revival of the
Corporate Debtor and the feasibility and viability of the
Resolution Plan.
10. That faced with the limited time granted under the Order,
the RP has been insisting on the Respondent No. 3/ Applicant
that it executes the letter of intent and submit its additional
bank guarantee pursuant to the resolution plan which had
been approved, and which is now to be filed before the NCLT.
11. That the Respondent No. 3/ Applicant also suffers from
the threat of invocation of its existing bank guarantee of INR
150 crores that it had submitted in support of the DVI
Resolution Plan, if it does not execute the letter of intent and
submit the additional bank guarantee.”
(emphasis supplied)
12 On 18 June 2020, the IA filed by DVI was listed before this Court when the
following order was passed:
“The application made by the applicant for withdrawal of the
offer is hereby rejected and in case he indulges in such
kind of practice, it will be treated as contempt of this
Court in view of the various orders passed by this Court at
his instance. The application is accordingly dismissed.”
(emphasis supplied)
Following the order of this Court, the RP called upon DVI to submit a performance bank
guarantee for a balance of INR 150 crores which was reiterated on 6 July 2020 setting
an outer limit of 10 July 2020. In the meantime, on 30 June 2020 DVI moved its
8
rectification application11 before this Court on the ground that:
(i) No application had ever been filed by DVI seeking withdrawal of the order;
and
(ii) DVI had never approached this Court earlier for any relief including
seeking an extension of time.
13 NCLT passed an order on 9 July 2020 approving the resolution plan submitted by
DVI. Following this, on 10 July 2020, an email was addressed to DVI by the erstwhile
RP to provide its nominations to the Implementation and Monitoring Committee (“IMC”).
By this email, DVI was also requested to attend the first meeting of the IMC scheduled
on 14 July 2020. On 14 July 2020, DVI by its email stated that formation of the IMC and
the convening of meetings was premature and recorded its intent to institute an appeal
against the order of the NCLT dated 9 July 2020 approving the resolution plan. On 21
July 2020, the RP addressed a communication to DVI to implement the resolution plan
and submit a performance bank guarantee for the balance INR 150 crores. This was
reiterated in a communication dated 23 July 2020 of the CoC to DVI. DVI by its letter
dated 25 July 2020 reiterated its intent to lodge an appeal against the order of NCLAT
and eventually filed its appeal12 before the NCLAT challenging the order of the NCLT
dated 9 July 2020. The said appeal is pending adjudication before the NCLAT. On 3
September 2020, DVI addressed an email invoking clause 8.7 of the resolution plan to
seek its termination forthwith. The email recorded that:
“6. Our client states that in view of outbreak of the COVID19 pandemic since March 2020 and continuing till date,
the business/assets/revenues of the Corporate Debtor
have been adversely and materially affected beyond INR
11 IA No.58156 of 2020 12 Company Appeal (AT) (Insolvency) No. 654 of 2020
9
300 crores triggering clause 8.7 (iii) of the Resolution
Plan. This constitutes a ‘Force Majeure Event’ (as defined in
the Amtek Resolution Plan) which is a self operating clause
providing for the forthwith termination of the Resolution Plan.
The extent of the aforesaid adverse and material impact on
the business/assets/revenues of the Corporate Debtor have
remained uncontroverted by you in proceedings before the
NCLT Chandigarh. In any event, withholding of the
information sought vide the email dated 13 July 2020
only reinforces the fact that the event of Force Majeure
has occurred resulting in the forthwith termination of the
Amtek Resolution Plan.”
(emphasis supplied)
14 On 26 August 2020, the CoC filed a Contempt Petition13 before this Court on the
ground that DVI was in breach of the order of this Court dated 18 June 2020 by seeking
to withdraw the resolution plan. On 10 September 2020, DVI filed an IA14 in the pending
appeal before the NCLAT seeking cancellation and return of the performance bank
guarantee.
15 Notice was issued by this Court in the contempt petition instituted by the CoC on
25 September 2020.
16 On 14 December 2020, notice was issued by this Court on the rectification
application filed by DVI.
17 The learned Senior Counsel who have principally urged submissions on behalf of
the contesting parties are:
(i) Mr Mukul Rohatgi for DVI in support of the rectification application;
(ii) Mr Tushar Mehta, Solicitor General of India in support of the Contempt Petition
filed by the CoC;
13 Contempt Petition No.524 of 2020 14 IA No.21814 of 2020
10
(iii) Mr Niraj Kishan Kaul, learned Senior Counsel for the RP; and
(iv) Dr Abhishek Manu Singhvi, learned Senior Counsel on behalf of the contemnor.
18 Mr Mukul Rohatgi, learned Senior Counsel appearing on behalf of DVI submitted
that the order of this Court dated 18 June 2020 needs to be rectified or clarified on the
ground that it proceeds on two factual misconceptions. The factual errors are stated to
be that:
(i) The IA that was moved by DVI was for withdrawal of the offer (resolution plan);
and
(ii) Various orders have been passed by this Court at the instance of DVI.
19 The submission is that the observation of the Court that “in case he [DVI]
indulges in such kind of practice, it will be treated as contempt of this Court” is premised
on a factual misconception. Addressing the Court on the first of the above premises, Mr
Rohatgi submitted that the reliefs which were sought in the application that was filed by
DVI on 12 June 2020 were in the following terms:
“
(a) Pass an order modifying the Order dated 08.06.2020 to
grant a period of 2 (two) months from the date of the Order
to the Respondent No. 3/ Applicant to examine and
understand the impact of the Covid-19 pandemic and the
lock down to discuss the terms of the Resolution Plan with
the Committee of Creditors and thereafter direct the NCLT
to consider the matter of I.A. No. 48906 of 2020 and pass
appropriate orders;
(b) Pass an order directing the Committee of Creditors and the
resolution professional not to act upon the existing
resolution plan until conclusion of the above process,
subject to the Applicant/ Respondent No. 3 extending the
term of the existing bank guarantee for a corresponding
period;”
11
20 It was urged that there was no attempt on the part of DVI to withdraw from the
resolution plan. On the contrary, what the IA postulated was that a period of 15 days
which was fixed, commencing from 8 June 2020, for the NCLT to pass orders on the
approval application had resulted in practical difficulties for parties to enter into a
meaningful discussion and negotiation. DVI, according to the submission, stressed that
the period which was reserved for the NCLT to decide the approval application, which
was to expire on 23 June 2020, was inadequate and there was a threat on the
invocation of the performance bank guarantee. It was in this context that DVI
highlighted the serious financial impact of COVID-19 on the business of the corporate
debtor in the context of which it sought time to assess the impact of the pandemic on
the business and financial health of the corporate debtor. On the second of the factual
premises set out in the order of this Court, DVI has stressed that it had never moved
any application before this Court earlier for seeking an extension of time and hence the
basis of the order of this Court is factually incorrect.
The submission which has been urged on behalf of DVI has been opposed by Mr
Tushar Mehta, learned Solicitor General and by Mr Niraj Kishan Kaul, learned Senior
Counsel, appearing respectively for the CoC and the RP. The Solicitor General
submitted that:
(i) a detailed process was undertaken following the order of this Court dated 24
September 2019 to ensure that resolution plans could be invited so as to obviate
an order of liquidation of the corporate debtor. DVI was in the fray even before
the proceedings had reached this Court and even after the order of 24
September 2019, it had indicated its intent to enter the fray. From 4 November
2019 when DVI submitted its financial proposal, extensions of time were granted
12
by this Court on 13 November 2019, 2 December 2019, 20 January 2020 and 10
February 2020. Though the extensions were sought by the CoC, there can be no
manner of doubt that this was to facilitate the finalization and approval of a
resolution plan and DVI was among the resolution applicants. After the CoC
approved DVI’s resolution plan on 11 February 2020, an IA was filed by the CoC
on 13 May 2020. This Court by an order dated 8 June 2020 relegated the
proceedings to the NCLT for considering the approval application. Laying stress
on the IA filed by DVI on 12 June 2020, it was urged that an attempt was made
by DVI to wriggle-out of its commitments under the resolution plan which has
been approved by the CoC on 11 February 2020 by highlighting the impact of
COVID-19 on the financial health of the corporate debtor.
(ii) Despite this Court having rejected the IA on 18 June 2020 :
(a) DVI failed to take steps in pursuance of the resolution plan which is
approved by the NCLT on 9 July 2020 by
(i) failing to submit the second tranche of the performance bank
guarantee of INR 150 crores;
(ii) failing to provide its nomination to the IMC;
(iii) refusing to attend the meetings of the IMC;
(iv) setting up through its advocates the plea that a force majeure
event had occurred resulting in termination of the resolution plan.
(b) This conduct, it has been submitted, is contumacious in that despite being
placed on notice by the order of this Court dated 18 June 2020 that:
(i) DVI’s IA stood dismissed; and
(ii) Any attempt to resile from the resolution plan would result in the
13
invocation of the contempt jurisdiction, DVI effectively thwarted
the implementation of the resolution plan.
The Solicitor General has thus opposed the application for rectification and supported
the contempt petition on the above submissions.
21 Adopting a similar line of submissions, Mr Niraj Kishan Kaul, learned Senior
Counsel urged that:
(i) A plea of force majeure on account of COVID-19 was specifically raised in the
application filed by DVI before this Court on 12 June 2020;
(ii) By a letter dated 3 September 2020 addressed by the advocates of DVI, a plea
of force majeure was set up even after the order of this Court dated 18 June
2020 rejecting the IA; and
(iii) Even before the NCLAT, DVI filed an additional affidavit on 12 September 2020
for pleading a case of force majeure based on the COVID-19 pandemic.
On these grounds, it was submitted that DVI has made an intentional and willful attempt
to evade compliance of its obligation under the approved resolution plan though its IA
was specifically rejected on 18 June 2020 by this Court.
22 Dr Abhishek Manu Singhvi, learned Senior Counsel appearing on behalf of
the contemnor submitted that:
(i) In order to invoke the contempt jurisdiction, a disobedience has to be willful and
not by implication;
(ii) The exercise of legal rights by a party to a proceeding cannot constitute
contempt;
14
(iii) DVI was within its legitimate rights in challenging the order of the NCLT;
(iv) The view which may be taken on the merits of the submissions which have been
addressed by DVI on whether the conditions precedent to the implementation of
the resolution plan have been fulfilled cannot be basis for invoking the contempt
jurisdiction. An adjudicatory forum may take a decision, one way or the other on
the merits of DVI’s submissions, but a plea of contempt cannot be founded on
the acceptance or rejection of the plea of DVI that the conditions precedent to the
implementation of the resolution plan have not been fulfilled.
(v) In this context, the reply filed by the contemnor to the contempt petition
specifically sets out the case of DVI that the condition precedents to the
implementation of the resolution plan have not been fulfilled. The following
paragraphs of the reply have been emphasized:
“5. It is submitted that Resolution Plan dated 17.01.2020 (r/w
the addendum dated 07.02.2020) as submitted by DVI and
approved by the COC contains several obligations/conditions
precedents for its effective implementation and to ensure the
going concern status of the Corporate Debtor. It is an
admitted position that the Resolution Professional / COC inter
alia failed to ensure compliance of certain conditions
precedents under the Resolution Plan including failure of
obtaining the prior written consent of the mortgage of the Ace
Complex Land whilst executing a long term lease deed on
behalf of the Corporate Debtor. By an email dated
29.01.2020, such default was brought to the due notice of the
Resolution Professional by the representative of DVI. The
aforesaid requirement of obtaining the prior written consent
was further reiterated by DVI in the addendum dated
07.02.2020. A copy of the email dated 29.01.2020 is attached
as Annexure R-1. (Pages 37-40)
6. It is a matter of record that the aforesaid issues were
brought before the National Company Law Tribunal,
Chandigarh (“NCLT”) at the time of hearing of the IA filed by
the Resolution Professional for the approval of the Resolution
Plan. However, the NCLT proceeded to approve the
Resolution Plan on 09.07.2020 by inter alia unilaterally
modifying the provisions of the Resolution Plan to the
detriment of DVI. Respectfully, it is submitted that in the
15
absence of fulfilment of the aforementioned provisions of the
Resolution Plan (amongst others), the very
implementation/feasibility/ viability of the Resolution Plan and
revival of the Corporate Debtor fails into jeopardy. DVI has
accordingly exercised its rights as available under lay by filing
its appeal before the National Company Law Appellate
Tribunal (“NCLAT”). Without prejudice to the aforesaid and
as elaborated hereunder, the Resolution Professional was
also intimated of the termination of the Resolution Plan on
03.09.2020 pursuant to the self-operative termination clause
of the Resolution Plan as approved by the CoC.
9. DVI’s Resolution Plan dated 17.01.2020 (read with its
addendum dated 07.02.2020) inter alia contains contingent
conditions in the form of clause 2.5.2, which is set out as
under:
“Unless waived (where permissible under Applicable Law) by
the Resolution Applicants, Acquisition of the Corporate
Debtor by the Resolution Applicants in terms of sub-section
5.1 (Acquisition as a Going Concern) of this Resolution Plan
and any other action set out in sub-sections 5.1 and 5.2
(Acquisition as a Going Concern), of the Resolution Plan are
contingent on the following conditions having been fulfilled in
a form and manner satisfactory to the Resolution Applicants
(“Effective Date Conditions Precedents”)
(a) Occurrence of NCLT Approved Date;
(b) Receipt of a copy of the order of the NCLT approving this
Resolution Plan; and
(c) term lease (subsisting for 20 years or more) for the ACE
Complex Land with Acceptable Terms.”
“Acceptable Terms” has been defined in the Resolution Plan
as under:
“Shall mean terms relating to the lease of ACE
Complex Land and shall be suitable protective terms
acceptable to the Resolution Applicants including (i)
confirmation of the validity and subsistence of the lease
arrangement by way of prior written consent of Vistra ITCL
Limited acting as the security trustee on behalf of KKR India
Financial Services Limited and L&T Finance Limited in a form
and substance acceptable to the Resolution Applicants; (ii) no
right of termination according to the lessor as long as lease
rentals are paid; and (iii) right of first refusal occurring to the
Resolution Applicants, in case of sale of ACE Complex Land.”
10. It is thus seen that it is one of the essential
requirements of the Resolution Plan for the Corporate Debtor
to execute a long-term lease (for 20 years or more) in respect
of the Ace Complex Land with “Acceptable Terms” i.e. with
the prior written consent of Vistra ITCL (India) Limited
(“Vistra”) viz; the mortgagee of the Ace Complex Land.
16
11. Significantly, the aforesaid requirement of the
“Execution of a long term lease (subsisting for 20 years or
more) for the ACE Complex Land with Acceptable Terms”
was reiterated in the addendum to the Resolution Plan dated
07.02.2020.”
23 During the course of the hearing, Dr Singhvi made the following oral statement
namely that “the application filed by DVI before the Supreme Court was to consider
finding solutions for the delay occasioned by COVID-19. Neither was force majeure
pleaded nor has it been pleaded now and only an extension of time has been sought on
the ground of Covid-19”. In other words, the submission of Dr Singhvi is that
(i) DVI has not set up a plea of force majeure as a basis for withdrawing from the
resolution plan; and
(ii) Whether the conditions precedent under the resolution plan have been fulfilled is
a matter which is sought to be urged in the appeal before the NCLAT.
The application for rectification
24 The application for rectification is premised on the assertion that there are two
factual misconceptions contained in the order of this Court dated 18 June 2020. Firstly,
the order proceeds on the basis that DVI in its IA of 12 June 2020 intended to withdraw
from the resolution plan, which was not the case; and secondly, the order indicates that
extensions of time for the submission of resolution plans were obtained on behalf of
DVI, which is contrary to the record. The submission, in other words, is that DVI did not
intend to resile from the resolution plan and only sought to highlight the financial impact
of the COVID-19 pandemic on the economy, the auto industry and the viability of the
corporate debtor. This submission has been reiterated by Dr Abhishek Manu Singhvi,
17
learned Senior Counsel when he urged that the application moved before this Court on
12 June 2020:
(i) was to consider finding solutions for the delay due to COVID-19;
(ii) force majeure was not pleaded; and
(iii) the only plea was for the extension of time.
25 The record before this Court would however belie the critique of the order dated
18 June 2020 and of the submissions made by learned Senior Counsel. The IA filed by
DVI was styled as “an application for rectification”, as its title indicates, but paragraph 1
states that it is “an application for clarification / modification of the order dated 8 June
2020”. On 8 June 2020, this Court had relegated the matter of approval of the resolution
plan to the NCLT with a timeline of 15 days. In the IA filed by DVI purportedly for
‘clarification and modification’, it was submitted that “due to Covid-19 pandemic DVI’s
resolution plan (as submitted and approved by the CoC) was unviable and not feasible
in the present circumstances”. DVI submitted that when the proceedings came up on 8
June 2020 it had urged that its resolution plan was required to be relegated to the
adjudicating authority to assess the impact of the pandemic on the economy, the auto
industry and the financial health of the corporate debtor and to enable the parties to
renegotiate the terms of the resolution plan. In other words, DVI sought to submit that
the purpose of relegating the issue of approval of the resolution plan was to enable a
re-negotiation to take place before the resolution plans which have been approved by
the CoC could be the subject matter of an approval of the adjudicating authority. Now,
this submission of DVI cannot be accepted for two reasons: firstly, it is a settled
principle of law that the record of the Court speaks for itself and the terms of a judicial
order reflect what has been decided. The order of this Court dated 8 June 2020
18
indicates that since the fresh resolution plan had been passed by the CoC with the
majority of 70 per cent, “the matter of IA” namely, IA 48906 of 2020 filed by the CoC
was being relegated to the NCLT for passing “appropriate orders”. There is absolutely
no indication in the order of the Court dated 8 June 2020 that the purpose of relegating
the IA to the NCLT was to facilitate a fresh evaluation being made by DVI in regard to
the impact of the pandemic on the economy, the auto industry and the health of the
corporate debtor. DVI, in other words, has attempted to read into the order dated 8
June 2020 a basis which does not find expression in the terms of the order. Such an
exercise is plainly impermissible. Secondly, Section 31 of the IBC provides the
requirements to be observed, before the adjudicating authority approves the resolution
plan. Sub-Sections (1) and (2) of Section 31 are in the following terms:
“(1) If the Adjudicating Authority is satisfied that the resolution
plan as approved by the committee of creditors under subsection (4) of section 30 meets the requirements as referred
to in sub-section (2) of section 30, it shall by order approve
the resolution plan which shall be binding on the corporate
debtor and its employees, members, creditors, [including the
Central Government, any State Government or any local
authority to whom a debt in respect of the payment of dues
arising under any law for the time being in force, such as
authorities to whom statutory dues are owed,] guarantors and
other stakeholders involved in the resolution plan:
[Provided that the Adjudicating Authority shall, before passing
an order for approval of resolution plan under this subsection, satisfy that the resolution plan has provisions for its
effective implementation.]
(2) Where the Adjudicating Authority is satisfied that the
resolution plan does not confirm to the requirements referred
to in sub-section (1), it may, by an order reject the resolution
plan.”
26 The role of the adjudicating authority under sub-section (1) of Section 31 comes
into being upon the approval of the resolution plan by the CoC under sub-section (4) of
Section 30. The function which is assigned by the statute to the adjudicating authority is
19
to determine whether the resolution plan which has been approved by the CoC meets
the requirements of sub-section (2) of Section 30. Upon being satisfied that the
resolution plan meets those requirements, the adjudicating authority “shall by order
approve the resolution plan”. Before passing an order of approval the adjudicating
authority has to satisfy itself that the resolution plan has provisions for its effective
implementation. In the backdrop of the above provisions, the order of this Court dated 8
June 2020 required the adjudicating authority to perform the functions which are
entrusted to it under Section 31 of the IBC. To suggest that the purpose of the order
dated 8 June 2020 was to enable DVI to re-negotiate the resolution plan after assessing
the impact of the pandemic is thus fundamentally flawed. It is flawed because this
assertion is contrary to the plain terms of the record. It is flawed also because the
submission is contrary to the nature of the function which is expected to be exercised
by the adjudicating authority by the plain terms engrafted into the provisions of Section
31. When DVI moved its application on 12 June 2020, it asserted that the timeline of 15
days has “resulted in practical difficulties for parties to enter into any meaningful
discussions and negotiations”. To assert that there was any scope for negotiations and
discussions after the approval of the resolution plan by the CoC would be plainly
contrary to the terms of the IBC. DVI, in paragraph 7 of its application stated that it was
seeking a clarification/modification for, inter alia, the following reasons:
(i) Its management team was based out of the US and found it difficult to travel to
India during the course of the pandemic;
(ii) The pandemic had had a drastic impact on the business, revenue, assets and
financial and operational health of the corporate debtor;
(iii) The meeting of the CoC dated 4 May 2020 recorded the performance updates of
20
the corporate debtors bearing on its financial health;
(iv) The RP had on 3 June 2020 shared additional information with DVI, which was
substantial in its significance;
(v) DVI’s resolution plan was based on the financials of the corporate debtor prior to
the COVID-19 pandemic;
(vi) The pandemic had materially and adversely impacted commercial assumptions
underlying the business plan and financial proposal for revival of the corporate
debtor;
(vii) The RP was requiring DVI to submit an additional bank guarantee pursuant to
the resolution plan failing which DVI faced the threat of the invocation of the
performance bank guarantee of INR 150 crores which it had submitted;
(viii) DVI even pleaded “special equities”. The reference to special equities contains a
distinct flavor of a ground being set up to injunct the invocation of the
performance bank guarantee. DVI sought a period of two months to (i) assess
the impact of the pandemic on the business and financial health of the corporate
debtor; (ii) the consequential impact of these circumstances on the feasibility and
viability of the resolution plan; and (iii) to allow parties to negotiate the terms of
the resolution plan. It was in this backdrop, that the reliefs which were sought in
the IA were to permit DVI a period of two months “to examine and understand the
impact of Covid-19 pandemic and the lockdown to discuss the terms of the
resolution plan with the CoC”; and
(ix) DVI in its IA also sought a restraining order against the CoC and the RP from
acting upon the existing resolution plan until the conclusion of the above process
subject to it extending the existing bank guarantee.
21
27 The order of this Court dated 18 June 2020 must be understood in the context of
the IA which was moved by DVI. When the three judge Bench in its order dated 18 June
2020 observed that the “application made by the applicant for withdrawal of the offer is
hereby rejected” it must be understood in the context of the plea which was setup by
DVI. There can be no mistaking the fact that DVI, despite having submitted a resolution
plan which had undergone discussion and revision before the CoC before being
approved in the meeting of the CoC of 11 February 2020, was seeking to renege its
applications to fulfill the resolution plan. The plea for being allowed to re-examine the
impact of the pandemic and to re-negotiate the terms of the resolution plan makes it
abundantly clear that DVI was not willing to fulfill the terms of the obligations which it
had agreed. This is evident from the fact also that though DVI was obliged to furnish the
second tranche of its performance bank guarantee of INR 150 crores, it was not ready
to do so. On the contrary, apprehending a threat of the invocation of the first tranche of
the bank guarantee of INR 150 crores, DVI pleaded special equities and sought a
direction allowing it to keep the bank guarantee alive until the process of re-negotiation
was completed in two months. This again was to overcome the consequence of the
invocation of the bank guarantee arising from DVI’s default. The prayer seeking a
direction to allow DVI to extend the bank guarantee was artfully worded since the effect
would be to restrain the invocation of the bank guarantee. One of us (Justice MR Shah)
was a member of the Bench which declined to grant relief on the IA filed by DVI on 12
June 2020. But, for the purpose of the present application, this judgment is based on
the record as it stands, which leaves no manner of doubt that DVI was seeking to
renege on its commitments. When the order of this Court dated 18 June 2020 alludes to
“the application made by the applicant for withdrawal of the offer”, the reference is
22
clearly to the substantive content of the IA which indicates that DVI was not ready to
abide by the commitments made by it in the resolution plan. The latter part of the order
dated 18 June 2020, placed DVI on notice that if it indulged in such kind of practices in
the future, it was “to be treated as contempt of this Court in view of the various orders
passed by this Court at his instance”. DVI submits that the orders of this Court were not
passed at its instance since applications for the extension of time had earlier been
granted on the request by the CoC. The list of dates filed by DVI indicate that DVI filed
its Vakalatnama in the appeal on 5 June 2020 a point which was stressed by Mr Mukul
Rohatgi, learned Senior Counsel. However, there can be no manner of doubt that the
extensions of time granted by this Court were to enable a due consideration of the
proposals of resolution applicants of which DVI undoubtedly was an applicant. This is
evident from the manner in which the proceedings unfolded. On 24 September 2019,
this Court directed the RP to invite fresh offers within a period of 21 days. As a result of
offers being received after the deadline under the invitation which was issued pursuant
to the above directions, an IA was moved on 6 November 2019 seeking an extension of
four weeks. On 13 November 2019, this Court directed that the consideration would be
confined to five offers “received within the time specified in the advertisement”. On 21
November 2019, the CoC sought a modification of the order of 13 November 2019 to
correctly record that while five resolution applicants had responded to the fresh
invitation by the RP only one resolution plan had been submitted before the last date of
submission. The CoC sought liberty to consider the additional three resolution offers,
one of which was the offer by DVI. It was in this context that on 2 December 2019, this
Court partly allowed the application for modification by directing that fresh offers to be
invited within thirty days. It was in pursuance of the order of this Court dated 2
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December 2019 that a public announcement was made by the RP on 3 December
2019. DVI submitted undertakings under Section 29A of the IBC and other documents
on 6 December 2019. Fresh resolution plans were submitted by four entities including
DVI on 31 December 2019.
28 On 6 January 2020, the CoC declared DVI as the highest evaluated resolution
applicant. DVI submitted a revised resolution plan dated 17 January 2020, following
which the voting which was scheduled by the CoC on that day was cancelled. The
revised proposal of the DVI was discussed in the 29th meeting of the CoC. On the same
day – 20 January 2020 –when the proceedings were listed before this Court it took note
of the fact that the CoC was in the process of approving a resolution plan following
which an extension of two weeks was granted. DVI submitted an addendum to the
resolution plan on 7 February 2020.
29 On 10 February 2020, the CoC sought an extension of a week for the resolution
plan to be voted upon by the members of the CoC. On 11 February 2020, the resolution
plan of DVI was approved and an affidavit was filed by the RP before this Court on 19
February 2020 reporting the approval of DVI’s resolution plan by the CoC. Appropriate
directions were sought. This sequence of events leaves no manner of doubt that the
extensions which were granted were to facilitate the process initially of inviting
resolution applicants to submit their plans and later for the evaluation of the plans which
had been submitted. After DVI was found to be the highest evaluated resolution
applicant, extensions were sought and granted for the resolution plan to be finalized
and voted upon by the CoC. Who sought an extension of time is really beside the point
and is of subsidiary importance. Formally it may be true that the extensions were
24
applied for by the CoC, with the RP having apprised this Court also of the approval
granted to DVI’s resolution plan. However, DVI was the beneficiary of the extensions
which were granted by this Court. The extensions granted from time to time facilitated
the consideration of the resolution plan submitted by DVI. DVI cannot be heard to
contend that the order of this Court dated 8 June 2020 suffers from an error when the
process of seeking extensions before this Court ultimately led up to the approval of its
resolution plan. DVI’s application for rectification, in other words, is an attempt to
renege from the resolution plan which it submitted and to resile from its obligations. This
is a devious attempt which must be disallowed. The rectification application must
accordingly be dismissed.
Contempt Petition No. 542 of 2020
30 The premise of the contempt proceedings which has been initiated by the CoC is
that despite the order of this Court dated 18 June 2020, DVI has by its conduct
(i) Obstructed the implementation of the resolution plan; and
(ii) Set up a plea in the teeth of the rejection of its IA by this Court on 18 June 2020.
31 Dr Abhishek Manu Singhvi, learned Senior Counsel is correct in the
formulation of legal principle but it is in the application of those principles where the
fine-print of this case lies. There can be no manner of doubt that
(i) the contempt jurisdiction is to be exercised with circumspection;
(ii) the acceptance or rejection of a plea on merits is distinct from whether a party is
in breach of the order of court;
(iii) the disobedience of an order must be willful before it constitutes contempt;
25
(iv) a willful breach must appear clear by the conduct of a party not by implication;
and
(v) the exercise of legal rights and remedies would not constitute contempt.
32 We must at the outset note that on 8 June 2020, this Court relegated the matter
to the NCLT to decide upon the approval application within a fortnight. NCLT passed an
order approving the resolution plan submitted by DVI on 9 July 2020. DVI having taken
recourse to its appellate remedy before the NCLAT under the provisions of Section 61
of the IBC does not constitute contempt. The plea of contempt however proceeds on
the conduct of DVI. Bearing on this issue, the following circumstances have to be noted:
(i) the pleas which were set up by DVI in paragraphs 9,12,13,15 and 17 of its IA
filed on 12 June 2020, clearly sought to setup a foundation for force majeure. In
paragraph 9, DVI pleaded that “Covid-19 pandemic has materially and adversely
impacted commercial assumptions underlying the business plan and financial
proposal for revival of the corporate debtor and the feasibility and viability of the
resolution plan”. In paragraph 12, DVI urged that the execution of a letter of intent
and submission of an additional bank guarantee “would mean that the approved
resolution plan is being implemented without taking into consideration the
changed circumstances, and would be directly in conflict with the intent of
discussing the plan after understanding the impact of the changed financial
position of the Company and the market as a whole”;
(ii) Para 13 of the IA stated that DVI “has been placed in an impossible situation
where, on one hand the impact of the changed circumstances needs to be taken
into consideration for examining the impact of the same on the resolution plan…”;
26
(iii) In para 15, DVI submitted that it was “imperative that the CoC and the resolution
professional do not move forward without first giving it [DVI] the opportunity to
examine the impact of the changed circumstances on the plan and its feasibility
and to thereupon discuss the same with the CoC”; and
(iv) Finally, in para 17, DVI pleaded that it “may be allowed to assess the impact of
the COVID-19 pandemic on the overall business and financial health of the
Corporate Debtor, and the consequential impact of these circumstances on
feasibility and viability of DVI’s resolution plan and a period of 2 (two) months […]
may be granted to the parties to negotiate the terms of DVI’s resolution plan […]”.
These averments clearly indicate a foundation for the defence of force majeure.
33 On 3 September 2020, after the order of this Court dated 18 June 2020 rejecting
the above IA, an email was addressed on behalf of the DVI by Mr Dinesh Pednekar, of
Economic Laws Practice (“ELP”), the advocates representing DVI to the RP. The email
inter alia stated that:
“6.Our client states that in view of outbreak of the Covid-19
pandemic since March 2020 and continuing till date, the
business/assets/revenues of the Corporate Debtor have been
adversely and materially affected beyond INR 300 crores
triggering clause 8.7(iii) of the Resolution Plan. This
constitutes a ‘Force Majeure Event’ (as defined in the Amtek
Resolution Plan) which is a self-operating clause providing for
the forthwith termination business/assets/ revenues of the
Corporate Debtor have remained uncontroverted by you in
proceedings before the NCLT Chandigarh. In any event,
withholding of the information sought vide the email dated 13
July 2020 only reinforces the fact that the event of Force
Majeure has occurred resulting in the forthwith termination of
the Amtek Resolution Plan.”
27
On 12 September 2020, in an additional affidavit filed before the NCLAT, DVI again
sought to plead the COVID-19 pandemic as a reason for allowing it to re-negotiate the
resolution plan. The above circumstances leave no manner of doubt that despite the
rejection of its IA by this Court on 18 June 2020, DVI continued to persist in raising the
same grounds as a justification to be relieved of the obligations imposed on it by the
terms of its resolution plan.
34 Dr Abhishek Manu Singhvi, learned Senior Counsel had, in the course of his
submissions which have been recorded earlier, submitted that neither was force
majeure pleaded then (in the IA filed before this Court) nor thereafter.
35 Faced with the communication dated 3 September 2020 of ELP made on behalf
of DVI, Dr Abhishek Singhvi submitted that the submission was not before the NCLAT.
However, even this is factually incorrect.
36 Mr Niraj Kishan Kaul, learned Senior Counsel has drawn the attention of the
Court to the fact that on 12 September 2020, additional affidavit was filed before the
NCLAT where the plea of force majeure was raised by DVI. Besides this, DVI has,
despite the approval of the resolution plan, failed to
(i) submit a performance bank guarantee for the balance of INR 150 crores;
(ii) make a nomination to the IMC; and
(iii) failed to attend the meetings of the IMC.
37 The provisions of the IBC are premised on a time bound process for the
resolution of corporate insolvencies. Effectively, the conduct of DVI after the CoC
approved the resolution plan on 11 February 2020 has thwarted the entire process,
28
thus, bringing things to a stand-still. Alive to the realities of the situation, Dr Abhishek
Manu Singhvi, learned Senior Counsel has stated before the Court that in the
proceedings which are pending before the NCLAT, DVI shall not plead force majeure
based on the outbreak of the Covid-19 pandemic.
38 The issue which needs to be addressed is whether recourse to the contempt
jurisdiction is valid and whether it should be exercised in the facts of this case.
Undoubtedly, as we have noted earlier, the conduct of DVI has not been bona fide. The
extension of time in the course of the judicial process before this Court enures to the
benefit of DVI as a resolution applicant whose proposal was considered under the
auspices of the directions of the Court. DVI attempted to resile from its obligations and
a reading of its application which led to the passing of the order of this Court dated 18
June 2020 will leave no doubt about the fact that DVI was not just seeking an extension
of time but a re-negotiation of its resolution plan after its approval by the CoC. Then
again, despite the order of this Court dated 18 June 2020 rejecting the attempt of DVI, it
continued to persist in raising the same pleas within and outside the proceedings before
the NCLAT. The conduct of DVI is lacking in bona fides. The issue however is whether
this conduct in raising the untenable plea and in failing to adhere to its obligations under
the resolution plan can per se be regarded as a contempt of the order of this Court
dated 18 June 2020. DVI was undoubtedly placed on notice of the order that should it
proceed in such terms, it would invite the invocation of the contempt jurisdiction. Having
said that, it is evident that the order of this Court dated 18 June 2020 rejected the IA
moved by DVI and as a necessary consequence, the basis on which the reliefs in the IA
were sought. Therefore correctly, it has been now stated on behalf of the DVI that it will
not set-up a plea of force majeure in view of the dismissal of its IA on 18 June 2020.
29
However lacking in bona fides the conduct of DVI was, we must be circumspect about
invoking the contempt jurisdiction as setting up an untenable plea should not in and by
itself invite the penal consequences which emanate from the exercise of the contempt
jurisdiction. Likewise, the default of DVI in fulfilling the terms of the resolution plan may
invite consequences as envisaged in law. On the balance, we are of the considered
view that it would not be appropriate to exercise the contempt jurisdiction of this Court.
During the course of the hearing, Dr Abhishek Manu Singhvi, learned Senior Counsel
has relied on the affidavit filed in response to the contempt petition while seeking to
urge that DVI will be within in its rights to urge whether the conditions precedent to the
enforcement of the resolution plan have been fulfilled. Since DVI is in appeal before the
NCLAT, we express no opinion on the merits of the submission. The NCLAT will take a
view on the tenability and merits of the submission of DVI that the conditions precedent
under the resolution plan have not been fulfilled after hearing the parties. This is not an
issue which arises before the Court in the present proceedings either upon the
application for rectification moved by DVI or the contempt petition moved by the CoC.
39 For the above reasons, our conclusions and directions are that :
(i) There is no merit in the application for rectification moved by DVI. IA No. 58156
of 2020 in Civil Appeal No 6707 of 2020 shall stand dismissed;
(ii) It is not expedient in the interest of justice to pursue the contempt proceedings.
The Contempt Petition (C) No. 524 of 2020 in Civil Appeal No. 6707 of 2019 shall
accordingly stand dismissed, subject to (iii) below;
(iii) In terms of the submission which has been made by DVI before this Court and
even otherwise, as a consequence of the dismissal of its IA on 18 June 2020, it
30
shall not set-up a plea for force majeure in the proceedings which are pending
before the NCLAT in appeal against the order of the NCLT approving the
resolution plan; and
(iv) The appeal filed by DVI against the approval of the resolution plan by the NCLT
shall peremptorily be heard and disposed of by the NCLAT not later than within a
period of one month from the date of the present judgment.
40 There shall be an order in the above terms.
……….….....................................................J.
[Dr Dhananjaya Y Chandrachud]
…..….….....................................................J.
[M R Shah]
New Delhi;
February 23, 2021
